Two Camden charters lose tax-exempt status

After more than three years of failing to file required IRS forms, two Camden charter schools have lost their tax-exempt status, a requirement to be granted a New Jersey charter.

LEAP Academy University Charter School and Camden Pride Elementary Charter School were listed Wednesday by the IRS as having their 501(c)(3) status revoked. The IRS automatically revokes an organization's tax-exempt status if it fails to file Form 990 for three consecutive years. Both schools officially lost their status in 2010.

The state Department of Education will be "examining these issues with each of the schools to determine the next steps we will take," spokeswoman Barbara Morgan said Wednesday.

The nonprofit board of a charter school, which is the entity granted a charter, must have a valid 501(c)(3) certification, Morgan said.

Carlos Pérez, chief executive officer of the nonprofit advocacy group New Jersey Charter Schools Association, said this was the first time he had heard of charter schools losing their tax-exempt status. He was not sure whether that could result in the revocation of their charters, which are required for operation as state-recognized public schools.

LEAP Academy officials said in a statement that they had received "conflicting advice" on the requirement for 990 filings and were notified of the IRS action only in December 2011. They have been working to restore their tax-exempt status, filing overdue forms in March, said spokesman Adam Dvorin.

Officials of Camden Pride Elementary School, one of three schools under the Camden Charter School Network, did not respond to calls for comment. Messages left at the homes of cofounders Joseph Conaway and William Helmbrecht were not returned Wednesday evening.

Aside from possible consequences through the state Department of Education, LEAP's $8.5 million tax-exempt bonds could be in jeopardy. In 2003, the Delaware River Port Authority issued LEAP the special-project bonds, guaranteed by Rutgers University, for facility construction.

Part of the compliance requirements for 501(c)(3) bonds is that after their issuance, the tax-exempt organization must remain a qualified 501(c)(3), said Michael Knoll, a University of Pennsylvania Law School professor and tax law and policy expert.

However, because the bonds are guaranteed by Rutgers-Camden, which is tax-exempt, it is not clear what might happen with the bonds.

Rutgers University spokesman Michael Sepanic said: "Rutgers' commitment remains unchanged. We are reviewing this situation."

Last spring, LEAP came under scrutiny for another financial irregularity.

A state audit issued May 21 showed that LEAP used $136,368 for nonallowable expenses such as field trips and salaries during the 2009-10 school year. LEAP has paid back the full amount.

Founded in 1997, LEAP is one of Camden's more prominent charter schools, with a large downtown location. In August, LEAP will open a new 60-student high school that will focus on science, technology, engineering, and math, and a new kindergarten-to-third grade school. LEAP Lower School (K-6) and LEAP Upper School (7-12) are one block apart on Cooper Street.

During the 2011-12 school year, 90 percent of LEAP's $12.8 million budget came from the Camden School District. Federal funds were expected to provide $722,463.