FOURTH DIVISION

BARNES, P. J.,

RAY and MCMILLIAN, 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

March 22, 2016

In the Court of Appeals of Georgia

A15A2407. COLUMBUS, GEORGIA, BOARD OF TAX

ASSESSORS v. THE MEDICAL CENTER HOSPITAL

AUTHORITY.

BARNES, Presiding Judge.

The Board of Tax Assessorsfor Columbus, Georgia (“Tax Board”) appealsthe

trial court’s grant of summary judgment to The Medical Center Hospital Authority.

The trial court found that eight parcels of real estate owned by the Hospital Authority

were exempt from ad valorem property taxes for the years 2009 through 2012. The

Tax Board arguesthat the trial court erred in concluding that the parcels were “public

property” exempt from taxation regardless of how the property was being used. For

the reasons that follow, we affirm. 

The Medical Center Hospital Authority in Columbus submitted to the

Muscogee County Board of Tax Assessors a “Request for Non-Taxability” for eight

parcels of real estate for the years 2009 through 2012. The Tax Board denied the
requests. The Hospital Authority appealed the denial of non-taxability to the

Muscogee County Board of Equalization, which granted the request as to one parcel,

and denied it as to the other seven parcels. The Tax Board appealed the single grant

of non-taxability to the superior court and the Hospital Authority appealed the denial

of the other seven parcels to the superior court, which consolidated all of the actions.

Following a hearing, the superior court granted the Hospital Authority’s motion for

summary judgment, holding that “[a]ll eight of the parcels of real property . . . whose

taxability for ad valorem property tax purposes was properly before this court, are

determined to be exempt from ad valorem property taxation.” 

The Tax Board arguesthat the trial court erred by holding that all of the parcels

at issue were “‘public property’ exemptfromad valoremproperty taxation,regardless

of how these parcels are used by the Authority, its lessee Doctors Hospital, and a

private, for-profit sublessee.” The Board also argues that the trial court erred in

holding that the medical office building occupied by a for-profit clinic was taxexempt. 

The trial court’s holding was not as specific as the Tax Board’s description,

however. While the court outlined the parties’ arguments — the Hospital Authority’s

that its real property was exempt as “public property” under OCGA § 48-5-41 (a) (1)

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(A), and exempt for the operation of facilities similar to those of cities and counties

under OCGA § 31-7-72 (e) (1), and the Tax Board’s argument that the property was

not being used for a hospital or related purpose — the courtsimply concluded that the

properties were exempt from ad valorem property taxation without explicating its

reasons. 

We conduct a de novo review of the law and the evidence when considering

a trial court’s grant or denial of a motion for summary judgment, and affirm the

court’s grant of the motion if it is right for any reason. Alta Anesthesia Assocs. of Ga.

v. Bouhan, Williams & Levy, 268 Ga. App. 139, 142-143 (1) (601 SE2d 503) (2004). 

As early as 1877, Georgia’s constitution allowed our legislature to exempt

“public property” from taxation. Penick v. Foster, 129 Ga. 217, 222 (58 SE 773)

(1907). This exemption “rests upon the most fundamental principles of government,

being necessary in order that the functions of government be not unduly impeded, and

that the government be not forced into the inconsistency of taxing itself in order to

raise money to pay over to itself, which money could be raised only by other

taxation.” Id. at 225.

The 1983 Georgia Constitution preserved all existing ad valorem tax

exemptions “until otherwise provided for by law.” Ga. Const. Art. VII, § II, Para. IV.

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One such pre-existing statutory exemption in the Georgia Public Revenue Code

provides that “all public property” is exempt from “all ad valorem property taxes in

this state.” OCGA § 48-5-41 (a) (1) (A). The Hospital Authority Law contains

another pre-existing statutory ad valorem tax exemption, granting to Authorities “the

same exemptions and exclusions from taxes as are now granted to cities and counties

for the operation of facilitiessimilar to facilitiesto be operated by hospital authorities

as provided for under this title.” OCGA § 31-7-72 (e) (1). 

The first question framed by the Tax Board in this appeal is whether all real

property owned by a hospital authority is automatically exemptfromad valoremtaxes

“regardless of the factual circumstancessurrounding how these parcels are used.”The

second question is whether a medical office building leased to a for-profit clinic,

which is located on the same parcel of property occupied by a non-profit hospital, was

subject to ad valorem taxes. To answer these questions, we must review the statutes

and case law.

Hospital authorities are quasi-governmental entities first created by statute 75

years ago. 

In 1941, the State of Georgia amended its Constitution to allow political

subdivisions to provide health care services. 1941 Ga. Laws p. 50. The

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State concurrently enacted the Hospital Authorities Law ..., Ga. Code

Ann. § 31-7-70 etseq.(2012), ‘to provide a mechanismfor the operation

and maintenance of needed health care facilities in the several counties

and municipalities of the state.’ § 31-7-76 (a). The purpose of the

constitutional provision and the statute based thereon was to create an

organization which could carry out and make more workable the duty

which the State owed to its indigent sick. As amended, the Law

authorizes each county and municipality, and certain combinations of

counties or municipalities, to create “a public body corporate and

politic” called a “hospital authority.” §§ 31-7-72 (a), (d). Hospital

authorities are governed by 5- to 9-member boardsthat are appointed by

the governing body of the county or municipality in their area of

operation. §31-7-72 (a).

