Wrap-up on Georgia tax legislation, 2016

In addition to Decatur’s homestead exemptions (see prior coverage here) and personal property tax exemption for fulfillment centers (see here), Governor Deal signed at least a half dozen other tax-related bills into law last week.

By signing House Bill 1104, the governor authorized a vote in Columbus-Muscogee County on eliminating the property tax freeze that Columbus has had in place since 1982. The freeze had become controversial locally and the mayor there campaigned against the freeze saying that it slowed economic growth.

The governor also signed HB 937 granting a sales tax break for the new Falcons stadium and other projects of "competitive regional significance," Senate Bill 369 authorizing sales tax increases for transportation improvements in Atlanta and Fulton County subject to voter approval, HB 991 waiving penalties and interest for military taxpayers who became delinquent while deployed, HB 987 amending conservation use covenants for ad valorem taxes, HB 769 exempting boats and all-terrain vehicles in dealer inventory from personal property taxes, and HB 960 making several changes to taxes administered by the state including the interest rate on past due state income taxes.

Governor OK’s tax exemption for fulfillment centers

Governor Deal has approved a tax exemption for fulfillment centers in Georgia in jurisdictions that offer freeport exemptions.

In addition to real property taxes, businesses normally pay “personal property taxes” on business inventory. Many communities offer a freeport exemption which reduces personal property taxes the same way a homestead exemption reduces real property taxes. House Bill 935 expands the types of inventory eligible for exemption to include inventory at fulfillment centers. 

This expansion of freeport exemptions is part of a larger economic development strategy for Georgia. The Augusta Chronicle reported on the story behind the HB 935 last month:

…U.S. consumers are increasingly shifting toward e-commerce. That’s prompting retailers to develop distribution centers closer to urban areas to shorten delivery times as more companies promise same-day delivery and free shipping, said Curtis Spencer, president of the IMS Worldwide consulting firm…

“It [HB 935] will definitely make us competitive over other states,” said Jannine Miller, director of the Georgia Center of Innovation for Logistics, which is hosting this week’s [Georgia Logistics Summit] conference.

Commissioner of Economic Development Chris Carr said e-commerce is a targeted segment of the logistics industry.

“If you look as far as the eye can see, e-commerce is critically important,” he said. “We want to be a place companies want to locate and give them every reason to be here. That will help us do that.”… 

HB 935 was signed into law on May 3.

General Assembly adopts tax changes

On the final day of its legislative session, the Georgia General Assembly approved several bills involving taxes.

The most significant was Senate Bill 369, which authorizes up to a ½ percent sales tax increase in Atlanta for MARTA expansion, a ¾ percent sales tax increase in Fulton County for transportation, and up to a ½ percent sales tax increase in Atlanta for transportation improvements and congestion reduction. State Senator Brandon Beach said on the final night of the legislative session that Fulton County and cities outside of Atlanta could authorize an additional ¼ percent sales tax for transit. In other words, both Atlanta and Fulton County could each increase their sales tax rate by 1 percent with differing ratios going toward mass transit and roads.

Narrower bills dealing with ad valorem tax breaks for specific industries also passed. House Bill 769 provides a personal property tax exemption to boat dealers and all-terrain vehicle dealers. HB 769 was sent to the governor on April 1. HB 935 authorizes a freeport property tax exemption to fulfilment centers such as Amazon or Walmart that ship merchandise ordered by consumers online or by phone. HB 937 gives a sales tax break for the new Falcons stadium and other projects of "competitive regional significance."

HB 960 makes several changes to taxes administered by the state. Section 1 of the bill clarifies matters of taxpayer confidentiality. Section 2 changes the interest rate calculation for state-issued tax refunds. Section 3 changes the interest charged on past due state taxes from 1 percent to the annual prime loan bank rate. Section 4 changes the penalties for failing to file a return for taxes held in trust for the state. Section 5 amends procedures for tax tribunals. HB 960 is the result of a study committee that found the interest rates were too high.  Neither SB 369 nor HB 960 have been sent to the governor yet.

The House of Representatives did not approve income tax rate reductions (SB 280 and SR 756) or property tax assessment caps (SB 298 and SB 259) proposed by the Senate.

State House approves tax exemption for fulfillment centers

The Georgia House of Representatives has unanimously approved a bill that would exempt merchandise in stock at fulfillment centers from business inventory taxes in jurisdictions that offer a freeport exemption.  Normally, businesses with inventory are subject to business personal property taxation on tangible items including equipment and inventory.  House Bill 935 excludes goods and wares at fulfillment centers with a freeport exemption from personal property taxes when those items are stored for less than 12 months.  Fulfillment centers are used by companies such as Amazon to fulfill orders placed by customers online or by phone.

