2004-621, APPEAL OF TOWN OF WOLFEBORO

arguing that it was entitled to a charitable exemption because it was a under RSA 72:23, V (2003). The Home appealed this decision to the BTLA, denied the Home’s request for a charitable exemption for the tax year 2002 Back Bay. The units at Back Bay are independent living units. The Town The Home operates an elderly housing co mplex in Wolfeboro known as

reverse. exemption to property owned by the respondent, Taylor Home (Home). We decision of the board of tax and land appeals (BTLA) granting a charitable tax DALIANIS, J. The petitioner, Town of Wolfeboro (Town), appeals a

Spector on the brief), for the Town of Sandwich, as amicus curiae. Mitchell & Bates, P.A., of Laconia (Walter L. Mitchell and Laura A.

and orally), for the respondent. Martin, Lord & Osman, P.A., of Laconia (Marshall D. Hickok on the brief

orally), for the petitioner. Barto and Puffer, P.A., of Concord (Mark H. Puffer on the brief and

(New Hampshire Board of Tax and Land Appeals) APPEAL OF TOWN OF WO LFEBORO

No. 2004 - 621 Board of Tax and Land Appeals

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. O pinions are available on the Internet by 9:00 Errors may be reported by E - mail at the following address: errors in order that corrections may be made before the opinion goes to press. Hampshire, One Noble Drive, Concord, New Hampshire 03301, of any editorial Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

occupancy. In p. 2 2002, the entry fee for Back Bay was $140,000; the average live at Back Bay. In addition, each resident must pay a monthly fee for assisted living and nursing care or not, must pay an entry fee for the right to All residents, whether they enter into the contract with the Home for

the assisted living and nursing care components. agreement, which allows people to reside in Back Bay without contracting for residents at t he Laconia property, the Home also offered a separate residence Back Bay signed a life care agreement in p. 2 2002, identical to that signed by assisted living or nursing care facilities at Back Bay. Though all residents at Back Bay is made up entirely of independent living units. There are no The distinction between Back Bay and the property in La conia is that

Id. at 7 p. 2 29. T he City of Laconia did not challenge this finding by the BTLA. Id.

or nursing care services. charitable assistance to older residents requiring intensive assisted [the] Home provides a significant source of funds for providing is the lifeblood of most charitable organizations, cost shifting at to carry out [the] Home’s legislative purpose. Just as fund raising [are] one of the main “money engines” generating funds necessary

the independent living units at the Laconi a complex $700,000 in monthly fee assistance annually. Id. The BTLA also found that the Home had provided over $ p. 2 2 million in entry fee assistance, as well as the independ ent living units were between $125 and $270 per month, and that approximately fifty percent of the market rate, that the fees for the residents in this ruling included that the Home offered its assisted living units at and occupied directly for its charitable purpose. Id. The evidence supporting We also upheld the BTLA’s ruling that the Laconia property was used

to pay. Id. at 7 p. 2 28. finding that the Home cares for its residents for life, regardless of their ability by alleviating the burden on the government of caring for the elderly and its BTLA’s findings, including its finding that the Home provided a publ ic service organization for the purposes of a property tax exemption based upon the Id. In that case, we upheld a ruling that the Home was a charitable complex includes independent living, assisted living and nursing care facilities. Laconia. Appeal of City of Laconia, 146 N.H. 725, 726 (2001). The Laconia the BTLA and this court, concerning the Home’s elderly housing complex in granting an exemption. City of Laconia involved a similar inquiry before both The BTLA relied upon our decision in Appeal of City of Laconia in

directly for charitable purposes. recognized charitable organization, and the property was used and occupied p. 3 3

admission trust fund. As of the date of the BTLA hearing, however, no resident $10,000 from each new entry fee and transfers it immediately to the charitable funds to subsidize entry fees and monthly fees i f necessary. The Home takes resident will be asked to leave the Home due to nonpayment. The Home has a financial inability to make the required monthly payments.” No nursing care It is the Home’s polic y that no resident be forced to leave “based solely on

expense. those who might one day require assisted living or nursing care at the Home’s be liabilities, however, because adding more residents increases the number of greater costs on to its existing residents. The independent living units can also care, the Home chose to expand the number of residents, rather than pass costs increased due to the number of people entering assisted living or nursing were established to subsidize the operation of the Home as a whole. As its facilities, of which it has several, made up entirely of independent liv ing units, or costs of Back Bay from its other facilities. It asserts that its satellite organization. The Home does not, and claims that it cannot, separate revenue The Home is one corporation. All of its e mployees work for the same

