A year ago at the November 25 town council business meeting, Ordinance 2013-17 authorizing a lease of the Schenck Farm to the West Windsor Historical Society was scheduled to be introduced. Then-Council president George Borek mentioned that this ordinance had been pulled from the agenda and would be considered at a later time.
The proposed ordinance was discussed at the December 9 work session, where land use manager Sam Surtees confirmed that although the society was registered as a New Jersey nonprofit organization, it was not federally recognized as a tax-exempt 501(c)(3) organization. Township attorney Michael Herbert then read the governing state statute and confirmed that federal law must be complied with to proceed with the lease. Councilwoman Kristina Samonte agreed that registration as a 501(c)(3) would have to be obtained before a lease could be signed. Further action was delayed.
An identical ordinance, 2014-20, was introduced at the November 10 council meeting. But as President Bryan Maher mentioned, and as discussed at length during public comment, the same issue that was brought up before has apparently never been addressed.
As far as I am currently aware, the Historical Society still has not shown that it is a tax-exempt 501(c)(3) organization at the federal level. As Herbert himself discussed last December, such recognition is required according to New Jersey law dealing with leasing public property to organizations of this type. The full citation is N.J.S.A. 40a:12-14, Subsection (c):
“In the case of a lease to a nonprofit corporation or association for a public purpose, the lease shall be authorized by resolution, in the case of a county, or by ordinance, in the case of a municipality, and may be for nominal or other consideration. Said authorization shall include the nominal or other consideration for the lease; the name of the corporation or corporations who shall be the lessees; the public purpose served by the lessee; the number of persons benefiting from the public purpose served by the lessee, whether within or without the municipality in which the leasehold is located; the term of the lease, and the officer, employee, or agency responsible for enforcement of the conditions of the lease.
“Said ordinance or resolution shall also require any nonprofit corporation holding a lease for a public purpose pursuant to this section, to annually submit a report to the officer, employee or agency designated by the governing body, setting out the use to which the leasehold was put during each year, the activities of the lessee undertaken in furtherance of the public purpose for which the leasehold was granted; the approximate value or cost, if any, of such activities in furtherance of such purpose; and an affirmation of the continued tax-exempt status of the nonprofit corporation pursuant to both State and federal law.”
Contrast the above comprehensive requirements with the much-abbreviated version given under the “Now therefore be it ordained” part of the proposed ordinance:
“2. Pursuant to N.J.S.A. 40a:12-14, the Historical Society shall annually submit a report to the Township administration setting out the use to which the leasehold was put, the activities of the Historical Society undertaken in furtherance of the above public purpose and an affirmation of the continued tax-exempt status of the Historical Society.”
The omission of most of the statutory requirements, especially the final phrase “pursuant to both State and federal law,” was improper both in 2013 and now. There is also the issue of a possible lapse in the society’s New Jersey nonprofit status, which also needs addressing.
The IRS explains the difference between federal and state tax-exemption requirements on its website: “Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions. Although most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as exempt from federal income tax, an organization must meet requirements set forth in the Internal Revenue Code. See Types of Tax-Exempt Organizations or Publication 557 for more information.” An online search for the above terms will quickly bring up all the required information and procedures.
In summary, the Historical Society needs to take the initiative to obtain federal tax-exempt status as a 501(c)(3) organization, and they must also show continued recognition as a nonprofit at the state level. I encourage them to acquire the necessary documentation so that the ordinance and lease can be finally approved.
John A. Church
West Windsor
