Lawsuit Seeks to Strip University of Tax Exempt Status for Engaging in Technology Transfer

An argument that Princeton University should lose its tax-exempt status, due to the commercial nature of Technology Transfer activities, has been allowed to go forward.

The lawsuit claims that not only should certain buildings lose their status because they serve a commercial rather than academic purpose, but the distribution of royalties to inventors should strip the entire university of tax-exempt status under New Jersey law.

Local attorney Bruce Afran represents the plaintiffs in this case, and recently stated:

“Under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.”

New Jersey Tax Court Judge Vito Bianco rejected the University request to dismiss the lawsuit last week, noting the importance of the issues. This raises questions concerning the intersection of state definitions of tax-exempt and non-profit organizations, with respect to routine activities of academic research institutions operating under federal definitions.

The lawsuit has been pending for nearly three years, and the recent decision does not necessarily mean that there will be any immediate action.

Share This Post