In the Supreme Court of Georgia



                                                   Decided: September 12, 2016


 S16A0691. HERON LAKE II APARTMENTS, L. P. et al. v. LOWNDES
             COUNTY BOARD OF TAX ASSESSORS.


      HINES, Presiding Justice.

      This is an appeal by the owners of residential rental properties in Lowndes

County from a final order of the superior court declaring that OCGA § 48-5-2

(3) (B.1),1 which excludes low-income housing income tax credits from

consideration for the purpose of assessing ad valorem tax, is unconstitutional as

violating the taxation uniformity provision of the Georgia Constitution, Ga.

Const. of 1983, Art. VII, Sec. I, Par. III (a) (“taxation uniformity provision”).2

      1
          OCGA § 48-5-2 (3) (B.1) provides:

                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.

      2
          Ga. Const. of 1983, Art. VII, Sec. I, Par. III provides:

                (a) 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.
    (b)(1) Except as otherwise provided in this subparagraph (b), classes of subjects for
    taxation of property shall consist of tangible property and one or more classes of
    intangible personal property including money; provided, however, that any taxation
    of intangible personal property may be repealed by general law without approval in
    a referendum effective for all taxable years beginning on or after January 1, 1996.
        (2) Subject to the conditions and limitations specified by law, each of the
         following types of property may be classified as a separate class of property
         for ad valorem property tax purposes and different rates, methods, and
         assessment dates may be provided for such properties:
             (A) Trailers.
             (B) Mobile homes other than those mobile homes which qualify the owner
             of the home for a homestead exemption from ad valorem taxation.
             (C) Heavy-duty equipment motor vehicles owned by nonresidents and
             operated in this state.
       (3) Motor vehicles may be classified as a separate class of property for ad
        valorem property tax purposes, and such class may be divided into separate
        subclasses for ad valorem purposes. The General Assembly may provide by
        general law for the ad valorem taxation of motor vehicles including, but not
        limited to, providing for different rates, methods, assessment dates, and
        taxpayer liability for such class and for each of its subclasses and need not
        provide for uniformity of taxation with other classes of property or between
        or within its subclasses. The General Assembly may also determine what
        portion of any ad valorem tax on motor vehicles shall be retained by the state.
        As used in this subparagraph, the term “motor vehicles” means all vehicles
        which are self-propelled.
(c) Tangible real property, but no more than 2,000 acres of any single property owner,
which is devoted to bona fide agricultural purposes shall be assessed for ad valorem
taxation purposes at 75 percent of the value which other tangible real property is
assessed. No property shall be entitled to receive the preferential assessment provided
for in this subparagraph if the property which would otherwise receive such
assessment would result in any person who has a beneficial interest in such property,
including any interest in the nature of stock ownership, receiving the benefit of such
preferential assessment as to more than 2,000 acres. No property shall be entitled to
receive the preferential assessment provided for in this subparagraph unless the
conditions set out below are met:
      (1) The property must be owned by:
         (A)(i) One or more natural or naturalized citizens;
             (ii) An estate of which the devisee or heirs are one or more natural or
             naturalized citizens; or
             (iii) A trust of which the beneficiaries are one or more natural or naturalized
             citizens; or
        (B) A family-owned farm corporation, the controlling interest of which is

