Georgia Department of Law, from the office of Samuel S. Olens, Attorney General

Official Opinion 2016-5

September 12, 2016
To: 

Commissioner, Georgia Department of Revenue

Re: 

Because neither the Constitution nor the Act’s provisions authorize or contemplate a cap on assistance grants based on the total exemption value of forest land conservation use property, the Department of Revenue would not be authorized to impose an administrative cap on assistance grants issued pursuant to the Forest Land Protection Act of 2008 in the manner proposed.

You have requested my official opinion regarding the authority of the Georgia Department of Revenue (“Department”) to impose an administrative cap on assistance grants to counties, municipalities, and county and independent school districts made pursuant to the Forest Land Protection Act of 2008 (“FLPA”).  The Department is giving consideration to a cap on assistance grants under FLPA based on the total exemption value of forest land conservation use property in a given local taxing jurisdiction if the difference between the forest land conservation use value and the 2008 fair market value of the land exceeds the total exemption value.  Because the formula for assistance grants is set forth in both the Georgia Constitution and the FLPA statutes, and neither provides for such a limitation, it is my official opinion that the Department would not be authorized to limit assistance grants in this manner.

I. BACKGROUND

Forest Land Protection Act

The Forest Land Protection Act of 2008, 2008 Ga. Laws 297 (House Bill 1211), was enacted by the General Assembly pursuant to an amendment passed by the voters to Article VII, Section I, Paragraph III of the Georgia Constitution.  See Ga. Const. Art. VII, Sec. I, Para. III(f), 2008 Ga. Laws 1209 (House Resolution 1276).  That amendment authorizes a special assessment for “forest land conservation use property” from ad valorem taxation.  Id. at Art. VII, Sec. I, Para. III(f)(1).  Under FLPA, taxpayers can apply to designate a minimum of 200 acres they own as forest land conservation use property and be specially assessed at a lower valuation.  O.C.G.A. § 48‑5‑7.7 (Supp. 2016).  In exchange for the special assessment, taxpayers must place the subject land into a 15-year covenant and agree that the land will be used only for specified purposes.  Id. § 48‑5‑7.7(d) (Supp. 2016).  If a taxpayer breaches the covenant either by changing land use or subdividing the land into smaller parcels, penalties are imposed against the taxpayer which can equal three times the tax savings the taxpayer received for each year of the covenant period depending on when the breach occurred.  Id. § 48‑5‑7.7(m), (n) (Supp. 2016).

 

“Forest land conservation use value” is determined based on a set of tables published annually by the Department.  Id. §§ 48‑5‑2(5) (Supp. 2016); 48‑5‑271 (2010); 48‑5A‑1(5) (2010); Ga. Comp. R. & Regs. r. 560‑11‑11‑.12.   The value from the tables is called the “exemption value” of forest land conservation use property in a given local taxing jurisdiction.  This “exemption value” is then subtracted from the current fair market value of the property to determine the “forest land conservation use value.”  Because forest land conservation use value is assessed instead of the fair market value of the land, taxpayers thus receive a reduced tax bill under FLPA.  Additionally, the total property tax digest of a local taxing jurisdiction with forest land conservation use property is lower than it would be if assessed under fair market value principles.

As property tax digests are reduced due to land specially assessed under FLPA, the Act also provides for assistance grants to local taxing jurisdictions to offset any revenue loss.  Ga. Const. Art. VII, Sec. I, Para. III(f)(3)(A); O.C.G.A. §§ 48‑5A‑1 through 48‑5A‑4 (2010).  Assistance grants are calculated by a three step process.  First, a local taxing jurisdiction must “subtract[] the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year.”  Ga. Const. Art. VII, Sec. I, Para. III(f)(4); O.C.G.A. § 48‑5A‑3(b) (2010).  Second, the calculated valuation loss is multiplied by the millage rate of the local taxing jurisdiction.  Ga. Const. Art. VII, Sec. I, Para. III(f)(4); O.C.G.A. § 48‑5A‑3(b) (2010).  Third, the determined revenue reduction is subject to a 3% threshold whereby revenue reductions of 3% or less are issued a grant worth 50% of the reduction, and revenue reductions above 3% are issued a grant worth 50% for the first 3% of reduction and then 100% of the remaining reduction.  Ga. Const. Art. VII, Sec. I, Para. III(f)(3); O.C.G.A. § 48‑5A‑3(c)(1) (2010).

