Georgia Court Rules Tax Credits Are Not Income in Valuation

According to an attorney who is working on the case, a recent Georgia Supreme Court decision against tax officials in Lowndes County could affect the affordable housing market in that state. The issue at hand is low income housing tax credits and how those are valued when it comes to calculating property taxes. The court’s ruling stated that the tax credits were not actual income, which means tax assessors have to use an income approach to value these kinds of properties. That involves determining taxable value based on how much income the properties are generating.

The same court also stated that there were section of state law that the Board of Assessors had claimed were not constitutional, and those claims were not found to have merit. In other words, there was no conflict between those areas of the state’s law and the state’s constitution. Those sections dealt with the uniformity of taxation, and stated that all properties in the same kind of class had to have the same manner of taxation. By overturning the ruling of a lower court, the Georgia Supreme Court effectively made it easier for the state to keep its low-income housing.

Without the Court’s ruling, ad valorem taxes would have continued rising. That would have made property that’s now rent-controlled unaffordable. The issues surrounding this case started more than a decade ago, resulting in a battle that has been fought ever since. The Board of Assessors brought the case to the courts for judgment, in order to get guidance on how the tax credits should be considered when it came to valuing what are termed Section 42 properties. Now that the state has that information on low-income housing tax credits, it will have to decide whether to appeal again or accept the ruling.

The Court ruled that tax credits for Section 42 properties are considered under unusual circumstances, and also under a type of valuation called the cost approach. Also, the Court restated a previous ruling that Section 42 credits affect how much a buyer with knowledge of the situation would pay and a seller in that situation would accept. As such, any appraisal going forward should conform to a fair market value definition that is consistent with the Court’s ruling.