(Citation and punctuation omitted.) Federal Trade Commission v. Phoebe Putney

Health System, Inc., ___ U.S. ___ (133 SCt 1003, 1007; 185 LE2d 43) (2013)

(holding that State’s grant of general corporate powersto hospital authorities does not

include permission to use those powers anti-competitively).

In 1964, the Georgia legislature amended the Hospital Authorities Law to grant

to hospitals run by hospital authorities the same tax relief granted to hospitals run by

the government. Undercofler v. Hospital Auth., 221 Ga. 501, 503-504 (1) (145 SE2d

487) (1965) (specifically addressing exemption from sales and use tax); OCGA § 31-

7-72 (e) (1). Our Supreme Court determined that the 1964 legislation “was intended

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as a remedy for the evil of the law as [previously] construed by the Court of Appeals

whereby thismeans of protecting the health of cities and counties[, (services provided

by hospital authorities),] was made to pay taxes while the identical services by cities

and counties were exempt.” Undercofler, 221 Ga. at 504 (1).

Five years later, the Georgia Supreme Court found no constitutional restraint

upon a hospital authority’s ability to issue revenue anticipation certificatesto finance

the construction of a new hospital, then lease it to a non-profit hospital that would

repay the debt from its revenue. Bradfield v. Hospital Authority of Muscogee County,

226 Ga. 575 (176 SE2d 92) (1970). That year, the court also addressed the issue

squarely before us in this case, and held that real property owned by a hospital

authority that producesincome used to further the authority’s mission is exempt from

ad valorem taxes, in Hospital Authority of Albany v. Stewart, 226 Ga. 530 (175 SE2d

857) (1970). Specifically, the Supreme Court considered the following certified

question from the Court of Appeals: whether 

real property held and owned by a public hospital authority, created

under and by virtue of the Hospital Authorities, [is] “public property”

within the meaning of the Constitution of 1945, Art. VII, Sec. I, Par. IV

(Code Ann. § 2-5404) and Ga. L. 1946, p. 12, as amended (Code Ann.

§ 92-201) so as to be exempt from ad valorem taxation, where the

property itself is not a part of the hospital but its income is properly

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devoted to public purposes(hospital operations) in the furtherance of the

legitimate functions of the hospital authority.

Id. at 531-532. 

Comparing the situation before it to that in Undercofler, 221 Ga. 501, the

Supreme Court in Stewart reasoned as follows: “While that case dealt with the Sales

and Use Tax Act[,] the same reasoning would apply as to ad valorem taxes. The

exemption to cities and counties is because their property is public property. The

same exemption for a hospital authority of necessity would be because its property

is public property.” 226 Ga. at 538; OCGA § 31-7-72 (e) (1).

The Tax Board in this case points out that Stewart does not expressly hold that

a hospital authority’s use of its propertywas wholly irrelevant to itstax exemptstatus.

While we agree that Stewart does not expressly so hold, it does hold that a hospital

authority’s use of income from property that was not part of the hospital is relevant

to the taxability of that property. The opinion itself contains little information about

the nature of the property at issue, but the certified question indicated that the

property was not part of the hospital, and that its income was “devoted to public

purposes (hospital operations) in the furtherance of the legitimate functions of the

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hospital authority.” 226 Ga. at 531.

1 The Supreme Court concluded that, because the

income was used to operate the hospital, the property from which the income was

derived was “public property” exempt from ad valorem taxes. 

In this case, the record establishes that only one of the eight parcels at issue

generated any income during the tax yearsin question, that being the parcel on which

both Doctors Hospital and the ColumbusClinic were located. The Hospital Authority

leased the property to the non-profit Doctors Hospital, which subleased a portion to

the for-profit Columbus Clinic. The issue as to that parcel was whether, consistent

with Stewart, the income it produced was devoted to hospital operations “in the

furtherance of the legitimate functions of the hospital authority.” Stewart, 221 Ga. at

531. If it was, the parcel was not taxable.

The other seven parcels produced no income. The issue asto those parcels was

whether their use, rather than any income derived from their use, was devoted to

public purposes in furtherance of the Hospital Authority’s legitimate functions. If

1The Supreme Court revealed in a later case that the hospital authority property

found exempt from taxation in Stewart consisted of “several city lots, some pecan

groves and some farming acreage.” Teachers’ Retirement System of Ga. v. City of

Atlanta, 249 Ga. 196 (288 SE2d 200) (1982). In Teachers’, the Court held that

property owned by a public corporation for income-producing purposes was public

property exempt from taxation. 

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they were, then the authority owed no ad valorem taxesto the Tax Board and the trial

court did not err. 