exceed the average. by other facilities, though the Home asserts that its accommodations and care monthly fee for nursing home care was comparable to the average rate charged for assisted living at the Home in 2002 was approximately $2,000. The nursing care facilities, depending upon the length of the stay. The monthly fee is still required to pay monthly or daily fees while in the assisted living or assisted living or nur sing care, no additional entry fee is required. The resident are available. When such a resident needs to move from independent living to right to enter the assisted living units, but are given a preference when units ce rtified their need for nursing care. These residents do not have a similar just as in any other nursing facility, a doctor or healthcare provider has a contractual right to enter the nursing care facility at the Home, provided that, Independent living residents, who have signed a life care agreement, have

monthly fee for these services, except for the care ma nagement services. needed services.” All Back Bay residents must pay additional costs above their management services, which “[help] Residents to arrange for and coordinate housekeeping services, laundry s ervices, some transportation services and care housing development; for example: a service that delivers frozen meals, residents of Back Bay that may not be available to residents of an ordinary their ut ilities, except curbside trash pickup. There are services available to the Residents of independent living units are responsible for paying for all of

refundable over a period of ten years. percent of the entry fee was non - refundable, the remaining eighty percent was monthly fee, which varie d according to the size of the unit was $900. Twenty p. 4 4

the purposes for w hich they are established, provided that none of organizations . . . owned, used and occupied by them directly for V. The buildings, lands and personal property of charitable

taxation: RSA 72:23 exempts the following real estate and personal property from

Appeal of Kiwanis Club of Huds on, 1 p. 4 40 N.H. 92, 94 (1995). board misapprehended or misapplied the law, its order will be set aside. statute is to be decided ultimately by this court. Therefore, if we find that the order is u njust or unreasonable.” RSA 541:13 (1997). The interpretation of a court is satisfied, by a clear preponderance of the evidence before it, that such decision “shall not be set aside or vacated except for errors of law, unless the questions properly before it are deemed prima facie lawful and reasonable. Its clearly unreasonable or unlawful. Findings of fact made by the BTLA on B:12 (2003). To prevail, the Town must show that the BTLA’s decision was Appeals from BTLA decisions are governed by RSA chapter 541. RSA 71 -

and rulings, as Back Bay is integral to the functioning of its Laconia complex. services provided in Laconia. The Home urges us to affirm the BTLA’s findings evidence of cost shifting or that revenue from the Back Bay is subsidizing the reasonably nece ssary to the Home’s charitable purpose, and that there is no 72:23, V. The Town argues further that the independent living units are not owned, used and occupied directly for charitable purposes as required by RSA The Town challenges this ruling on appeal, arguing that Back Bay is not

management” services noted above. when such needs should arise, as well as the additional “care the same access to assisted living and nursing care facilities, if and independent living units in Laconia. In each case, residents have units in the Town any diff erently than it operates The Ledges evidence [the] Home operates the Back Bay independent living which have already been found to be charitable. There is also no Home’s operations in the Town and its operations in Laconia, to suggest a viable leg al distinction can be drawn between [the] In summary, there is nothing in the record before the board

V charitable exemption.” In addition, the BTLA stated: community based in the City of Laconia and, thus, qualifies for an RSA 72:23, Wolfeboro was “an integral and ins eparable component of the Taylor Home Based upon the above facts, the BTLA found that the property in

reimbursement from either Medicare or Medicaid for the care it provides. Finally, by its contract with the State, the Home is prohibited from seeking of Back Bay had received a subsidy for either entry fees or monthly fees. p. 5 5

purpose. Id. at 1107. them, and found that the rentals directly fulfilled the organization’s charitable occupied a nd used by the charity because its tenants had exclusive control of will be allowed.” Id. at 1108. We rejected an argument that the units were not or are necessary for the organization to accomplish its purpose, an exemption We stated, “[I]f the rentals directly fulfill the organization’s charitable purpose, twenty - five percent of their income as rent. Senior Citizens, 122 N.H. at 1106. housing for low and moderate income individuals. Tenants generally paid welfare of needy elderly and handicapped people through the provision of Partnership. In Senior Citizens, the purpose of t he charity was to promote the Corp. of Claremont v. City of Claremont, 122 N.H. 1104 (1982), and Housing Instead, this case is more akin to Senior Citizens Housing Development