                                       2
             owned by individuals related to each other within the fourth degree of civil
             reckoning, or which is owned by an estate of which the devisee or heirs are one
             or more natural or naturalized citizens, or which is owned by a trust of which
             the beneficiaries are one or more natural or naturalized citizens, and such
             corporation derived 80 percent or more of its gross income from bona fide
             agricultural pursuits within this state within the year immediately preceding the
             year in which eligibility is sought.
         (2) The General Assembly shall provide by law:
                 (A) For a definition of the term “bona fide agricultural purposes,” but such
                 term shall include timber production;
                 (B) For additional minimum conditions of eligibility which such properties
                 must meet in order to qualify for the preferential assessment provided for
                 herein, including, but not limited to, the requirement that the owner be
                 required to enter into a covenant with the appropriate taxing authorities to
                 maintain the use of the properties in bona fide agricultural purposes for a
                 period of not less than ten years and for appropriate penalties for the breach
                 of any such covenant.
         (3) In addition to the specific conditions set forth in this subparagraph (c), the
         General Assembly may place further restrictions upon, but may not relax, the
         conditions of eligibility for the preferential assessment provided for herein.
(d)(1) The General Assembly shall be authorized by general law to establish as a separate
class of property for ad valorem tax purposes any tangible real property which is listed in the
National Register of Historic Places or in a state historic register authorized by general law.
For such purposes, the General Assembly is authorized by general law to establish a program
by which certain properties within such class may be assessed for taxes at different rates or
valuations in order to encourage the preservation of such historic properties and to assist in
the revitalization of historic areas.
    (2) The General Assembly shall be authorized by general law to establish as a separate
         class of property for ad valorem tax purposes any tangible real property on which
         there have been releases of hazardous waste, constituents, or substances into the
         environment. For such purposes, the General Assembly is authorized by general law
         to establish a program by which certain properties within such class may be assessed
         for taxes at different rates or valuations in order to encourage the cleanup, reuse, and
         redevelopment of such properties and to assist in the revitalization thereof by
         encouraging remedial action.
(e) The General Assembly shall provide by general law:
     (1) For the definition and methods of assessment and taxation, such methods to
       include a formula based on current use, annual productivity, and real property sales
       data, of: “bona fide conservation use property” to include bona fide agricultural and
       timber land not to exceed 2,000 acres of a single owner; and “bona fide residential
        transitional property,” to include private single-family residential owner occupied
        property located in transitional developing areas not to exceed five acres of any
        single owner. Such methods of assessment and taxation shall be subject to the
         following conditions:

                                           3
        (A) A property owner desiring the benefit of such methods of assessment and
        taxation shall be required to enter into a covenant to continue the property in bona
        fide conservation use or bona fide residential transitional use; and
        (B) A breach of such covenant within ten years shall result in a recapture of the tax
        savings resulting from such methods of assessment and taxation and may result in
        other appropriate penalties;
        (2) That standing timber shall be assessed only once, and such assessment shall be
        made following its harvest or sale and on the basis of its fair market value at the time
        of harvest or sale. Said assessment shall be two and one-half times the assessed
        percentage of value fixed by law for other real property taxed under the uniformity
        provisions of subparagraph (a) of this Paragraph but in no event greater than its fair
        market value; and for a method of temporary supplementation of the property tax
        digest of any county if the implementation of this method of taxing timber reduces
        the tax digest by more than 20 percent, such supplemental assessed value to be
        assigned to the properties otherwise benefiting from such method of taxing timber.
(f)(1) The General Assembly shall provide by general law for the definition and methods of
assessment and taxation, such methods to include a formula based on current use, annual
productivity, and real property sales data, of “forest land conservation use property” to
include only forest land each tract of which exceeds 200 acres of a qualified owner. Such
methods of assessment and taxation shall be subject to the following conditions:
        (A) A qualified owner shall consist of any individual or individuals or any entity
        registered to do business in this state;
        (B) A qualified owner desiring the benefit of such methods of assessment and
        taxation shall be required to enter into a covenant to continue the property in forest
        land use;
        (C) All contiguous forest land conservation use property of an owner within a county
        for which forest land conservation use assessment is sought under this subparagraph
        shall be in a single covenant;
        (D) A breach of such covenant within 15 years shall result in a recapture of the tax
        savings resulting from such methods of assessment and taxation and may result in
        other appropriate penalties; and
        (E) The General Assembly may provide by general law for a limited exception to the
        200 acre requirement in the case of a transfer of ownership of all or a part of the
        forest land conservation use property during a covenant period to another owner
        qualified to enter into an original forest land conservation use covenant if the original
        covenant is continued by both such acquiring owner and the transferor for the
        remainder of the term, in which event no breach of the covenant shall be deemed to
        have occurred even if the total size of a tract from which the transfer was made is
        reduced below 200 acres.
(2) No portion of an otherwise eligible tract of forest land conservation use property shall be
entitled to receive simultaneously special assessment and taxation under this subparagraph
and either subparagraph (c) or (e) of this Paragraph.
(3)(A) The General Assembly shall appropriate an amount for assistance grants to counties,
municipalities, and county and independent school districts to offset revenue loss attributable

