Tax dispute between Concord and student loan servicer goes to Supreme Court
A dispute over whether a student loan servicer should pay property taxes in Concord has reached the New Hampshire Supreme Court.
Granite State Management & Resources maintains that it is exempt from taxes as a charitable organization. A Merrimack County Superior Court judge sided with the corporation last year, ruling that it works to minimize the costs of student loans and to provide outreach services to students and their families. But the Supreme Court has accepted an appeal from the city of Concord over the corporation’s taxes in 2008 and 2009.
The city says in its appeal that Granite State Management & Resources does not qualify for tax exemption. While the corporation has charitable affiliates, the city argues that Granite State Management & Resources “only operates as a loan servicer and administrator, which is not a charitable activity.”
The corporation’s properties located off Regional Drive in Concord have a total assessed value of $8.57 million, according to the city’s assessment records. Granite State Management & Resources owns the property and provides management services for three other nonprofit corporations. Together, they form the NHHEAF Network Organizations.
As a loan servicer, Granite State Management & Resources contracts with lenders to service federally guaranteed loans and some private program loans. As a charitable organization, its mission serves “the charitable and educational purpose of providing low cost or alternative financial assistance to eligible students . . . and of supporting the development of higher education and educational opportunities,” according to a brief filed to the Supreme Court.
“Through the activities of GSMR . . . New Hampshire students and parents were able to obtain access to lower cost funds to finance the cost of education,” according to a brief filed in the Supreme Court by Margaret Nelson, the corporation’s attorney.
Nelson also cites a number of outreach services provided by the corporation, including a Center for College Planning to help students obtain loans and search for grants or scholarships, free seminars for families and online resources.
The city argues that those charitable activities are not performed by Granite State Management & Resources, but by its affiliates.
“Even if NHHEAF and NHHELCO (its affiliate organizations) were deemed charitable, GSMR is not permitted to ‘bootstrap’ or ‘piggy-back’ on the charitable activities of another organization to demonstrate that it qualifies as a charity, even if it makes those organizations more efficient,” City Solicitor Jim Kennedy wrote in his appeal to the Supreme Court.
Granite State Management & Resources earns a large profit from servicing loans, Kennedy wrote in his appeal.
The corporation’s loan portfolio in 2008 and 2009, the years disputed in the lawsuit, totaled $2.5 billion, according to its court filings. It earned net profits of $1.9 million in 2008 and $3.1 million in 2009.
Nelson defended the corporation’s financial resources in court documents as “necessary to permit it to maintain adequate reserves and demonstrate the financial capability needed to meet its contractual obligations, which, in turn, allowed it to fulfill its charitable mission.”
Nelson and Kennedy both declined to comment yesterday. A message left for an executive at Granite State Management & Resources was not returned yesterday afternoon.
Since 2000, the corporation has been under a payment-in-lieu-of-taxes (PILOT) agreement with the city for the portion of its property that includes its office building. Granite State Management & Resources paid the city an annual amount equal to its assessed value multiplied by the municipal portion of the tax rate.
PILOT agreements are voluntary for tax-exempt organizations, said Kathryn Temchack, the city’s director of real estate assessments.
The tax dispute began in 2008, when the city and the corporation discussed the
PILOT agreement, according to court documents. The city’s assessing office then determined that it was not eligible for a charity tax exemption. In 2009, the city began charging the corporation its full property tax bill.
Granite State Management & Resources appealed to Merrimack County Superior Court, where Judge Richard McNamara found the corporation exempt from taxes but accountable for the PILOT agreement. If the Supreme Court does not find the corporation to be exempt from taxes as a charity, it will have to pay property taxes.
Both sides will make oral arguments before the New Hampshire Supreme Court on April 11.