N.H. court clarifies rules for nonprofits

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CONCORD, N.H. (AP) – In a broad ruling Thursday, the state Supreme Court clarified the standards nonprofit organizations must meet to win exemption from local property taxes.

The ruling came in a dispute between Eldertrust of Florida Inc. and the town of Epsom, where Eldertrust owns a nursing home, Epsom Manor, and an assisted living facility, Heartland Place.

Epsom billed Eldertrust, of Tennessee, nearly $105,000 in property taxes on the two facilities in 2002, arguing Eldertrust did not qualify for the charitable exemption because its charter did not require it to provide services to low-or moderate-income seniors.

The town also said Eldercare required seniors to sign a statement saying they could be discharged for failing to pay their fees.

Eldertrust paid the taxes, then sued. A lower court ruled in Eldertrust’s favor and the high court upheld that Thursday.

In its ruling, the high court noted it had ruled narrowly on similar cases in the past, but it was the first time the justices had analyzed all the factors municipalities – and courts – should use in granting tax exemptions under state law.

To win an exemption, a nonprofit must have a “charitable purpose;” be required to offer that service to the public and not just its own members; need the property to carry out its purpose; and use all its income and profits for that service, the court ruled.

Eldertrust’s articles of incorporation did not have to mention low-and moderate-income people, but it might have to serve them to show its purpose was charitable, the court said.

Although it charged fees, Eldercare met that test by showing that both facilities operated at a loss, that patients did not have to prove they could pay to be admitted and that it negotiated lower rates with patients after their Medicare coverage or other funds were exhausted, the court ruled.

Some people also stayed for months without paying and Eldercare accepted many patients on Medicaid, which paid far less than the cost of providing services to those people.

“The facilities provided care and services, which cost more than the fees charged, to a portion of the population who otherwise would have imposed a burden upon the government,” Justice James Duggan wrote for the court.

“The record also reflects that ElderTrust used profits generated at other of its facilities in order to keep Epsom Manor and Heartland Place in operation.”

Bill Chapman, a lawyer for Eldercare, said he was pleased with the ruling, but that it would not help resolve another case he’s handling: defending the tax-exempt status of an artists’ colony in Peterborough.

The MacDowell Colony case revolves around the question of whether providing artists, writers and composers with food, shelter and a quiet place to work benefits the public, or a substantial portion of the public, including state residents.

The town of Peterborough argues that the colony only benefits the artists it selects, not New Hampshire residents. Chapman has argued that the artists’ work benefits society at large, so the MacDowell Colony’s support for the artists serves a public purpose.

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