Granite State Mgmt. & Res. v. City of Concord

• Citation: 75 A.3d 1112,165 N.H. 277
• Decision Date: 21 August 2013
• Docket Number: No. 2012–436,2012–436
• Parties: GRANITE STATE MANAGEMENT & RESOURCES v. CITY OF CONCORD
• Court: Supreme Court of New Hampshire

165 N.H. 277

75 A.3d 1112

GRANITE STATE MANAGEMENT & RESOURCES

v.CITY OF CONCORD

No. 2012–436

Supreme Court of New Hampshire.

Argued: April 11, 2013

Opinion Issued: August 21, 2013

Sulloway & Hollis, P.L.L.C., of Concord (Margaret H. Nelson on the brief and orally), for the petitioner.

City Solicitor's Office, of Concord (James W. Kennedy and Danielle L. Pacik on the brief, and Mr. Kennedy orally), for the respondent.

LYNN, J.

The respondent, City of Concord (City), appeals an order of the Superior Court (McNamara, J.) granting summary judgment to the petitioner, Granite State Management & Resources (GSMR), and denying summary judgment to the City, based upon a finding that GSMR is a charitable organization eligible for a tax exemption under RSA 72:23, V (2012) for the tax years 2008 and 2009. We affirm in part, reverse in part, and remand.

I. Facts

The summary judgment record supports the following facts. GSMR is a New Hampshire nonprofit corporation that is exempt from federal income tax under 26 U.S.C. § 501(c)(3). Article 2 of its Articles of Agreement (articles) sets forth GSMR's purpose as:

providing low cost or alternative financial assistance to eligible students and to parents, custodians or guardians of such students who are attending educational institutions or participating in educational programs in the United States of America and its territories ...and of supporting the development of higher education and educational opportunities for the citizens of the United States of America and its territories.

(Emphasis added.)

According to its chief financial officer (CFO), Dean Grondin, GSMR has two primary functions: student loan servicing and staffing. First, GSMR contracts with its nonprofit affiliate, New Hampshire Higher Education Loan Corporation (NHHELCO), to service loans originated under the Federal Family Education Loan Programs (FFELP), a federally guaranteed student and parent educational loan program. NHHELCO is a nonprofit organization that is also exempt from federal income tax under 26 U.S.C. § 501(c)(3) ; it is a qualified lender under FFELP and supplements FFELP loans when they provide insufficient funding. See 20 U.S.C. § 1078. GSMR services education loans for several lenders in addition to NHHELCO, including private organizations.

Second, GSMR provides "all administrative and management services and all staff necessary to enable" NHHELCO and two other nonprofit affiliates of GSMR "to carry out their charitable and education[al] purposes." Together with NHHELCO, these nonprofit affiliates—the New Hampshire Higher Educational Assistance Foundation (NHHEAF) and NHHEAF Network Educational Foundation (NNEF)—comprise the so-called NHHEAF Network. NHHEAF is a nonprofit organization exempt from federal income tax under 26 U.S.C. § 501(c)(3) that serves as an in-state guarantor of loans originated under the federal guaranteed student and parent educational loan programs. NNEF was a tax-exempt charitable trust that suspended operations in 2008 and transferred its assets to NHHELCO. But for the staffing services provided by GSMR, the NHHEAF Network organizations do not have any employees.

The trial court found that "there can be no serious dispute that the fundamental purpose of GSMR is to service educational loans" and that its only assets "likely to generate income are the loan servicing assets." GSMR derives income from origination fees paid by borrowers, loan servicing and origination fees paid by institutions, and interest stemming from the education loans that GSMR administers. It uses its income to "pay operational expenses, to pay for uncollectible loans and collection expenses, to fund loan default reserves, to provide student[s], parent[s], and institution[s] information and counseling, ... to pay for the development of new educational loan related activities and services," and to conduct "statewide outreach efforts." In 2008 and 2009, GSMR serviced approximately $2.5 billion in loans, earned a substantial net profit, maintained investments, and retained a surplus.

According to GSMR, as a result of its activities in 2008 and 2009, "New Hampshire students and parents were able to obtain access to lower cost funds to finance the cost of education," "New Hampshire educational institutions were assured of the flow of funds necessary to allow them to continue their educational activities," and "New Hampshire lenders were provided with a convenient means to provide families with educational financing."

II. Procedural Background

GSMR owns four parcels of land located at 1–4 Barrell Court in Concord. Lots 17 and 20 are used for parking. Office buildings are located on Lots 18 and 19, which were consolidated in 2001.

