Fulton County Board of Tax Assessors v. Piedmont Park Conservancy , 333 Ga. App. 265 ( 2015 )

SECOND DIVISION
ANDREWS, P. J.,
MILLER and BRANCH, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/
July 16, 2015
In the Court of Appeals of Georgia
A15A0356. FULTON COUNTY BOARD OF TAX ASSESSORS v.
PIEDMONT PARK CONSERVANCY.
BRANCH, Judge.
Appellant Fulton County Board of Tax Assessors (“the Board”) denied
appellee Piedmont Park Conservancy (“the Conservancy”) a charitable tax exemption
as to a building in the Atlanta park owned by the Conservancy but occupied in part
by lessees operating two restaurants. The Conservancy appealed to the Fulton County
Board of Equalization, which also denied the exemption, and then to the superior
court, which granted the Conservancy a tax exemption as to those portions of the
building not occupied by the restaurants. On this appeal, the Board asserts that the
superior court erred when it granted the Conservancy the proportional tax exemption
because such exemptions are not authorized by law and because the Conservancy has
failed to prove that it is entitled to such an exemption. We find no error and affirm.
The relevant facts are not in dispute. The Conservancy, which is recognized by
the Internal Revenue Service and the Georgia Secretary of State as a Section 501 (c)
(3) charitable corporation, purchased the property at issue, which includes one
building, from the American Legion in 1999. In March of that year, the Conservancy
applied for a tax exemption for the property on the basis of the Conservancy’s status
as a “purely public charity”1 and represented to the Board that a portion of the
building would be provided to the City of Atlanta police as a precinct “without
charge.” The Conservancy also stated that fees arising from activities held at the
property, such as evening courses, “would only cover expenses associated with
programs” and “[would] not constitute a ‘lease’ or ‘rent.’” On the basis of these
representations, the Board granted the Conservancy a full tax exemption as to the
building in 1999. The police did not use any portion of the building as a precinct,
however, and soon vacated the space given to them.
In 2001, after learning that visitors to the Park sought food services there, the
Conservancy leased 18.57% of the building to Willy’s Mexicana Grill for ten years
1
See OCGA § 48-5-41 (a) (4).
2
in exchange for more than $50,000 annual rent and a profit-sharing arrangement
under which the Conservancy would receive 6% of gross sales in excess of
$1,000,000. In 2002, the Conservancy leased an additional 9.73% of the building to
a second restaurant for ten years in exchange for more than $28,000 annual rent and
6% of gross sales in excess of $850,000. All of the income received by the
Conservancy from the restaurants during the years at issue has been devoted to the
Conservancy’s charitable purposes, which include the preservation and enhancement
of the park and the provision of recreational and educational services to the public;
no part of the Conservancy’s earnings is distributed to private persons or
shareholders. The portion of the building not leased to the restaurants, amounting to
71.7% of its square footage and known as the Piedmont Park Community Center,
consists of office space for the Conservancy, an environmental education center, and
a room used for Conservancy events and community meetings. The Conservancy also
uses the Center for events including summer camp programs and an open-air
community market.
In 2005, and in response to an inquiry from the Board, the Conservancy
represented that it continued to use the property for charitable purposes. In January
2013, after an appraiser observed the restaurants in operation at the property, the
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Board notified the Conservancy that its entire tax exemption as to the property was
denied for the tax years 2010, 2011, and 2012, and requested that the Conservancy
complete an exemption application concerning its use of the property for the tax years
2010 and 2011. The Conservancy did not complete the application; instead, it
appealed to the Board of Equalization, which also denied the exemption. The
Conservancy then appealed to the superior court, which granted an exemption as to
the 71.7% of the building not leased to the restaurants.
On appeal from this ruling, the Board argues that Georgia law does not
authorize a tax exemption for any portion of a property owned by a charitable
organization engaged in commercial activities on that same property. The Board also
argues that the Conservancy did not present evidence as to the charitable use of the
remainder of the property. We disagree with these contentions.
OCGA § 48-5-41 (a) (4) provides an exemption for “all ad valorem property
taxes” to “[a]ll institutions of purely public charity.” Under the Georgia Constitution
of 1945 and a 1946 amendment to it, charitable institutions were authorized to use a
portion of their property to generate income as long as the property’s “primary
purpose” remained charitable. See Ga. Const. of 1945, Art. VII, Sec. I, Par. IV; Ga.
