New Hampshire Legal Fight Raises Concerns for Charities

As the economy worsens, there are signs that state and local governments will seek money from tax-exempt groups to help close budget gaps — and New Hampshire is becoming a prime example.

According to the Associated Press, Gov. John Lynch, a Democrat, is seeking $85-million in surplus money from the Joint Underwriting Association, a tax-exempt medical malpractice insurance fund.

The association had planned to use part of the surplus to pay dividends to its member doctors. But the governor argues that the money belongs to New Hampshire because the state created the fund and because it is exempt from paying taxes.

The association is fighting the effort in court.

An editorial in the Union Leader, a newspaper in Manchester, N.H., says that while the malpractice fund is an unusual organization, lawmakers could make similar arguments against other tax-exempt organizations.

“If the court validates the argument that the organization’s nonprofit status was one justifiable reason for the state to take its cash, that would give legislators cover for expanding such raids in the future,” it argues.