The City of Decatur does not offer a freeport exemption, so this would not affect fulfillment centers if we had any.  DeKalb County offers the freeport exemption, and this could expand tax relief to companies operating fulfillment centers in the county.

State House approves permanent exemption for boat dealers

Most business inventory in Georgia is subject to personal property taxes collected by counties and cities.  The state revenue code has previously exempted watercraft held in inventory for resale for a limited period of time.  The exemption has usually been authorized for a four-year time period; in other words, the exemption sunset after several years until it was renewed.

House Bill 769 would make the exemption permanent for boats held in inventory for sale or resale.  The bill is somewhat out of the ordinary because legislators have generally preferred putting an expiration date on most tax credits and exemptions over the last couple years.  But HB 769 was approved unanimously by the House last week and is now being considered by the Senate.

The bill would have no effect in Decatur since we have no boat dealers.  Individual boat owners in Decatur remain subject to an annual personal property tax bill from the City of Decatur and DeKalb County.

Personal property taxes due in 5 days

Businesses with inventory in Decatur owe their personal property taxes to the City no later than Dec. 21. Bills are based on property such as merchandise, office or work equipment, furniture, fixtures, or boats. This is not a tax on buildings or land. This is also separate from occupation tax bills which are paid in order to renew a business license.

Taxable values are based on what you or your tax preparer reported, or if you failed to file your own value, DeKalb assigned a value to you earlier this year. The deadline to appeal has passed. If you’ve closed my business or sold the property, the taxes must be paid and cannot be pro-rated. These taxes are owed to both DeKalb County and to the City of Decatur separately. 

At www.decaturgatax.com, you can search, view or re-print your City bill. Credit card payments are accepted with a 2.2 percent plus 30 cent third-party processing fee whether made in person or online. E-checks are accepted at no extra charge. You can pay by check or cash if you prefer. Taxpayers will be charged a 10 percent penalty plus 1 percent interest per month for payments made after a short grace period. Liens will be placed on accounts that remain delinquent.

Decatur bills $688K in personal property taxes

Nearly 400 local businesses with inventory valued at $7,500 or more recently received a personal property tax bill from the City of Decatur. The amount billed totaled $687,916. About 60 percent of personal property tax revenue will go to the City Schools of Decatur and the remainder will be applied toward City funds.  The biggest bills in Decatur for 2015 went to Comcast, Noble I (Courtyard Marriott), CVS, and DeVry.

Payments, which can be made online at www.decaturgatax.com, are due no later than Dec. 21.

10 days left to reduce your business inventory tax liability for 2015

Businesses are required to file a return annually with the DeKalb County assessor’s office by April 1. Businesses that fail to file are assessed a 10 percent penalty that will increase your tax bill with DeKalb County and the City of Decatur for 2015. Failing to file will also result in DeKalb determining a value for you for 2015 rather than accepting your stated value.

Your return (also known as a “PT50”) should list your business’s property including inventory, equipment, furniture, machinery, fixtures, computers, and other assets. This type of property is known as “personal property.” If your property is worth less than $7,500, you should still file a return, but no personal property taxes are levied.

Personal property tax is different from real property taxes which are taxes on buildings and land. It is also different from occupational taxes which are for business licenses. It is also separate from income taxes, but many accountants or tax professionals who prepare income tax returns for businesses may also notify DeKalb of your business property value on your behalf.

The deadline to apply for a Freeport exemption with DeKalb County (which is like a homestead exemption but for businesses’ personal property) is also April 1. Please visit DeKalb’s website or call them at 404-371-2000 for instructions of filing your return, information on filing for DeKalb’s Freeport exemption, or to notify DeKalb if your business has closed or moved. Taking a moment now to focus on your personal property could help reduce the personal property tax bills that you’ll receive from DeKalb and Decatur later this fall.

Tax savings tip to businesses that pay personal property taxes

Taxes for personal property (which generally consists of business inventory, office equipment or furniture, and certain tangible items such as boats and aircraft) may be deductible expenses on your federal tax return if you itemize. TurboTax offers the following information about personal property tax deductions:

If you itemize deductions on your federal tax return, you may be able to claim a deduction for the personal property taxes you've paid. One method that states can use to raise revenue is to charge you a tax on your personal property. This type of tax is separate, and may be in addition, to the state and local taxes you pay on your real estate. However, if you itemize deductions on your federal return, you may be eligible to claim a deduction for all personal property taxes you pay…

When you can deduct personal property tax
If you end up paying personal property taxes to your local government, the IRS allows you to claim a deduction for it on your federal tax return. However, the IRS requires you to satisfy certain requirements, regardless of how your government classifies the tax. To claim the deduction, the tax must only apply to personal property you own, be based on its value and be charged on an annual basis, irrespective of when the government collects it from you. Therefore, if the state only charges the tax at the time you purchase the property then it does not meet the IRS definition of a deductible personal property tax. 