1. While the Tax Board argues that the superior court granted summary

judgment “without any consideration of how the Authority is using any of the eight

parcels at issue” and that “fact issues exist” as to the Authority’s use, it has not

identified what those factual issues might be. In its motion for summary judgment,

the Hospital Authority argued that “real property owned by a Georgia hospital

authority is wholly exempt from ad valorem property taxation because it is ‘public

property,’” but it also submitted evidence describing how the parcels were used. The

Tax Board produced no evidence that the properties were being used in a different

manner. 

To support its motion for summary judgment, the Hospital Authority submitted

the affidavit of its assistant treasurer, who stated that the Authority has no employees

and does not actively manage or operate the healthcare facilities it owns, but instead

leases them to entities who are then responsible for the facilities’ management. The

Authority is exempt from federal income taxes as both a governmental entity and a

non-profit company under § 501 (c) (3) of the Internal Revenue Code. The Hospital

Authority financed the 2008 purchase of these eight parcels of real property by

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issuing income-tax-exempt debt instruments. Seven of the parcels were purchased

from Columbus Doctors Hospital, Inc. One parcel, which the Authority leases to the

non-profit Doctors Hospital, Inc., contains both Doctors Hospital and a medical office

building containing the for-profit Columbus Clinic. Doctors Hospital, Inc., manages

and operates the hospital and sublets the medical office building to the Columbus

Clinic. A multi-level parking deck is located on four of the parcels, produces no

income, and is available to patients, visitors, and employees of both the hospital and

clinic. The last two parcels are paved parking lots that are also available at no charge

to patients, visitors, and employees. 

The eighth parcel at issue is one of three conveyed to the Hospital Authority

when it bought Hughston Hospital in 2008 and is a wooded area with walking trails

that is part of the hospital grounds. That parcel generates no income. According to the

assistant treasurer, the Tax Board granted the Hospital Authority’s Request for

Nontaxibility on the other two parcels, one containing Hughston Hospital itself and

the other also containing the wooded walking trails. 

In itsmotion for summary judgment, the Hospital Authority argued its property

was exempt from ad valorem taxation aslong asthe property or any income produced

by it was “properly devoted to public purposes, and to the furtherance of the

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legitimate functions of a hospital authority.” The Authority also argued that all of the

parcels supported and complemented the provision and receipt of medical services,

although it also argued that their use need not be related to the provision of medical

services to be exempt. In response, the Tax Board argued that exemptions from

taxation must be strictly construed, and that the Authority had failed to demonstrate

that the parcels — which included “undeveloped acreage” next to Hughston Hospital

or the remote parking lots near Doctors Hospital — were being used to further its

legitimate functions. 

Clearly, the mere fact that property is owned by a Hospital Authority does not

exempt it from property taxes. Also clearly, under Stewart, 226 Ga. at 531, the

property need not actually contain a healthcare facility to be exempt, as long as the

use of the property or its income furthers “the legitimate functions of the hospital

authority.” Id. The Tax Board endorses a reading of the law that would require a

Hospital Authority to justify its use of property as a free benefit to patientsthat might

otherwise generate income, but that is not required. No evidence in the record creates

an issue of fact regarding the usage of the properties, but rather the evidence

establishes as a matter of law that all of the parcels at issue in this case further the

legitimate function of the Hospital Authority. None of the properties are used for a

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purpose “wholly unrelated” to the Hospital Authority’s function. The parking lots

obviously further the function of the hospital by providing free parking for Doctors

Hospital patients, visitors, and employees, and one parcel containsthe hospital itself.

Further, the walking trails in the wooded lot on the Hughston Hospital grounds are

available to patients, visitors, and employees. The trial court did not err in finding that

the parcels were exempt from ad valorem taxation.

2. The Tax Board also argues that the trial court should not have granted

summary judgment to the Hospital Authority on the taxability of the parcel on which

both Doctors Hospital and the Columbus Clinic were located. 

While OCGA § 31-7-72 (e) (1) grants the property tax exemption to hospital

authorities as described earlier, § 31-7-72 (e) (2) provides that the property tax

exemption does not apply to any real property in which 50 percent or more of the

floor space is leased to a for-profit entity. The Tax Board argues that if the Authority

had complied with itsrequest to divide the parcel containing both the hospital and the

clinic when it bought the property, then the portion on which the clinic was located

would clearly have been taxable, because 100 percent of the floor space was occupied

by a for-profit company. 

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But when the Hospital Authority bought the parcel, it already contained both

facilities. The Authority did not merge two parcels and then argue that it was entitled

to an exemption because the clinic was less than half the size of the hospital. And to

support its motion for summary judgment, the Hospital Authority included the

affidavit of a registered land surveyor establishing that the square footage of the clinic

was less than half of the hospital’s square footage. While the Tax Board argues that

the two buildings are separate and that the Authority should not be allowed to exclude

the property from taxation by “artful line-drawing,” it cites to no record evidence

regarding that issue. And under the plain terms of the statute, the exemption was not

lost, because less than 50 percent of the floor space on that parcel of land was leased

to a for-profit company. Accordingly, the trial court did not err in finding the parcel

exempt from ad valorem property taxes.

Judgment affirmed. Ray and McMillian, JJ. concur.

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