Expert: Phil Nicols - 11/20/2008

Question
Phil,

I am a member of a church in NJ that has been leasing a portion of our space to a for-profit daycare for many years.  Although the church is exempt from taxes as a non-profit organization, we have recently learned that we could be liable for property taxes on the space that is occupied by the daycare.  We are concerned about this and want to be legit.  We would like to better understand what our potential exposure is.  Is there a limit to how far back we can be charged for back taxes?

Thanks.

Answer
whoa! that's a good one!??

first, Im based near Toronto Canada so, we have different laws, Prime Minister vs President although we pay more attention to your elections than we do for our own :~)

2) Im no expert on nonprofits, although I hear they can be very profitable.

3rd, Im not a tax lawyer.

based on what I do know, I would think that it would depend on if the daycare was set up as a non profit (NP) organization. if it were, I doubt you would be exposed to taxes.

even if it isn't set up as a NP, I would think it would depend on how the "rent" is described. Is it "rent" or is it a series of "monthly tax deductible donations"

the outstanding factor is ALWAYS, "Who has the best lawyer" - AS you know, we've seen guilty people get off with murder and innocent people fried because of some technicality or bad evidence. Law is never black and white -- its gray AT BEST!

Here's what you need to do:

1) Find a good NJ TAX Lawyer.

2) Find a good NJ NON PROFIT Lawyer -- one that has experience in Non Profit status. I highly doubt you will find the same in one -- they will be separate people - maybe even separate firms.

3) please write back to me and let me know what happens. Im really interested to see what they have to say - direct email "pnicols (at) stockwellrealty.com"

Sorry I cant be of direct help, but maybe point you in the right direction. A real estate broker is not going to help you in this case.

best, Phil