Attorney Gen. v. Loreto Publications, Inc., 2015–0220

• Decision Date: 27 May 2016
• Docket Number: No. 2015–0220,2015–0220
• Citation: 142 A.3d 706,169 N.H. 68
• Parties: ATTORNEY GENERAL, Director of Charitable Trusts v. LORETO PUBLICATIONS, INC.
• Court: New Hampshire Supreme Court

169 N.H. 68

142 A.3d 706

ATTORNEY GENERAL, Director of Charitable Trusts

v.LORETO PUBLICATIONS, INC.

No. 2015–0220

Supreme Court of New Hampshire.

Submitted: February 17, 2016

Opinion Issued: May 27, 2016

Joseph A. Foster, attorney general (Thomas J. Donovan, director of charitable trusts, on the brief), for the petitioner.

Douglas Bersaw, non-lawyer representative appearing by approval of the Supreme Court under Rule 33(2), on the brief, for the respondent.

HICKS, J.

The respondent, Loreto Publications, Inc. (Loreto), appeals an order of the Circuit Court (Leonard, J.) ruling that Loreto failed to establish that it was statutorily exempt from filing annual reports with the New Hampshire Attorney General's Office, see RSA 7:19, :28 (2013), and requiring it to file reports for fiscal years 2010 to 2014. The petitioner is the Director of Charitable Trusts of the Attorney General's Office. We affirm.

The trial court found, or the record supports, the following facts. Loreto is a nonprofit corporation organized under RSA chapter 292. See RSA ch. 292 (2010 & Supp. 2015). Its stated purpose is "the promotion, and propagation of the Roman Catholic religion through the publication, sale, or distribution of books, magazines, pamphlets or [tracts], and the use of any other communications media, whether electronic, audio, visual, printed, written or oral." In or around 2003, the Internal Revenue Service (IRS) granted Loreto a tax exemption under section 501(c)(3) of the Internal Revenue Code.

See 26 U.S.C. § 501(c)(3) (2012). In 2008, the Charitable Trust Unit of the Attorney General's Office learned that Loreto was operating as a 501(c)(3) tax exempt organization in New Hampshire and advised Loreto that New Hampshire law required it to register with and submit annual reports to the Attorney General's Office. See RSA 7:21, II (2013); RSA 7:28, III. In 2009, Loreto registered with the Charitable Trust Unit but did not file an annual report for fiscal year 2010 or any subsequent fiscal year. In 2013, Loreto's 501(c)(3) status was "automatically revoked [by the IRS] for its failure to file a Form 990–series return or notice for three consecutive years."

The Interim Director of Charitable Trusts sought an order in the circuit court requiring Loreto to file its delinquent reports. Loreto moved to dismiss, arguing that "[s]ince [it] ... is NOT a Charitable Trust, but rather a church/religious organization, [the] court lacks subject matter jurisdiction under [ RSA 547:3, II(a) ] to hear this matter." The court denied the motion. The court held an evidentiary hearing at which, over Loreto's objection, Diane Murphy Quinlan, the Chancellor of the Roman Catholic Diocese of Manchester, testified that she was unaware of an institutional relationship between Loreto and the Roman Catholic Church. Also over Loreto's objection, Terry Knowles of the Charitable Trust Unit testified about, among other things, Loreto's status as a 501(c)(3) tax exempt organization.

Loreto argued that it was a "religious organization" or an "integrated auxiliary" of a religious organization under RSA 7:19, I, and was therefore exempt from the reporting requirements. The court rejected this argument and ordered Loreto to file its delinquent reports. Loreto appealed.

RSA 567–A:4 (2007) sets forth our standard of review: "The findings of fact of the judge of probate are final unless they are so plainly erroneous that such findings could not be reasonably made." See RSA 490–F:3 (Supp. 2015) (conferring the jurisdiction, powers, and duties of the former probate court on the circuit court). Thus, "we will not disturb the [circuit court's] decree unless it is unsupported by the evidence or plainly erroneous as a matter of law." In re Estate of Couture, 166 N.H. 101, 105, 89 A.3d 541 (2014).

Loreto reasserts its argument that the trial court lacks subject matter jurisdiction over this case. "A party may challenge subject matter jurisdiction at any time during the proceeding, including on appeal, and may not waive it." In the Matter of Ball & Ball, 168 N.H. 133, 140, 123 A.3d 719 (2015) (quotation omitted). "We review, de novo, whether the trial court in this case ha[s] subject matter jurisdiction." Id.

