Appeal of City of Rochester

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

In Case No. 2021-0392, Appeal of City of Rochester, the
court on January 31, 2023, issued the following order:

The court has reviewed the written arguments and the record submitted
on appeal, has considered the oral arguments of the parties, and has
determined to resolve the case by way of this order. See Sup. Ct. R. 20(2). The
petitioner, City of Rochester (City), appeals an order of the Board of Tax and
Land Appeals (BTLA) ruling that the respondent, Rochester Agricultural &
Mechanical Association (RAMA), is entitled to a charitable tax exemption under
RSA 72:23, V (2012). We affirm.

I. Background

The following facts were found by the BTLA or appear in the record. In
1879, RAMA was established under Chapter 152 of the General Laws of New
Hampshire authorizing voluntary corporations engaged in, among other things,
“agricultural, educational, or charitable purposes.” G.L. 152:1 (1878). Under
its 1879 articles of incorporation, RAMA’s stated purpose was “to improve and
stimulate agricultural and mechanical skill” as well as to purchase and make
improvements to property. RAMA organizes the annual Rochester Fair.

In 1984, RAMA filed restated articles of incorporation under RSA chapter
293-A. See RSA 293-A:10.07 (2016). The restated articles provide that RAMA
“is empowered to transact any and all lawful business for which corporations
may be incorporated under RSA 293-A,” while reiterating that RAMA’s principal
purpose is “[t]o improve and stimulate agricultural and mechanical skills.”

In 2020, RAMA filed an application for a charitable tax exemption with
the City. The City denied the application because it concluded that RAMA’s
“charter speaks about the purpose of its formation but contains no obligations
to do any charitable acts.”

RAMA appealed to the BTLA. After an evidentiary hearing, the BTLA
found that RAMA was a charitable organization eligible for the tax exemption
under RSA 72:23, V. The City moved unsuccessfully for a rehearing, and this
appeal followed.
II. Analysis

On appeal, the City has the burden of showing that the BTLA’s decision
is clearly unreasonable or unlawful. Appeal of City of Concord, 161 N.H. 344,
347 (2011); see RSA 541:13 (2021). The BTLA’s findings of fact are deemed
prima facie lawful and reasonable. Appeal of City of Concord, 161 N.H. at 347-
48. “We will not set aside or vacate a BTLA decision except for errors of law,
unless we are satisfied, by a clear preponderance of the evidence before us,
that such order is unjust or unreasonable.” Id. at 348 (quotation and brackets
omitted).

Resolution of this appeal requires that we consider the interpretation and
application of RSA 72:23, V and RSA 72:23-l. ElderTrust of Fla. v. Town of
Epsom, 154 N.H. 693, 696 (2007); see RSA 72:23-l (2012). The interpretation
and application of statutes present questions of law, which we review de novo.
ElderTrust, 154 N.H. at 696. “Therefore, if we find that the board
misapprehended or misapplied the law, its order will be set aside.” Appeal of
City of Concord, 161 N.H. at 348 (quotation omitted). “We note that the
legislative purpose to encourage charitable institutions is not to be thwarted by
a strained, over-technical and unnecessary construction.” Marist Bros. of N.H.
v. Town of Effingham, 171 N.H. 305, 310 (2018) (quotation omitted).

The BTLA concluded that RAMA is a charitable organization eligible for a
tax exemption after considering the four factors set forth in ElderTrust: (1)
whether the institution or organization was established and is administered for
a charitable purpose; (2) whether an obligation exists to perform the
organization’s stated purpose to the public rather than simply to members of
the organization; (3) whether the land, in addition to being owned by the
organization, is occupied by it and used directly for the stated charitable
purposes; and (4) whether any of the organization’s income or profits are used
for any purpose other than the purpose for which the organization was
established. ElderTrust, 154 N.H. at 697-98. Under the fourth factor, the
organization’s officers or members may not derive any pecuniary profit or
benefit. Id. at 698; see RSA 72:23, V. On appeal, the City challenges the
BTLA’s findings with respect to each of these factors.