How to deduct personal property taxes
Paying a personal property tax is not always enough to claim the deduction. In addition to satisfying the IRS requirements, you must also be eligible to itemize, since this is the only way you can claim the deduction. To determine whether you are eligible to itemize, simply add up all of your expenses for the year that are eligible for a deduction, such as medical expenses, charitable contributions and mortgage interest payments. If the total is more than the standard deduction you can claim for your filing status, then go ahead and itemize and take a deduction for your personal property tax payments. 

There are about 400 personal property taxpayers in Decatur that pay these taxes to Decatur and to DeKalb County.  To verify how much you paid in personal property taxes to Decatur in 2014, please use our website at www.decaturgatax.com where you can print a receipt from your account or a tax bill reflecting your charges and payments.

As always, this blog is not intended to provide instructions on how you should file your income taxes or how much you should deduct. Since individual circumstances vary, please contact an income tax professional for verification and further guidance.

Doraville offers freeport exemption in 2015

Last month, voters in Doraville approved a freeport tax exemption for personal property (property which usually consists of business inventory). The measure passed was for a “level 1” exemption, meaning that there are still some types of business inventory that would remain taxable. A “level 2” freeport exemption would exempt more types of business inventory. Freeport exemptions for businesses work similarly to homestead exemptions for residents by exempting at least a portion of the property’s value. To some extent, freeport exemptions reduce the commercial share of the tax base relative to the residential share. Decatur does not provide a freeport exemption. 

From the AJC last month:

Doraville voters pass manufacturing tax breaks 

Doraville voters approved three tax breaks for businesses during last week’s election. The initiatives, known as freeport exemptions, are intended to attract and retain manufacturing and logistics industries, according to the city. Voters passed each of the ballot measures by about 2-to-1 margins. The exemptions on local ad valorem taxes apply to: 

• Inventory of goods in the process of being manufactured or produced, including raw materials and partly finished goods. 

• Finished goods produced in Georgia within the last 12 months 

• Finished goods stored in Georgia within the last 12 months and destined for shipment out of state

Residents in the city of Stone Mountain approved a similar tax break, making them the first two DeKalb County cities to do so. The county adopted a version of the freeport exemption in 1977.

Reminder: business personal property taxes due Dec. 22

Business personal property taxes in Decatur are due in less than 30 days for 2014.  The taxes can be paid online at www.decaturgatax.com with an electronic check with zero convenience fees, or online by credit card with a convenience fee.  The taxes are based on returns filed by you or your agent with DeKalb County before April 1, 2014.  If you didn't file a value, DeKalb County determined a value for you.  Decatur takes that value, multiplies it by our 50 percent assessment ratio and our 2014 combined millage rate of 33.5 to arrive at your amount billed.  Revenues from the tax are distributed to the school system, the Downtown Development Authority, the city's capital improvement, bond, and general operating funds to provide quality services to the public.

Reminder to file business property return

If a business in Georgia has tangible property worth more than $7,500, they are required to pay an annual business personal property tax bill.  Currently this affects about 450 business owners in Decatur, who pay personal property taxes to both the City of Decatur and DeKalb County.

We run into many business owners who either do not know or disagree with the valuation of their personal property.  If you fall into this category, I recommend that you file a return of your business personal property with the DeKalb County tax assessor's office prior to their April 1 deadline to help ensure an accurate value for tax year 2013.

Being familiar with your own taxable property and its value is the best way to prevent surprises later on in the year when you receive your annual bill.  If you or your business purchased property or had any significant changes to your fixed assets or business inventory, please let the county know.

Here are the guidelines from DeKalb County's website:

Georgia statutes and regulations require that all aircraft, boats, and tangible business personal property (furniture, fixtures, equipment, inventory, leaseholds. etc.) be reported annually. Business personal property used or located in DeKalb County should be reported on a "PT50P Business Personal Property Tax Return".

Statutes require that a value be determined even if the owner fails to file a BAR or return of value. Failure to file timely subjects the owner to possible penalties, loss of depreciation, and exemptions, if applicable.

City sends nearly 400 ‘Intents to FiFa’

Decatur is sending notices to about 270 property owners who owe a total of $570,000 real property taxes to the city and the school system for 2012 and any other outstanding balances.  These letters provide notice that we intend to file a lien (also known as fieri facias, a “FiFa”, meaning a writ of execution) unless the taxes are paid within 30 days.