The circuit court has jurisdiction over, among other matters, "cases involving charitable uses and trusts." RSA 547:3, II(a) (Supp. 2015). RSA 7:21, II defines "[c]haritable trust" as, among other things, a "charitable organization," which includes "[a]ny person or entity that is determined by the [IRS] to be a tax exempt organization pursuant to section 501(c)(3) of the Internal Revenue Code" or "[a]ny other person or entity that is or holds itself out to be established, in whole or in part, for any benevolent, philanthropic ... or other charitable purpose." RSA 7:21, II (quotation omitted).

There was testimony at the evidentiary hearing, and the exhibits showed, that Loreto registered as a charitable trust with the Attorney General's Office in 2009 and held 501(c)(3) tax exempt status until the IRS revoked that status in 2013. Loreto maintains that it registered under protest and has not been a 501(c)(3) tax exempt organization since 2009. Regardless of the truth of these assertions, however, Loreto stated in its articles of incorporation, and its president testified, that Loreto was organized as a nonprofit corporation for the charitable purpose of promoting Roman Catholicism. See Restatement (Third) of Trusts § 28, at 9 (2003) ("Charitable trust purposes [may] include ... the advancement of religion...."). Thus, the record shows that Loreto "holds itself out to be" a charitable entity, and is, therefore, a charitable trust under RSA 7:21, II. Accordingly, we hold that the trial court had subject matter jurisdiction over this case.

Next, Loreto challenges the relevance and, therefore, the admissibility of the testimony of Quinlan and Knowles. "We will not reverse the trial court's decision to admit evidence absent an unsustainable exercise of discretion." State v. Ramsey, 166 N.H. 45, 49, 88 A.3d 175 (2014). " ‘Relevant evidence’ means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." N.H. R. Ev. 401.

In the trial court, Loreto sought to establish, among other things, that it was an "integrated auxiliary" of the Roman Catholic Church. Quinlan's testimony concerned the absence of a relationship between Loreto and the Diocese of Manchester, which tended to make it less probable that Loreto was an integrated auxiliary. Thus, the trial court did not unsustainably exercise its discretion by ruling that Quinlan's testimony was relevant and admissible.

Loreto also asserted that it is not a charitable trust. On appeal, it argues that, from 2010 to 2014—the years relevant to the petitioner's complaint—Loreto did not have 501(c)(3) status because it stopped filing exemption forms with the IRS after 2009. Thus, its evidentiary argument, as we understand it, is that Knowles' testimony about Loreto's 501(c)(3) status after 2009 is irrelevant because it conflicted with the petitioner's exhibits, which, according to Loreto, show that it held 501(c)(3) status only until 2009. However, because 501(c)(3) tax exempt organizations are charitable trusts under RSA 7:21, II, Knowles' testimony about Loreto's 501(c)(3) designation was relevant. That this testimony may have conflicted with other evidence does not render it inadmissible. See N.H. R. Ev. 402 ("All relevant evidence is admissible, except as limited by constitutional requirements or as otherwise provided by statute or by these rules or by other rules prescribed by the New Hampshire Supreme Court."). Thus, the trial court did not unsustainably exercise its discretion by admitting Knowles' testimony about Loreto's 501(c)(3) status.

Loreto's principal argument is that it is statutorily exempt from the Attorney General's reporting requirements because it is a "religious organization" or an "integrated auxiliar[y]" of a religious organization under RSA 7:19, I. RSA 7:28, III requires all charitable trusts that are registered in New Hampshire to file annual reports with the Attorney General's Office. RSA 7:19, I, exempts from the statutes governing charitable trusts "any religious organization which holds property for charitable or religious purposes or their integrated auxiliaries or ... conventions or associations of churches." RSA 7:19, I (emphasis added). The statute does not define either "religious organization" or "integrated auxiliar[y]." See id.

The trial court determined that "religious organization" in RSA 7:19, I, "refers to religious houses of worship or churches," and concluded that Loreto had failed to show that it was either. The court also concluded that Loreto had failed to show that it was an "integrated auxiliary" of a religious organization because, it reasoned, "[b]ased upon the testimony offered at the [h]earing, ... the Roman Catholic Church does not recognize an institutional relationship with Loreto ... [and] has no direct authority [or] involvement with Loreto."

Loreto argues for a broader definition of "religious organization" as "a voluntary association that is based on or related to a religion and seeks to advance one or more of its purposes or interests but does not encompass the full range or scope of a religion or church." (Quotation omitted.) The petitioner counters that the term is ambiguous and that, therefore, we must rely upon legislative history. Based upon that history, the petitioner argues that the drafters intended for the statute to mirror a federal tax law enacted in 1969, see Tax Reform Act of 1969, Pub.L. No. 91–172, § 101(d)(1), 83 Stat. 487, 519–20, which "added an annual filing requirement for tax exempt organizations but excluded ‘churches, their integrated auxiliaries, and conventions or associations of churches.’ " (Quoting 26 U.S.C. § 6033(a)(3)...