State proposes rule to strike non-taxable properties from county digests

The Georgia Department of Revenue has proposed a rule that would establish a process to remove exempt properties that are listed "illegally" in county digests.  I am not sure what prompted this proposed rule or what the intent of it is.  Maybe there hasn't been a clear procedure before if a county doesn't regard a property as tax-exempt, but DOR thinks it should be exempt.

On the one hand, it makes more sense to me for assessors to determine what is taxable since that is part of their job. On the other hand, if there is a disagreement between the state and the local assessors, and that disagreement could delay approval of the county's digest, then it may be better to give the state this type of line-item authority.

DOR will consider the 11-page proposed rule on Oct. 31 at 10 a.m. at 1800 Century Boulevard.

Georgia sales tax holiday this weekend

Just in time for back-to-school shopping, many items on sale this weekend in Georgia will be exempt from sales taxes. From July 30 to 31, most clothing, computer equipment, and school supplies will be tax-exempt. The clothing exemption applies to merchandise under $100 per item including clothes, accessories, diapers and athletic gear; the technology exemption applies to computers and computer components under $1,000; and the school supply exemption applies to products under $20 per item. For details and a fuller listing of non-taxable and taxable items, see the Georgia Department of Revenue’s fact sheet here.

In Decatur and DeKalb County, this holiday means a potential savings of 7 percent on eligible purchases.

4 tax elements of DeKalb soccer deal

The draft memorandum of understanding (MOU) between DeKalb County and the new Atlanta United soccer team includes several provisions related to taxes:

Property tax exemption
Sec. 1(i) of the MOU says “…Atlanta United’s interest in the Project will constitute a usufruct, and the County will use its best efforts to cause the DeKalb County Chief Appraiser/Board of Tax Assessors to confirm the Parties’ determination of such interest as a usufruct.” I take this to mean that the property of the soccer headquarters and complex would be exempt from property taxes because the deed would stay in the name of a tax-exempt entity (DeKalb County or the DeKalb County development authority) because the agreement allows Atlanta United to use (as a usufruct) the land without owning it. (See an explanation of usufruct under Georgia tax law here.)

Income tax credits
Sec. 5(a) of the MOU says that DeKalb would seek opportunity zone status from the Georgia Department of Community Affairs. “If awarded, the Operator [Atlanta United] shall be eligible to apply job tax credits up to $3,500 per job created as an offset to its State of Georgia income tax liability.”

Sales tax capital outlay
Sec. 5(c) of the agreement says that “The County’s efforts shall include proposing that the Board of Commissioners of the County include Pedestrian Connectivity improvements in the proposed March 2016 Referendum Ballot for approval as an authorized Capital Outlay Project from a Special Purpose Local Option Sales Tax.” In other words, a portion of one of the existing seven pennies of local sales taxes would go toward pedestrian connectivity from the soccer site to the Kensington MARTA station.

Tax allocation district
Sec. 5(f) of the agreement says that “…The County agrees to discuss in good faith permitting the use of any accumulated funds from any applicable tax allocation district to be utilized for any permissible expense… with respect to the construction, maintenance of Phase 2 of the Project… The County will use its best efforts to obtain the participation of the DeKalb County School Board in this tax allocation district.”

Update on state university concessionaire tax exemptions

The Fulton County Daily Report reported last month that the state Board of Regents has signed a 65-year contract with Corvias, a student housing company, to provide almost 10,000 beds across nine state university campuses for an initial outlay of $517 million. The Daily Report quoted an attorney involved in the Board of Regents-Corvias deal as saying, “A lot of other university systems have been watching the Board of Regents' process, and we think it is going to be a model nationwide." The contract was awarded shortly after voters approved a referendum guaranteeing tax-exempt status for state university student parking and dormitories that are leased and managed by private companies.

Dorm tax exemption passes despite opposition from Athens

Tuesday’s referendum on guaranteeing property tax exemptions for privately-operated student housing and parking decks owned by the state university system passed overwhelmingly with 76 percent of electors voting yes.

The ballot measure passed by majorities in every county in Georgia except Athens-Clarke County where the University of Georgia is located. There, the number of opponents edged out supporters with 12,683 voting no and 12,120 voting yes. That result is somewhat unsurprising considering the long history of frustrations in Athens-Clarke over the amount of non-taxable property in the county. The university system owns so much tax-exempt property there that many non-exempt property owners feel unfairly burdened. There is also some skepticism there over what is perceived as a sweetheart deal: before the election the Athens Banner-Herald called the proposal, “Basically a tax break for private developers who build student housing and parking facilities.” On the flip side, if UGA weren’t in Athens, there wouldn’t be as many taxable businesses and homes there either.  Supporters also argue that the university system has too much debt to finance new developments on its own if the measure hadn't passed.

Dalton State College already has a plan in the works to take advantage of the referendum’s passage for a new student housing development. The Dalton Daily Citizen reports that there are developments at nine campuses planned statewide now that the referendum has passed.