Decatur is also sending notices to over a hundred business personal property owners—mostly businesses with taxable inventory—who owe about $100,000 in taxes to the city and schools.

For comparison, Decatur sent 350 Intents to FiFa for unpaid real property taxes around this time last year.

This is, at a minimum, the third notice that we have sent attempting to collect payment.  The original bills were mailed on October 20, 2012.  Past due notices were sent on Jan. 14, 2013.  Bills are also available our website 24/7.  If the debt is owed on more than one installment, multiple notices have been sent on a regular basis since the account first became delinquent.

If the taxes owed are not paid before the 30-day deadline, a lien will be filed against the property.  A tax lien can lower a property owner’s credit score.

Property owners interested in making payment arrangements with us must apply to do so before the 30-day deadline elapses.  Such requests will be evaluated on a case-by-case basis for residents with valid reasons, a substantial down payment, and a history of timely payments.  Even if approved for extended payment arrangements, a lien will still be set against the property to protect the city’s interests.

Please be aware that if a payment was made within the last few business days, there may have been a delay in applying your payment to your account while our bank processed the payment.  If you receive a notice but have just recently paid, please disregard the notice or call us at 404-370-4100 to confirm that your account is paid current.

City tax collection rate inches up

The grace period for Decatur's 2012 second installment real property and annual business personal property tax payments expired on Jan. 7, 2013.  By the end of the grace period, the city normally has a collection rate for real property taxes of about 94 or 95 percent, with the remaining amount collected in subsequent months through delinquent collections, lien filing, and annual tax sale processes.  

By the end of the grace period this year, we are already at a 97 percent collection rate.  This represents an improvement of about $300,000 collected for the City and school system compared to the same deadline last year.

By the end of the tax sale, which we usually conduct each August, Decatur’s real property tax collection rate normally reaches 99.9 percent.  Thank you, Decatur taxpayers, for your timely payments and high rate of tax compliance!

Unfortunately, the collection rate for business personal property taxes (such as business inventory and equipment) is much lower than for real property, but the rate is consistent with prior year collections.

Property tax grace period ends in 5 days

The City of Decatur’s second installment real property tax bills and business personal property tax bills for 2012 were due on Dec. 20.  No penalties or interest have been charged to past due accounts yet, but this grace period will end this Monday, Jan. 7.  After that, a 10 percent penalty and monthly interest charge of 1 percent will apply to unpaid amounts.

For the first time, we enclosed a return envelope with your tax bill that you can use to send your payment.  Previously, you had to provide your own envelope.  As long as you get your payment postmarked by Jan. 7, no penalties or interest will apply.

If you’re not sure about your payment status, you can check our website at www.decaturgatax.com.  Please be aware that payments may not display on the website until 48 hours after your check has cleared the bank.

On average, we will have collected 92 percent of taxes due to the City by the conclusion of the grace period.  The remaining 7.9 percent will be collected in subsequent weeks and months through our delinquent collections, tax lien, and tax sale processes.

On behalf of the Revenue Division, I’d like to thank all the taxpayers of Decatur for funding the high-quality services the City provides, and for giving us the opportunity to serve you!

Concerned about online fees?

Over 22,379 visitors have used our online tax look-up website, www.decaturgatax.com since it was launched in late 2010.  December 2011 was a record month with 1,916 visitors alone (and Decatur only has about 8,000 properties)!

Although people increasingly turn to our website to look up tax information, we hear occasional concerns from the public about the online payment option.  The City of Decatur’s third party payment processor charges 2.2 percent plus 30¢ for online credit card payments through Visa, MasterCard, Discover, and American Express.

Through our online survey, we’ve even received a comment that “The County has never charged a fee for payment.”  Actually, DeKalb County’s website says “Payments may be accepted via VISA, MasterCard, American Express, and Discover, but a 2.5 percent transaction fee will be added to the payment.”

The perception that Decatur charges a fee that the county doesn’t charge may stem from the fact that DeKalb doesn’t charge a fee for online checks.

While that function is not directly supported by the city’s third party processor, you may be able to issue an online check to the City of Decatur through your personal bank at no charge to you.  Several major and local banks or credit unions offer account services such as online checking that would enable you to pay through the Internet without incurring a fee.  In other words, you could use our website to look up how much money you owe, then use your own online bank account to issue a payment without having to write out your own paper check.  Please contact your bank for terms and details.

Decatur taxpayers can also pay online through PayPal, which I noticed is currently offering a “Bill Me Later” feature that offers six months to pay on payments of $99 or more.  I’m not endorsing any one payment method over another, but that feature may be an option worth looking into for some Decatur residents or business taxpayers facing short-term cash flow problems.  Details on that program can be found here.