As to the first ElderTrust factor (requiring taxpayer to be established and
administered for a charitable purpose), ElderTrust, 154 N.H. at 697, the City
argues that (1) RAMA is not established as a charitable organization, and (2)
organizing the Rochester Fair does not constitute a charitable function.

We first address whether RAMA is established as a charitable
organization. RSA 72:23, V requires that an entity must be a “charitable
organization[]” to be eligible for a tax exemption. RSA 72:23, V. RSA 72:23-l
defines the word “charitable” with respect to RSA 72:23, and provides that
“[t]he term ‘charitable’ as used to describe a corporation, society or other

2
organization within the scope of this chapter . . . shall mean a corporation,
society or organization established and administered for the purpose of
performing, and obligated, by its charter or otherwise, to perform some service
of public good.” RSA 72:23-l (emphases added). The City argues that RAMA
filed its 1984 restated articles of incorporation under RSA chapter 293-A, the
New Hampshire Business Corporation Act, as an entity authorized to conduct
“all lawful business.” The City argues that the 1984 incorporators could have,
but did not, incorporate under RSA chapter 292, which governs voluntary
corporations. See RSA 292:1 (2016) (setting forth the purposes for which
voluntary corporations may be formed, including “[t]he promotion of
agriculture”).

The legislature did not limit its definition of “charitable” to only those
institutions incorporated under chapter 292, and we decline to do so. See RSA
72:23-l. We will not add words that the legislature did not see fit to include,
nor will we adopt an “over-technical and unnecessary construction” of RSA
72:23-l. Marist Bros., 171 N.H. at 310; see also Appeal of Town of Seabrook,
163 N.H. 635, 653 (2012) (“We accord statutory language its plain and ordinary
meaning, and we will not add words the legislature did not see fit to include.”).
The fact that RAMA’s restated articles of incorporation were filed under chapter
293-A is not sufficient, on its own, to disqualify RAMA from meeting the
statutory definition of “charitable.” See RSA 72:23-l.

The City next argues that RAMA’s articles of incorporation do not provide
a purpose that is charitable in nature. We disagree.

“Generally, charitable purposes fall into the following categories: (1)
relieving poverty; (2) promoting health; (3) advancing education; (4) aiding
religion; (5) providing governmental or municipal facilities and services; and (6)
other purposes that are beneficial to the community.” Granite State Mgmt. &
Res. v. City of Concord, 165 N.H. 277, 284 (2013). RAMA’s restated 1984
articles of incorporation provide that the organization’s principal purpose is
“[t]o improve and stimulate agricultural and mechanical skills.” That purpose
falls into the third general category of charitable purposes — advancement of
knowledge or education. See id.; see also Restatement (Third) of Trusts § 28(b)
(2003) (discussing purposes of a charitable trust). RAMA’s purpose is
consistent with educational purposes we have previously recognized as
charitable. See, e.g., Marist Bros., 171 N.H. at 311 (holding that advancing
education and aiding religion are charitable purposes); Town of Peterborough v.
MacDowell Colony, Inc., 157 N.H. 1, 7 (2008) (holding that promoting art is a
charitable purpose); Greater &c. Girl Scout Council v. Pelham, 100 N.H. 24, 26
(1955) (holding that training young people for citizenship is a charitable
purpose). In light of the foregoing, the City has not met its burden of showing,
by a preponderance of the evidence, that the BTLA’s finding that RAMA is
established as a charitable organization is unjust or unreasonable. See Appeal
of City of Concord, 161 N.H. at 348.

3
 We turn next to the second ElderTrust factor: whether RAMA is obligated
to perform its charitable purpose for the public. See ElderTrust, 154 N.H. at
697-98. The City argues that organizing the Rochester Fair is not a charitable
act because the public must pay to attend and only 20-25% of the Fair is
agricultural.

