State’s Sublease to Private Party Not Tax Exempt

Town of Ossipee v. Whittier Lifts Trust, et al.
Town of Ossipee v. Whittier Lifts Trust, et al.
No. 2002-470
Tuesday, July 8, 2003
In this case, the New Hampshire Supreme Court interpreted and applied RSA 72:23 relative to tax exemptions for real and personal property owned by the State.

The defendant, Whittier Lifts Trust (“the Trust”), owned a piece of property on Mount Nickerson in Ossipee. The trust leased a portion of the property to Whittier Communications. Whittier Communications in turn sublet the property to the State so that the State could construct a 180-foot communications tower. Whittier Communications and the State also entered into a license agreement whereby Whittier Communications was permitted to occupy a portion of the tower and also sublicense space to third party telecommunications providers.

The Town of Ossipee assessed the value of the Trust’s interest in the land and tower for $224,943. The Trust sought a tax abatement, which was denied. The Trust filed an appeal with the Board of Tax and Land Appeals, which was later transferred to the superior court. The superior court held that Whittier Communications possessed a taxable interest in the tower by virtue of the fact that it licensed space to third parties. The court further found that the State, pursuant to the sublease, must reimburse Whittier Communications for any taxes levied. The court held that the Trust did not have a taxable interest in the tower. The State and the Town of Ossipee appealed to the Supreme Court.

RSA 72:23, I(a) provides that property owned by the State is exempt from taxation “unless said real or personal property is used or occupied by other than the State.” On appeal, the State argued that Whittier Communications should not be subject to taxation because the State owned the tower and Whittier Communications did not use or occupy it. The Supreme Court disagreed, and affirmed the superior court’s decision, concluding that the act of sublicensing space on the tower to third parties constituted a “use” by Whittier Communications for purposes of RSA 72:23. In so holding, the Supreme Court relied upon its charitable exemption cases decided under RSA 72:23, V. See Appeal of Kiwanis Club of Hudson, 140 N.H. 92 (1995); Senior Citizens Housing Dev. Corp. v. City of Claremont, 122 N.H. 1104 (1982).

The State further argued that even if Whittier Communications had a taxable interest in the tower, the State had no obligation to reimburse it for taxes paid. In response to this argument, the Court relied on the language of the sublease itself. The sublease contained a paragraph where the State asserted that the tower would be exempt from taxation under RSA 72:23 but, if taxes were assessed, the State would indemnify Whittier Communications. Finding no ambiguity in the sublease, the Court held that the State must indemnify Whittier Communications for any taxes paid based on its use of the tower.

Finally, the town argued that the Trust should also be subject to taxation by virtue of the fact that the tower was situated on Trust property. The Court disagreed, holding that the Trust did not “use or occupy” the tower as contemplated by RSA 72:23, I(a). The mere presence of the tower on Trust property did not automatically give rise to the kind of use or occupation necessary to overcome the general rule that State owned property is exempt from taxation.