                                           4
For the reasons which follow, we affirm the judgment of the superior court.

     The following facts are not in dispute in this appeal. The properties at



     to the implementation of this subparagraph. Such grants shall be made in such manner and
     shall be subject to such procedures as may be specified by general law.
         (B) If the forest land conservation use property is located in a county, municipality, or
        county or independent school district where forest land conservation use value causes
        an ad valorem tax revenue reduction of 3 percent or less due to the implementation of
        this subparagraph, in each taxable year in which such reduction occurs, the assistance
        grants to the county, each municipality located therein, and the county or independent
        school districts located therein shall be in an amount equal to 50 percent of the amount
        of such reduction.
        (C) If the forest land conservation use property is located in a county, municipality, or
        county or independent school district where forest land conservation use value causes
        an ad valorem tax revenue reduction of more than 3 percent due to the implementation
        of this subparagraph, in each taxable year in which such reduction occurs, the
        assistance grants to the county, each municipality located therein, and the county or
        independent school districts located therein shall be as follows:
              (i) For the first 3 percent of such reduction amount, in an amount equal to 50 percent
              of the amount of such reduction; and
              (ii) For the remainder of such reduction amount, in an amount equal to 100 percent
              of the amount of such remaining reduction amount.
     (4) Such revenue reduction shall be calculated by utilizing forest land fair market value. For
     purposes of this subparagraph, forest land fair market value means the 2008 fair market value
     of the forest land. Such 2008 valuation may increase from one taxable year to the next by a
     rate equal to the percentage change in the price index for gross output of state and local
     government from the prior year to the current year as defined by the National Income and
     Product Accounts and determined by the United States Bureau of Economic Analysis and
     indicated by the Price Index for Government Consumption Expenditures and General
     Government Gross Output (Table 3.10.4). Such revenue reduction shall be determined by
     subtracting the aggregate forest land conservation use value of qualified properties from the
     aggregate forest land fair market value of qualified properties for the applicable tax year and
     the resulting amount shall be multiplied by the millage rate of the county, municipality, or
     county or independent school district.
     (5) For purposes of this subparagraph, the forest land conservation use value shall not include
     the value of the standing timber located on forest land conservation use property.
(g) The General Assembly may provide for a different method and time of returns, assessments,
payment, and collection of ad valorem taxes of public utilities, but not on a greater assessed
percentage of value or at a higher rate of taxation than other properties, except that property
provided for in subparagraph (c), (d), (e), or (f) of this Paragraph.

                                                5
issue are eligible to receive federal and state low-income housing income tax

credits (“tax credits”) pursuant to Section 42 of the Internal Revenue Code of

1986, as amended (“Section 42"), and OCGA § 48-7-29.6.3 In exchange for

      3
          OCGA § 48-7-29.6 provides:

       (a) As used in this Code section, the term:
           (1) “Federal housing tax credit” means the federal tax credit as provided in Section 42
           of the Internal Revenue Code of 1986, as amended.
           (2) “Median income” means those incomes that are determined by the federal
           Department of Housing and Urban Development guidelines and adjusted for family
          size.
          (3) “Project” means a housing project that has restricted rents that do not exceed 30
          percent of median income for at least 40 percent of its units occupied by persons or
          families having incomes of 60 percent or less of the median income, or at least 20
          percent of the units occupied by persons or families having incomes of 50 percent or
          less of the median income.
          (4) “Qualified basis” means that portion of the tax basis of a qualified Georgia project
          eligible for the federal housing tax credit, as that term is defined in Section 42 of the
          Internal Revenue Code of 1986, as amended.
          (5) “Qualified Georgia project” means a qualified low-income building as that term is
         defined in Section 42 of the Internal Revenue Code of 1986, as amended, that is located
         in Georgia.
    (b)(1) A state tax credit against the tax imposed by this article, to be termed the Georgia
    housing tax credit, shall be allowed with respect to each qualified Georgia project placed in
    service after January 1, 2001. The amount of such credit shall, when combined with the total
    amount of credits authorized under Code Section 33-1-18, in no event exceed an amount
    equal to the federal housing tax credit allowed with respect to such qualified Georgia
    project.
       (2)(A) If under Section 42 of the Internal Revenue Code of 1986, as amended, a portion
       of any federal housing tax credit taken on a project is required to be recaptured as a result
       of a reduction in the qualified basis of such project, the taxpayer claiming any state tax
       credit with respect to such project shall also be required to recapture a portion of any state
       tax credit authorized by this Code section. The state recapture amount shall be equal to
       the proportion of the state tax credit claimed by the taxpayer that equals the proportion
       the federal recapture amount bears to the original federal housing tax credit amount
       subject to recapture. The tax credit under this Code section shall not be subject to
        recapture if such recapture is due solely to the sale or transfer of any direct or indirect
        interest in such qualified Georgia project.
            (B) In the event that recapture of any Georgia housing tax credit is required, any

