A Charitable Tax Exemption is Not Lost Merely Because a Qualified Organization Actually Conducts its Activities Through a Series of Related Entities

Granite State Management & Resources v. Concord
Granite State Management & Resources v. Concord
No. 2012-436
Wednesday, August 21, 2013

The Plaintiff (GSMR) is one of several organizations that comprise the “NHHEAF Network”. This is a group of affiliated non-profit organizations, qualified as such under the Internal Revenue Code, that deals with a variety of student loans for higher education, including the federally guaranteed student and parent loan program. These organizations occupy a building and its associated parking lots in Concord.


The relationship between the organizations is complex, as is the historical course of dealings between them and the City regarding property taxation of the land and buildings. By 2009, the City determined that GSMR did not qualify for a charitable tax exemption, and assessed tax. After a petition for abatement was denied, the matter was appealed to the Superior Court, which determined that GSMR was indeed entitled to the exemption. The City appealed to the Supreme Court.


The Supreme Court ultimately affirmed a portion of the trial court’s order, reversed other parts, and remanded for further proceedings.  The court analyzed GSMR’s tax status using the four-part test set out in ElderTrust of Florida v. Epsom, 154 N.H. 693 (2007).  Of particular interest to municipalities is the court’s application of the first factor, which is whether the institution or organization was established and is administered for a charitable purpose.  The city argued that the trial court had incorrectly determined that GSMR was a charitable organization because it did not directly originate and guarantee the student loans at the core of NHHEAF Network operations. Instead, the function of this entity was to manage and service the loans originated by other portions of the Network group.


This argument failed, and the court found that “Direct service to the public is not required for a charitable tax exemption…[A]n organization can indirectly provide a benefit to the public …by means of a service…”, citing Appeal of the City of Concord, 161 N.H. 344 (2011).


Thus, the mere fact that a charity has a complex legal or organizational structure is not fatal to its request for a charitable exemption.  The key is to verify that the organization requesting the exemption provides either a direct service to the public, or service to a related charitable organization that provides the direct service to the public.