Opinion ID: 2392136
Heading Depth: 1
Heading Rank: 3

Heading: The 2006 Referendum and the 2006 Amendment

Text: In the November 2006 statewide election, the following referendum question was presented to the people of Georgia: Shall the Act be approved which grants an exemption from ad valorem taxation on property owned by a charitable institution which generates income when that income is used exclusively for the operation of such charitable institution? The question was answered yes by 68.5% of the voters. This approval resulted in an amendment to OCGA § 48-5-41(d), effective January 1, 2007. See Ga. L.2006, p. 377, §§ 1, 2. The revised statute retained the existing OCGA § 48-5-41(d)the source of the primary purpose limitation on the use of charitable property to produce incomeas subparagraph (d)(1), but with this new introductory phrase: [e]xcept as otherwise provided in paragraph (2) of this subsection. The new subparagraph (d)(2)the exception to the old subsection (d)was the following: With respect to paragraph (4) of subsection (a) of this Code section [which provides the tax exemption for institutions of purely public charity], 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. Read in its legal and historical context, it is clear that the 2006 amendment and the referendum that allowed it to be enacted were meant to expand the tax exemption for a charity's property that is used to generate income for the charity. A referendum was not required to reduce or repeal an ad valorem tax exemption granted to institutions of purely public charity, see Ga. Const, of 1983, Art. VII, Sec. II, Par. IV, only to expand an existing exemption or create a new one, see Art. VII, Sec. II, Par. II(a)(1). It is also clear that the only significant difference between the 2006 statute and its predecessorand the only element of the new provision that expanded the existing tax exemptionwas the deletion of the primary purpose qualifier present in the old subsection (d). Thus, while before the 2006 amendment real estate and buildings owned by all exempt institutions could not be used for the primary purpose of securing an income thereon, the amendment allowed such property of purely public charities to be used for the purpose of securing income. Importantly, the other restrictions on the use of charitable property to generate income including the restrictions that prevent the income from being diverted to private gain remained unchanged, see OCGA § 48-5-41(c) and the second sentence of (d)(1); the new provision also was limited to institutions of purely public charity that are federally tax-exempt, and it did not apply to tax-exempt institutions such as burial places, religious and educational institutions, and nonprofit hospitals. Even with these remaining restrictions, the value of the new law to some charities is apparent. For example, a building owned and used by the Salvation Army or Goodwill Industries entirely as a thrift storeselling low-cost clothes and other goodsmight now qualify for the property tax exemption (assuming all other restrictions are satisfied), whereas before 2007 only a building not used primarily for such income-generating activity would have qualified. Similarly, a historic building owned and preserved by a purely public charity but used more than incidentally as rental space for parties could now qualify for the tax exemption (again assuming all other restrictions are satisfied, including the return of all income generated to the operation of the charitable institution).