306 Ga. 816 FINAL COPY
S19A0975. HERON LAKE II APARTMENTS, LP et al. v. LOWNDES COUNTY BOARD OF TAX ASSESSORS.
BOGGS, Justice.
This is the second appearance before this Court of the dispute
between appellee Lowndes County Board of Tax Assessors (“the
Board”) and eight partnerships which built and now operate
affordable housing apartment complexes (“Section 42 properties”) in
Lowndes County (collectively, “Appellants”), with the help of federal
and state Low Income Housing Tax Credits (“LIHTCs” or “Section
42 Tax Credits”), in connection with which they executed Land Use
Restrictive Covenants. See 26 USC § 42.1 The dispute before us
turns on the valuation of these tax credits when calculating ad
valorem real property taxes.
1 Section 42 of the Internal Revenue Code allows property owners to
agree to rent to low-income tenants for below-market rates in exchange for the right to claim federal income tax credits each year for ten years. The amount of the tax credit awarded is a percentage of the qualified basis of each qualifying low-income building. See 26 USC §§ 38 (b) (1), 42 (a) (1), (2). As explained below, we conclude that the trial court had
subject matter jurisdiction to decide this case, and that LIHTCs do
not constitute “actual income” for purposes of OCGA § 48-5-2 (3) (B)
(vii) (II). Moreover, OCGA § 48-5-2 (3) (B) (vii) (I) and (II) do not run
afoul of the Georgia Constitution’s taxation uniformity provision.
See Ga. Const. of 1983, Art. VII, Sec. I, Par. III (a).2 Accordingly, we
reverse the judgment of the trial court.
1. OCGA § 48-5-2 (3) defines the phrase “[f]air market value of
property” for purposes of ad valorem real property taxation as “the
amount a knowledgeable buyer would pay for the property and a
willing seller would accept for the property at an arm’s length, bona
fide sale.” The statute then specifies when certain approaches to
valuation are to be used and certain criteria that must or may be
used in making the valuation. See OCGA § 48-5-2 (3) (B). The
General Assembly has repeatedly revised OCGA § 48-5-2 (3), and, in
2 “All taxes shall be levied and collected under general laws and for public
purposes only. Except as otherwise provided in subparagraphs (b), (c), (d), (e), and (f) of this Paragraph, all taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.”
2 2001, amended it by adding subparagraph (B.1), which provides as
follows:
The tax assessor shall not consider any income tax credits with respect to real property which are claimed and granted pursuant to either Section 42 of the Internal Revenue Code of 1986, as amended, or Chapter 7 of this title in determining the fair market value of real property.
Ga. L. 2001, p. 1098, § 1 (emphasis supplied). 3 That was the genesis
of the dispute between the Board and Appellants.
(a) The Prior Litigation
In 2015, the Board filed a declaratory judgment action in
Lowndes County Superior Court challenging the 2001 amendment,
and the trial court entered an order finding that subsection (B.1)
was unconstitutional because it violated the taxation uniformity
provision of the Georgia Constitution. This Court affirmed that
order in Heron Lake II Apts. v. Lowndes County Bd. of Tax Assessors,
3 As discussed below, in Heron Lake II Apts. v. Lowndes County Bd. of
Tax Assessors, 299 Ga. 598, 610 (791 SE2d 77) (2016), we held OCGA § 48-5-2 (3) (B.1) unconstitutional for violating the Georgia Constitution’s taxation uniformity provision. And even though the General Assembly amended OCGA § 48-5-2 (3) in both 2017 and 2019, subsection (B.1) still appears in the Georgia Code. 3 299 Ga. 598 (791 SE2d 77) (2016) (hereinafter “Heron Lake I”),
addressing the underlying statutory and policy issues in detail. See
id. at 610. The opinion began by noting OCGA § 48-5-3’s mandate
that “[a]ll real property . . . shall be liable to taxation” and considered
the status of the LIHTCs as part of “the bundle of rights, interest
and benefits connected with the ownership of real estate” in the
Georgia Department of Revenue’s Appraisal Procedures Manual,
which is written to “guide county tax officials.” Id. at 605-606
(citation and punctuation omitted). See Ga. Comp. R. & Regs. r. 560-
11-10-.02 (1) (x). After reviewing the Court of Appeals’ analysis of
subsection (B.1) in Pine Pointe Housing v. Lowndes County Bd. of
Tax Assessors, 254 Ga. App. 197 (561 SE2d 860) (2002), and noting
the General Assembly’s unsuccessful attempt in 2002 to amend the
Georgia Constitution to permit the classification of qualified low-
income building projects as a separate class of property for ad
valorem property tax purposes, this Court concluded that the
LIHTCs “are a benefit connected to the real estate itself,” that the
tax credits are not “intangible personal property” because of their
4 dependence on the real estate giving rise to them, and that excluding
them from the assessment of fair market value “grants preferential
treatment for ad valorem taxation purposes and creates a subclass
of tangible property other than as permitted by the State
Constitution,” which “runs afoul of the taxation uniformity
provision.” Heron Lake I, 299 Ga. at 608-610.
