Nonprofit … For Profit? Universities and Property Tax Law

Ting: In many American cities, land is power. Land shapes who gets to live where, what gets built, and which communities are transformed. If you were to map that power, parcel by parcel, you might expect to see developers, corporations, or the city itself dominating the landscape. But in neighborhood after neighborhood, a different name keeps appearing: universities.

Private universities now control large amounts of urban land, not just classrooms and libraries, but apartment buildings, retail spaces, and mixed-use developments that look and function much like the surrounding city. The boundary between campus and neighborhood has become increasingly hard to see.

There’s one key difference, though: much of that land is exempt from property taxes. Because universities are classified as nonprofits, their property often qualifies for tax exemption under laws meant to support educational missions. For traditional academic spaces, that makes sense. But as universities expand into revenue-generating real estate, the distinction between educational use and commercial activity becomes harder to identify.

This is where property tax law comes in. Under statutes like New York’s Real Property Tax Law 420-a, courts apply a standard of “exclusive” or “primary” nonprofit use to decide whether a property should remain tax-exempt. In cases such as Fields v. Trustees of Princeton University, judges are asked to determine whether university-owned land is truly serving an educational purpose.

In this episode, we look at how that legal standard holds up in practice. How have New York courts interpreted nonprofit use? When does university landholding begin to resemble large-scale real estate development? And does existing doctrine meaningfully limit institutions that now function as major urban landlords?

To invite some expert opinions, I speak with two students deeply involved in housing and tenant advocacy in neighborhoods shaped by university expansion—work that engages directly with questions of gentrification, access, and tenant rights.

Together, these perspectives point to a broader question at the center of this episode: Does the legal category of “nonprofit” still capture the role universities play in the cities they increasingly shape?

This is Low of the Land, Podcast for the Columbia University Law Review, and I’m Ting, your host for this episode.

Ting: It's great to have you guys here! Thank you so much for agreeing to this interview. To start off first, Reesa and Jane, could you guys introduce yourselves real quick?

Jane: Sure! My name is Jane. I am a sophomore at Barnard studying urban studies and human rights, and I am involved in the Housing Equity Project. I have worked with them for like a year doing advocacy work, and I've also been involved with the inventory team and food recovery network in trying to get food waste out to our communities that are around us.

Ting: Thank you!

Reesa: My name is Reesa. I am a second year at Columbia University, and I am studying urban studies, public health, and race and ethnicity studies. Hopefully…that will all work together. I am also involved with the Housing Equity Project at Columbia University. I serve as the co-director, so I oversee all five of the major initiatives that we have, but our core value is really trying to fight against the ongoing and historical gentrification of the West Harlem and Morningside Heights area. I also work at Goddard Riverside Law Project, which is a tenant advocacy nonprofit dedicated to helping and supporting tenants in the Harlem area sue their landlords and to help tenants make sure that they can get the repairs that they deserve and file HP actions.

Ting: Thank you so much! I'm so glad to have you guys here today! I'm sure you guys have a lot to say. So to start right off, could you briefly explain how property tax exemption works for nonprofit educational institutions under state law?

Jane: I guess how I understand it, Reesa, critique me with maybe your own thoughts, is that basically because if we're talking about Columbia specifically or just any large university, they are basically organizing nonprofit under the idea that something like education serves the public benefit, so taxing it would undermine like, basically a socially valuable function. And so personally, I see this idea as a little subversive, especially in the case of schools like Columbia and NYU, because they are both private universities, large private universities that are for-profit, and they are not public benefits. So those are some ideas that we can definitely grapple with.

Reesa: Yeah, I think that you explained that really well. The main, the main contention here is that the property…it's under the guise that the property is being used for education, and if it's used to make money, that serves like a business-like purpose, it doesn't qualify, but that's not necessarily, I mean, you know, what are the lines of that? Like, for example, at Columbia, we can take like Carman Hall or Hartley, they have classrooms in there, and so they could have one specific classroom in those buildings, and so what they can do on those dorms and properties is basically make them tax exempt because they can justify like, oh, actually, this is like an educational building and stuff, even though it's literally, like, you know, a residential dorm.

Ting: Oh really? Okay, that’s really interesting, I didn’t know that.

Reesa: Yeah, it's like really sneaky. That’s why we have one or two classrooms just like randomly scattered around places. I think I want to say that Broadway Hall also has a classroom. It's very strategic.

Ting: Oh my gosh! Okay. Thank you so much for bringing that to my attention.

