HERON LAKE II APARTMENTS, LP et al.
LOWNDES COUNTY BOARD OF TAX ASSESSORS.
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 U.S.C. § 42. The dispute before us turns
on the valuation of these tax credits when calculating ad
valorem real property taxes.
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
Accordingly, we reverse the judgment of the trial court.
§ 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 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 added).
That was the genesis of the dispute between the Board and
The Prior Litigation
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 Apartments, L.P. v.
Lowndes County Board of Tax Assessors, 299 Ga. 598 (791
S.E.2d 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 "all 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 officials." Id. at 606. 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, L.P. v. Lowndes County Board of Tax
Assessors, 254 Ga.App. 197 (561 S.E.2d 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 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
(Citation and footnote omitted).
The Current Litigation
2017, the General Assembly further amended OCGA § 48-5-2
(3). See Ga. L. 2017, p. 25, § 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 added:
(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.
(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.
. . .
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. . . .
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."
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 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.
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."
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 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.
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.
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. Cityof Atlanta, 299 Ga.
676, 677 (791 S.E.2d 821) (2016) (citations and punctuation
omitted). A controversy is justiciable "when it is
definite and concrete, rather than being ...