(b) The Current Litigation
In 2017, the General Assembly further amended OCGA § 48-5-
2 (3). See Ga. L. 2017, p. 55, § 1. The amendment changed the second
sentence of paragraph (3) to mandate the consideration of data
provided by the property owner, and added a new division (vii) to
subparagraph (B). The new OCGA § 48-5-2 (3) (B) (vii) is further
subdivided, and says, with emphasis supplied:
(I) In establishing the value of any property subject to rent restrictions under the sales comparison approach, any income tax credits described in division (vi) of this subparagraph that are attributable to a property may be considered in determining the fair market value of the property, provided that the tax assessor uses comparable sales of property which, at the time of the comparable sale, had unused income tax credits that were transferred in an arm’s length, bona fide sale.
5 (II) In establishing the value of any property subject to rent restrictions under the income approach, any income tax credits described in division (vi) of this subparagraph that are attributable to property may be considered in determining the fair market value of the property, provided that such income tax credits generate actual income to the record holder of title to the property. ...
Moreover, the 2017 amendment rewrote OCGA § 48-5-2 (3) (B) (vi)
to provide that in determining the fair market value of Section 42
properties, tax assessors shall apply, among other things, the
following criterion:
Rent limitations, higher operating costs resulting from regulatory requirements imposed on the property, and any other restrictions imposed upon the property in connection with the property being eligible for any income tax credits with respect to real property which are claimed and granted pursuant to either Section 42 of the Internal Revenue Code of 1986, as amended, or Chapter 7 of this title or receiving any other state or federal subsidies provided with respect to the use of the property as residential rental property; provided, however, that properties described in this division shall not be considered comparable real property for the assessment or appeal of assessment of properties not covered by this division. . . .4
4 Former OCGA § 48-5-2 (3) (B) (vi) said:
Rent limitations, operational requirements, and any other
6 Finally, the amendment redesignated former OCGA § 48-5-2 (3) (B)
(vii) as OCGA § 48-5-2 (3) (B) (viii), and that provision says that in
determining the fair market value of real property, tax assessors
shall also consider “[a]ny other existing factors provided by law or
by rule and regulation of the commissioner [of revenue] deemed
pertinent in arriving at fair market value.”
In the past, the Board has appraised appellants’ state and
federal tax credits using the income approach appraisal method.
According to the Board, after the 2017 amendment passed, this
approach was no longer viable, so it filed a new declaratory
restrictions imposed upon the property in connection with the property being eligible for any income tax credits described in subparagraph (B.1) of this paragraph or receiving any other state or federal subsidies provided with respect to the use of the property as residential rental property; provided, however, that such properties described in subparagraph (B.1) of this paragraph shall not be considered comparable real property for assessment or appeal of assessment of other properties[.] Subparagraph (B.1) states the same thing regarding Section 42 and Chapter 7, so this change did not substantively alter the underlying law; it only eliminates the need to refer to (B.1) — the provision we held unconstitutional in Heron Lake I — for further instruction. Moreover, in Ga. L. 2017, p. 774, § 48, the General Assembly revised language in paragraph (3) as part of a modernization effort, but these changes are not relevant here.