Jane: There's like a lot of sneaky ways that Columbia tries to get around land use law, so they can be tax-exempt because otherwise you have to pay a lot to live here as a student, and it's clearly for profit. They operate kind of like a hotel. So like Reesa was saying.

Ting: Thank you so much! Like, first question, and we're already starting off great. I'm excited! So, for our next question, when statutes refer to exclusive or primary nonprofit use, what do those terms actually mean in legal practice?

Jane: I guess how I think about it is that, like exclusive use, I guess does not mean 100% purely educational activity, but I guess how courts interpret it is I think that they really they interpret it as more of like the dominant or primary use of the property that must further the nonprofit's mission. Legally, I guess exclusive doesn't necessarily mean exclusive. It means dominant use.

Ting: Hm…that's great. I just wanted to, first of all, define some definitions since listeners may not necessarily be super familiar with the topic in general. Do you have any add-ons, Reesa?

Reesa: For exclusive nonprofit use, I think the best way to define this would be that the organization itself needs to be exclusively organized and operated for charitable purposes, and there needs to be no semblance that they are trying to actually gain any money. And then for primary nonprofit use, it is...

Jane: So does it have something to do with a 501(c)(3) status, you think?

Reesa: There's different primary indicators. So what they do is to determine, to distinguish whether a nonprofit is either under the guise of the exclusive nonprofit use or the primary nonprofit use, they analyze, and by they, I mean courts, and by they, I mean like the IRC in terms of tax exemption status, they analyze the time and effort, like how staff and volunteers spend their time, the expenses. So they'll analyze the actual percentage of the budget spent on exempt versus non-exempt activities. That's a huge indicator of where their actual uses and intentions are. And then also their mission statements, but usually the guises are... They're not going to tell people that they're trying to make money under the mission statement. But there is this private benefit trap, per se, that says that if a nonprofit's primary activity is not like social welfare, but instead to like help a specific group of individuals, private enjoyment or something, then it just immediately fails the primary use test.

Ting: Just basically helping defining some terms, and on the topic of that, courts have interpreted exclusive use with some flexibility, often allowing universities to engage in limited commercial activity. How did that more flexible interpretation develop over time?

Jane: I guess when I think about… just to provide some examples of limited commercial activity, I think of like bookstores and like different ways for Columbia to make some money on the side of tuition, merch, etc. So I think that's pretty typical example of what exclusive uses, flexibility looks like. But I don't know.

Reesa: I can't think of any court-specific example, but I can think because over time universities have grown and added things like housing and dining and bookstore. Like that's not, you know, universities were primarily, like, for the courses and for research and academia. Even that has expanded way more than what the original founding of it was. But because they've added like housing, dining, and bookstores, courts have now realized that these extensions also now support education. So they become… the courts themselves now become more flexible and now have some leeway for like non-educational uses because like dining itself isn’t inherently educational, but when you put it into a university setting or practice, that’s the place in which like a non-educational thing can then be interpreted as something educational.

Jane: Yeah, like supporting even like selling bookstores to students and like selling these certain or like all these different still costly amenities to these students still help them achieve the end goal of education at our institution. Therefore, we should still be tax-exempt.

Ting: Hm…that makes sense. Courts often say revenue-generating activity is permissible if it's incidental to an institution's educational mission—so this is kind of what you guys touched on—what does incidental mean in practice?

Jane: I think it kind of just relates to maybe what we were saying. Reesa, critique me if you think I'm wrong. I feel more like these kinds of things at first were kind of incidental, being like, oh, these are some amenities we want to provide to our students to help them achieve this education. We are offering them, and that was kind of an incident that evolved into something that was more normalized, into, I guess, the practice of the larger private university. But that's kind of the way I think about it.

Reesa: Yeah, absolutely. It just means that incidental is like it's conveniently…it's a conveniently secondary aspect that actually helps the school's main purpose, which is education. So, like you could take Blue Java Cafe or like Cafe East or, I don't know, what else do we have on campus…

Jane: Like Joe’s.

Reesa: Or the fact that we chose interest flex relationships with Koronets and stuff like that. That then becomes like okay, because it is under the guise of supporting student life, and the supporting of student life, that is an educational purpose.

Ting: That makes sense because definitely Blue Java does not feel very strictly educational. That makes sense. To bring all of this conversation into the broader real-world context, recent cases on this topic, such as Fields v. Trustees of Princeton University, have challenged university exemptions based on commercial use. What do these cases reveal about the limits of current exemption doctrine?