In 2008, the City assessed taxes on Lots 17 and 20 based on their full value. Although Lot 17 was subject to a payment-in-lieu-of-taxes (PILOT) agreement entered into by the City and GSMR in February 2001 (February 2001 PILOT), the City informed GSMR in 2003 that the PILOT had expired, and began taxing Lot 17 at its full value. The City taxed consolidated Lots 18 and 19 pursuant to a separate PILOT agreement entered into in September 2000 (September 2000 PILOT). Although the September 2000 PILOT applied solely to Lot 18, in 2003 the City started using the combined value of Lots 18 and 19 when appraising the consolidated lot for PILOT purposes. In 2008, the City assessed taxes on consolidated Lots 18 and 19 under the September 2000 PILOT using the lots' combined value. GSMR paid the assessed taxes on all four lots, but informed the City that it believed the tax bill "include[d] a substantial overpayment." GSMR subsequently brought a petition for declaratory judgment.

In 2009, the City determined that GSMR did not qualify for the charitable tax exemption because it did not meet the statutory definition of "charitable." See RSA 72:23, V, :23–l (2012). After applying, unsuccessfully, for a full abatement of its 2009 taxes, GSMR filed a second petition for declaratory judgment.

The trial court consolidated GSMR's petitions, and the parties filed cross-motions for summary judgment. GSMR argued that it "fully meets the standards for a charitable exemption under RSA 72:23, V and that the City's decision in 2009 to ... [deny] GSMR such a tax exemption was incorrect." As regards 2008, GSMR contended that the City improperly taxed: (1) Lot 17 at its full rate, even though it was subject to the February 2001 PILOT; and (2) Lot 19 under the terms of the September 2000 PILOT, which was applicable only to Lot 18. The City argued in its motion for summary judgment that GSMR was not eligible for a charitable tax exemption under RSA 72:23, V for 2008 and 2009 because it is not a charitable organization.

The trial court granted GSMR's motion for summary judgment and denied the City's motion. Addressing GSMR's tax liability for consolidated Lots 18 and 19, the court found that the lots were subject to the September 2000 PILOT and that it was "appropriate for the City to use the consolidated lot when valuing the parcel subject to the PILOT for billing purposes." The court also agreed with the City that in 2004, Lot 17 ceased to be subject to the February 2001 PILOT. Nevertheless, it concluded that Lots 17 and 20 were exempt from taxation because GSMR was "a charitable organization entitled to a tax exemption" and it used the lots "for parking for the facilities for which GSMR is entitled to an exemption." The court's determination that Lots 17 and 20 are tax-exempt apparently applied both to 2008 and 2009, given its findings that GSMR was a charitable organization during these years and that the February 2001 PILOT had previously terminated. It is not clear from the record, however, whether the trial court's determination that consolidated Lots 18 and 19 were subject to the September 2000 PILOT pertains solely to 2008 or to 2009 as well, i.e. , whether the September 2000 PILOT was terminated prior to 2009. The City appealed.

III. Standard of Review

In reviewing the trial court's rulings on cross-motions for summary judgment, "we consider the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of law." N.H. Assoc. of Counties v. State of N.H., 158 N.H. 284, 287–88, 965 A.2d 1012 (2009) (quotation omitted). "If our review of that evidence discloses no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law, then we will affirm the grant of summary judgment." Concord Gen. Mut. Ins. Co. v. Green & Co. Bldg. & Dev. Corp., 160 N.H. 690, 692, 8 A.3d 24 (2010) (quotation omitted); see RSA 491:8–a (2010).

IV. Charitable Exemption

RSA 72:23, V exempts from taxation:

[t]he buildings, lands and personal property of charitable organizations and societies organized, incorporated, or legally doing business in this state, owned, used and occupied by them directly for the purposes for which they are established, provided that none of the income or profits thereof is used for any other purpose than the purpose for which they are established.

Pursuant to RSA 72:23–l :

The term "charitable" ... shall mean a corporation, society or organization established and administered for the purpose of performing, and obligated, by its charter or otherwise, to perform some service of public good or welfare advancing the spiritual, physical, intellectual, social or economic well-being of the general public or a substantial and indefinite segment of the general public that includes residents of the state of New Hampshire, with no pecuniary profit or benefit to its officers or members, or any restrictions which confine its benefits or services to such officers or members, or those of any related organization.

In ElderTrust of Florida v. Town of Epsom, 154 N.H. 693, 919 A.2d 776 (2007), we held:

[T]he plain language of RSA 72:23, V and RSA 72:23–l

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