7 judgment action seeking a ruling that the 2017 amendment was
unconstitutional for violating the Georgia Constitution’s taxation
uniformity provision. The Board also asked the trial court to
interpret the 2017 amendment to allow LIHTCs to continue to be
treated as regular income.
In a November 9, 2018 Final Order, the trial court cited Heron
Lake I and Pine Pointe and declared OCGA § 48-5-2 (3) (B) (vii) (I),
which addresses the sales comparison approach, unconstitutional
for violating the taxation uniformity provision. The trial court also
held that LIHTCs could be considered “actual income” under OCGA
§ 48-5-2 (3) (B) (vii) (II)’s income approach and, alternatively, that
OCGA §48-5-2 (3) (B) (vii) (II) would violate our Constitution’s
taxation uniformity provision if it were read to exempt LIHTCs from
being considered as “actual income.”
On appeal, Appellants raise the following three enumerations
of error: (1) the trial court lacked jurisdiction over the Board’s
petition because, when the Board filed suit, it had not yet assessed
the Appellants’ properties for the 2018 tax year; (2) the trial court
8 erred in finding that LIHTCs were “actual income” rather than
offsets against tax liability; and (3) the trial court erred in declaring
OCGA § 48-5-2 (3) (B) (vii) (I) and (II) unconstitutional, given the
General Assembly’s power to forbid the use of improper appraisal
methods. Appellants argue that the valuation methodology the
Board used — the income approach, counting LIHTCs as “actual
income” — substantially inflated their tax assessments and, by
negating the intended benefit of LIHTCs, will significantly reduce
the availability of affordable housing in Georgia.
2. Appellants contend that the trial court lacked subject matter
jurisdiction to consider this case, because when the Board filed suit
in 2017, it had not yet assessed taxes on the appellants’ properties
for tax year 2018. We disagree.
“It is a settled principle of Georgia law that the jurisdiction of
the courts is confined to justiciable controversies, and the courts
may not properly render advisory opinions.” Fulton County v. City
of Atlanta, 299 Ga. 676, 677 (791 SE2d 821) (2016). A controversy is
justiciable “when it is definite and concrete, rather than being
9 hypothetical, abstract, academic, or moot.” Id. (citation and
punctuation omitted).
Pursuant to the Declaratory Judgment Act, OCGA § 9-4-1 et
seq., “[i]n cases of actual controversy,” and “in any civil case in which
. . . the ends of justice [so] require,” Georgia’s superior courts “have
power . . . to declare rights and other legal relations of any interested
party petitioning for” such a declaration. OCGA § 9-4-2 (a), (b). “To
state a claim for declaratory judgment, a party need only allege the
existence of a justiciable controversy in which future conduct
depends on resolution of uncertain legal relations.” City of Atlanta
v. Hotels.com, 285 Ga. 231, 234 (674 SE2d 898) (2009) (holding that
City stated viable claim for declaratory relief as to applicability of
hotel tax ordinance). “The purpose of the Declaratory Judgment Act
is to settle and afford relief from uncertainty and insecurity with
respect to rights, status, and other legal relations; the Act is to be
liberally construed and administered.” Id. (citation and punctuation
omitted).
In this case, the trial court had jurisdiction over the Board’s
10 petition for declaratory relief. As the Board’s petition demonstrates,
the parties in this case have an actual, justiciable controversy:
namely, whether and how the Board can, under the 2017
amendment, consider the LIHTCs awarded to Appellants when
carrying out its mandatory duty to assess ad valorem property taxes
on Appellants’ low-income housing developments for tax year 2018.
