Capital for Change, Inc. v. Bd. of Assessment Appeals of the Town of Wallingford

215 Conn.App. 681

283 A.3d 562

CAPITAL FOR CHANGE, INC.

v.BOARD OF ASSESSMENT APPEALS OF the TOWN OF WALLINGFORD

AC 44404

Appellate Court of Connecticut.

Argued May 25, 2022

Officially released October 11, 2022

Lori Welch-Rubin, with whom was J. Michael Sulzbach, New Haven, for the appellant (plaintiff).

Janis M. Small, corporation counsel, Wallingford, for the appellee (defendant).

Alvord, Prescott and DiPentima, Js.

ALVORD, J.

The plaintiff, Capital for Change, Inc., appeals from the judgment of the trial court dismissing its appeal from the decision of the defendant, the Board of Assessment Appeals of the Town of Wallingford (board), which upheld the denial of the plaintiff's application for a charitable organization real property tax exemption. On appeal, the plaintiff claims that the court improperly concluded that the plaintiff's property is not exempt pursuant to General Statutes § 12-81 (7) because its mission to support affordable housing for low and moderate income persons is not a charitable purpose and, therefore, it is not organized exclusively, and its property is not used exclusively, for carrying out charitable purposes. We affirm the judgment of the trial court on the ground that, regardless of whether the plaintiff's mission to support affordable housing is a charitable purpose, the undisputed evidence demonstrates that the plaintiff's property is not used exclusively for such a purpose, as required to qualify for the exemption.

The following facts, as stipulated by the parties or undisputed in the record, and procedural history are relevant to our resolution of this appeal. The plaintiff, a community development financial institution, is a tax-exempt charitable organization for federal tax purposes that owns real property located at 10 Alexander Drive (property) in Wallingford. The plaintiff uses the property to engage in commercial lending, consumer lending, loan servicing, and third-party contract administration. The plaintiff primarily provides its services to (1) developers and homeowners "to improve and increase the supply of housing affordable to Connecticut residents," (2) consumers, commercial entities and industrial customers, including utility companies, related to the administration of energy efficiency loans, and (3) nonprofits, small businesses, and municipalities.¹

The plaintiff provides "flexible financing" for the development of affordable housing through its social impact investment program. With that program, investors "are seeking to obtain not just a financial yield on their investment, but they want to see that the activity they're funding has ... other social impact[s]." In addition to the return on their investments, therefore, the investors receive a report from the plaintiff on the different impacts associated with the plaintiff's lending activities. The investments are "[l]ow return to the investor" but also "[low] cost to [the plaintiff]." In addition, numerous banks lend money to the plaintiff. The plaintiff, in turn, makes loans to consumers and commercial entities to use toward the acquisition, construction and/or renovation of affordable housing.² Some of the banks require a direct assignment of the loans made by the plaintiff with their funds. In those circumstances, the plaintiff services the loan for the bank. The plaintiff's loan servicing for these banks, and other lenders, consists of payment processing, principal and interest disbursement, default management, and debt collection.³

In addition to its services related to the development of affordable housing, the plaintiff also is involved in providing financial services for certain energy efficiency loan programs. The plaintiff created its sole member subsidiary, CT Energy Efficiency Finance Company (CEEF Co.), to "develop and finance clean energy, energy conservation and load management, and energy efficiency projects."⁴ CEEF Co. contracts with utility companies, specifically, Eversource and Avangrid, to help oversee statutorily mandated programs such as Home Energy Solutions, the Energize CT Heat Loan program, and the Energy Conservation Loan program.⁵ The programs are essentially "self funded revolving loan fund[s]," in that they are funded by the utility companies’ customers, i.e., the ratepayers, through mandatory charges added to their utility distribution fees. The utility companies collect the mandatory ratepayer fees and forward them to CEEF Co. to administer the energy efficiency loan programs. The energy efficiency loans funded through these programs are made to consumers, commercial entities, and industrial customers.

