This case clarifies the impact of a residential mortgage or equity loan on a taxpayer’s eligibility for the elderly property tax exemption under RSA 72:39-a.
The taxpayer, Marijane Kennedy, applied to the City of Nashua for an elderly exemption. The City denied the exemption on the ground that the taxpayer’s net assets exceeded the City’s eligibility limit of $125,000. The taxpayer appealed to the Board of Tax and Land Appeals (BTLA), claiming that the equity loan on her home should be deducted from her assets, bringing them below $125,000. The BTLA agreed with her, and the City appealed to the New Hampshire Supreme Court. The Court reversed.
RSA 72:39-a, “Conditions for Elderly Exemption,” sets forth the eligibility requirements for taxpayers to qualify for the exemption. Among other requirements, the statute says that the taxpayer may not own “net assets” in excess of the municipality’s limit, “excluding the value of the person’s actual residence and the land upon which is it located....‘Net assets’ means the value of all assets, tangible and intangible, minus the value of any good-faith encumbrances….” RSA 72:39-a, I(c).
Both sides agreed that the value of the taxpayer’s residence should not be included in the calculation of her net assets for the purpose of the elderly exemption. However, the taxpayer argued that her net assets should also be reduced by the amount of the equity loan secured by her residence. The City disagreed.
The Court considered both the taxpayer’s and the City’s arguments, and decided the case instead in favor of the City based upon the argument put forth by the New Hampshire Municipal Association in its amicus curiae brief. The term “encumbrance” as used in the statute was the key to the analysis. It is defined in Black’s Law Dictionary as “a claim or liability that is attached to property or some other right and that may lessen its value, such as a lien or mortgage.” “We conclude that the plain meaning of RSA 72:39-a, I(c) is that net assets means the value of all includable assets net of any encumbrances on those assets. We therefore agree with the City that because the taxpayer’s residence is not counted as an asset in the net asset calculation…, no encumbrance on that residence is deducted in that calculation.”
The taxpayer raised an additional issue, arguing that a taxpayer with a less-valuable home and no mortgage is financially better able to pay taxes than a taxpayer with a more valuable home that is encumbered by a mortgage, because the first taxpayer may actually have larger net assets. The Court rejected this argument as well, noting that the statute does not account at all for the various debts a taxpayer may owe except for those secured by the includable assets.