That legal question, which is similar to the one the parties litigated
to this Court in Heron Lake I, has created substantial uncertainty
with respect to the parties’ legal rights and legal relations. See
OCGA §§ 9-4-1; 9-4-2. Accordingly, the trial court had jurisdiction to
rule on the Board’s petition pursuant to the Declaratory Judgment
Act.
3. Appellants also claim that the trial court erred in concluding
that Section 42 Tax Credits constitute “actual income” under OCGA
§ 48-5-2 (3) (B) (vii) (II)’s income approach, because those credits
merely offset Section 42 property owners and investors’ individual
tax liability. We agree.
To recap the statutory scheme at issue here, OCGA § 48-5-6
11 mandates that, subject to certain exceptions not at issue here, all
taxable real property “shall be returned for taxation at its fair
market value.” OCGA § 48-5-2 (3) defines “fair market value” and
provides a list of several criteria that tax assessors “shall apply . . .
in determining the fair market value of property.” As relevant here,
OCGA § 48-5-2 (3) (B) (vi) requires tax assessors to consider “[r]ent
limitations . . . and any other restrictions imposed upon the property
in connection with the property being eligible for” Section 42 Tax
Credits.
In the wake of our decision in Heron Lake I, the General
Assembly added OCGA § 48-5-2 (3) (B) (vii) (I) and (II), which tell
tax assessors how they can use the sales comparison and income
approaches in determining the fair market value of Section 42
properties. OCGA § 48-5-2 (3) (B) (vii) (II) provides that, when
establishing the fair market value of Section 42 properties under the
income approach, tax assessors may consider LIHTCs attributable
to those properties, “provided that” the LIHTCs “generate actual
income to the record holder of title. . . .”
12 For starters, in deciding whether the trial court erred in
concluding that LIHTCs can be counted as “actual income” under
OCGA § 48-5-2 (3) (B) (vii) (II)’s income approach, “we first look to
the text . . . [a]nd because we presume that the General Assembly
meant what it said and said what it meant when it comes to the
meaning of statutes,” we “must read the statutory text in its most
natural and reasonable way, as an ordinary speaker of the English
language would.” Fed. Deposit Ins. Corp. v. Loudermilk, 305 Ga. 558,
562 (1) (826 SE2d 116) (2019) (citations and punctuation omitted).
Here, a plain text reading of OCGA § 48-5-2 (3) (B) (vii) (II)
demonstrates that the trial court failed to construe the statutory
phrase “actual income” in the “most natural and reasonable way,”
because LIHTCs do not provide recipients of those credits with
“actual income.” Loudermilk, supra. Rather, when claimed by an
investor or owner of an interest in a Section 42 property, LIHTCs
merely reduce that person’s overall tax burden. Heron Lake I, 299
Ga. at 603. Thus, by claiming these tax credits, investors do not
receive more money from anyone; they merely pay less in taxes to
13 the government. See id. (noting that LIHTCs “‘flow through’ the
partnerships to the limited partners, who would then use the tax
credits to reduce their individual income tax liabilities”). Cf. Gaddy
v. Ga. Dept. of Revenue, 301 Ga. 552, 559 (1) (a) (ii) (802 SE2d 225)
(2017) (holding that “[w]hen the state refunds money for
overpayment of taxes” to taxpayer claiming private school tax
credits, state is not remitting public funds but is “returning the
taxpayer’s own money”). As such, we decline to read OCGA § 48-5-
2 (3) (B) (vii) (II)’s phrase “actual income” to include LIHTCs,
because they merely reduce investors’ individual tax liabilities.5
Our conclusion that LIHTCs do not constitute “actual income”
for the purpose of OCGA § 48-5-2 (3) (B) (vii) (II) is consistent with
the persuasive reasoning of the United States Supreme Court’s
decision in Randall v. Loftsgaarden, 478 U. S. 647 (106 SCt 3143, 92
LE2d 525) (1986), and the function of the particular tax credits at
5 Although we have previously stated that these tax credits “are an item
of value” with respect to the fair market value of Section 42 properties, see Heron Lake I, 299 Ga. at 609, we did not hold in that case that they constitute “actual income.” The concepts of fair market value of property and income earned from property are not equivalent. 14 issue in this case. In Randall, the Court considered whether federal
tax benefits received by owners of certain securities could be
considered “income” under securities laws. The Court concluded that
a security owner’s receipt of federal tax benefits, in the form of tax
deductions and tax credits, did not constitute “income” under “any
reasonable definition.” Id. at 656 (II). The Court explained that the
tax deductions and tax credits
have no value in themselves; the economic benefit to the investor — the true “tax benefit” — arises because the investor may offset tax deductions against income received from other sources or use tax credits to reduce the taxes otherwise payable on account of such income.