Jane: Kind of just speaking on, I'll pivot back to that actual court case, but when I think about like exemption doctrine and how it's shifted and molded over time into being a way that universities can expand under the guise of the educational mission and serving the community, and subverting that definition into, like, something completely else. I usually think about Columbia's expansion into Manhattanville and their use of eminent domain, even as a private institution, and how they've kind of shifted those definitions in order to get the state to seize land on their behalf that they've considered to be blighted. I think that is kind of a primary, like a mirroring example of how these exemptions can grow into something that really affects entire communities on a completely different level.

Reesa: Yeah, I think especially with Fields v. Trustees of Princeton, I think that a case like this very much demonstrates how the courts are paying a lot more attention to attention to whether universities are actually now kind of stepping into acting like businesses, which I mean, I guess maybe this is an opinion, maybe this controversial, like I think is very much the case, especially with large universities like Columbia or kind of that league of institutions that really, really sells itself. But essentially, if a school is making significant profit from things unrelated to education, like we could even take the example that Columbia is like the largest private landholder in New York City itself, then courts can take away the tax exemption from that property.

Ting: Did you think these exemption doctrines were ever originally designed to accommodate this scale of activity in the first place?

Reesa: That's so interesting, actually.

Jane: I would say no. I mean, I maybe should have looked up when these doctrines were created, but I think that universities like Columbia and even like we can think about all the Ivies, like Yale, it's like also, I think, a really great example, have just expanded to like have such massive endowments that I think even like 50 years ago, I'll think a lot of people underestimated the power like almost like business power and like monetary power as well as like the social power of these institutions. So I think that my answer would be, I don't think so.

Reesa: Yeah, I don't think it was the underlying intention, but I do want to be cautious in that sense of, you know, a lot of these institutions, I mean, they were built to primarily serve the white and the wealthy and a lot of, even as like women, we're really not even, we were not in their original founding of what this educational institutions look like. So I think it's important to at least critique that in some sense, because you know, when you think about industrialization, that period of thirst for the scientific revolution and productivity and all of it, like money is a driver. And so again, yeah, I agree with Jane. I don't think the intention was, you know, these insane endowments, and I think the, again, the arguable corruption I think it holds today, but I do think that they definitely weren't blind to the way in which money would play a role in the creation of these institutions. Because I mean, these people are going to come and they're going to study. And I think the expectation always was they're eventually going to give back. And that's still the thing that reigns today with alumni networks and the endowments.

Jane: I don't know, I've been learning about this a little bit recently, and especially in the 1940s and with World War II, I think that there was a shift in the view of what the university serves. And in developing, I guess, wartime technology and medical technology, I think a lot of exceptions were given to these large universities to make them work for the United States in a way that would also help turn the military industrial complex. So I think a lot of those exemptions were fueled off of that part of history in order for the university to work for the military, to work for the government, etc.

Ting: Thank you for the insightful and historical context behind it. I definitely did wonder at what point was there like a shift in attitude? And especially like I don't think people realize that a lot of private universities are like one of the biggest landholders in major cities, especially in New York City. And so, like on that note, cities like New York City rely heavily on property tax revenue. When major institutions hold large amounts of tax-exempt land, how does that shape their relationship with municipalities?

Reesa: Yeah, I think this is something that we've already very much gotten into in their relationships. I mean, this is also aside from Columbia's expansion into Harlem, I mean, the gates within themselves. Like, did you actually know that the structure of Columbia, like the architecture itself, all of the buildings and the doors are built actually facing the opposite direction of Harlem, as like this insane kind of architectural reinforcement of the fact that it was so separate and they didn't want Harlem communities to taint, said Columbia. Anyways, that's also a thing that's very prevalent in Philadelphia at the University of Pennsylvania. Same thing in Providence with Brown University, like Jane said, this is a very much a thing. Relationship with municipalities, I mean, that comes down to the, I would argue, the people that are most affected, like you can look at campaigns by like, for example, the Morningside Heights Community Coalition, I think they're going to have a rally next Thursday about the gates and expansion. And like this has been an ongoing conversation that people have had against Columbia University and their role. And then they have to always kind of readjust what those agreements look like in the relationship to the university with the actual city itself. I mean, there's the community board agreement, I forget 12…CBA 12. Is that what it is, Jane?

Jane: That's what I think so, but I don't, I'm not 100% sure.

Reesa: And that is in that agreement, actually. Columbia was only allowed to build and set up their main campus on like that 116th area to the city that they would keep 116th always open for community members so they could use it as a commute, they could use it as a community space, and everything. And now that is an extreme violation, of course. And so the enforcement power of that obviously is slim at the municipal level, especially with everything going on in the argument, so they can make federally for the gate closures. But yeah, I think it definitely it fraughts the relationship greatly.

