The Georgia Supreme Court ruled in favor of exemption for a nonprofit charitable institution even though it receives incidental rental revenues from the facility it owns and operates. The Court held that the property owner met all of the necessary criteria for exemption because it is an institution devoted entirely to charitable pursuits, the charitable pursuits are for the benefit of the public, and the use of the property is devoted to the charitable pursuits. The Court clarified the meaning of the 2007 amendment to the exemption statute by stating that the General Assembly must have intended to allow institutions that otherwise qualify as a purely public charity to use their property to raise income from activities that are not necessarily charitable in nature, as long as the primary purpose of the property is charitable and the income is used exclusively for the operation of the charity in pursuing its charitable purposes.

The following is a summary of the opinion as provided by the Georgia Supreme Court: ACTUAL DECISION

NUCI PHILLIPS MEMORIAL FOUNDATION, INC. V. ATHENS-CLARKE COUNTY

BOARD OF TAX ASSESSORS (S10G0448)

In a 4-to-3 vote, the Supreme Court of Georgia has reversed a decision by the Georgia Court of Appeals and ruled in favor of a foundation started by a woman whose son committed suicide while a student at the University of Georgia.

In today‟s ruling, written by Presiding Justice George Carley, the majority has found that under state law, the foundation qualifies for a property tax exemption for the building it uses for a program designed to prevent other suicides.

Nuci Phillips was a talented young musician who suffered from depression and ultimately took his own life. His mother, Linda Phillips, established the Nuci Memorial Foundation, Inc., which operates a facililty in Athens called “Nuci‟s Space.” The purpose of the facility is to offer a safe place where musicians and others can practice and listen to music, drink coffee and attend support groups that offer help for depression and emotional disorders. According to briefs filed in the case, Nuci‟s Space makes no profits. Those who need professional therapy are triaged by Mrs. Phillips and referred to low-cost therapy. Nuci‟s Space charges no fees to those seeking help, and it helps defray the cost of therapy for those who cannot afford it. To raise funds to support the program, the foundation rents out the facility for private birthday parties and wedding receptions. It also rents out rehearsal space to musicians.

After the Athens-Clarke County Board of Equalization granted the foundation an exemption from ad valorem taxes for the Nuci‟s Space facililty, the Athens-Clarke County Board 2 of Tax Assessors challenged it in court, arguing that the building is also used for non-charitable activities that have nothing to do with suicide prevention. But the Clarke County court ruled in favor of Nuci‟s Space, finding that the “Foundation has proven by a preponderance of the evidence that it is an institution devoted entirely to charitable pursuits,…” and that all “funds collected by [Petitioner] directly support the programs, services and mission of [Petitioner].” On appeal, the Court of Appeals reversed that decision, finding that Nuci‟s Space did not qualify for an exemption because the facility is not used “exclusively” for charitable purposes.

At issue in this case is Official Code of Georgia §48-5-41(d) (2), which the Georgia legislature amended in 2007. It states that “a building which is owned by a charitable institution that is otherwise qualified as a purely public charity and that is exempt from taxation…and which building is used by such charitable institution exclusively 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.”

In today‟s majority opinion, the Court finds that “the General Assembly must have intended to allow those institutions that otherwise qualify as a purely public charity to use their property to raise income from activities that are not necessarily charitable in nature so long as the „primary purpose‟ of the property was charitable and any „income is used exclusively for the operation of that charitable institution.‟” The activities cited by the Board of Tax Assessors, such as party rentals, “are an incidental use of the property and have the sole purpose of raising funds to be used for the organization‟s charitable services,” the majority finds. In light of the amended statute, any non-charitable activities “which have the sole purpose of raising income to be utilized in furtherance of the organization‟s charitable purposes, now qualify as activities exclusively devoted to the institution‟s charitable pursuits,” the majority rules. Joining the majority are Justices Hugh Thompson, Harold Melton and David Nahmias, who concurs in the judgment only.

In the dissent, Chief Justice Carol Hunstein writes that “the majority incorrectly analyzes the recent amendments to OCGA § 48-5-41 (d) and fails to rely upon the plain language of the current statute in reaching its result…” The legislature “in its wisdom chose to amend [the statute] in 2007 to restrict the circumstances under which income-generating property will be tax exempt, and I would hold that the Court is „constrained by the language of the statute to reach this result,‟” the dissent says. This Court has ruled before that for a property to qualify as an institution of “purely public charity,” it must meet three criteria, including that “the use of the property must be exclusively devoted to those charitable pursuits.”

“Because the Nuci‟s Space property is not used by the Foundation exclusively for its charitable purposes, I would hold that the property is not entitled to exemption from ad valorem taxation and would affirm the decision of the Court of Appeals,” says the dissent, joined by Justices Robert Benham and P. Harris Hines.

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