As to the first argument, our case law does not prohibit charitable
organizations from charging fees. See Marist Bros., 171 N.H. at 312 (“The
charge of an admission fee, all of the proceeds of which are used to defray
operating expenses, does not alter [an institution’s] standing as a charity.”);
Granite State, 165 N.H. at 292 (“It is recognized that a corporation does not
lose its exempt status . . . merely because it has a net income or makes a profit
or charges fees for its services. The destination of the income, and not the
source of the income, determines the exemption.” (quotation omitted)).
Therefore, the fact that the public must pay to participate in the Rochester Fair
is not fatal to RAMA’s charitable status.

As to the City’s second point, the BTLA concluded:

The Taxpayer has a stated purpose in its “charter” documents that
includes the promotion (or “stimulation”) of “agricultural and mechanical
skill.” Although the city may believe otherwise, the conduct of an annual
agricultural fair, where farm products, methods and equipment are
exhibited, promoted, displayed and honored by the Taxpayer, helps carry
out its charitable purpose of promoting agricultural and mechanical skill.
(Citation omitted.)
We agree with the BTLA. The City characterizes the Rochester Fair as a
“carnival.” However, the presence of amusements and attractions at the Fair
does not negate its charitable purpose. See Maryland State Fair & A. Soc. v.
Supervisor of Assess., 172 A.2d 132, 139 (Md. 1961). Indeed, amusements
and attractions advance RAMA’s charitable purpose by exposing a larger
audience to the agriculture-related exhibits and displays. Id. The BTLA did
not misapprehend or misapply the law when it found that organizing the
Rochester Fair constituted a charitable act. See Appeal of City of Concord, 161
N.H. at 348.

The City argues that RAMA lacks an enforceable charitable obligation
and, therefore, the BTLA erred in finding that it satisfied the second ElderTrust
factor. See ElderTrust, 154 N.H. at 697-98. The City argues that because
RAMA’s restated articles of incorporation lack mandatory language, such as
“shall,” the BTLA should not have considered RAMA’s history. The City’s focus
on the word “shall” is misplaced. See RSA 72:23-l (stating that an organization
must be “obligated, by its charter or otherwise, to perform some service of
public good or welfare” (emphasis added)); see also Marist Bros., 171 N.H. at
315 (“In determining whether an organization has an enforceable obligation to

4
perform a charitable service, we look to both its charter or organizational
statements and its actions taken pursuant to those statements.” (emphasis
added)).

“The purpose of the obligation requirement is to prevent organizations,
even if they operate for charitable purposes, from obtaining the benefits of a tax
exemption without providing some service of public good.” ElderTrust, 154
N.H. at 699. To establish this obligation we have consistently looked to both
an organization’s chartering documents and its historical operations. See, e.g.,
Marist Bros., 171 N.H. at 315; MacDowell Colony, 157 N.H. at 8-9; Appeal of
City of Franklin, 137 N.H. 622, 626 (1993).

RAMA’s history and chartering documents are unique and unlike any we
have previously considered. RAMA was established under Chapter 152 of the
General Laws of New Hampshire in 1879. For almost 150 years, RAMA has
organized the Rochester Fair in accordance with its stated purpose and has
operated without regard for profit. As evidence of this history, RAMA points to
its classification as a tax-exempt organization by the Internal Revenue Service
as well as its registration with the Charitable Trusts Unit of the New
Hampshire Attorney General’s Office.

Although RAMA’s restated articles provide that it “is empowered to
transact any and all lawful business for which corporations may be
incorporated under RSA 293-A,” RAMA maintains that, as a charity, “RSA
7:19–32-a prohibit it from operating as a for-profit entity or from deviating from
its stated purpose” of improving and stimulating agricultural and mechanical
skills. RAMA has argued, to both this court and the BTLA, that RSA 7:28-f
authorizes the Attorney General’s Charitable Trusts Unit to bring an
enforcement action if it violates these prohibitions. Therefore, we conclude that
the principles of judicial estoppel would prevent RAMA from arguing that it is
not obligated to comply with RSA 7:19–32-a.