                                                 6
receiving a ten-year award of tax credits, the property owners agreed to lease

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 30 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



           amended return submitted to the commissioner as provided in this Code section shall
           include the proportion of the state tax credit required to be recaptured, the identity of
           each taxpayer subject to the recapture, and the amount of tax credit previously
           allocated to such taxpayer.
       (3) In no event shall the total amount of the tax credit under this Code section for a
       taxable year exceed the taxpayer's income tax liability. Any unused tax credit shall be
       allowed to be carried forward to apply to the taxpayer's next three succeeding years' tax
       liability. No such tax credit shall be allowed the taxpayer against prior years' tax liability.
       (4) The tax credit allowed under this Code section, and any recaptured tax credit, shall be
       allocated among some or all of the partners, members, or shareholders of the entity
       owning the project in any manner agreed to by such persons, whether or not such persons
       are allocated or allowed any portion of the federal housing tax credit with respect to the
       project.
  (c) The commissioner and the state department designated by the Governor as the state
  housing credit agency for purposes of Section 42(h) of the Internal Revenue Code of 1986, as
  amended, shall each be authorized to promulgate any rules and regulations necessary to
  implement and administer this Code section.

                                                 7
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.

      On March 25, 2015, the Lowndes County Board of Tax Assessors (the

“Assessors”) filed in the Superior Court of Lowndes County a petition for

declaratory judgment as to the constitutionality of OCGA § 48-5-2 (3) (B.1),

which precluded the Assessors from considering the tax credits in determining

the fair market value of the real property at issue, as of January 1, 2015. As

noted, the superior court declared          OCGA § 48-5-2 (3) (B.1) to be

unconstitutional as running afoul of the taxation uniformity provision, and

affected property owners have filed the present appeal from the adverse ruling.

      Again, OCGA § 48-5-2 (3) (B. l) prohibits the tax assessor from




                                        8
considering tax credits in determining the fair market value of real property.4

Yet, OCGA § 48-5-2 (3) (B) (vi),5 as amended in 2014, provides, in determining

the fair market value of real property, that the tax assessor is to apply rental

limitations, operational requirements, and other restrictions imposed on a

property in connection with the property being eligible for any income tax


       4
           OCGA § 48-5-2 (3) provides:

       “Fair market value of property” means 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 income approach, if data is available, shall be considered in
       determining the fair market value of income-producing property. Notwithstanding
       any other provision of this chapter to the contrary, the transaction amount of the most
       recent arm's length, bona fide sale in any year shall be the maximum allowable fair
       market value for the next taxable year. With respect to the valuation of equipment,
       machinery, and fixtures when no ready market exists for the sale of the equipment,
       machinery, and fixtures, fair market value may be determined by resorting to any
       reasonable, relevant, and useful information available, including, but not limited to,
       the original cost of the property, any depreciation or obsolescence, and any increase
       in value by reason of inflation. Each tax assessor shall have access to any public
       records of the taxpayer for the purpose of discovering such information.



       5
        OCGA § 48-5-2 (3) (B) (vi) states in full that in determining the fair market value of real
property, the tax assessor shall apply:

       (vi) Rent limitations, operational requirements, and any other 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[.]



                                                 9
credits described in OCGA § 48-5-2 (3) (B. l). Consequently, as the superior

court stated, the issue is whether, given OCGA § 48-5-2 (3) (B) (vi), as amended

in 2014, OCGA § 48-5-2 (3) (B.1) violates the uniformity requirement of Ga.

Const. of 1983, Art. VII, Sec. I, Par. III (a).   The constitutionality of a statute

presents a question of law, and this Court’s review of a trial court's holding

regarding the constitutionality of a statute is de novo. Atlanta Oculoplastic

Surgery, P.C. v. Nestlehutt, 286 Ga. 731, 732-733 (2) (691 SE2d 218) (2010).

