East Stroudsburg University is heading to court over a $700,000 tax bill.
But it's students and parents who could end up taking a hit in the wallet.
At the center of the dispute is a corporation called University Properties Incorporated (UPI).
It's a non-profit that built and now runs two brand new dorms on campus.
Two 500 unit dorms are at the center of a debate on the East Stroudsburg University campus.
“The school district and the borough believe those residence halls to be taxable despite the fact that UPI is a tax exempt organization under both federal and state law,” said Richard Staneski, vice president of finance at East Stroudsburg university.
“This is a separate entity from the university," added Christopher Brown, solicitor for the East Stroudsburg School District. "If these were university owned dormitories we wouldn't be here. No one questions that the university is exempt from taxation.”
ESU claims the dorms are built on land owned by the university so they are exempt from property taxes.
That didn't stop Monroe County from sending a $700,000 tax bill for the new dorms at ESU.
UPI appealed the decision and won. UPI lawyers argued it's because the company is a charity.
“The school district disagrees with that decision for this reason," said Brown. "They've applied as a charity, but they don't do any charitable work.”
So the school district is taking the case to court.
University officials say if UPI loses housing fees could rise.
“We're going to have to increase charges to students to cover that additional cost," added Staneski. "That's a lot of money for a student.”
“That's true for every other landlord, or at least it's equally true for every other landlord in the country," added Brown. "Taxes get passed on to tenants all the time.”
So far the borough has not filed a lawsuit against UPI.
The non-profit has stopped plans for construction of a new building until they get a court ruling.