During the 2017 Session of the Georgia General Assembly, which convened Monday, January 9th, several legislative proposals affecting government revenues and finances will be introduced and considered. Here is a quick preview of some of the major items we expect to be at issue during this 2017 session:
Recent legislation has significantly expanded state and local revenue sources dedicated to transportation due to the passage of HB 170 (the “Transportation Funding Act of 2015”) and HB 106 in 2015. In addition to growing the amount of state dollars dedicated to transportation (HB 170), HB 106 also gave local governments new options for enacting their own local option taxes to support transportation projects. Beginning in 2017, counties that are not in one of the three regions that passed a regional T-SPLOST in 2010 will have the option of going to referendum to enact a single-county T-SPLOST. We anticipate that legislation will be introduced in 2017 to make this single-county T-SPLOST more flexible and easier to use by local governments.
Since the end of the 2016 session, there has also been a renewed push from local governments and the business and economic development communities for the General Assembly to address issues relating to regional transit. Both the House and Senate convened special study committees to examine this issue in the interim period, and we anticipate that the discussions before those panels will play a role in the transit landscape moving forward, particularly in regard to the state’s governance and funding role in transit programs.
In 2015, Governor Deal formed a 36-member Education Reform Commission comprised of legislators, school administrators, teachers, government officials, and business and non-profit leaders to make recommendations regarding needed improvements to Georgia’s school systems. Among other areas, the Commission was charged with examining the state’s K-12 funding formula. The Commission’s recommendations, released on the eve of the 2016 legislative session, called for greater local flexibility in spending state education dollars, and specifically called for portions of the funding to be based on specific student needs, including disability and economic disadvantage. The proposal also called for specialized grants to cover local administrative needs. The Commission also proposed tying a portion of teacher pay to student outcomes. Under current law, teacher pay is based on years of experience and education level. These reform measures were not considered by the legislature last year due to opposition from a number of groups. However, statements from the Governor leading up to the 2017 session suggest that a push to translate some or all of these ideas into new legislation may be underway.
Title Ad Valorem Tax (TAVT)
Passed in 2012, Georgia’s title ad valorem tax (TAVT) program exempted motor vehicles purchased after March 2013 from sales tax and the annual ad valorem tax in favor of a single ad valorem payment due at the time a vehicle title is registered. There have been a number of reforms to TAVT since its enactment, and this year we expect that the legislature will look to address at least four issues with the current law.
First, TAVT revenue is divided between the state and local governments based on a statutory formula. Under the formula, local governments’ share of the revenue increases each year until 2022, as the state phases out annual ad valorem payments on cars purchased prior to March 2013. However, the local percentage allocation is subject to an annual adjustment based on a “local target collection amount” also set forth in the TAVT law. In years when local governments exceed the target, their share of TAVT revenue for the following year is adjusted downward by the Department of Revenue (DOR) even if local governments were due for an increase in percentage share. This arrangement creates unpredictability for local governments and burdens governments that are already seeing a shortfall in TAVT revenue.
Second, we continue to see evidence that used vehicle dealers are manipulating the value of vehicles traded in for used vehicles, reducing or wiping out completely the amount of TAVT that can be collected on a given transaction. When a used vehicle is sold, its value for TAVT purposes is its DOR book value, even if a different price was negotiated by the dealer and buyer. That value is reduced by the value of any trade-in vehicle involved in the transaction. However, trade-ins are valued at the amount listed in the bill of sale. This incongruence allows dealers to manipulate bills of sale and artificially raise the value of trade-ins in order to limit or eliminate the amount of TAVT that is due.
Third, industry groups have argued that the market for auto leases has been hampered by requiring the collection of TAVT on the market value of a leased vehicle which is agreed upon by the dealer and lessee at the time the lease commences. Vehicle sellers argue that it is unfair to impose tax on the full value of the leased vehicle when the lessee may only use the vehicle for a limited time.
Finally, new Georgia residents are required to register their vehicles shortly after their arrival in the state and must pay TAVT even if they have already paid sales or registration taxes on those vehicles in another state. Legislators have received complaints about this requirement, especially from companies that have expanded their operations or workforces in Georgia, each arguing that this tax places an unfair and unwelcoming burden on their employees.
Georgia Agriculture Tax Exemption (GATE) Program
Legislation to tighten enforcement of the Georgia Agriculture Tax Exemption (GATE) program came close to passage in 2016, and we anticipate renewed efforts to address that program in 2017. The General Assembly will likely examine eligibility for GATE cards, including the income threshold an applicant must demonstrate to receive a GATE card. We also expect legislation to tighten enforcement of GATE card use, including working with merchants to collect proper records of exempt sales. Finally, legislators will look at ways the relevant state departments can better share information with each other and the General Assembly regarding the administration of this program and its fiscal impact.
Forestland Protection Act (FLPA) Assistance Grants
This past summer, DOR attempted through administrative action to limit the amount of funds local governments can receive from the state to offset tax losses arising from timber land being placed in the Forestland Protection Act (FLPA) program. The formula for determining the amount of the grants is set forth in the Georgia Constitution and in statute, and it provides that the amount of the loss local governments can claim is to be based on the difference between the properties’ current use values under FLPA and their 2008 fair market values. DOR’s action, had it proceeded, would have limited a number of counties’ assistance grants to their current year loss, even if the loss shown under the constitutional and statutory formulas would have been greater. DOR backed away from this action, and it has been advised that both a constitutional amendment and new legislation would be necessary to put these limitations in place. We anticipate introduction of a constitutional amendment and new enabling legislation that would provide for this change. We also anticipate new legislation to strengthen the property tax assessment and appeals process with regard to timber properties.
This article written by:
Clint Mueller, Legilative Director
Association County Commissioners of Georgia