Two tax measures on Georgia’s ballot

Tuesday’s election will include two ballot questions related to taxes in Georgia.

The first is a proposed constitutional amendment that would limit Georgia’s top marginal income tax rate to 6 percent. The tax rate has been steady at 6 percent since 1969 by statute, but this change would enshrine the rate in the state constitution. Supporters say the amendment would help attract businesses to Georgia by giving them additional confidence that the tax rate would not increase, while opponents say the cap would restrict Georgia’s ability to increase revenues if needed. The wording of the question is “Shall the Constitution of Georgia be amended to prohibit the General Assembly from increasing the maximum state income tax rate?”

The second tax question is a statewide referendum that would clarify that state university-owned student housing and parking decks leased and managed by private contractors would always retain tax-exempt status. Government property is almost always tax-exempt. The question reads, “Shall property owned by the University System of Georgia and utilized by providers of college and university student housing and other facilities continue to be exempt from taxation to keep costs affordable?” The Georgia Policy and Budget Institute’s Wesley Tharpe laid out the pros and cons of this proposal to The Marietta Daily Journal, saying:

"(The proposal will) allow Regents to reduce the nearly $4 billion in debt that it has accrued over time as a result of what some have described as overbuilding,” Tharpe said. “This could help free up the university to sell additional bonds at a better rate for other projects in the future. “The potential downside is that there are no restrictions explicitly spelled out in the legislation as to how much private companies will be able to charge for rent,” he continued. “The university system claims that it will still have the ability to regulate and limit student housing costs over time, but it is still somewhat of an open question since those rules are not laid out in the proposal."

Property tax exemption not always automatic for Georgia charities

In a recent decision, the Court of Appeals of Georgia affirmed the denial of tax-exempt status for tax years 2008 and 2009 for a property owned by a Fulton County charity.  H.O.P.E. for Divine Interventions, an organization providing services to needy families, was entitled to the exemption in 2010 and subsequent years when it actually delivered charitable services, but not from 2008-09 while the gutted apartment building H.O.P.E owned was being constructed and renovated.

H.O.P.E. argued that the construction and renovation of the property was a necessary step in its ultimate purpose of housing formerly homeless tenants, and asserted that the building was never used for any non-charitable purpose.  But the Court of Appeals found that the tax code does not exempt properties from taxes where charitable use is still being planned.

The firm of Sutherland, Asbill, & Brennan LLP has a short analysis of the decision and a link to the full ruling here.

In Decatur, property owners can apply for tax-exempt status through the DeKalb County assessor’s office.  For tax purposes, the City of Decatur uses the taxable or tax-exempt status that DeKalb determines.

In 2012, the assessed value of tax-exempt property in Decatur is $87 million out of $1.2 billion in total assessed value, or 7 percent of underlying property value in the city.

Major tax-exempt properties in Decatur include DeKalb County, Agnes Scott, the City of Decatur, Columbia Seminary, the housing authority, DeKalb Medical, the First Baptist Church, Decatur First UMC, MARTA, and city schools.

Are all retirement homes tax exempt?

In Georgia, a “nonprofit home for the aged” is exempt from property tax if the institution has no stockholders, income, or profit distributed to a private person, and is classified as a 501(c)(3).

But the exemption does not apply to “property of a home for the aged held primarily for investment purposes or used for purposes unrelated to the providing of residential or health care to the aged” (O.C.G.A. § 48-5-41(a)(12)(B)).

Which is why Columbus says it's going after the Spring Harbor continuing care community for taxes owed. WRBL offers this interesting report, at least interesting to fellow tax geeks.  (Note:  for some reason it'll take about 10 seconds after clicking play before this video starts.)

Tax-exempt musicians?

In a case that could possibly affect property owners in Georgia whose tax-exempt status is murky, Athens-Clarke County is taking Nuci’s Space to court.  (See this article from the Athens Banner-Herald.)  Nuci’s operates a nonprofit venture for musicians but also stages for-profit concerts. They pay no property taxes, but Athens-Clarke argues that they should.

Meanwhile,the University of Georgia is being audited by the IRS for income from UGA’s non-educational ventures like its golf course. Athens-Clarke officials say the Nuci’s Space lawsuit would have no bearing on UGA because Georgia law is ironclad with respect to the non-taxability of schools. The outcome of the Nuci’s case should have no effect on educational, government, or religious institutions.

By the way, the largest tax exempt property owners in Decatur are DeKalb County, Agnes Scott, the City of Decatur, Columbia Seminary, the Decatur Housing Authority, DeKalb Medical, the First Baptist Church, Decatur First United Methodist Church, MARTA, and Decatur Presbyterian Church. Two final notes: 1) Decatur’s tax-exempt owners do pay stormwater bills and 2) they’re also some of the largest employers in town.