Editorial: Court should back city in tax fight
Every taxpayer suffers when a property owner receives an undeserved exemption from taxation. To be entitled to the support of fellow property owners, paid in the form of higher tax bills for everyone else, an owner must prove beyond doubt that the property is used almost exclusively for religious or charitable purposes. Just being a non-profit isn’t enough. Doing a bit of charitable work isn’t enough. Nor is providing space to house a legitimate charitable organization.
The case for exemption from taxation made by Granite State Management & Resources, a student loan servicer and the owner of property off Regional Drive in Concord assessed at $8.57 million, is exceptionally weak. The city was right when it took another look at the building’s tax status and Merrimack County Superior Court Judge Richard McNamara wrong when he sided with the corporation by finding it tax-exempt.
The city appealed, and last week the state Supreme Court heard arguments on both sides. There’s a lot at stake. Granite State Management & Resources, by agreement, was making payments in lieu of taxes to the city. They totaled $56,519.60 in 2008. That’s far less than the corporation should have paid, given that the following year, the city sent it a tax bill for $170,085.66, a figure that doesn’t include the value of the parking lots on the property.
GSMR contracts with lenders to service federally-guaranteed student loans and some private loans. Servicing its loan portfolio of roughly $2.5 billion earned the corporation a net profit $1.9 million in 2008 and $3.1 million in 2009. The corporation has accumulated a multimillion-dollar surplus that, its website says, would go to governmental or non-profit organizations should the corporation ever dissolve. GSMR provides annual scholarships to approximately 11 students whose value came to $20,000 and $30,000 in the years in question. It also holds workshops and provides student loan counseling sessions, but its charitable efforts are, in the city’s words, “de minimus” and incidental to its real business of servicing loans for a fee.
In its argument before the court, the city noted the half-million-dollar salary GSMR’s board pays its longtime executive director, the six-figure salaries of some employees, and the awarding of hefty employee bonuses based on profits. The latter practice, in particular, strikes us as out of character for an organization that claims to be a charity.
GSMR offered a grab bag of reasons it should be accorded charitable status, but at heart its claim is based on its contention that by providing low-cost and efficient loan servicing it helps to reduce the cost of borrowing for higher education. We find that argument severely wanting.
The vast majority of the loans the corporation services are guaranteed by taxpayers, so it’s not like it’s taking a risk to help low-income students go to college. Nor did GSMR offer evidence that it charges dramatically less to service loans than a for-profit loan servicer would. Some of its tenant organizations may be considered charities but a landlord can’t, as the city argues, “piggyback on the charitable activities of another organization to demonstrate that it qualifies as a charity.” Donating to charities, as GSMR does, or engaging in a bit of charitable activity, say, by paying employees to do some charitable work on company time, does not a charity make.
The Supreme Court should order GSMR to stop shifting its tax burden to others and pay up.
The Bradford Town Hall has been closed for a year and a half. Yesterday’s editorial included an incorrect figure.