      By its express terms, the taxation uniformity provision of the Georgia

Constitution mandates that property of the same class be assessed and taxed

uniformly. Paragraph III (b) of the taxation uniformity provision states that,

with specified limited exceptions, “the classes of subjects for the taxation of

property shall consist of tangible property and one or more classes of intangible

personal property. . . .” See n. 2 supra.

      The Constitution creates “tangible property” as a single class of
      property. See Art. VII, Sec. I, Par. III(b). “Tangible property”•
      includes real and personal property, and the General Assembly has
      no authority to establish different classes or subclasses of tangible
      property other than as fixed by the [Constitution]. The types of
      tangible property that may be separately classified and subclassified
      by the General Assembly under the [taxation uniformity provision]
      are listed in subsection (b) of Article VII, Section I, Paragraph III


                                          10
Blevins v. Dade Cty. Bd. of Tax Assessors, 288 Ga. 113, 114 (1) (702 SE2d 145)

(2010). Neither Section 42 real property nor tax credits are part of this limited

list of express exceptions. However, the property owners urge that this is of no

moment because the tax credits are intangible personal property, and therefore,

can be assessed differently from real property without violating the uniformity

requirement. Thus, the threshold inquiry is the relationship of the tax credits to

the tangible property at issue, that is their appropriate classification, for the

purpose of ad valorem taxation.


      OCGA § 48-5-3 mandates that,

      [a]ll real property including, but not limited to, leaseholds, interests
      less than fee, and all personal property shall be liable to taxation
      and shall be taxed, except as otherwise provided by law. Liability
      of property for taxation shall not be affected by the individual or
      corporate character of the property owner or by the resident or
      nonresident status of the property owner.


The appraisal of real property for tax purposes is subject to regulation. Indeed,

the Georgia Department of Revenue has adopted regulations, which have been

compiled in an “Appraisal Procedures Manual” (“APM”), to guide county tax

officials in appraising real property. See Ga. Comp. R. & Regs. r.


                                        11
560-11-10-.01.6 “The APM defines ‘real property’ as ‘the bundle of rights,

interest and benefits connected with the ownership of real estate.’” Morton v.

Glynn Cty. Bd. of Tax Assessors, 294 Ga. App. 901, 904 (1) (670 SE2d 528)

(2008); Ga. Comp. R. & Regs. r. 560-11-10-.02 (1) (x). “‘Real estate’ means

the physical parcel of land, improvements to the land, improvements attached



      6
          Ga. Comp. R. & Regs. r. 560-11-10-.01provides:

      (1) Purpose. This appraisal procedures manual has been developed in accordance
      with Code section 48-5-269.1 which directs the Revenue Commissioner to adopt by
      rule, subject to Chapter 13 of Title 50, the “Georgia Administrative Procedure
      Act,”and maintain an appropriate procedural manual for use by the county property
      appraisal staff in appraising tangible real and personal property for ad valorem tax
      purposes.
      (2) Specific procedures. In order to facilitate the mass appraisal process, specific procedures
      are provided within this Chapter which are designed to arrive at a basic appraisal value of
      real and personal property. These specific procedures are designed to provide fair market
      value under normal circumstances. When unusual circumstances are affecting value, they
      should be considered. In all instances, the appraisal staff will apply Georgia law and
      generally accepted appraisal practices to the basic appraisal values required by this manual
      and make any further valuation adjustments necessary to arrive at the fair market values.
      (3) Board of tax assessors. The county board of tax assessors shall require the appraisal
      staff to observe the procedures in this manual when performing their appraisals. The county
      board of tax assessors may not adopt local procedures that are in conflict with Georgia law
      or the procedures required by this manual. The county board of tax assessors must consider
      the appraisal staff information in the performance of their duties. In each instance, however,
      the assessment placed on each parcel of property shall be the assessment established by the
      county board of tax assessors as provided in Code section 48-5-306.
      (4) Other appraisal procedures. The appraisal staff may use those generally accepted
      appraisal practices set forth in the Uniform Standards of Professional Appraisal Practice,
      published by the Appraisal Foundation, and the standards published by the International
      Association of Assessing Officers, as they may be amended from time to time, to the extent
      such practices do not conflict with this manual and Georgia law.



                                                12
to the land, real fixtures and appurtenances such as easements.” Ga. Comp. R.