purposes was not exempt). charity in question was religious organization, re ntal property used for secular exempt); Alton Bay Camp Meeting Asso. v. Alton, 109 N.H. 44, 49 (1968) (where question was school, rental property used for educational purposes was St. Paul’s School v. Cit y of Concord, 117 N.H. 243, 2 p. 5 52 (1977) (where charity in purpose of this charitable organization is, in fact, to provide housing. Cf., e.g., owned by a charitable organization that is rented to an individual, in that the Thi s case differs from some of our previous cases addressing property

agreements that rental property cases are helpful. in their units undisturbed. This arrangement is similar enough to rental of the units at Back Bay are paying for, among other things, the right to reside its contract with its occupants. We need not decide this issue. The residents rental agreements and that it claims that no real property interest is created by We recognize that the Home does not characterize its agreements as

mission. Id. must be reasonably nece ssary for the charitable organization to carry out its for a residence to qualify for a tax exemption, the occupancy of the property living quarters does not prevent the property from being tax exempt. In order cha ritable organization is rented to individuals who use the property as their 242 (1996). We have recognized that the fact that property owned by a the past. See The Housing Partnership v. Town of Rollinsford, 141 N.H. 239, We have had occasion to examine the use of property as residences in

shall be upon the claimant.” RSA 72:23 - m (2003). RSA 72:23, V. “The burden of demonstrating the applicability of any exemption

the purpose for which they are established. the income or profits thereof is used for any other purpose than p. 6 6

residents, which distinguish it from a standard property development, are only must pay for all of their utilities. Many of the services avai lable to Back Bay Partnership, 141 N.H. at 244. The occupants of the independent living units Bay receive no special benefits as a result of their residency. See Housing residents. City of Laconia, 14 p. 6 6 N.H. a t 728. Further, the residents at Back Unlike City of Laconia, there was no evidence of financial assistance given to size of the unit occupied, much as it would on the real estate rental market. rents are below mark et rate. Indeed the monthly occupancy fee varies with the development. Here, as in Housing Partnership, there is no evidence that the separating Back Bay, in Wolfeboro, from an ordinary rental housing The Home provides its charitable services in Laconia. There is very little

directly for the Home’s chari table purpose. sole basis for a charitable exemption, as they are not used and occupied Senior Citizens. The independent living units at the Back Bay cannot be the We find that this case is more similar to Housing Partnership than it is to

V). adjunct to a charitable purpose, no tax exemption is allowed under RSA 72:23, purpose. Id. at 243 - 44 (when property is owned and rented commercially as an demonstrate that the property was not simply an adjunct to its charitable property for the plaintiff’s charitable purposes.” Id. The plaintiffs failed to a result, the occupancy of the property by the tenants is not a direct use of the market rates and receive no special benefits from living in the property, and as We concluded that the tenants in H ousing Partnership “pay close to

the elderly and disabled. Id. at 243. disabled; such housing is often modified to accommodate the special needs of Housing Partnership, the housing in Senior Citizens was for the elderly and fluctuating market costs. Id. at 244. In add ition, unlike the housing in from Senior Citizens, where the benefit to the tenants did not depend upon and were increased as the operating costs increased, distinguishing the case 243. The rents charg ed were based upon the operating costs of the properties, provided by the organization was rent stability, not below - market rent. Id. at The rents for the properties were close to market levels, and the benefit

and obtaining financing for such projects using a combination of resources. Id. affordable housing, developing housing projects with long - term affordability residents, including: providing public education and advocacy in support of organization’s by - laws established a number of services provided to its apartment buildings and rented them to tenants. Id. at 240. The Housing Partnership, 141 N.H. at 241. The organization owned several of decent, safe and affordable housing for low and moderate income persons. the organiz ation in that case was to facilitate the development and preservation In Housing Partnership, we addressed a similar issue. The purpose of p. 7 7

the Home “work in concert” towards its charitable purpose is not the test; charitable mission.” City of Laconia, 146 N.H. at p. 7 729. Whether the elements of units and nursing care facilities all “work in concert to fulfill [the Home’ s] its finding in City of Laconia that the independent living units, assisted living 141 N.H. at 242. The BTLA noted in its ruling that the Town did not challenge for the Home to accomplish its charitable purpose. See Ho using Partnership, Nor are the independent living units at Back Bay reasonably necessary