Notably, however, instead of using the current year aggregate forest land fair market value in step one of the calculation, FLPA uses the “2008 fair market value of the forest land” subject to certain adjustments.  Ga. Const. Art. VII, Sec. I, Para. III(f)(4) (emphasis added); O.C.G.A. § 48‑5‑2(6) (2010).  Thus, if the current year fair market value of land is substantially less than the 2008 base year value, a local taxing jurisdiction’s grant could exceed its actual revenue reduction for the current year.

To provide an example, assume a local taxing jurisdiction had forest land property worth $150 million of 2008 fair market value, forest land property worth $100 million of current fair market value, and forest land property worth $80 million of current exemption value.  The “aggregate forest land conservation use value” of the property would be $20 million ($100 million less $80 million) and the actual current year revenue reduction value would be $80 million.  However, because FLPA uses the 2008 base year for fair market value, the local taxing jurisdiction would receive a grant based on a $130 million revenue reduction value loss instead of $80 million ($150 million less $20 million).  Hence, due to the 2008 base year for fair market value, the value loss is $50 million greater than the actual current year loss.

Distortions Arising From 2008 Fair Market Value Of Forest Land And The Department’s Administrative Cap Proposal

After FLPA became law, State authorities discovered that the assistance grant formula created significant distortions in distributions of grants depending on when a local taxing jurisdiction had revalued its land prior to the 2008 base year.  See Georgia Department of Audits and Accounts Special Examination Report No. 13-23 (2013).  For example, if a local taxing jurisdiction had revalued its land in 2007 or 2008, the jurisdiction often received grants exceeding its actual revenue loss because 2008 was a high value year.  Id. at pages 10-13.  However, if a local taxing jurisdiction had not revalued its land in the years directly preceding 2008, the grant was low or nonexistent because values had not been increased prior to the 2008 base year.  Id.  To correct this problem, the Department is considering an administrative cap on assistance grants whereby grants cannot exceed a local taxing jurisdiction’s actual revenue reduction from the total exemption value of forest land conservation use property.  Hence, using the example above, the local taxing jurisdiction’s grant would not be calculated on a $130 million value loss but would be limited to the actual loss of $80 million of value because that is the total exemption value of the forest land conservation use property for the current year.

II. ANALYSIS

It is my official opinion that the Department could not impose an administrative cap on assistance grants under FLPA in the above manner because neither the Georgia Constitution nor the FLPA statutes provide for such a limitation.  Ga. Const. Art. VII, Sec. I, Para. III(f)(4); O.C.G.A. § 48‑5A‑3(b) (2010).

“In construing a constitutional provision, the ordinary signification shall be applied to words.”  Blum v. Schrader, 281 Ga. 238, 239 (2006) (quoting Thomas v. MacNeill, 200 Ga. 418, 424 (1946)).  Therefore,

[a] Court must honor the plain and unambiguous meaning of a constitutional provision. Our duty is to construe and apply the Constitution as it is now written.  Where the natural and reasonable meaning of a constitutional provision is clear and capable of a natural and reasonable construction, courts are not authorized either to read into or read out that which would add to or change its meaning.

Id. at 239-40 (quoting Lowry v. McDuffie, 269 Ga. 202, 206 (1998) and Service Emps. Int’l. Union v. Perdue, 280 Ga. 379, 380, 382 (2006)).  Similarly, the cardinal rule of statutory construction “look[s] diligently for the intention of the General Assembly,” Judicial Council v. Brown & Gallo, LLC, 288 Ga. 294, 296-97 (2010), and “the ‘golden rule’ of statutory construction . . . requires us to follow the literal language of the statute ‘unless it produces contradiction, absurdity, or such an inconvenience as to insure that the legislature meant something else.’”  Telecom*USA v. Collins, 260 Ga. 362, 363 (1990) (quoting Dept. of Transp. v. City of Atlanta, 255 Ga. 124, 137 (1985) (Clarke, J., concurring specially)).