Id. at 657 (II) (emphasis in original). Accordingly, the Court rejected
the argument “that the tax deductions petitioners were entitled to
take by virtue of their partnership interests constitut[ed] income or
profits.” Id. (citation and punctuation omitted).
As we stated in Heron Lake I, Section 42 properties
are eligible to receive federal and state low-income housing income tax credits . . . pursuant to Section 42 of the Internal Revenue Code of 1986, as amended . . . and OCGA § 48-7-29.6. In exchange for receiving a ten-year award of tax credits, the property owners agreed to lease
15 their rental units to eligible low-income tenants at below- market rents set by the Georgia Department of Community Affairs (“GDCA”) for a period of thirty years or more. Income tax credits are claimed in equal amounts for a ten-year period beginning with the taxable year in which a qualified building is placed in service or, if elected by the owner, the succeeding taxable year (the “credit period”). During the credit period, the owner may not sell, transfer, or exchange the property without first requesting GDCA’s approval of the proposed sale, transfer, or exchange. The GDCA will not recognize a new owner until all required documentation is submitted and the new owner agrees in writing to assume the requirements and restrictions set forth in covenants applicable for low-income housing tax credits, Section 42, and corresponding federal regulations. After being awarded state and federal income tax credits by the GDCA, the property owners in this case “sold” the tax credits to investors in that they allowed investors to purchase limited partnership interests. The tax credits would “flow through” the partnerships to the limited partners, who would then use the tax credits to reduce their individual income tax liabilities.
Heron Lake I, 299 Ga. at 600-603 (footnote omitted).
Here, as in Randall, although the tax credits at issue do benefit
investors by allowing them to reduce their tax liabilities, they do not
constitute “income” for those individuals. Randall, 478 U. S. at 656-
657 (II). Rather, the tax credits operate to reduce the taxes
otherwise payable on account of income an investor receives from
16 other sources, thereby reducing the investor’s overall income tax
burden.
In short, contrary to the Board’s contention and the trial court’s
ruling, we can see no reasonable way in which to construe the phrase
“actual income” in OCGA § 48-5-2 (3) (B) (vii) (II) to include LIHTCs.
The financial benefit realized by an owner of a property interest in
a Section 42 property is a reduction in his or her overall tax liability
— i.e., a tax credit. That benefit does not constitute “actual income”
under OCGA § 48-5-2 (3) (B) (vii) (II).6 Accordingly, we reverse the
trial court’s conclusion to the contrary.
4. Appellants assert that the trial court erred in declaring both
OCGA § 48-5-2 (3) (B) (vii) (I) and (II) unconstitutional, because, in
passing the 2017 amendment, the General Assembly appropriately
exercised its authority to limit the use of improper appraisal
methods, and neither provision precludes tax assessors from
6 Courts in other states agree. See, e.g., Cottonwood Affordable Housing
v. Yavapai County, 72 P3d 357, 359 (Ariz. Tax Ct. 2003) (stating that LIHTCs “are not income flowing from the rental of the property”); Stillwater Housing Assoc. v. Rose, 254 P3d 726, 728 (Okla. Ct. Civ. App. 2011) (holding that LIHTCs are not income and do not replace income). 17 considering LIHTCs when calculating the fair market value of
Section 42 properties. We agree.
