For the latest evidence of the town-gown divide, look no further than New Jersey, where earlier this summer residents of Princeton banded together to sue the prestigious school in their backyard. The residents argued that Princeton University, which boasts the largest endowment per student in the country, should no longer be entitled to its tax-exempt status because the school makes money—from its scientific patents, ticketed concerts, on-campus eateries and more. The Ivy League school is operating like a business, the plaintiffs say, so the tax code should treat it like one.

The conflict isn't going away. In June, a state tax court judge said the case had merit and refused the school's request to dismiss the case. Princeton officials don't seem worried: Reacting to the judge's decision, a school vice president said that he expected any adjustments to its tax bill to be "quite modest."

Perhaps, but the townies still have a point. According to the lawsuit, the university took in over $115 million from patents in 2011, of which $35 million was given to various faculty members. The lawyer for the plaintiffs told the Times of Trenton that "People in Princeton pay at least one-third more in taxes because the university has been exempt all of these years." If all of the school's property were taxed, the bill would come to roughly $28 million a year, instead of the roughly $10 million the university is now contributing voluntarily to town coffers.

The tax controversy is also springing up elsewhere. Last year, the mayor of Providence, R.I., suggested that it was time for his city's largest employer, Brown University, to increase its tax payments. "Our taxpayers already subsidize the tax-exempt institutions in this city," Mayor Angel Taveras said. "It takes the revenue collected from 19,000 taxpayers" to account "for the $38 million in property taxes not paid by Brown University," he said at a press conference.

In March the mayor of Pittsburgh, Luke Ravenstahl, sued the University of Pittsburgh Medical Center on grounds that the teaching hospital had a "profit motive" and therefore shouldn't be tax exempt. The city sought to recover payroll as well as property taxes going back to 2007. The medical center filed a countersuit, claiming the city's actions violated the due process and equal protection clauses of the Constitution because it singled out the hospital among all of Pittsburgh's nonprofits. The city's lawyers call this reasoning "bizarre," and have filed a motion for it to be dismissed.