The city and county "did not explain why," said a frustrated Diana L. Walker, executive director of Martin Luther King Jr. Day Care in South Camden. "It feels like a game is being played."
Martin Luther King Jr. Day Care, which was assessed at $165,000 in 2010, is running with a slight deficit, Walker said, so it cannot afford to pay $7,500 in property taxes.
Year after year, Walker's business has been certified as a nonprofit by the IRS, she said. The fees she collects are minimal; about 90 percent of her clientele are low-income parents, who are not charged market rate.
"The underlying assumption is that we make a profit, but we don't," Walker said.
Then there's the education component. Some of Camden's nonprofit day cares say they operate just like a school with a curriculum and lesson plans, and, like schools, they should be not be taxed.
"The line between a day care and preschool is somewhat muddy," said Saul Wolfe, a Livingston lawyer in real property valuation litigation and a former tax assessor in Newark. "At what point is it educational?"
State statutes allow tax exemptions for schools but do not "spell out what constitutes a school," he said.
While the city was undergoing a full property revaluation over the last couple of years, the Camden County Board of Taxation helped sort through records and found what could be considered a costly mistake. Various Camden day cares, with a combined assessed property value of close to $3 million, including more than six day-care centers owned by Respond Inc., were listed as tax-exempt.
The county tax administrator's interpretation was that if the day care is not operating within or as part of a church, it should pay taxes.
City officials did not respond to repeated requests for an interview with tax assessor Frank Librizzi to comment on the policy.
"In the past . . . an assumption was made that they were tax-exempt," city attorney Marc Riondino said.
Letters were sent out to the day cares in December and January notifying them about the revocation of their tax-exempt status.
Many of the day-care directors interviewed for this article said they have 501(c)(3) certification as "nonprofit" from the IRS. However, Heppe said that nonprofit certification has "nothing to do with" municipal property taxes.
To be exempt from property taxes, an organization must fill out an "initial statement" form prescribed by the state Division of Taxation and return it to the municipal tax assessor's office.
El Centro Comunal Borincano day-care executive director Sonia Plaza, like several other directors, said she has always filled out the form. A 2006 letter signed by Librizzi states that El Centro is "tax exempt as of the 2005 taxing year."
Initial statements are to be filed every three years. Plaza said she sent her most recent form in October.
In that application, which specifically says that federal 501(c)(3) status is "not controlling with respect to New Jersey property tax exemptions," the organization must attempt to prove it falls into a tax-exempt statute, which includes educational, religious, and charitable organizations.
Although the assessor makes that initial decision on tax exemption, the decision can be appealed to the County Board of Taxation. Camden City officials went as far as to say they encouraged the day cares to appeal.
One day-care owner already lost her first appeal to the county tax board.
In January 2010, El Centro Comunal Borincano was one of the first day cares to receive a tax-exempt revocation letter at its building on Martin Luther King Boulevard in downtown Camden.
"I said, 'Wait a minute, it must be a mistake because we're tax-exempt,' " executive director Plaza said.
Since then, Plaza has been trying to fight against her new "for-profit" status, which entailed a $28,900 tax bill for 2010. She will soon receive her 2011 tax bill.
"We don't have that kind of money," she said. "I went through so much to have this building built, and now they are giving me a hard time." The building was completed in 2007.
She is filing a taxpayer complaint against the city.
Contact staff writer Claudia Vargas at 856-779-3917 or firstname.lastname@example.org.