It is well-settled that “[w]here rights are conferred by the Constitution or by statutes, mere rules of administrative bodies cannot amend or repeal those constitutional or statutory rights.”  TEC Am., Inc. v. DeKalb Cty. Bd. of Tax Assessors, 170 Ga. App. 533, 536 (1984) (quoting O’Neal v. Ga. Real Estate Comm’n, 129 Ga. App. 211, 212 (1973)).  Further,

administrative agencies . . . are not authorized to enlarge the scope of, or supply omissions in, a properly-enacted statute.  Nor may administrative agencies change a statute by interpretation, or establish different standards within a statute that are not established by a legislative body.  Rather, [] an administrative body . . .  is authorized only to adopt and implement rules “sufficient to administer” [an] Act’s provisions . . . .

North Fulton Med. Ctr. v. Stephenson, 269 Ga. 540, 543-44 (1998) (footnotes omitted).

The amendment to the Constitution authorizing FLPA clearly sets forth the assistance grant calculation formula:

Such revenue reduction shall be calculated by utilizing forest land fair market value.  For purposes of this subparagraph, forest land fair market value means the 2008 fair market value of the forest land.  Such 2008 valuation may increase from one taxable year to the next by a rate equal to the percentage change in the price index for gross output of state and local government from the prior year to the current year as defined by the National Income and Product Accounts and determined by the United States Bureau of Economic Analysis and indicated by the Price Index for Government Consumption Expenditures and General Government Gross Output (Table 3.10.4).  Such revenue reduction shall be determined by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year and the resulting amount shall be multiplied by the millage rate of the county, municipality, or county or independent school district.

Ga. Const. Art. VII, Sec. I, Para. III(f)(4) (emphasis added).  Additionally, the FLPA statutes contain the same calculation formula:

The revenue reduction to each county, municipality, and county or independent school district shall be calculated by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year and the resulting amount shall be multiplied by the millage rate of the county, municipality, or county or independent school district.

O.C.G.A. § 48‑5A‑3(b) (2010).  “Forest land fair market value” also has a nearly identical definition to that found in Ga. Const. Art. VII, Sec. I, Para. III(f)(4) and uses the 2008 fair market value of forest land as the base year.  See O.C.G.A. § 48‑5‑2(6) (Supp. 2016) (“‘Forest land fair market value’ means the 2008 fair market value of the forest land . . . .”). 

Here, although the Department’s proposed cap is eminently reasonable and would likely prevent windfall assistance grants due to the high value 2008 base year, neither the Constitution nor the FLPA statutes authorizes such a limitation. The Constitution unambiguously states that “revenue reduction shall be determined by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year.”  Ga. Const. Art. VII, Sec. I, Para. III(f)(4) (emphasis added).  The Constitution also specifically defines “aggregate forest land fair market value” to mean “the 2008 fair market value of the forest land.”  Id.  Hence, the Constitution does not contemplate a cap based on the exemption value of forest land nor does it appear to limit the calculation from the 2008 base year.

Like the Constitution, the FLPA statutes provide that revenue reduction “shall be calculated by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year.”  O.C.G.A. § 48‑5A‑3(b) (2010) (emphasis added).  The FLPA statutes further provide that “‘[f]orest land fair market value’ means the 2008 fair market value of the forest land.”  O.C.G.A. § 48‑5‑2(6) (Supp. 2016).  Thus, the FLPA statutes also do not authorize a cap or limit the calculation from the 2008 base year.  In essence, the proposed cap nullifies the constitutional and statutory requirement of using “the 2008 fair market value of the forest land” in the calculation of assistance grants whenever the grant amount is too high.  An administrative agency is not permitted to change the Constitution or a statute by interpretation.  North Fulton Med. Ctr., 269 Ga. at 543-44; TEC Am., Inc., 170 Ga. App. at 536. 

Therefore, it is my official opinion that because neither the Constitution nor the FLPA statutes authorize or contemplate a cap on assistance grants based on the total exemption value of forest land conservation use property, the Department of Revenue would not be authorized to impose an administrative cap on assistance grants issued pursuant to the Forest Land Protection Act of 2008 in the manner proposed.

Prepared by:

Alex F. Sponseller

Senior Assistant Attorney General