purposes. casts further doubt upon the use and occupancy of the property for charitable type of agreement. We note, however, tha t the availability of this arrangement none of the Back Bay residents for the tax year in question entered into this specifically excluding the resident from assisted living or nursing care, because We do not rely up on the availability of a separate residence agreement,

ordinary commercial rental facility. services available in Laconia that would distinguish Back Bay from any nursing care. There is little but a theoretical future use of the charitable 2002 might develop t he need for financial assistance, should they enter nursing care, and evidence that several of the residents at the Back Bay in five to thirty percent of its independent living residents will one day require of the organization. The Home presented evidence that an estimated twenty units at Back Bay into use and occupation directly for the charitable purp oses however, is not enough to transform the character of the independent living resident from its nursing care facility for non - payment. This contingency, The one distinguishing characteristic is the Home’s policy not to evict a

signing a contract with a different assisted living or nursing care facility. and the Home. Little distinguishes them from similar rights acquired by need arise. These righ ts have their source in the contract between the resident Home’s Laconia facility, and they have a right to enter nursing care should that entitled to a preference, should they need transfer to assisted living care at the The residents at Back Bay who signed the life care agreements are

122 N.H. at 1106. Senior Citizens, where the rental assistance was standardized. Senior Citizens, charitable assistance. This uncertainty further distinguishes this case from whether the Home has absolute discretion in deciding which residents receive presented on how the Home makes these funds available; it is not clea r inability to continue to make monthly payments, but no evidence was It is the Home’s policy that no one be asked to leave due to a financial

housekeeping services, just like a resident at Back Bay. development in Wolfeboro would have to pay extra for laundry, meals and available at an extra cost to the resident. A resident at another housing p. 8 8

accomplish its charitable purpose. Because we conclude that the BTLA’s order Home’s charitable purposes, or are reasonably necessary for the Home to independent living units at Back Bay are used or occupied directly for the therefore, that the record in this case does not support a finding that the of a charitable organization, without more than was presented here. We hold, housing development, which happens to op erate under the corporate umbrella We will not grant the benefit of a charitable tax exemption to a residential

distinction. of evidence of a charitable use in the present case creates a viable legal charitable uses and unchalle nged evidence to support those uses. The absence particular use. See id. at 251 - 59. The City of Laconia case presented different on one campus, granting and denying exemptions based on each item’s e xample, in St. Paul’s School, the examination focused on particular buildings organization must be examined according to its particular use, however. For which have already been found to be charitable.” Each property owned by an between [the] Home’s operations in the Town and its operations in Laconia, the record before [us] to suggest a viable lega l distinction can be drawn legal integration alone is not enough. The BTLA stated, “[T]here is nothing in to determine eligibility for tax exemption, St. Paul’s School, 117 N.H. at 250, integrated activities of the org anization as a whole must be considered in order Property with the Laconia Taylor Home facilities.” While it is true that the The BTLA also based its holding in part upon “the legal integration of the

m. It did not meet its burden. the applicability of the charitable exem ption was on the Home. See RSA 72:23 supplemented the Home’s operation as a whole. The burden of demonstrating neither evidence of Back Bay’s revenues, nor evidence of how those revenues . . . .” This conclusion is unsupportable, however, as the Home presented the independent living units to carry out the charitable goals of [the] Home Back Bay was “integral” to the Home and referred to the “financial necessity of The BTLA, relying upon our decision in City of Laconia, concluded that

existence of the funds generated by the independent living units at Back Bay. 146 N.H. at 729. In this case, however, the Town does challenge the use and the City of Laconia did not dispute those findings on appeal. City of Laconia, provided a significant source of funds for it s charitable purpose, we note that the independent living units were the “main ‘money engines’” of the Home and Although we did not disturb the BTLA’s findings, in City of Laconia, that

242. Home to accomplish its charitable purpose. Housing Partnership, 141 N.H. at rather, the independent living units must be reasonably necessary for the p. 9 9

concurred. BRODERICK, C.J., and NADEAU, DUGGAN and GALWAY, JJ.,

exemption for the prop erty in Wolfeboro. is unreasonable, we reverse its ruling that the Home is entitled to a tax