And of course we still take payments the old-fashioned way—from checks by mail, payments in person, or payments from your mortgage lender!

City and County taxes

Suppose you own a property—we’ll call it “Property A”—in Decatur worth $275,000 and you have no exemptions. Your City of Decatur taxes (plus fees) on Property A would be $4,831.56 for the year. Our millage rate is 32.935 mills (which includes taxes for Decatur schools) and we use a 50 percent assessment.

You would also owe DeKalb County $1,200.10 in taxes for Property A for the year. The County millage rate for Decatur residents is 10.91 mills. Georgia counties assess at 40 percent.

Now suppose you own a second $275,000 property, Property B, in unincorporated DeKalb—also without exemptions. You would owe $4,409.90 in DeKalb County property taxes for Property B. Your county taxes would not be $1,200.10 under this scenario. The millage rate for unincorporated DeKalb is 40.09 mills, not just the 10.91 mills that are imposed by the County on City residents:

The reason that an unincorporated property of equal value to a City of Decatur property would have a higher county tax liability than if it were inside the City is because the County is providing all the services (for example, school & fire services). Properties inside the City of Decatur pay a lower County tax because the City is providing the majority of services.

More Georgia school boards balance spending cuts and millage rates

While Muscogee and Chatham County school districts are considering property tax hikes to deal with thorny school budgets, DeKalb County is looking at spending cuts instead.

The AJC has reported that in DeKalb, “The tax rate will remain at 22.98 mills, which is the third highest in Georgia for schools, board chairman Tom Bowen said.” Budget savings will include 289 cut jobs, bigger class sizes, teacher furloughs, and a pay cut for the county school board.

According to the Times-Georgian, Douglas County is also looking at teacher furloughs and a hiring freeze, although Douglas hasn’t ruled out a change to their millage rate.

Millage rates & public hearings

Under certain circumstances, Georgia law requires public hearings before a change to the property tax millage rate can be adopted. News from Muscogee County (Columbus, Ga.) provides a good illustration of this. Muscogee’s school board, which oversees one of the biggest school districts in the state, recently proposed a millage rate increase of 1 percent.

If the Muscogee Board of Education had decided to keep total school tax revenues constant, they would have had to lower their millage rate (assuming their total property values have increased since the prior year’s digest). In that case, they could have simply adopted the lesser millage rate at any public meeting.

But if a taxing authority (school board, county commission, city council, etc.) decides to increase the millage rate, as in the case of Muscogee, or even hold the rate steady (which would lead to an increase in total taxes if total property values had risen), then they must hold three public hearings to give taxpayers a chance to speak their minds. That’s why Muscogee’s school board has already scheduled and advertised three meetings.

You may wonder how total property values can increase in the midst of a statewide freeze. Well, the freeze does not apply to new property developments and improvements to existing property. That means that city and county values could rise leading to roll-back rates that would require taxing authorities exceeding the roll-back rate to hold three public hearings first.

Judging from comments on the Columbus Ledger Enquirer about the Muscogee school board’s decision, many taxpayers down there will take advantage of the opportunity to participate in those hearings!

Chatham County (including Savannah), which also runs one of the biggest school districts in the state, is also considering a millage rate increase for its school system.

What are business personal property taxes?

In addition to real estate property tax, Decatur bills for taxes owed on personal property such as marine vessels, aircraft, business inventories, office or work equipment, furniture, or fixtures. In 2009, personal property tax bills were calculated by multiplying the assessed property value by the city’s combined millage rate of 32.935. Bills were mailed in October and were due by Dec. 21, 2009.

The property value is determined from a Taxpayer’s Report of Personal Property filed with the DeKalb County Board of Tax Assessors by the owner or the owner’s agent. If no report was filed, the value was based on an on-site audit or review of the previous year’s report or other related information.

State law requires personal property taxes to be based on the residency of the taxpayer and location of the personal property as of January 1 of each year. Personal property owned on that date must be reported and listed for assessment by March 1. Taxes must be paid regardless of any change in the residency of the taxpayer or disposition of the property later in the year.

If the DeKalb County Board of Tax Assessors tells us that you were a resident of the City of Decatur on January 1, or maintained a business located in the City of Decatur on that day, and you are liable to pay the full amount of personal property taxes as billed for the complete year.

Our office recently mailed out notices to individuals and businesses who owe personal property tax for 2009 and prior years. Interest will continue to accrue on unpaid balances by 1 percent monthly. If you received a late notice and have questions about your bill, please call us.