L. 1946, p. 13, § 1 (a), now codified as OCGA § 48-5-41 (d) (1); Nuci Phillips Mem.
4
Foundation v. Athens-Clarke County Bd. of Tax Assessors, 288 Ga. 380, 389-390 (2)
(703 SE2d 648) (2010) (Nahmias, J., concurring specially). As subsections (c) and
(d) (1) of the same statute explain:
(c) The property exempted by this Code section . . . shall not be
used for the purpose of producing private or corporate profit and
income distributable to shareholders in corporations owning such
property or to other owners of such property, and any income from such
property shall be used exclusively for religious, educational, and
charitable purposes or for either one or more of such purposes and for
the purpose of maintaining and operating such religious, educational,
and charitable institutions.
(d) (1) Except as otherwise provided in paragraph (2) of this
subsection [quoted below], this Code section . . . shall not apply to real
estate or buildings which are rented, leased, or otherwise used for the
primary purpose of securing an income thereon and shall not apply to
real estate or buildings which are not used for the operation of
religious, educational, and charitable institutions. Donations of
property to be exempted shall not be predicated upon an agreement,
contract, or other instrument that the donor or donors shall receive or
retain any part of the net or gross income of the property.
(Emphasis supplied.) OCGA § 48-5-41 (c), (d). And the Supreme Court of Georgia
has long granted tax exemptions to charities even when the commercial activity at
those charities’ properties have generated income, as long as that income is used
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exclusively for religious, educational, or charitable purposes.” In Elder v. Henrietta
Egleston Hosp. for Children, 205 Ga. 489 (53 SE2d 751) (1949), for example, our
Supreme Court upheld an ad valorem exemption for a hospital that charged patients
for varying proportions of their medical care, but used all of the income generated for
charitable purposes, on the ground that such charges did not destroy the hospital’s
status as a “purely public charity,” with “the fact that patients who are able to pay are
charged for services rendered” not altering “its character as such.” Id. at 490-491
(citing the 1947 predecessor of OCGA § 48-5-41). Likewise, in Church of God of the
Union Assembly v. City of Dalton, 216 Ga. 659 (119 SE2d 11) (1961), the Court
upheld an ad valorem exemption for a church building containing a restaurant used
primarily to feed members of the church, visiting church personnel, and persons in
need, but which was also open to paying customers. Because the evidence “demanded
a verdict so exempting” the building, including the restaurant, the Court ordered that
a verdict be modified so as to grant the building an exemption. Id. at 660, 662 (citing
the 1947 and 1953 predecessors to OCGA § 48-5-41).
In Peachtree on Peachtree Inn v. Camp, 120 Ga. App. 403 (170 SE2d 709)
(1969), this Court held that although a small portion of a building owned by the
Georgia Baptist Convention and used by two retail stores “would not be tax exempt”
6
because “[t]he area where the stores are located is being used to gain rental [income]
and not for the primary purpose of operating the [home],” that portion of the same
building actually used as a home for the aged was tax-exempt, even though its
residents paid rent. Id. at 411. Thus, and although prior precedent had recognized that
income-producing operations could occur on a property without destroying the
charitable status of any part of that property, see Elder, 205 Ga. at 490-491; Church
of God of the Union Assembly, 216 Ga. at 660-662, Peachtree on Peachtree ratified
a charitable tax exemption as to those portions of a property not used to produce
income. 120 Ga. App. at 411 (citing predecessor statute to OCGA § 48-5-41 as well
as Church of God, supra).In 1991, the Supreme Court of Georgia reaffirmed that OCGA § 48-5-41
authorized ad valorem tax exemptions for property owned by a “purely public
charity” under a three-part test: “First, the owner must be an institution devoted
entirely to charitable pursuits; second, the charitable pursuits of the owner must be
for the benefit of the public; and third, the use of the property must be exclusively
devoted to those charitable pursuits.” York Rite Bodies of Freemasonry of Savannah
v. Bd. of Equalization of Chatham County, 261 Ga. 558 (2) (408 SE2d 699) (1991).
In the wake of York Rite, this Court continued to hold that proportional exemptions
7
as to those portions of a property not engaged in income-producing activities were
consistent with OCGA § 48-5-41’s provision of exemptions to “purely public
charities.” See, e.g., Lamad Ministries v. Dougherty Cty. Bd. of Tax Assessors, 268
Ga. App. 798, 804-806 (4) (602 SE2d 845) (2004) (reversing trial court’s denial of
exemption as to home for the aged when the court’s aggregation of property
“deprived that portion of the property used primarily as a place of worship from tax
exemption”; tax assessors were “fully capable of separating the tax exempt property
from nonexempt property” and assessing each accordingly) (footnote omitted).
