Issue now before tax court as township searches for ways to increase revenues.
By: Shanay Cadette
WEST WINDSOR The township has challenged the tax-exempt status of two organizations that bill themselves as nonprofits International School Services Inc. on Roszel Road and Community Options Inc. on Alexander Road as it searches for ways to increase tax revenues.
Both organizations were removed from the tax-exempt list in 2003 after the township conducted a review of properties and found they did not meet the state criteria for exemptions. The organizations appealed the removals to the state tax court.
ISS works to further educational missions around the world, while Community Options trains and helps disabled people develop employment skills and find homes. Both were granted tax-exempt status in the 1990s, but Township Attorney Michael Herbert said, "We’re very confident in our position that they should be paying taxes."
Based on the township’s assessment of the two properties, the organizations could be forced to pay more than $100,000 in taxes a year if the tax court decides in the township’s favor, Mr. Herbert said.
Most nonprofit property, outside of higher-education facilities, is taxed, Mr. Herbert explained. A few nonprofit organizations such as cemeteries, higher-education institutions, religious entities and groups that contribute to the "moral and mental improvement of men, women and children" are considered tax-exempt.
State law spells out the need for nonprofit organizations to directly not indirectly seek to uplift the general public mentally and morally to be considered tax-exempt, Mr. Herbert said.
ISS meets that test, according to Mark Schorr, the attorney who represents the organization.
He said nothing has changed since ISS was first granted tax-exempt status in the late 1990s. Back then, a former township attorney said ISS was tax-exempt because its buildings are used "exclusively for the moral and mental improvement of men, women and children."
Mr. Schorr explained ISS is dedicated to furthering American-style education internationally through the planning, designing and management of schools. It also provides consultant services and other educational needs.
"We think the exemption was appropriately granted in the first place," Mr. Schorr said. ISS is "directly involved in education overseas. They do the same thing as school districts in New Jersey."
Mr. Herbert argues ISS indirectly promotes or encourages other educational institutions through gifts of money, property, payment of salaries, fellowships and grants. It operates on the behalf of for-profit companies like BP-Amoco, Lockheed Martin and others to assist with financial management, publishing, supply purchases and other needs related to education.
ISS "doesn’t qualify under the state statutes because technically the beneficiaries of that service are private corporations that are profiting themselves," Mr. Herbert said.
The ISS building is also not used as a college, school, academy or seminary, he said.
"ISS’s activity of merely supporting certain facilities that are ‘educational in character’ (either financially or otherwise) is not tantamount to carrying out the purposes" of educational institutions, Mr. Herbert wrote in a memo.
Community Options is not tax-exempt for similar reasons, township officials said.
Although the organization provides training and help for disabled people, some of its office space is leased to various parties for a monthly charge so the groups can conduct business. That use violates the moral and mental improvement standard under state law.
Mr. Herbert claims all of the tenants who use office space at Community Options are profit-making groups who would never qualify for tax exemption themselves.
"The training of the disabled to provide copying, food services and custodial services is only incidental to this lease," Mr. Herbert wrote in a memo. "While the leasing out of conference and office facilities may indirectly benefit Community Options’ charitable purpose of training disabled persons by providing conveniently located offices in which those individuals may work, it is not ‘reasonably necessary’ to fulfilling the organization’s teaching mission."
Attempts to contact officials at Community Options on Monday were unsuccessful.
Township officials could not say if there are other nonprofit organizations that should be paying taxes. "I hope (this is) a rare case," said Mayor Shing-Fu Hsueh.
Mr. Herbert predicts more municipalities will closely examine the tax-exempt status of nonprofit groups because "every town is strapped for cash because the state has reduced revenues to municipalities significantly," he said. The search for potential municipal revenues is "going to become a critical issue."