Jane: I think also, I mean, I've just learned a bit about what hostile architecture can do. This is like a little bit from like the legal lens. But I think that Columbia and Barnard were created with these large, like, grandiose fences that almost create like a fortress-type feeling on campus. And I think a lot of students have grown to feel like this creates a sense of, quote unquote, safety. But I think that it's really important to understand that a lot of community members, whom this university and like the benefits of this university and the university's money were essentially promised to, through law, feel very excluded because of hostile architecture. And because of these large gates and because of the security guards. And I think that it's kind of created this feeling of like this is something I can't access as a member of this community as someone who's been living in the Harlem and Morningside Heights area for a long time. I think that's definitely something that we really need to talk about as Columbia students and Barnard students, and how we can break this bubble that we live in, and how we can better serve the people who are around us that the university is affecting every day.

Ting: Yeah, that's perfect. And even though you said that this is shifting away from a legal lens, I think it's very important to acknowledge that I mean, as students, we are here for only four years, and the community members are here for however long they choose to reside here. And that's just a different time frame. And it's kind of crazy how we're shifting their environment when they're the original residents here.

Reesa: Yeah, I always think that's so funny. Like, sometimes I'm walking to like West Side or something. And I'm like, yeah, I'm just like in my college area, like getting some Tru Fru or like a snack. But it's like, oh, these are real people's grocery stores. I am very much an outsider in this. And I'm going to be here very temporarily. Shaping back to what we really started talking about with exemption and everything, when universities are not paying taxes on these large areas of land and these properties, municipalities, they feel like they're losing money. And that creates its own set of tension within itself that might not be at the community level, but very much at the city government level. And then that, you know, the animosity that can exist between the university and city government, you know, that creates tensions that lead into a lot of aspects of city life.

Jane: I also think that there's also an interesting tension between Columbia's argument against how they are like an economic driver or like a large employer in the area, and how I guess that quote unquote supports the area around them and how like almost that justifies some of the actions that they have taken when in reality, I feel like the lot of the pay is not fair. There's a lot of different angles to this that I think Columbia argues…Columbia argues like a wide array of different angles as to why they are benefiting the community. But I think it's really important to be way more critical of what they're saying.

Ting: Yes, for sure. I want to introduce another aspect to this. Many cities turn to payment in lieu of taxes or pilot agreements instead of litigating exemption status. What does the reliance on pilots tell us about the adequacy of existing statutes?

Reesa: I think that this continuous reliance really just demonstrates that the law itself, it doesn't fully solve the issue. And so instead of fighting within court cities and universities, they make deals where the university pays something, like, voluntarily, there was the REPAIR bill. Do you remember the REPAIR bill? That was the Repay Egregious Payments and Invest It Right Act. This was a huge bill trying to pass through the New York Senate, I believe. And this was last year, and they kind of, it really got really lost and bogged down with everything else that kind of has happened. But it was basically trying to entice NYU and Columbia to actually use their money for the public benefit that they claim to.

Jane: And it didn't get passed or anything? I don't know much about it.

Reesa: It didn't. There was a lot of like advocacy around it, like at the lower level organizing and stuff. But I don't know, I think that that's definitely a way in which people have tried, municipalities have tried to hold these actual universities accountable. But I am not aware of any times or examples in which that has been successful.

Jane: And I think, I don't, I wouldn't necessarily use the word “reliance” on pilot programs, because a lot of them, as you were saying, Reesa, just haven't really gone through or been successful. I think that the idea of them, even if they were to go through, still is heavily relying on, it doesn't make okay the fact that these large private universities that act like corporations in many senses are, like, tax-exempt and don't serve the community around them. And even if there are student movements that attempt to use Columbia's money for the greater good, it's such so fractional and so minimal as to what like Columbia's trustees and the endowment and like what that insane amount of money could do, even just a fraction of that same amount of money could do to help community members that have been affected by the ongoing expansion.

Reesa: It's, I think, honestly, this whole, especially question, is super comparable to just the kind of whole debate in America right now on whether or not we should tax billionaires more, right? It's the, you know, they want to keep their money, especially these business corporations, which are educational institutions. And so we're kind of trying to really see, okay, does the holding of more money, is that inherently inequitable? And if so, can we actually develop laws or programs that are going to combat that? And we're seeing right now the answers kind of no, it's really hard to get around that, and actually keep people accountable with it, people and institutions. But I'm hopeful. I feel like we're really gonna, unfortunately, I think it does come at the cost that we have to, it's come to the extreme of how much power they have for us to have to step in and dwindle it.