In Nuci Phillips, decided in 2010, a plurality of the Supreme Court of Georgia
summarized the history of OCGA § 48-5-41 through 2006 as follows:
Under the exemption statutes from 1946 to 2006, those institutions that
qualified as purely public charities were allowed to use their property to
produce income as long as the primary purpose of the property was not
to secure income, the income-producing activity was consistent with its
charitable activities, and the income was used exclusively for the
institution’s charitable purposes. As long as these three income rules
were satisfied, then a charitable organization that raised income would
be considered as using its property “exclusively” for its charitable
purposes and thus remain a purely public charity.
8
(Citation omitted; emphasis supplied.) 288 Ga. at 381-382 (1). As the Nuci
Phillips plurality also noted, subsection (d) (2) was added to OCGA § 48-5-41 in
2006, providing that
real estate or buildings which are owned by a charitable institution that
is exempt from taxation under Section 501(c) (3) of the federal Internal
Revenue Code and used by such charitable institution for the charitable
purposes of such charitable institution may be used for the purpose of
securing income so long as such income is used exclusively for the
operation of that charitable institution.
Ga. L. 2006, pp. 376, 377, § 1. Only one year later, however, the legislature replaced
this version of subsection (d) (2) with one providing that
a building which is owned by a charitable institution that is otherwise
qualified as a purely public charity and that is exempt from taxation
under Section 501(c)(3) of the federal Internal Revenue Code and which
building is used by such charitable institution exclusively for the
charitable purposes of such charitable institution, and not more than 15
acres of land on which such building is located, may be used for the
purpose of securing income so long as such income is used exclusively
for the operation of that charitable institution.
Ga. L. 2007, p. 341, § 1 (emphasis supplied); Nuci Phillips, 288 Ga. at 382 (1).
9
The Nuci Phillips special concurrence noted that “[t]he only substantial change
made by the 2007 amendment was to limit – to the building owned by the charity and
not more than 15 acres on which the building sits – the extent of property that may
be used primarily to generate income.” 288 Ga. at 394 (4) (Nahmias, J., concurring)
(emphasis supplied). “The reason for this limitation is not apparent from the statute,
but its effect is to prevent a charity from receiving the tax exemption if it owns a large
amount of income-producing land.” Id. Notwithstanding these observations, an
outright majority of the Nuci Phillips Court agreed that with the 2006 and 2007
amendments to the statute, “the General Assembly intended to broaden the ability of
charitable institutions to use their property to raise income.” 288 Ga. at 383 (1)
(plurality); see also id. at 392 (3) (Nahmias, J., concurring) (the 2006 amendment to
OCGA § 48-5-41 (d) “expanded the existing tax exemption” by deleting the
“‘primary’ purpose qualifier present in the old subsection (d)”) (emphasis supplied).
In the face of this legislative and interpretative history, the Board argues that
the plain language of subsections (c) and (d) (2) of the statute forbids the
Conservancy from using any portion of the property at issue for income-producing
activity while maintaining tax-exempt status. This argument runs contrary to at least
forty years of Georgia law.
10
We remain bound by our Supreme Court’s decision in York Rite as applied by
the plurality in Nuci Phillips, to the effect that “three factors must be considered and
must coexist” in order for a court to conclude that “property qualifies as an institution
of ‘purely public charity’” under OCGA § 48-5-41 (a) (4): “First, the owner must be
an institution devoted entirely to charitable pursuits; second, the charitable pursuits
of the owner must be for the benefit of the public; and third, the use of the property
must be exclusively devoted to those charitable pursuits.” York Rite, 261 Ga. at 558(2). As the York Rite Court also noted, “the requirements of OCGA § 48-5-41 (c) and
(d) must also be complied with by any institution that qualifies under subsection (a)
(4) as an institution of purely public charity in order to entitle that institution to
exemption from ad valorem taxation.” Id. at 559 n. 3 (3) (a). Specifically, an
institution seeking an ad valorem tax exemption as to a property must show that “any
income from such property shall be used exclusively for religious, educational, and
charitable purposes,” OCGA § 48-5-41 (c); that the property is not “rented, leased,
or otherwise used for the primary purpose of securing an income thereon,” id. at (d)
(1); and that any income earned by that property “is used exclusively for the operation
of that charitable institution.” Id. at (d) (2).
11
Here, the Conservancy remains “devoted entirely” to its mission of furthering
recreational and educational activities in the Park, and these activities continue to be
undertaken “for the benefit of the public,” such that the first two requirements of York
Rite are satisfied. See York Rite, 261 Ga. at 558 (2), citing OCGA § 48-5-41 (a) (4).
