A. Definition of Fair Market Value
“Fair market value” is defined in O.C.G.A. § 48-5-2(3). Prior to S.B. 346, it was defined 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 new legislation bill makes several significant changes to this definition.
- Directly after the definition, the following was added: “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.”
- A new subsection (.1) was added to the definition section (3) defining the phrase “arm’s length, bona fide sale” as: “[A] transaction which has occurred in good faith without fraud or deceit carried out by unrelated or unaffiliated parties, as by a willing buyer and a willing seller, each acting in his or her own self-interest, including but not limited to a distress sale, short sale, bank sale, or sale at public auction.
- Subsection (3) previously had required the assessor to “consider” a list of criteria (including zoning, current use, and covenants) when determining fair market value. This section now states that “the assessor shall apply” these criteria, as well as adding the criteria of “bank sales, other financial institution owned sales, or distressed sales, or any combination thereof, of comparable real property.”
- A new subparagraph (B.2) was added to subsection (3) stating: “In determining the fair market value of real property, the tax assessor shall not include the value of any intangible assets used by a business, wherever located, including patents, trademarks, trade names, customer agreements, and merchandising agreements.”
B. Returns and Assessments
1. Due Dates of Returns
O.C.G.A. § 48-5-18 was amended to provide that the due date for all property tax returns, both real and personal property, is April 1. The prior statute provided a date of April 1 for most counties but a date of March 1 for some counties.
2. Notices of Assessment Required
O.C.G.A. § 48-5-306 was amended to require that an annual notice of real property assessment be given by the boards of tax assessors to all owners of real property.
- The prior statute only required that notice be given of any changes to the prior year value. Because the notice of assessment is what triggers the appeal process, the taxpayer would not have the opportunity to file an appeal on a value that simply was carried over from the prior year unless the taxpayer filed a real property tax return claiming the lower value. (Very few taxpayers file an annual real property tax return and instead rely on the provision that “deems” a return to be filed at the prior year value.)
- This new provision cures that common “foot-fault” by taxpayers and insures the opportunity to file an appeal in each year.
S.B. 346 extensively revises the appeal procedure found in O.C.G.A. § 48-5-311. Within 45 days from the issuance of the notice of assessment (it was previously 30 days in some counties), taxpayers can choose one of three options:
- For both real and personal property, appeal to the board of equalization on matters of taxability, uniformity, and value;
- For both real and personal property, appeal to binding arbitration for matters of value; and
- For certain real property (nonhomestead real property with a value in excess of $1 million), appeal to a hearing officer for matters of value and uniformity.
2. Board of Equalization
Amended O.C.G.A. § 48-5-311(e)(2) provides that taxpayers initiate the appeal to the board of equalization by filing an appeal within 45 days with the board of tax assessors. The assessors then review the appeal; if they make no changes, they forward the appeal to the board of equalization. If the assessors change the assessment, they are required to issue a new assessment and the taxpayer has 30 days (previously 21 days) to file a new appeal notice with the board of tax assessors, at which time the matter is transferred to the board of equalization. The procedure before the board of equalization is largely unchanged, though there are a handful of exceptions:
- O.C.G.A. § 48-5-311(a)(4) authorizes the governing authority of two or more counties to establish regional boards of equalization.
- O.C.G.A. § 48-5-311(d)(4)(A) gives the clerk of the superior court oversight and supervision authority over the boards of equalization, including the selection of members, qualifications, and the scheduling of hearings. The prior statute did not assign such authority and, by default, employees of the boards of tax assessors generally assumed such duties.
- O.C.G.A. § 48-5-311(e)(6)(D) requires the board of equalization to render its decision at the conclusion of the hearing.
- O.C.G.A. § 48-5-311(e)(9) provides that if the parties agree to a value during the appeal, then, depending upon the status of the appeal, either the board of tax assessors or the board of equalization shall enter that value as the fair market value (and the three-year rule regarding subsequent valuations in O.C.G.A. § 48-5-299(c) applies, unless waived by the parties).
- Finally, O.C.G.A. § 48-5-311(g) provides that the taxpayer and board of tax assessors can agree to waive the appeal to the board of equalization and proceed directly to superior court.
Prior to S.B. 346, there were two separate arbitration procedures. For real and personal property, taxpayers could elect nonbinding arbitration. Starting in 2009, S.B. 240 provided for binding arbitration for real property only. S.B. 346 repealed the non-binding arbitration procedure and generally adopted the 2009 binding procedure for both real and personal property. See O.C.G.A. § 48-5-311(f).
- The taxpayer initiates binding arbitration by filing a notice of arbitration appeal with the board of tax assessors within 45 days of the notice of assessment.
- Upon receipt of the appeal, the board of tax assessors has ten days to issue a notice to the taxpayer acknowledging receipt of the appeal and notifying the taxpayer that it has 45 days to submit a certified appraisal (an appraisal that is certified by a real property appraiser as classified by the Georgia Real Estate Commission and the Georgia Real Estate Appraisers Board).
- The board of tax assessors then has 45 days to consider the appraisal and either accept the value in the appraisal or certify the matter to the superior court—if the board of tax assessors fails to act, then the appraisal value becomes the value for tax purposes.
- The parties can agree to an arbitrator or the arbitrator will be selected by the superior court.
- The arbitrator will conduct a hearing and select either the value submitted by the taxpayer or the value submitted by the board of tax assessors (“baseball arbitration”).
- Neither party can appeal the decision of the arbitrator to superior court.
4. Hearing Officer
This is a new procedure that is available only for appeals of certain real property—nonhomestead property with a fair market value over $1 million (it is unclear whether the taxpayer may select this method if the assessment is over $1 million but the taxpayer believes the actual value to be below that amount). See O.C.G.A. § 48-5-311(e.1).
- The taxpayer initiates the appeal by filing a notice requesting this procedure with the board of tax assessors within 45 days of the notice of assessment.
- The board of tax assessors has 90 days to review the appeal and make any changes. If no changes are made, the board of tax assessors certifies the matter to superior court. If changes are made, then the board of tax assessors notifies the taxpayer of such changes. The taxpayer then has 30 days to respond if such changes are acceptable. If unacceptable, then the matter is certified to superior court.
- Hearing officers are selected by court, unless agreed to by the parties, and must be a general real property appraiser or a residential real property appraiser.
- The hearing officer shall conduct a hearing, at which the board of tax assessors has the burden of proving its assessment by a preponderance of the evidence.
- Subparagraph (7) states that “any issues other than fair market value and uniformity raised in the appeal shall be preserved for appeal to the superior court.”
- At the conclusion of the hearing, the hearing officer is required to notify the parties of the decision verbally and then in writing. Unlike arbitration, there is no limitation or qualification as to what value may be selected by the hearing officer.
- Either party can appeal the decision to superior court.
5. Appeals to Superior Court
S.B. 346 gives taxpayers the option of selecting either a bench or jury trial. (As the amendment is written, this should be the case regardless of who files the appeal.) Prior to this amendment, O.C.G.A. § 48-5-311(g) provided for jury trials for all matters except questions of law.
For additional information call Tim Peaden, Michael Giovannini or Clark Calhoun.