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Georgia House Bill 581: Navigating the implications for property tax assessments

Dec. 3, 2024

Georgia has just passed House Bill 581 (HB 581), also known as the “Save Our Homes Act,” which introduces significant changes to property tax regulations for both homeowners and commercial real estate owners and investors in Georgia. Below outlines the residential, commercial, manufacturing, and sales tax impacts, as well as how your property tax consultant should be adjusting their appeal approach to accommodate for these changes:

1. Statewide Floating Homestead Exemption

• Provision: HB 581 establishes a statewide “floating” homestead exemption that limits the annual increase of a home’s assessed value for property tax purposes to the rate of inflation. This measure aims to prevent substantial property tax hikes due to rising property values.
• Property tax consulting implication: Homeowners with existing homestead exemptions will automatically benefit from this provision. Local governments have the option to opt out of this exemption by passing a resolution after conducting three public hearings.

2. New local option sales tax (FLOST)

• Provision: The bill introduces a new local option sales tax, referred to as the floating homestead local option sales tax (FLOST), which local governments can implement to provide property tax relief. This tax can be levied in increments up to 1% and requires approval through a local referendum. The revenue generated is intended exclusively for reducing property taxes.
• Sales tax and property tax consulting implication: Property tax consultants should monitor local referendums for the adoption of FLOST, as it may affect the overall tax burden on properties within those jurisdictions. Sales tax consultants should be aware of this increased levy when analyzing sales taxes paid out by corporations.

3. Procedural changes to property tax assessments and appeals for commercial real estate

Provisions

• Removal of the estimate of current tax based on the previous year’s millage rates from assessment notices
• Requirement for assessment notices to include the current year’s “estimated roll-back rate” established by the local government
• Mandate for a disclaimer on property tax bills if the roll-back rate is exceeded
• Codification of the requirement that properties are appraised at least every three years
• Provision of a “three-year lock” only if the property value is reduced on appeal
• Removal of the provision limiting fair market value to the sale price the year after the sale

Property tax consulting implication

These procedural changes will require commercial real estate property tax consulting firms to adjust assessment and appeal strategies accordingly. The removal of certain provisions may necessitate a more proactive approach in monitoring property valuations and engaging in appeals. Some changes might include:

• Appraisal frequency: The requirement for properties to be appraised at least every three years ensures that commercial properties will not go extended periods without revaluation. This consistency may prompt more frequent reviews of assessed values for commercial properties, especially in markets with significant fluctuation.
• Three-year lock: The provision of a three-year lock only if the property value is reduced on appeal can affect how businesses approach appeals. Securing a reduced valuation will now provide limited protection against subsequent increases, making appeal outcomes particularly impactful for property tax planning.
• Fair market value changes: The removal of the provision limiting fair market value to the sale price the year after the sale is noteworthy for commercial property transactions. Buyers will need to account for the potential of immediate increases in valuation that reflect current market conditions rather than a lag tied to the transaction year.
• Roll-back rate transparency: The inclusion of the estimated roll-back rate and disclaimers on tax bills introduces more transparency in tax calculations. For commercial property owners, this could highlight discrepancies between assessed values and actual tax liabilities, potentially influencing appeal decisions.

These procedural updates align with trends aimed at increasing transparency and fairness while ensuring properties reflect accurate market values. For commercial property owners, these changes mean a heightened need to stay proactive in managing their assessments and pursuing appeals when discrepancies arise. We always recommend partnership with an experienced property tax provider, particularly when navigating tax law changes as they pertain to your portfolio.

4. Increase in tangible personal property tax exemption

• Provision: HB 581 increases the exemption for tangible personal property from $7,500 to $20,000. This change is intended to alleviate the financial burden on businesses by reducing the property tax on business supplies and equipment due to inflationary pressures.
• Business personal property tax consulting implication: This increase in exemption will affect the taxable value of business personal property. An in-depth review of all asset valuations to ensure they are taking full advantage of this exemption will be necessary for all entities.

If you have questions about how the passing of HB 581 might impact your portfolio and the associated property taxes, contact our Atlanta office today. The enactment of HB 581 is contingent upon the passage of a constitutional amendment (House Resolution 1022) by Georgia voters in the November 2024 referendum. If approved, the bill will take effect on Jan. 1, 2025. Local governments wishing to opt out of the statewide floating homestead exemption must do so by March 1, 2025.

We recommend Georgia property owners remain informed and monitor the outcome of the November 2024 referendum to determine the enactment status of HB 581. Once the status of the bill is determined, contact us to ensure your assessment and appeal procedures to align with the new regulations.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.