"CEEF Co. ... has no employees. They contract with [the plaintiff] to do the work. [The plaintiff] provides all administrative services to its sole member subsidiary in the execution of CEEF Co.’s contracted services to Eversource. Reimbursement is provided by scheduled, contracted fees for service. [The plaintiff] performs various duties in consumer lending, loan servicing and finance and administration for CEEF Co. These services are contracted under fee for services agreements executed by and between [the plaintiff], CEEF Co., Eversource and Avangrid. These services include marketing, intake and processing of applications, managing a contractor network to provide services, monitoring work completion, funding loans, receiving payments, reimbursing funding sources, reporting to funders, and collections of delinquent accounts. [The plaintiff] also provides on bill repayment (OBR) services to Eversource for these loans. OBR is shadow accounting of loan payments invoiced through the utility's distribution bills and collected by the utilities. Current agreement terms provide a closed loan origination fee, a monthly per loan servicing fee, and an annual fee to administer periodic financial reporting, audits, obtain insurances, and other required administrative services." The plaintiff is compensated for its services to CEEF Co. "under fee for services agreements that stipulate either per item charges (e.g., closed/funded loan, serviced loan/month) or set amounts for monthly administrative costs/reimbursements (e.g., accounting/reporting, insurances, audit)."

Apart from its services related to affordable housing and energy efficiency loans, the plaintiff also provides certain financial services to small businesses, nonprofits, and municipalities. For small businesses, the plaintiff "work[s] with all the micro lenders around the state to have accelerator training programs for early stage businesses to help grow them and ... to provide them capital to be able to help those businesses get launched ... and to grow."⁶ For nonprofits, the plaintiff offers "bridge loans to provide interim capital where there's ... a funding obligation [from a third party] that's going to be delivered at some point in time," which "help[s] smooth the operational expenses of the nonprofits." The plaintiff offers loan servicing to nonprofits such as Habitat for Humanity and other neighborhood housing services "that are smaller [and] do some lending [but] don't have the ability ... to do debt collection and don't have the adequate systems to do it accurately so they outsource it to [the plaintiff]." The plaintiff also provides loan servicing to municipalities such as the towns of Rocky Hill, Enfield, West Hartford, and the city of Norwalk.

In 2018, the plaintiff filed an application for a tax exemption with respect to the property pursuant to § 12-81 (7). The assessor for the town of Wallingford denied the plaintiff's application, and the plaintiff filed an appeal with the board. The board denied the plaintiff's appeal, and the plaintiff subsequently filed the present action in the Superior Court, appealing from the board's decision.

During a trial to the court, the plaintiff presented testimony from its president and chief executive officer, Calvin Vinal. The parties stipulated to certain undisputed facts and offered several documents as exhibits, including the plaintiff's and CEEF Co.’s foundational documents, certain federal tax forms, and summaries of the plaintiff's loan products, which the court admitted into evidence.

On November 2, 2020, the court issued a memorandum of decision dismissing the plaintiff's appeal from the board's decision. At the outset, the court recognized that "[t]here is no genuine issue as to any material fact. The parties differ on the proper characterization of that evidence and the application of ... § 12-81 (7) to the facts established by the evidence."

In its analysis, the court first focused on certain language set forth in § 12-81 (7) (B),⁷ specifically, that "housing for persons or families of low and moderate income shall not constitute a charitable purpose under this section."⁸ The court explained its view that "[s]ubsection (B) makes the statutory term ‘charitable purposes’ a term of art for purposes of ... § 12-81. No matter how ‘charitable’ a purpose might be in common parlance—or, for that matter, for purposes of the Internal Revenue Code—‘housing for persons or families of low and moderate income shall not constitute a charitable purpose under this section .’ ... The term ‘section’ facially applies to the entire text of [§] 12-81. A fortiori, it applies to subsection (7), paragraph (A) of that section. The statutory text is unambiguous." (Emphasis in original.)

The court then focused on the following relevant language set forth in § 12-81 (7) (A) : "[T]he real property of ... a corporation organized exclusively for ... charitable purposes or for two or more such purposes and used exclusively for carrying out one or more of such purposes ...." The court determined that "[t]he repeated use of the word ‘exclusively’ in subsection [7] (A) has independent significance. For its property to be exempt from taxation, a corporation must be ‘organized exclusively’ for ‘charitable purposes.’ The property must also be ‘used exclusively’ for charitable purposes. This means that if a...