Court Allows Charitable Tax Exemption for Summer Youth Camp

The Marist Brothers of New Hampshire v. Town of Effingham
New Hampshire Supreme Court Opinion No. 2017-0187
Friday, September 14, 2018

The Marist Brothers of New Hampshire (MBNH) is a New Hampshire non-profit corporation affiliated with The Marist Brothers of the Schools and the Roman Catholic Church. MBNH runs a co-educational camp in the summer on its property on Lake Ossipee, and it rents that property out during the rest of the year. There are no restrictions on who can rent the property or what the renters can use the property for.

The summer camp is staffed by the Marist Brothers, who receive room and board but no additional compensation, and other staff who are paid; relatives of the staff and of the Marist Brothers are permitted to attend for free. MBNH does charge attendees of the camp a $175 registration fee plus tuition, which ranges from $1,900 to $5,900, depending upon the length and time of stay. MBNH also grants some scholarships. MBNH’s revenues in 2015 totaled $1,363,200, of which $1,239,565 was earned from tuition and fees, and $92,854 from rental of the Property. The total expenses that year were $1,255,313, resulting in net income of $107,907. MBNH also pays U.S. Province a yearly assessment, which was $106,000 in 2015. U.S. Province operates a number of ministries throughout the United States.

MBNH applied for and was denied a charitable tax exemption under RSA 72:23, V by the Town of Effingham. The superior court judge upheld the town’s denial of the exemption.

On appeal, the New Hampshire Supreme Court reversed. The Court articulated the four-part test that must be used when determining whether an entity qualifies for this exemption and then analysis each element:

1. the institution or organization was established and is administered for a charitable purpose;

2. an obligation exists to perform the organization’s stated purpose to the public rather than simply to members of the organization;

3. the land, in addition to being owned by the organization, is occupied by it and used directly for the stated charitable purposes; and

4. any of the organization’s income or profits are used for any purpose other than the purpose for which the organization was established. Under the fourth factor, the organization’s officers or members may not derive any pecuniary profit or benefit.

1. Established and Administered for a Charitable Purpose

The trial judge had determined that MBNH was not obligated to provide its services to the general public because it charged campers a significant fee and provided only negligible financial aid, thereby effectively excluding a large segment of the population from participating and limiting participation only to the wealthy. Disagreeing with the trial judge, the Court reasoned that an entity does not lose its charitable status simply because it collects a fee or derives a net income; it is the destination, not the source, of the income that is important. The Court, citing a Massachusetts case, determined that a large segment of the population, whether wealthy or not, would be interested in sending their children MBNH’s summer camp, despite the significant costs. The Court also said that the fees were not unreasonable in light of the costs; revenue from tuition and fees in 2015 would not have covered all the expenses.

2. Obligation Exists to Perform Services for General Public

The Court determined that MBNH’s Articles of Agreement and bylaws, which require MBNH to provide opportunities for “spiritual, cultural, and physical needs of youth” regardless of characteristics such as race or nationality—coupled with its long history of providing such services—established an enforceable obligation to provide charitable services to the public. In addition, these services were not limited to MBNH members only because about 500 children from around the world attended the camp: an indefinite group, which, given the age restrictions on attendance, are likely change from year to year.

3. Land is Occupied and Used Directly for Charitable Purpose

The Court determined that the renting of the property during the off-season did not destroy the tax exempt status: This use was “incidental” and did not interfere with the primary charitable purpose of running a religious and educational summer camp during the limited summer season. The Court also determined that the rental income—$92,854 in 2015—was de minimis when calculated in proportion to MBNH’s total revenue (approximately 7%). Therefore, the primary purpose of the property was to engage in the charitable purpose of running the summer camp.

4. Income and Profits Used for Charitable Purpose

Disagreeing with the trial court, the Supreme Court determined that MBNH’s contributions to U.S. Province did not disqualify MBNH from the tax exemption. U.S. Province had provided substantial benefits and assistance to MBNH, including purchasing the property at issue, building the facility and donating labor, and essentially subsidizing MBNH’s operations. The Court also found that U.S. Province shares in the general mission of educating and supporting religious education and that it “assessed” the monetary amounts on almost all its ministries. The Court determined that these payments were reimbursement by MBNH for benefits received, paid on an annual basis and in the maximum amount MBNH could afford. Therefore, the Court held all income and profits were properly used by MBNH for supporting the charitable purpose.

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