346 Ga. App. 63
Ga. Ct. App.2018Background
- City of Atlanta (owner of Hartsfield-Jackson Airport) granted two seven-year agreements to Paradies and Paradies II to operate retail concessions at four airport parcels located in Clayton County (two parcels also in College Park). The agreements included the 2015 tax year.
- In 2015 Clayton County and the City of College Park assessed ad valorem real property taxes against the plaintiffs’ interests; plaintiffs paid and sued for refunds under OCGA § 48-5-380.
- The superior court granted the plaintiffs summary judgment, holding the rights granted were non-taxable usufructs rather than estates for years subject to ad valorem taxation.
- Defendants appealed, principally arguing the interests were taxable estates for years (or possibly franchises) and that leasehold improvements were taxable to plaintiffs.
- The Court of Appeals reviewed de novo and affirmed, concluding the agreements’ language and pervasive restrictions rebutted the presumption that a seven-year term created an estate for years and instead established non-taxable usufructs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Nature of interest: usufruct vs. estate for years | Agreements create only usufructs; therefore interests are not subject to ad valorem real property tax | Seven-year term presumes estate for years; plaintiffs’ obligations (taxes, insurance, improvements) indicate an estate for years | Court held interests are usufructs; restrictions and retained control by City rebut presumption of an estate for years |
| Effect of contract language expressly calling the grant a "usufruct" | Parties’ labeling reflects their intent and supports non-taxable usufruct | Labeling is not determinative; must examine substance | Court treated the label as probative but relied on overall terms and control retained by City to affirm usufruct characterization |
| Tax-liability/insurance/repair obligations in agreement | Such obligations do not transform a usufruct into an estate when balanced against pervasive restrictions | Tax/insurance/repair duties indicate a lessee’s estate-like rights and ownership of improvements | Court found those provisions insufficient to overcome other indicia of retained dominion and pervasive limitations; plaintiffs still hold usufructs |
| Taxability of leasehold improvements | Plaintiffs argued improvements surrenderable to City and thus not separately taxable beyond plaintiffs’ interest in the parcels | County argued plaintiffs owned improvements in 2015 and those should be taxed | Court held improvements pass to City on termination and thus any interest in improvements is coextensive with the non-taxable usufruct; no reversible error in declining to tax improvements separately |
Key Cases Cited
- Richmond County Bd. of Tax Assessors v. Richmond Bonded Warehouse Corp., 173 Ga. App. 278 (discusses usufruct definition and non-taxability)
- Diversified Golf, LLC v. Hart County Bd. of Tax Assessors, 267 Ga. App. 8 (explains factors showing retention of dominion converts lease to usufruct)
- Jekyll Dev. Assoc. v. Glynn County Bd. of Tax Assessors, 240 Ga. App. 273 (treats usufruct as license and evaluates contract labeling)
- Allright Parking of Ga. v. Joint City-County Bd. of Tax Assessors, 244 Ga. 378 (scrutinizes lease terms to determine intent re: usufruct vs estate for years)
- Macon-Bibb County Bd. of Tax Assessors v. Atlantic Southeast Airlines, 262 Ga. 119 (analyzes retention of control and regulatory conditions indicating usufruct)
- Eastern Air Lines v. Joint City-County Bd. of Tax Assessors, 253 Ga. 18 (holds long-term leases may nonetheless create usufructs given pervasive restrictions)
- Camp v. Delta Air Lines, 232 Ga. 37 (landlord approval requirements for improvements/signage inconsistent with estate for years)
- Fulton County Bd. of Assessors v. McKinsey & Co., 224 Ga. App. 593 (land and improvements constitute one taxable item)
- Buoy v. Chatham County Bd. of Tax Assessors, 142 Ga. App. 172 (contrasting fact pattern where obligations and autonomy supported estate for years)