Two Camden charter schools scramble to restore tax-exempt status
Charter schools across New Jersey leverage their federal tax-exempt status to enhance their classrooms and expand their facilities.
Charter schools across New Jersey leverage their federal tax-exempt status to enhance their classrooms and expand their facilities.
While the state doesn't require charters to have 501(c)(3) certification to operate, those with the designation can entice donors with the promise of a tax deduction for their gifts. They also can gain access to grants and apply for tax-exempt bonds, said Carlos Perez, chief executive officer of the nonprofit advocacy group New Jersey Charter Schools Association.
But if that the status is missing or revoked, the benefits disappear, said IRS spokesman David Stewart.
That's why two Camden charter schools that lost their status are trying to get it back.
Camden Pride Charter School, part of the trio of charter schools under the Camden Charter School Network, and LEAP Academy University Charter School had their 501(c)(3) status revoked by the IRS in November 2010 and were notified about a year later of their failure to file Form 990 for three consecutive years. The schools' predicament became public a couple of weeks ago.
LEAP's urgency to restore its status is to avoid losing the tax exemption on $8.5 million in bonds. In 2003, the Delaware River Port Authority issued LEAP the special-project bonds, guaranteed by Rutgers University, for construction of its high school. Part of the compliance requirements for the bonds is that after their issuance, the tax-exempt organization must remain a qualified 501(c)(3).
Camden Pride is attempting to get clarity from the IRS and have a good record with its donors, said cofounder Joseph Conway.
He said he had received conflicting information from the IRS about the filings required for its three schools.
"We don't get the same answer twice," he said Wednesday.
Conway said he hoped to resolve the issue soon so the school could raise funds for expansion and continue to receive grants from foundations. Some foundations donate money only to certified 501(c)(3)s. For example, the Campbell Soup Foundation gave $10,000 to Camden Promise Charter School in 2011 for its summer program.
Despite the unresolved 501(c)(3) status, LEAP Academy University Charter School has continued with its planned expansion.
In a letter received Jan. 17 by the state Department of Education, LEAP asked to increase its enrollment in anticipation of a new school near Petty's Island in Cramer Hill. There is a 21-day period for public comment before the state decides, said Department of Education spokesman Richard Vespucci.
This is LEAP's second attempt at getting the plan approved in time to open for the 2014-15 school year. The state denied the proposal in April because of the state's investigation into LEAP's mismanagement of federal Title 1 funds. The school has since repaid $136,368 it used on non-allowable expenses in 2009-10.
Financing for the Cramer Hill campus has not been finalized, said LEAP spokesman Adam Dvorin. State law does not allow charter schools to use state funds to build new facilities. However, a mortgage may be obtained to purchase an existing building and renovate it, Perez said.
In August, LEAP opened a $12.4 million science, technology, engineering and mathematics (STEM) school, its third school along Cooper Street in downtown Camden. The school purchased the building through a private loan program and a $10 million mortgage.
TEAM Schools, a KIPP charter-school network in Newark, N.J., has a fund-raising team under its affiliated nonprofit and 501(c)(3) certified Friends of TEAM, which has attracted more than 100 donors, from foundations to local residents.
"A lot of it is front-loading for new schools," said the founder and CEO of TEAM Schools, Ryan Hill.
TEAM, which runs five charter schools in Newark, is working to develop an additional five schools in the city.
"Single charter schools," he said, "don't necessarily need to fund-raise. . . . Multi-charters definitely need to fund-raise."
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