Home | State Tax Profiles | Tax Calendar | Locations | POER Connect Login | Client Connect Login

Georgia Court Upholds Taxation of Sec. 42 Credits

by Paul Miller, Atlanta, July 2015


In a landmark ruling, the Superior Court of Lowndes County, Georgia ruled that Section 42  tax credits are a benefit connected with the ownership of real estate. As such, the credits must be included as part of the assessable value of the property for ad valorem taxes.


This means the State of Georgia can issue property tax upon a Federal tax credit because of its connection to the property.




The Lowndes County Board of Tax Assessors filed suit seeking a declaratory judgment regarding the assessment of several low-income housing developments with Section 42 tax credits.

The properties include: Herron Lake II Apartments, Brookhaven Lake Park, Woodlawn Terrance Apartments, Brookhaven TC Lake Park, Gateway Pines Hahira, Gateway Pines II Hahira, and Ashley House Apartments.


In his ruling, Judge Harry Altman explained that as a matter or federal statute, the right to use Section 42 tax credits is connected with the ownership of real estate.

If a Section 42 building is sold, the subsequent owner of the building receives the right to use the remaining tax credits. So the right to use Section 42 tax credits is not an intangible benefit for purposes of Georgia law.

The court order states:


"Valuing a property without considering a right, interest, or benefit in the 'bundle of rights, interests, and benefits connected with ownership of real estate' violates the uniformity requirement of the Georgia Constitution."


This decision is only binding in the Superior Court of Lowndes County but it may be persuasive authority that other courts choose to adopt.