Georgians should be confident that their taxes are being assessed equally, uniformly, and with clarity. House Bill 399 seeks to give Georgians that confidence.
Some local governments have started issuing a “possessory interest tax.” These local governments have used this undefined tax as a way to levy taxes on entities for property they do not own, cannot transfer, and use at the will of another. In other words, they have invented a tax to tax things that state law does not allow them to tax.
Clayton County and the city of College Park have begun using this possessory interest tax. They are inappropriately taxing airport concessionaires that operate as usufructs. A usufruct gives an entity, like a concessionaire, a license to use real property. It is more limited than a lease. Examples of usufructs include stores in the mall and restaurant chains located on places like college campuses.
According to Georgia law, usufructs are not taxable. That means local governments cannot send a bill for property taxes to these entities because they do not own an interest in the property. Remember, they merely have a license to use the property. Rather than taxing the store or restaurant using the space directly, state law requires local governments to tax the property owners who allow stores and restaurants to use the space.
Those seeking to continue using this possessory interest tax point to wording in the aviation code to justify this tax. But that law was intended to clarify that taxable property, such as leases, could not hide from taxation at an airport. Leases are different than usufructs because leases give the leasee a controlling interest in the property. This law was never intended to give local governments the ability to tax usufructs.
When the Ways and Means Committee in the House heard testimony from Clayton County tax officials this session, several things struck me. First, why did they only assess taxes against 30 percent of the concessionaires and not all of them? This question raises concerns about the uniformity clause and equal protection clause under the Georgia Constitution. Next, if Clayton County truly wanted the courts to decide this issue, as it has claimed, why did it fail to take steps to certify three years of tax appeals to the superior court that the concessionaires had previously filed?
While sympathetic to reduced tax revenues caused by the economic downturn, such financial struggles do not give a local governments the right to create a tax that is not authorized under Georgia law. As policy makers, we seek to right the wrong and protect the integrity of our tax code, and that is what HB 399 does.
