Ga. Supreme Court Rules in Favor of Property Owners in Tax Credit Case

The Georgia Supreme Court has ruled in favor of property owners in a recent case concerning the valuation of affordable housing projects that receive state and federal tax credits (under 26 USC § 42, or Section 42).

The Board of Assessors’ Arguments: Following a string of court decisions and legislative changes, the Lowndes County Board of Tax Assessors sought to void statutory language that limited how properties receiving tax credits could be valued. The statutory limits, introduced in 2017, required tax assessors to compare tax credit properties to other tax credit properties when applying the sales approach to valuation, and only consider the tax credits in the income approach when they generate ‘actual income’ to the property owner. The Tax Assessors argued that the statutory limits were a violation of Georgia’s uniformity clause (that all property of the same class must be valued in the same way). They further argued that the tax credits associated with the property should be considered as income when applying the income approach to valuation, which would result in a higher valuation for property tax purposes.

The Property Owners’ Arguments: The property owners argued that the tax credits were not income, but instead offset other tax liability. As a policy matter, they argued that by counting those credits as income, the inflated tax assessment negated the benefit of the tax credits and, on a bigger scale, would threaten the viability affordable housing projects in Georgia.

The Court’s Decision: On September 23, 2019, the Georgia Supreme Court ruled in favor of the property owners: that the tax credits themselves were not “income” for purposes of property tax valuation; and that the statutory limitations on valuing tax credit property were not unconstitutional because they did not completely preclude the tax assessors from considering the tax credits and the methods themselves were not improper, unreasonable, or arbitrary.

Read the full decision here: HERON LAKE II APARTMENTS, LP et al. v. LOWNDES COUNTY BOARD OF TAX ASSESSORS, Ga. Supreme Court Case No. S19A0975.

The Take-Away: This decision helps to ensure fair property tax valuations for tax credit properties.

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