In light of RAMA’s unique history — a chapter 152 entity reincorporating
under RSA chapter 293-A while also being registered as a charitable
organization — as well as its nearly 150-year history of organizing the
Rochester Fair and operating as a non-profit organization, we conclude that,
even if the restated articles alone do not sufficiently circumscribe RAMA’s
discretion, an enforceable charitable obligation nevertheless exists. See Marist
Bros., 171 N.H. at 315.

Next, the City argues that the BTLA erred when it found that the land for
which RAMA sought a charitable tax exemption is owned, occupied, and used
by RAMA for its stated charitable purpose as required by the third ElderTrust
factor. See ElderTrust, 154 N.H. at 698. On appeal, the City appears to argue
that RAMA does not use its land for a charitable purpose because a third-party
vendor coordinates events at the fair, and that the BTLA “ignored” its evidence

5
to this effect. Our review of the record, including the transcript, leads us to
conclude there was a sufficient basis to support the BTLA’s decision. See
Marist Bros., 171 N.H. at 309 (“[W]e defer to the [BTLA]’s judgment on such
issues as resolving conflicts in the testimony, measuring the credibility of
witnesses, and determining the weight to be given evidence.” (quotation
omitted)).

Finally, the City challenges the BTLA’s finding that RAMA meets the
fourth ElderTrust factor. See ElderTrust, 154 N.H. at 698. The City argues
that RAMA’s members derive pecuniary benefits from the organization because
“shareholders of RAMA and their families receive free tickets to the Rochester
Fair while the public has to pay.”

The BTLA found that:

In the board’s experience, it is not uncommon for many tax exempt
organizations, including museums devoted to art, history, natural history
and other purposes, as well as agricultural fairs, to charge the public for
admission, food and drink and other attractions while not charging
admission to members. This practice is both common and eminently
reasonable and does not result in the loss of a charitable exemption.

On appeal, the City does not challenge these findings or the BTLA’s legal
conclusion. Therefore, we will not review them sua sponte.

Further, our case law acknowledges members of a charitable
organization can receive some benefits without violating the prohibition on
pecuniary benefits. See Marist Bros., 171 N.H. at 324-25. For example, in
Marist Brothers, we considered whether allowing “fifty (50) to sixty (60) children
or relatives of camp employees and brothers to attend the camp for free each
summer” constituted a pecuniary benefit to the members of the religious
organization that ran the camp. Id. at 324 (quotation omitted). We concluded
that because the Brothers receive no compensation for staffing the camp, “free
camp attendance for the Brothers’ relatives would constitute nothing more
than payment of reasonable compensation to members for their service,” and
thus did not amount to a pecuniary benefit. Id. at 324-25 (quotation omitted).
In this case, the BTLA heard testimony that members receive only two free
admission tickets to the Fair. To the extent that the free admission tickets are
given to members in recognition of their volunteer efforts, as RAMA argues on
appeal, the two free tickets are analogous to the free camp attendance in
Marist Brothers, and can be viewed as payment of reasonable compensation to
members for their service. See id.

Thus, we conclude that the City has not shown, by a preponderance of
the evidence, that the BTLA’s finding that “[w]hile [RAMA] has shareholders,

6
officers and a board of directors, they are not compensated, no dividends of any
type are paid and no income or profits are diverted to them” is unjust or
unreasonable. We, therefore, decline the City’s invitation to reverse on this
ground.

For the foregoing reasons, the City has not met its burden on appeal.
Therefore, the BTLA’s decision ruling that the City erred in denying RAMA a
charitable tax exemption under RSA 72:23, V is affirmed. We have reviewed
the City’s remaining arguments and determine that they do not warrant further
discussion. See Vogel v. Vogel, 137 N.H. 321, 322 (1993).

Affirmed.

MACDONALD, C.J., and HICKS, BASSETT, HANTZ MARCONI, and
DONOVAN, JJ., concurred.

Timothy A. Gudas,
Clerk

7