& Regs. r. 560-11-10-.02 (1) (v). Also, OCGA § 44-1-2 (a) defines "real estate"

to be:

               (1) All lands and the buildings thereon;
               (2) All things permanently attached to land or to the buildings
               thereon; and
               (3) Any interest existing in, issuing out of, or dependent upon land
               or the buildings thereon.


         As is evident, the very existence of tax credits is inextricably bound with

the ownership of real estate. As the Court of Appeals concluded in Pine Pointe

Housing, L.P. V. Lowndes County Board of Tax Assessors, 254 Ga. App. 197

(561 SE2d 860) (2002), “Section 42 tax credits provide a . . . stream of value

tied solely to the property.” Id. at 200 (1) (b). Although the Court of Appeals

determined that it was inappropriate to retroactively apply OCGA § 48-5-2 (3)

(B.1) to the underlying controversy in Pine Pointe Housing, much of the

analysis in the case in regard to ad valorem tax valuation is apposite here.

         In 1996, Pine Pointe Housing, a limited partnership, constructed a 71- unit

rental housing project in Valdosta, and the property received an allocation of tax

credits. As in the present case, the limited partnership permitted the tax credits


                                          13
to “flow through” to the tax benefit of its limited partners. Pine Pointe appealed

the 1997 ad valorem tax assessment of the property to the Lowndes County

Board of Equalization, and the Lowndes County Board of Tax Assessors then

appealed the ruling of the board of equalization to the superior court, which held

a de novo hearing in the matter in November 2000. The issue was the fair

market value of the property as of January 1, 1997, and, specifically how to

value the property for ad valorem tax purposes given the applicable rental

restrictions and federal income tax benefits. On November 30, 2000, the

superior court issued its order establishing the fair market value of the property;

in doing so, the superior court concluded that the mortgage equity or debt equity

income approach to valuation was valid and applicable to the property and that

in determining fair market value, it had to consider, inter alia, restrictive

covenants of record and the associated tax credits. Pine Pointe appealed,

contending, among other things, that the superior court erred in considering the

tax credits in determining fair market value. The Court of Appeals disagreed,

rejecting Pine Pointe’s arguments that the tax credits had, in economic effect,

been sold, and thus had no value to Pine Pointe; that consideration of the tax

credits was inconsistent with the APM; that the tax credits could not be

                                        14
considered income for accounting purposes; that the superior court's ruling was

inconsistent with principles established by case law; and that OCGA § 48-5-2

(3) (B.1), which was effective as of July 1, 2001, prohibited consideration of the

tax credits.

      As the Court of Appeals explained, generally real property is taxed

according to its fair market value, and the General Assembly has defined fair

market value 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.” OCGA § 48-5-2 (3), supra at n. 4. The Court explained that OCGA § 48-

5-2 (3) (B) set forth the factors which had to be considered in determining fair

market value, which factors include any restrictions or limitations on the use of

the property resulting from state or federal law, rules or regulations, and any

other factors pertinent to the fair market value; in such determination, the taxing

authorities are required to apply external factors, such as zoning, deed

restrictions, and other pertinent factors, which would by their very nature,

include tax credits. The Court of Appeals elaborated,

      The credits have value to a taxpayer with federal income tax
      liability and can be “passed through” a partnership structure to
      those taxpayers. Because Section 42 tax credits are generated by a

                                        15
      designated property, a third party would pay for the value as part of
      that property's sale price in a bona fide, arm's length transaction.
      Furthermore, the tax credits go hand in hand with restrictive
      covenants that require the property to charge below-market rent. By
      statute, these restrictions are required to be considered by the
      assessor. If viewed in isolation, the rental restrictions would
      artificially depress the value of the property for tax valuation
      purposes.

Pine Pointe Housing, supra at 198 (1).

      The tax credits are a benefit connected to the real estate itself, rather than

to any individual or entity. Indeed, “if a property eligible for Section 42 tax

credits is sold, then the subsequent owner of the property is entitled to the future

tax credits associated with the property.” Id. at 199 (1) (a); 26 U.S.C.A. § 42 (d)

(7) (A) (ii).7 And,

      a future owner could choose to act in a way that would eliminate the
      [Section 42] credit, but it does not change the law that any tax credit
      generated is associated with the property nor the evidence that an
      available tax credit has value to a third-party purchaser.
      Furthermore, the Internal Revenue Code has provisions which
      encourage a buyer and seller of property generating Section 42 tax
      credits to ensure the property continues to be operated as a

      7
          26 U.S.C.A. § 42 (d) (7) (A) (ii) provides:

                [T]he credit allowable by reason of subsection (a) to the taxpayer for any period after
                such acquisition shall be equal to the amount of credit which would have been
                allowable under subsection (a) for such period to the prior owner referred to in
                subparagraph (B) had such owner not disposed of the building.