As noted above, the taxation uniformity provision of the
Georgia Constitution mandates that all property of the same class
be assessed and taxed uniformly. See Ga. Const. of 1983, Art. VII,
Sec. I, Par. III (a). The Georgia Constitution directs the General
Assembly to provide, by general law, “methods of assessment and
taxation.” Ga. Const. of 1983, Art. VII, Sec. I, Par. III (e) (1). The
General Assembly has passed legislation which provides that,
subject to some exceptions not at issue in this case, all property
subject to ad valorem taxation in Georgia “shall be returned for
taxation at its fair market value. . . .” OCGA § 48-5-6.7 And as
discussed above, in the 2017 amendment to OCGA § 48-5-2 (3) (B),
the General Assembly defined the contours of at least two
approaches that assessors may use to establish the fair market
7 OCGA § 48-5-2 (3) defines the “fair market value of property” as
“the amount a knowledgeable buyer would pay for the property and a willing seller would accept for the property at an arm’s length, bona fide sale,” and says that “[t]he income approach, if data are available, shall be utilized in determining the fair market value of income-producing property . . . .” 18 value of Section 42 properties: the sales comparison approach, see
OCGA § 48-5-2 (3) (B) (vii) (I), and the income approach, see OCGA
§ 48-5-2 (3) (B) (vii) (II). See Ga. L. 2017, p. 55 § 1.
We held in Heron Lake I that the General Assembly may not,
for the purposes of assessing ad valorem real property taxes on
Section 42 properties, completely exempt LIHTCs from an assessor’s
consideration. See Heron Lake I, 299 Ga. at 610. Central to that
holding was our conclusion that LIHTCs affect “the amount a
knowledgeable buyer would pay for the property and a willing seller
would accept for the property at an arm’s length, bona fide sale,” so
by categorically exempting LIHTCs from assessors’ computation of
the fair market value of Section 42 properties, the General Assembly
had effectively placed those properties in a distinct subclass of
property for taxation purposes, which violated our Constitution’s
taxation uniformity provision. See id. (citing OCGA § 48-5-2 (3)).
Here, unlike in Heron Lake I, we must review the trial court’s
rulings on two statutory provisions that do not preclude tax
assessors from considering LIHTCs when they determine the fair
19 market value of Section 42 properties. In that respect, the provisions
at issue here do not directly implicate our Constitution’s taxation
uniformity provision as did the provision at issue in Heron Lake I.
So, this case is less about taxation uniformity and more about the
propriety of the two methods of determining the fair market value
of Section 42 properties that the General Assembly enacted in 2017.
At the outset, we note our well-settled principle that
all presumptions are in favor of the constitutionality of an act of the legislature and that before an Act of the legislature can be declared unconstitutional, the conflict between it and the fundamental law must be clear and palpable and this Court must be clearly satisfied of its unconstitutionality. Moreover, because statutes are presumed to be constitutional until the contrary appears, the burden is on the party alleging a statute to be unconstitutional to prove it.
Dev. Auth. of DeKalb County v. State of Ga., 286 Ga. 36, 38 (1) (684
SE2d 856) (2009) (citations and punctuation omitted). Moreover, we
have long held that if “the language of an act is susceptible of a
construction that is constitutional, and another that would be
unconstitutional, that meaning or construction will be applied which
will sustain the act.” HCA Health Svcs. v. Roach, 265 Ga. 501, 503
20 (2) (458 SE2d 118) (1995) (citation and punctuation omitted).
In this case, the Board has failed to carry its heavy burden of
demonstrating that a “clear and palpable” conflict exists between
the 2017 amendment and the taxation uniformity provision. See
Dev. Auth. of DeKalb County, 286 Ga. at 38 (2) (upholding the
constitutionality of bond referendum requirement). We conclude
that, in passing the 2017 amendment at issue, the General
Assembly acted within its broad authority to establish methods of
tax assessment, and that the amendment does not run afoul of the
Georgia Constitution’s taxation uniformity provision.
