A 501(c)(3) charitable organization is exempt from federal income tax. Is it also exempt from property taxes? Only when its charitable mission is its dominant or primary purpose. If the dominant or primary purpose of its work is to benefit its members, or a limited class of persons, and the public will derive only an incidental benefit, then the charitable organization will not meet the requirement for property tax exemption under RSA 72:23, V.
The Home Care Association of New Hampshire (HCA) is a 501(c)(3) organization with a stated mission to enhance the ability of "agencies providing home health care to deliver quality services to New Hampshire residents." The HCA is a membership organization including providers of home health, homemaker, hospice or other home care services; home medical equipment providers; organizations doing business with home care providers or interested in HCA's mission, such as insurers and trade and membership associations; and individuals who subscribe to the stated purpose and objectives of the organization and who pay the membership dues. The HCA was given a charitable tax exemption on the real estate it owned and used as office space for the tax years 1984 to 2005. In 2006, however, the City denied HCA's request for a tax exemption.
The Court in ElderTrust of Florida, Inc. v. Epsom, 154 N.H. 693, 697-98 (2007), set forth four factors that an organization seeking a charitable tax exemption under RSA 72:23, V and RSA 72:23-l must satisfy:
- the institution or organization was established and is administered for a charitable purpose;
- an obligation exists to perform the organization's stated purpose to the public rather than simply to members of the organization;
- the land, in addition to being owned by the organization, is occupied by it and used directly for the stated charitable purposes; and
- any of the organization's income or profits are used for any purpose other than the purpose for which the organization was established. Under the fourth factor, the organization's officers or members may not derive any pecuniary profit or benefit.
The crux of the City's argument against granting the tax exemption was that "HCA is, in fact, a trade association with its primary focus on advancing 'the common interests of its members,' rather than the interests of the general public." The City claimed that, notwithstanding its stated goals, the HCA is not administered and operated in a manner that bestows a public benefit and, thus, is ineligible for the tax exemption.
The Court reviewed its more recent case law regarding charitable tax exemptions to illustrate that a charitable organization need not provide services directly to the public to qualify for the exemption. In Peterborough v. MacDowell Colony, 157 N.H. 1 (2008), the Court held that an organization can indirectly provide a benefit to the public by means of a service that is provided only to certain individuals. In that case, the organization provided a benefit to the public by promoting art in its artist-in-residence program, where a select group of artists were allowed to use the property to further their art. In MacDowell, the Court reasoned that promotion of the arts is a charitable purpose; that the artist-in-residence program promotes the arts; and that the general public is therefore benefited by the program. Thus, the MacDowell property qualified for the charitable tax exemption.
In this case, the Court clarified the criteria for a charitable exemption. It held that the benefit to the public must not be merely incidental to a dominate primary purpose of benefiting HCA's members, nor slight, negligible or insignificant when compared to the benefit derived by HCA's members. The Court remanded the case to the Board of Tax and Land Appeals for further proceedings consistent with the Court's opinion.