NEWPORT — The New Hampshire Supreme Court has ruled in favor of New London Hospital Association in an appeal of the charitable property tax-exempt status for the Newport Health Center (NHC) on John Stark Highway that had been denied by the town of Newport.

The hospital association appealed the exemptions for the health center — which opened in 2012 and is owned and operated by the hospital, a member of the Dartmouth Health system — for the tax years 2015, 2017 and 2018. Those were the years the New London Hospital (NLH) applied for tax-exempt status and was denied by the town.

New London Hospital, in a statement released Wednesday, noted that the court affirmed the tax-exempt status of the health center, which has served the Newport community in an “underserved region of New Hampshire.”

“Our commitment to serving and being a vital member of the Town of Newport is still the same today as it was when the Newport Health Center first opened, and we are grateful to be a part of the community,” said Audra Burns, a DH spokeswoman.

Between 2015 and 2023, excluding 2016 which was not part of the case, the hospital paid more than $1.5 million in property taxes, according to Newport Finance Director Paul Brown.

Newport Town Manager Kyle Harris said on Thursday he had, “no comment at this time” about what the ruling means for the town.

The 12-page ruling issued Wednesday upholds a lower court decision in favor of the hospital association on two of the four factors under ElderTrust, the state law governing charitable property tax exempt status, and reverses the fourth one, which the lower court denied.

The parties agreed NLH met the criteria for tax-exempt status under the first ElderTrust factor, which states that the “institution or organization was established and is administered for a charitable purpose.”

Under the fourth factor, the organization’s officers or members cannot receive any “pecuniary (financial) profit or benefit.”

The main arguments under the fourth factor boiled down to NLH’s stating that the trial court “erred in determining that DHH (Dartmouth Hitchcock Health) received a business benefit from NHC through its patient referral policy” and payments to independent contractors.

The town countered by claiming that the health system “received such a benefit by realizing downstream revenues due to referrals from patients seen at NHC” and the independent contractors did not share in NLH’s charitable mission.

The referral process states that the hospital’s affiliated providers refer patients for appropriate medical care when not available at NLH.

“Given that the policy concerns patients in need of services, we conclude, as a matter of law, that the practice of referring patients to DHH for ‘appropriate medical care’ that NLH cannot provide, does not confer on DHH a ‘pecuniary…benefit’ prohibited under the fourth ElderTrust factor,” the justices wrote.

The justices also disagreed with the town’s argument that all entities, including independent contractors, receiving compensation from NLH “share the same charitable mission.”

“Because NLH received services in exchange for the monies it paid the independent contractors, it need not show that those contractors share NLH’s charitable mission,” the ruling states.

On factors two and three of ElderTrust, the Supreme Court affirmed the lower court’s ruling in the hospital’s favor. Factor two requires that the organization serve its charitable purpose for a public benefit “rather than simply to members of the organization.”

Factor three requires that “the land, in addition to being owned by the organization, is occupied by it and used directly for (its) charitable purpose.”

Regarding factor two, the town said NLH’s articles of agreement do not contain an “enforceable obligation to perform its charitable purpose.” The justices disagreed, writing that the articles of incorporation do in fact define the charitable purpose such that it can be enforced.

Finally, on factor three, the justices rejected the town’s argument that the health center was set up to provide only primary care and women’s health services with a mechanism in place with referrals to New London Hospital or other members of the DH system.

“NHC was not used for NLH’s stated charitable purpose but was used as a money maker for the DH system,” the town argued.

In affirming the lower court ruling on factor three, the justices said, “we cannot conclude that providing primary care and women’s health services at NHC does not carry out NLH’s third stated purpose.”

Wednesday’s ruling has broader implications for the state’s nonprofit hospitals and health systems and their allowable tax exemptions, New Hampshire Hospital Association President Steve Ahnen said.

“This is an important ruling that provides much needed clarity of New Hampshire’s tax-exempt statutes for non-profit hospitals and health systems as well as other non-profit providers with a charitable mission to serve their communities across the state,” Ahnen said.

Patrick O’Grady can be reached at pogclmt@gmail.com.