11 May 2018 Amendments to CUVA Help Georgia Property Owners
Written by: Joel L. McKie, Esq.
On Tuesday, Georgia Governor Nathan Deal signed SB 458, a bill that modifies Georgia’s conservation use property tax abatement program (commonly known as “CUVA”). The bill, which modifies O.C.G.A. § 48-5-7.4, goes into effect on July 1, 2018.
Georgia’s CUVA program generally allows natural or naturalized citizens, qualifying estates and trusts, and family owned farm entities to often pay lower property taxes where they agree to maintain their bona fide conservation use property in its current use for ten years. If a qualifying person or entity breaches that ten year current use covenant, unless an exception applies, the qualifying person has to repay double the saved taxes, plus interest. For example, if a property owner had been saving on average of $4,000 per year on property taxes due to CUVA and the property owner breaches the covenant at year six (6), the property owner would have to repay $48,000 ($4,000 X 6 X 2), plus interest, to the county tax commissioner, unless an exception to the double breach penalty applies.
For several years, the CUVA statute has permitted owners over the age of 65 who have had the property in CUVA for at least 13 years to breach a renewal covenant and avoid the double breach penalty. However, some counties took the position that this exception only applied to natural citizens and naturalized citizens and had no application to a family owned farm entity. This conclusion penalized farmers who had made the thoughtful decision to place farm property in limited liability companies or other limited liability entities. SB 458 clarifies that a family owned farm entity must only repay the-then current year tax savings (as opposed to the double penalty described above) where the entity breaches after the third year of a ten year renewal covenant if any one of the entity’s partners, members, or shareholders has reached the age of 65 and that partner, member or shareholder has held a beneficial interest, directly or indirectly, in the covenanted property for at least 13 years.
While the application of CUVA is highly technical, interpretation of its implementing statute is often left to the decision of county attorneys with little binding precedent from Georgia’s appellate courts to guide their advice to boards of tax assessors. Landowners are often unable to challenge statutory construction decisions made by local counties because the cost in attorneys’ fees can outweigh the potential tax savings. Additions to CUVA made by SB 458 may change that calculus for property owners. Going forward, if a county denies an application to enter a 10 year covenant or decides to enforce a breach of the covenant penalty and the superior court ultimately reverses either of those decisions, the taxpayer will be entitled to recover costs of litigation and reasonable attorneys’ fees incurred in the action.
For several years, unless the property was placed in CUVA prior to May 1, 2012, a residential property located on bona fide conservation use property has been taxed at normal valuations under the CUVA statute. Some counties have required a recorded plat to establish the boundaries of the residential property which remain subject to normal taxation. SB 458 clarifies that counties cannot require a recorded plat as a condition of participating in CUVA. SB 458 makes additional changes regarding what can be required by the tax assessor in establishing whether tracts less than ten acres can qualify as bona fide conservation use property.
All information provided in this article is for informational purposes only, is not intended to be relied upon without consultation with counsel, and does not constitute legal advice.