First, following our decision in Heron Lake I, the General
Assembly acted to give tax assessors a basis upon which to assess
ad valorem taxes on Section 42 properties. The 2017 amendment is
consistent with the primary teaching of Heron Lake I, because it
does not altogether preclude tax assessors from considering LIHTCs
as part of the fair market value of Section 42 properties. See Heron
Lake I, 299 Ga. at 610.
Secondly, the Board has failed to show that the specific
21 methodologies adopted in the 2017 amendment are improper. As we
have long held:
[T]here is no requirement that the same method be utilized to determine what the fair market value [of tangible property and realty] is. Quite to the contrary, the court has repeatedly held that the utilization of different methods to determine fair market value does not contravene the Constitution or the laws of Georgia.
Dougherty County Bd. of Tax Assessors v. Burt Realty Co., 250 Ga.
467, 469 (298 SE2d 475) (1983). Moreover, our Constitution’s
uniformity taxation provision does not preclude tax assessors from
“apply[ing] different methods of arriving at the fair market value of
tangible property.” Rogers v. DeKalb County Bd. of Tax Assessors,
247 Ga. 726, 728 (2) (279 SE2d 223) (1981). Finally, the question in
such cases is whether the valuation method used fairly and justly
establishes the fair market value of the property, such that the
method is not “arbitrary or unreasonable.” Sherman v. Fulton
County Bd. of Assessors, 288 Ga. 88, 91-93 (701 SE2d 472) (2010)
(punctuation omitted) (quoting DeKalb County Bd. of Tax Assessors
v. W. C. Harris & Co., 248 Ga. 277, 281 (3) (282 SE2d 880) (1981)).
22 The two methodologies at issue here are neither arbitrary nor
unreasonable. Rather, they are reasonable approaches for tax
assessors to use in carrying out their complex duty of computing the
fair market value of Section 42 property. As for the sales comparison
approach, in OCGA § 48-5-2 (3) (B) (vii) (I), the General Assembly
reasonably limited that approach to situations in which the property
being assessed could be most fairly compared to sales of other
Section 42 properties with unused tax credits. First, the General
Assembly limited the scope of that approach, because, as both
parties agree, sales of such properties rarely occur. Second, in
limiting the applicability of the sales comparison approach to
situations in which it is appropriate, the General Assembly
attempted to ensure that when tax assessors use that approach, it
yields fair and accurate results.8 Third, despite its limiting effect,
8 The Louisiana Supreme Court has also recognized the difficulty in valuing Section 42 properties using a comparable sales approach. See Williams v. Opportunity Homes, 240 S3d 161, 168-169 (La. 2018) (noting that the value of Section 42 properties is unique because of impediments federal regulations place on those properties, and concluding it would not be appropriate to compare those properties with economically dissimilar unregulated commercial property).
23 OCGA § 48-5-2 (3) (B) (vii) (I) may provide assessors with a
methodology that is appropriate in the future, and we decline to
speculate that a sale of a Section 42 property with unused LIHTCs
will never occur. For those reasons, OCGA § 48-5-2 (3) (B) (vii) (I)’s
sales comparison approach is not arbitrary or unreasonable. See
DeKalb County Bd. of Tax Assessors, 248 Ga. at 281 (3).
With respect to the income approach, consistent with our
conclusion above — that LIHTCs as currently structured do not
constitute “actual income” for the purposes of OCGA § 48-5-2 (3) (B)
(vii) (II) — we agree that this method has a narrow range of potential
applications. But that does not mean that it cannot be applied in any
circumstances, or that it is arbitrary or unreasonable. For example,
while we hold that today’s LIHTCs cannot be counted as “actual
income” under the income approach, we do not hold that the statute
cannot be applied as written — i.e., in circumstances where a tax
assessor could show that LIHTCs “generate actual income,” such as
where LIHTCs resulted in a net payment to the taxpayer rather
than merely reducing her tax liability. Cf. OCGA § 48-7-40.36 (g) (1)
24 (providing refundable income tax credits to timber farmers impacted
by Hurricane Michael). And for those reasons, OCGA § 48-5-2 (3) (B)
(vii) (II)’s income approach is not arbitrary or unreasonable. See
Thus, OCGA § 48-5-2 (3) (B) (vii) (I) and (II) are not
unconstitutional, because they do not completely preclude tax
assessors from considering LIHTCs in determining fair market
value; rather, they simply limit the applicability of the sales
comparison and income approaches. And given the difficulties
inherent in determining the fair market value of Section 42
properties, there is nothing arbitrary or unreasonable about the
General Assembly’s limiting use of those approaches to situations
where they can be accurately and fairly applied based upon reliable
data.