Jane: I think that if we're trying to understand from the university's perspective, which I think, like, I try to always understand before I make the critique is they're like, “oh, we’re able to provide this elite level of education to students who have come here through merit,” – which is a whole other discussion – “that, that deserve like this high level of education at top, top professors, etc”. And I think we can have that conversation. But even if Columbia were to pay their taxes, I still think that Columbia would be an extremely elite institution. So I think that that is just where the argument completely falls flat. The endowment's huge. Columbia has so much money. We have so many, so many alumni. So I think from that angle of the university, like what you were talking about, Reesa, with the billionaires, if you tax billionaires, they're still going to be rich, you know.

Ting: Thank you both so much! As we are a little bit short on time, I want to wrap it up and leave the listeners with one key takeaway. If you could condense your beautiful ideas throughout this entire interview into one key takeaway for listeners new to the issue, what would be the one key takeaway?

Jane: Okay, I guess I'll go first. Basically, I just hope the one key takeaway would be that where you go to school and where they spend their money is, and how they intentionally act has a really big impact on the community around you, even though the university attempts to create a more bubble effect that will protect you from this effect they have on the community around you. It still does have an impact. Try to remove yourself from the Columbia bubble and the bubble that the gates try to create, and try to get more involved if you have the time, and the energy, and the resources.

Reesa: Yeah, I totally agree. I think that our student positionality is a lot more powerful than we might think it is. Right? We are, I mean, we are inherently funding these institutions with our tuition and everything. And so, you know, grappling with that is it's hard, but it's important. But just being as active as you can in institutions, community environment, I think, is very important. I think that a lot of communities actually really lean on the voices and the work of the students that come temporarily to the area, and then they leave. And I think that as long as you are being aware enough to use your position and use your role correctly. We have to hold, of course, these institutions accountable. I mean, educational institutions are very important. We're not calling for the dissolution of it, but it's more so to interact with the communities around the better is important. So we need to do our job as students to leverage that power.

Jane: 100%. I think it's definitely just like an accountability thing.

Ting: Just for the sake of the betterment of the community around us. Is there any final thoughts you both have that we haven't addressed already?

Jane: Uh…Join HEP.

Reesa: Yeah, there's so many cool things to do in it. Also, as a Columbia listener, definitely try to get involved in West Harlem and the Harlem area in general. There's so many organizations, you know, you attend a meeting, you talk to people. I mean, you really start to learn the impact that Columbia is having. And again, staying ignorant to that is, it's not good. So just involve yourself and ask questions, and recognize your place as a Columbia student.

Jane: I would agree with that. Stay critical, and also, HEP has so many different cool branches that you can join. I think it has a place for anyone who wants to try to get involved.

Ting: Yes, definitely. I support the HEP plug.

This episode started with some topical legal questions: how property tax exemption works, and how courts decide what counts as nonprofit use.

But what quickly became clear is that property tax law doesn’t operate in a vacuum. The standards courts apply, like “primary” or “incidental” use, are flexible. And in practice, they’ve stretched to accommodate universities that now operate far beyond classrooms, into housing, retail, and large-scale urban development.

That flexibility reflects a broader assumption built into the law: that universities serve a public good. And in many ways, they do! But as our experts pointed out, that assumption can also obscure when university activity starts to resemble and focus on commercial development more than education.

First, there’s a problem with how “primary” use doesn’t actually mean exclusive, and how something as simple as placing a classroom inside a residential building can help justify tax exemption. And how “incidental” uses, things such as dining, retail, or student services, have expanded over time, becoming normalized parts of university.

Second, there’s also a problem with how cities respond. Instead of consistently challenging tax exemptions in court, municipalities often rely on workarounds such as PILOT agreements, informal payments that acknowledge the limits of existing doctrine without really fixing any of it.

These legal choices have complex consequences. They determine how much revenue cities like New York can collect. They shape relationships between universities and local governments. And they affect neighborhoods like West Harlem, where university expansion is directly correlated with rising costs, displacement pressures, and long-standing community concerns.

At the same time, this conversation also turned inward.

As our guests emphasized, students are not outside of this system. We benefit from powerful institutions, and we move through neighborhoods that those decisions directly shape, even if only temporarily.

So the key takeaway isn’t just strictly about whether property tax doctrine is working as intended. It’s also about recognizing the role universities play as major landholders, and thinking more critically about what that means for the communities around them.

And for those of us on a college campus, being a more active agent is simple: it can start with paying closer attention to how the space around you is organized, and finding ways, however small, to stay engaged with the communities these educational institutions affect.