Further, the Conservancy’s use of income generated at the property is “used
exclusively for the operation” of the Conservancy such that York Rite’s third
requirement is satisfied. York Rite, 261 Ga. at 558 (2). Specifically, any income
earned by the Conservancy is used in furtherance of its “religious, educational, and
charitable purposes,” OCGA § 48-5-41 (c); 71.7% of the building at issue remains
“exclusively devoted to” the Conservancy’s charitable purposes, such that the
property’s “primary purpose” remains charitable, id. at (d) (1); and such income
earned by the Conservancy is used “exclusively for the operation of” the
Conservancy. Id. at (d) (2); see also York Rite, 261 Ga. at 558 (2). In the language of
the Nuci Phillips plurality, the tax-exempt status of the Conservancy building at issue
is not abrogated simply because a part of that property is used to produce income
because the property has never been used “‘for the primary purpose of securing an
income thereon.’” Id. at 385 (emphasis supplied), quoting OCGA § 48-5-41 (d) (1).
Rather, and because the statute “permits the securing of income by non-charitable
12
activities if used exclusively for the operation of the charitable institution,” Nuci
Phillips, 280 Ga. at 387 (2), the Conservancy is entitled to a proportional tax
exemption concerning the building at issue. Id.; see also id. at 398 (7) (Nahmias, J.,
concurring) (foundation’s property was “exclusively devoted to those charitable
pursuits” when income from the property was “used exclusively for the operation of
the charitable institution”) (citations and punctuation omitted). Compare First
Congregational Church v. Fulton County Bd. of Tax Assessors, 320 Ga. App. 868,
878 (2) (c) (740 SE2d 798) (2013) (physical precedent only) (church was not entitled
to exemption as to its parking lot used to produce income approximately 85% of the
time); H.O.P.E. Through Divine Interventions v. Fulton County Bd. of Tax Assessors,
318 Ga. App. 592, 598-599 (734 SE2d 288) (2012) (charity that did not use any of
the subject property for its stated charitable purposes during the two-year period at
issue was not entitled to an exemption for that period).
The Board also argues that the Conservancy is not entitled to a proportional
exemption under the circumstances of this case because it failed to provide evidence
of the charitable use of that portion of the building not occupied by the restaurants
and because the restaurants are turning a profit, generating “more income than what
is paid for rent.” The first of these contentions is belied by the record, which includes
13
an unrefuted affidavit stating that the Community Center occupies 71.7% of the
building at issue and that the Center is used for purposes consistent with the
Conservancy’s charitable mission. And the profitability of the tenant restaurants has
no bearing on the question whether the Conservancy is entitled to a proportional
exemption as to the space not occupied by these tenants.
Citing the Nuci Phillips special concurrence,2 the Conservancy argues that it
is entitled to a charitable exemption as to 100% of the building at issue. We have no
jurisdiction over this question, however, because the Conservancy did not cross-
appeal the trial court’s imposition of ad valorem tax on the 28.3% of the building
dedicated to income-producing activities. See OCGA § 5-6-38 (a) (a civil appellee
2
The Nuci Phillips special concurrence suggested that income-generating
activities having the “sole purpose of raising funds to be used for [an] organization’s
charitable services” should not bar that organization from an exemption “even if the
property were used for the primary purpose of securing such income.” 288 Ga. at 398
(Nahmias, J., concurring specially). By contrast, the plurality continued to consider
whether the “primary purpose” of the property was “not to raise income but to
provide services for those seeking mental health assistance.” 288 Ga. at 386 (2). We
also note that the General Assembly has not accepted our Supreme Court’s invitation
in Nuci Phillips to amend OCGA § 48-5-41 (d) (2). See 280 Ga. at 398-399 (8)
(plurality’s imposition of “primary” purpose restriction on “non-charitable” and
“charitable” income-producing activities “will be our effective precedent, governing
the outcome of future cases raising this issue”); Ga. L. 2014, Act 613, § 1, eff. Jan.
1, 2015 (amending only subsection (a) (1) (F) as to private property “primarily used
for student housing or parking” by the Board of Regents of the University System of
Georgia).
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may institute a cross appeal “by filing notice thereof within 15 days from service of
the notice of appeal by the appellant,” thus presenting “for adjudication on the cross
appeal all errors or rulings adversely affecting him”); Reliance Ins. Co. v. Cobb
County, 235 Ga. App. 685, 686 (510 SE2d 129) (1998) (dismissing appellee’s direct
appeal in light of availability of both interlocutory and cross-appeal procedures).
For all these reasons, the trial court did not err when it construed OCGA § 48-
5-41 as authorizing a proportional tax exemption for that portion of the building at
issue not devoted to producing income for the Conservancy.
Judgment affirmed. Andrews, P. J., and Miller, J., concur.
15