At first blush, Jefferson Township's attempt to block tax free status for Oorah's kids camp seems unjust and doomed to failure. But that may only be at first blush. A deeper look may favor Jefferson Township's claim that Oorah is not a true charity.
Charity in Taxes Tussle
Group Behind Kars 4 Kids Aims to Be Exempt From an Upstate Town's Levies
JAMES CAMPBELL • WSJ
A town in upstate New York is bracing for a fight after its largest private taxpayer—the group behind the car-donation program Kars 4 Kids—applied to be exempted from real-estate taxes on the grounds it is a charity.
Oorah Inc., which derives most of its income from Kars 4 Kids, has told officials that it wants to stop paying $306,000 a year in county, town and school taxes on two camps it owns in Schoharie County in the Catskill Mountains.
Local officials say the loss would be a severe blow to budgets already strained as a result of damage sustained during Hurricane Irene.
While Oorah has been granted federal nonprofit status, officials in Jefferson Township, one of the two towns where the camps are situated, have hired lawyers and accountants to fight the tax effort on several grounds.
"They have to in fact satisfy the assessing authorities that the property is being used for a tax-exempt charitable purpose," said Jefferson Supervisor Daniel Singletary.
Mr. Singletary said Jefferson would be making a vigorous case to the county assessor that Oorah's application for nonprofit status should be rejected.
Oorah, an Orthodox Jewish charity, is the town's biggest nongovernment taxpayer and last year contributed $208,399 to its budget.
The fight erupted after negotiations between Oorah and Jefferson over a separate issue ultimately crumbled. The charity wanted to issue $10 million in tax-exempt bonds through Schoharie County's industrial development corporation for improvements to the camps.
During talks over the bond issue, Oorah offered to pay Jefferson $41,000 a year in lieu of taxes for five years, said the charity's spokesman, Andrew Moesel.
"In light of all this, as a charitable organization entitled to a complete exemption, and in the face of our disappointment over the town's response to Oorah's offer, Oorah could not justify diverting money from its mission to pay the full tax rate—and one that represented a substantially increased assessment—as if Oorah were a for-profit company," Mr. Moesel said.
The tussle centers around two youth camps that between them have an assessed market value of $11.1 million.
Oorah bought a camp in Gilboa in 2006; the second, in Jefferson, was purchased in 2009. The charity has paid real-estate taxes on both properties since then, though its contribution to Gilboa's bottom line isn't as significant as it is in Jefferson.
Based in Lakewood, N.J., Oorah describes itself in tax filings as an outreach organization imparting Orthodox Jewish education, values and traditions.
It operates Kars 4 Kids in states nationwide through an associated entity called J O Y For Our Youth, according to tax filings. A catchy jingle advertising the donation program's toll-free number is commonly heard in New York City, urging listeners to donate their used vehicles.
In 2010, Oorah had $22.4 million in revenue, $19.5 million of which came from Kars 4 Kids, according to the most recently available federal tax filings.
That same year, it spent $6.3 million on charitable programs, including $3.5 million on the youth camps, according to filings with the New York Attorney General's Office.
Mr. Moesel, the spokesman for Oorah, said the remainder—roughly $14 million—was spent on capital improvement on the upstate camps and other facilities "which we believe will further our charitable mission."
Oorah's application for tax-exempt status, submitted in January, comes at a sensitive time for local government: Schoharie County is facing a deficit this year, said County Treasurer William Cherry.
"A significant percentage of our tax base was washed downstream with Hurricane Irene," he said.
He said seven months after the floods, the cost of the damage has yet to be fully assessed: "We can't measure it yet because so many homes and business are still in a state of indecision about whether to rebuild. We do know that the damage to the buildings and bridges and roads which belong to the county is at least $50 million."
Oorah's tax bill also supports 5% of Jefferson's annual school budget.
Jefferson plans to ask the county assessor to probe Oorah's finances and purchase of the property. Mr. Singletary said ownership of the camps recently was shifted from a subsidiary without tax-exempt status to the charitable parent organization.
"The properties were purchased in December from Oorah Resorts LLC in order to qualify for tax exemption," he said. Property records indicate the transfer was made for $1.
"Needless to say, we have to unwind all of this, and Oorah has an obligation to provide our assessor with enough information to prove that Oorah Resorts is not a guise or pretense for making a pecuniary profit," he said.
Mr. Singletary said he expects the county assessor also to consider legal issues involving Oorah and its associated organizations.
Mr. Moesel said: "We are confident Oorah meets all requirements for tax-exempt status in New York."
In 2009, J O Y For Our Youth agreed to pay $65,000 in settlements in Pennsylvania and Oregon after it was accused of misleading donors about the religious nature of the organization. Oorah didn't admit any wrongdoing.
In 2010, as part of its application for the tax-exempt bonds, the group told Schoharie County officials it was under investigation in New York and New Jersey in relation to the operation of Kars 4 Kids, according to a document described to The Wall Street Journal.
It also said it was being probed at the time by the New Jersey Attorney General over real-estate transactions involving Eliyahu Weinstein, a Lakewood, N.J., businessman indicted in 2010 on federal charges that he was running a Ponzi scheme. He has pleaded not guilty.
The investigation into Oorah's dealings with Mr. Weinstein, the document said, was prompted after bank records subpoenaed in a lawsuit brought against Mr. Weinstein revealed that Oorah had transferred $325,000 to one of his creditors.
Oorah also said in the 2010 document that J O Y had been subpoenaed by the New Jersey Attorney General over its fundraising practices but that it had since learned the matter was no longer being pursued actively.
A New Jersey regulatory official familiar with the investigation said that statement was incorrect. Mr. Moesel said its statement in its application was correct the time it was made.
"In terms of whether the investigation is 'active,' we are not aware of any activity, but have never been advised about the status," Mr. Moesel said.
A spokesman for New York Attorney General Eric Schneiderman said the office wouldn't comment on ongoing investigations.