Notable Opinions: September 23

The court issued two notable opinions today, both in cases appearing before the court for the second time. The first deals with the contracts clauses of the Federal and Georgia constitutions, the second with the tax uniformity clause of the Georgia Constitution.

Polo Golf and Country Club Homeowners Association, Inc v. Cunard et al.,

The case involves a request for declaratory relief clarifying the constitutional authority of Forsyth County officials to enforce an addendum to the County's stormwater management ordinance.

The current issue, the constitutionality of the ordinance, is the second time the case has come before the Court. In Polo I, the Court did not need to reach the constitutional issue, because then-existing provision applied only to new developments and redevelopments, but not to already-existing developments, which could trigger a contracts clause issue. See 294 Ga. at 495.

Here, in Polo II, the Court rejected the Constitutional challenge under both the Federal and State Constitutions, affirming the grant of  PGHOA's motion for judgement on the pleadings.

As to the Federal challenge, Justice Benham wrote for the Court that "[o]n its face" the [addendum] does not "prescribe the means by which an HOA must meet its responsibilities" nor does it "expressly or implicitly prohibit an HOA from using its contractual relationships with homeowners." Further, and most importantly for judgement on the pleadings, "PGHOA concedes [in its complaint] it can exercise at least one of its contractual remedies under the Declaration (i.e., abatement/self-help) against homeowners to meet its obligations to the county."

As to the State-Constitutional challenge, "PGHOA [ ] failed to fully articulate a vested right or how that any alleged vested right has been injuriously affected by the 2014 version of Section 4.2.2." and
"[i]n the absence of a vested right, or an injury thereto, there is no violation of the Georgia Constitution’s impairment clause."

The full opinion is available here.


Heron Lake Apartments v. Lowndes County Board of Tax Assessors

Heron Lake II deals with the constitutionality of a Georgia Statute providing for assessing ad valorem property taxes against Low Income Housing Apartment Complexes. The Court held that (1) the trial court had jurisdiction to consider the case under the declaratory judgement act; (2) low income housing tax credits are not "actual income" for purposes of determining the "value" at which low income housing land can be taxed; and (3) the statute determining value calculation for low income housing land does not violate the Georgia Constitution's taxation uniformity provision.

LEGAL BACKGROUND

The Georgia Constitution provides that “[a]ll 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.” Art. VII, Sec. I, Par. III (a). The litigation here stems from the interplay of the tax-uniformity provision and the statutes governing how to determine value of property for purposes of ad valorem taxes.

Under the internal Revenue code, using land for Low Income Housing entitles the owner to tax credits intended to offset the cost of accepting below-market rent value. OCGA 48-5-2 dictates how tax assessors may determine the taxable value of land, with subsection (3)(B) dealing with how low income housing tax credits ("LIHTCs") may be factored in.

PROCEDURAL HISTORY 

In Heron Lake I, the Court held that a prior version of 48-5-2 violated the taxation uniformity provision, since it categorically prohibited consideration of the value of the tax credit --thereby  impermissibly creating a "sub-class" of taxable land.

In 2017 the general assembly revised the statute, creating two alternate methods of assessing LIHTCs impact on land value. Under the "sales comparison" approach, assessors can consider LIHTCs as long as they compare sales of other recently sold property with unused tax credits that could be transferred in the transaction. OCGA 48-5-2(3)(B)(vi). Conversely, under the "income approach," LIHTCs can be considered if they generate "actual income" to the owner. OCGA 48-5-2(3)(B)(vii).

After the 2017 amendment, the Lowndes County Board of Assessors brought a declaratory judgement action seeking a ruling that either (1) the amendment violated the uniformity provision, or (2) LIHTCs are "actual income" which can be factored into the taxable value. The trial court agreed with the board on both points, holding in alternatives that if the LIHTCs could not be considered "actual income," the amendment was unconstitutional.

TODAY'S DECISION

The Court granted cert and reversed. After concluding there was a live controversy sufficient to allow a declaratory judgement action, the Court held that a tax credit is not "actual income" in the ordinary sense of that word. Unlike Heron Lake I, however, the 2017 version of the statute did not violate the uniformity provision.

In contrast the prior version of the statute, the 2017 amendments did not purport to wholly preclude consideration of LIHTCs. As a result, the Court held, the General Assembly had significant latitude under its constitutional authority to provide "methods of assessment and taxation." Ga. Const. Art.VII Sec. I p.III(e). Thus, the "sales comparison" and "income" approaches were permissible (at least on their face) as fair methods of valuation that are neither arbitrary nor unreasonable.

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

As for the income approach, even if there are a narrow set of cases in which it can be applied against LIHTCs, this does not necessarily mean they are nonexistent, or that it is arbitrary and unreasonable. 

Finally, the Court noted that tax assessors are not limited to using the sales comparison or income approaches, but may, subject to tax manual guidelines, consider other methods of determining fair market value in "unusual circumstances."



The full opinion is available here.


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