Finally, we also note that, in determining the fair market value
of Section 42 properties, tax assessors are not limited to using either
the sales comparison or income approaches. For example, OCGA
§ 48-5-2 (3) (B) (viii) directs tax assessors to apply — among other
25 criteria — “[a]ny other existing factors provided by law or by rule and
regulation of the commissioner [of revenue]” when determining the
fair market value of real property. (Emphasis supplied.)
Furthermore, the Appraisal Procedures Manual — which is part of
the Department of Revenue’s regulations — directs appraisers to
consider the sales comparison, income, and cost9 approaches in
determining the fair market value of real property, but it expressly
states that “[i]rrespective of the valuation approach used, the result
of any appraisal of real property . . . shall conform to the definition
of fair market value.” Ga. Comp. R. & Regs. r. 560-11-10-.09 (1). See
also Ga. Comp. R. & Regs. r. 560-11-10-.09 (1) (a), (4) (a)-(c).
The Appraisal Procedures Manual also explains that most of
the valuation procedures and methods it prescribes “are designed to
provide fair market value under normal circumstances.” Ga. Comp.
R. & Regs. r. 560-11-10-.01 (2) (emphasis supplied). In recognition of
9As stated in the Appraisal Procedures Manual, the cost approach estimates the cost of new improvements to a property, subtracts accrued depreciation, and then adds in the value of the land. See Ga. Comp. R. & Regs. r. 560-11-10-.09 (4) (a). 26 the fact that nearly all real property is unique in one way or another,
the Appraisal Procedures Manual states that “[w]hen unusual
circumstances are affecting value, they should be considered.” Id.
Moreover, the Appraisal Procedures Manual provides that appraisal
staff may use generally accepted appraisal practices set forth by
both the Appraisal Foundation and the International Association of
Assessing Officers, so long as those practices are consistent with the
Appraisal Procedures Manual and Georgia law. Ga. Comp. R. &
Regs. r. 560-11-10-.01 (4).
In short, OCGA § 48-5-2 (3) (B) (vii) (I) and (II) do not violate
our Constitution’s taxation uniformity provision, nor are they
arbitrary or unreasonable. Moreover, tax assessors have alternative
methods of assessing the fair market value of Section 42 properties.
Therefore, OCGA § 48-5-2 (3) (B) (vii) (I) and (II) are not
unconstitutional, and we reverse the judgment of the trial court.
Judgment reversed. All the Justices concur, except Bethel and Ellington, JJ., disqualified.
27 DECIDED SEPTEMBER 23, 2019. Taxation; constitutional question. Lowndes Superior Court. Before Judge Altman. The Barnes Law Group, Roy E. Barnes, John R. Bartholomew, Powell & Waters, Alfred J. Powell, Jr., Coleman Talley, Edward F. Preston, for appellants. Elliott, Blackburn & Gooding, Walter G. Elliott, for appellee. Arnall Golden Gregory, Henry R. Chalmers, Jennifer L. Shelfer, Jeffrey C. Adams; Christopher M. Carr, Attorney General, W. Wright Banks, Jr., Deputy Attorney General, Alex F. Sponseller, Senior Assistant Attorney General, Oliver tum Suden, Assistant Attorney General, Andrew A. Pinson, Solicitor-General, amici curiae.