                                                  16
      low-income rental project.


Pine Pointe Housing., supra at 199-200 (1) (a); 26 USCA § 42 (d) (7).

Furthermore, the fact that the tax credits are by statute expressly linked to a

“qualified low-income building” and not the underlying land itself does not alter

this tie. See 26 U.S.C.A. § 42 (a).8 Indeed, a building by statutory definition is

“real estate.” See OCGA § 44-1-2 (a), supra.

      As for the argument that consideration of the tax credits for the purpose

of property valuation and assessment would run afoul of the provision in the

APM that real property excludes intangible benefits associated with the

ownership of real estate, such as business goodwill, it is without merit.9 The fact

that tax credits can be transferred independently from the ownership of the


      8
          26 U.S.C.A. § 42 (a) provides:

      In general.--For purposes of section 38, the amount of the low-income housing credit
      determined under this section for any taxable year in the credit period shall be an amount
      equal to--
      (1) the applicable percentage of
      (2) the qualified basis of each qualified low-income building.
      9
          Ga. Comp. R. & Regs. r. 560–11–10–.02 (1) (x) provides:

      Real property. “Real property” means the bundle of rights, interests, and benefits connected
      with the ownership of real estate. Real property does not include the intangible benefits
      associated with the ownership of real estate, such as the goodwill of a going business
      concern.

                                               17
associated real property does not render them “intangible personal property” for

the purpose of valuation for taxation. Again, the APM expressly includes in the

definition of real property the “bundle of rights, interests, and benefits

connected with the ownership of real estate.” Ga. Comp. R. & Regs. r.

560–11–10–.02 (1) (x). Furthermore,

      Section 42 tax credits are not the type of benefit associated with
      owning real estate, such as goodwill, that cannot be taken into
      account in determining the value of a property to a third party.
      Goodwill is a favor which the management of a business wins from
      the public, and as such is more associated with a business operation
      than the property on which the business is located.

Pine Pointe Housing., supra at 200 (1) (b) (Internal quotation marks omitted.).

Even if tax credits, considered artificially in isolation, are intangible in nature,

they, in fact, do not exist in isolation - they are wholly dependant upon and are

not viable apart from the real estate giving rise to them. As noted, the tax credits

are an item of value “tied solely to the property.” Id. Thus, they are part and

parcel of the tangible real estate and “may properly contribute to an assessment

of fair market value.” Morton v. Glynn Cty. Bd. of Tax Assessors, supra at 906

(1). Indeed, to conclude otherwise would bar from consideration a property

right which plainly affects the amount a knowledgeable buyer would pay and a


                                        18
willing seller would accept in a sale, thus, effectively nullifying the statutory

definition of fair market value. See OCGA § 48-5-2 (3), supra at n. 4.

       Simply, inasmuch as OCGA § 48-5-2 (3) (B.1) exempts these income tax

credits from consideration in determining the fair market value of the properties

at issue, the statute grants preferential treatment for ad valorem taxation

purposes and creates a subclass of tangible property other than as permitted by

the State Constitution. See Ga. Const. of 1983, Art. VII, Sec. I, Par. III (b),

supra at n. 2. This runs afoul of the taxation uniformity provision.10 Blevins v.

Dade County Bd. of Tax Assessors, supra at 114 (1). Consequently, the

judgment of the superior court stands.

       Judgment affirmed. All the Justices concur.




       10
         That OCGA § 48-5-2 (3) (B.1) violates the taxation uniformity provision was implicitly
recognized by the General Assembly when it proposed the following 2002 amendment to the Georgia
Constitution that would have authorized an exception to the uniformity requirement of Ga. Const.
of 1983, Art. VII, Sec. I, Par. III (a) for Section 42 properties:

       "Shall the Constitution be amended so as to provide that qualified low-income building
       projects may be classified as a separate class of property for ad valorem property tax
       purposes and different rates, methods, and assessment dates may be provided for such
       building projects? "

The proposed constitutional amendment was rejected by voters in the November 2002 general
election.


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