HB 560: Joint county and municipal sales and use tax (LOST); negotiations for distribution of tax proceeds; revise provisions

The House Committee on Ways and Means offers the following substitute to HB 560:

A BILL TO BE ENTITLED

AN ACT

To amend Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to sales and use taxes, so as to exempt from local taxes the sale or use of construction materials used in certain capital outlay projects for educational purposes; to provide that such exemption only applies to projects for local school systems that have in effect certain homestead exemptions from property taxation; to provide for conditions, limitations, and definitions; to provide for payment, collection, and refunds; to provide for an automatic repeal; to provide for the maximum amount of local sales and use taxes that may be imposed; to revise provisions related to a special district sales and use tax; to provide for conditions under which such tax may be imposed; to provide for clarifications; to revise provisions related to the joint county and municipal sales and use tax (LOST); to provide for the distribution of tax proceeds under certain circumstances; to limit the application of certain requirements with respect to absent counties; to provide for related matters; to provide for applicability; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

PART I

SECTION 1-1.

Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to sales and use taxes, is amended in Code Section 48-8-3, relating to exemptions from sales and use taxes, by adding a new paragraph to read as follows:

"(10.1)(A) Notwithstanding any provision of Code Section 48-8-63 to the contrary, the sale or use of qualifying construction materials used in capital outlay projects for educational purposes.

(B) The exemption provided for in this paragraph shall only apply to local sales and use taxes.

(C)(i) Notwithstanding the exemption provided for in subparagraph (A) of this paragraph, all sales and use taxes imposed on the sale or use of qualifying construction materials shall be paid and collected pursuant to the requirements of this chapter.

(ii) The benefit of the exemption allowed by this paragraph may be claimed by the local school system for which the qualifying construction materials were used. To claim the exemption, the local school system shall file a request for refund in the manner prescribed by the department. The department shall refund to the local school system the amount of taxes paid on qualifying construction materials used in the capital outlay project for educational purposes. No refund made pursuant to this paragraph shall include interest.

(iii) Any refund received by a local school system pursuant to this paragraph shall be allocated to a fund or account for capital outlay projects and used in accordance with the requirements for sales taxes for educational purposes authorized pursuant to Article VIII, Section VI, Paragraph IV of the Constitution of Georgia.

(D) As used in this paragraph, the term:

(i) 'Capital outlay project for educational purposes' means a project that:

(I) Was approved and funded through a sales tax for educational purposes authorized pursuant to Article VIII, Section VI, Paragraph IV of the Constitution of Georgia; and

(II) Is for a local school system which has in effect a base year value or adjusted base year value homestead exemption from ad valorem taxation for educational purposes for all residents of the local school system.

(ii) 'Local sales and use taxes' mean sales taxes, use taxes, or local sales and use taxes levied or imposed at any time in any area consisting of less than the entire state, however authorized, including, but not limited to, such taxes authorized by or pursuant to a constitutional amendment; by or pursuant to Section 25 of an Act approved March 10, 1965 (Ga. L. 1965, p. 2243), as amended, the 'Metropolitan Atlanta Rapid Transit Authority Act of 1965'; and by or pursuant to Articles 2, 2A, 2B, 3, 4, 5, 5A, and 5B of this chapter.

(iii) 'Qualifying construction materials' means any materials used in the construction of a capital outlay project for educational purposes that will remain as part of such project after completion of construction or that become incorporated into such project's real property. Such term shall not include any materials that remain in the possession of a contractor after the completion of construction.

(E) This paragraph shall stand repealed on December 31, 2033;"

PART II

SECTION 2-1.

Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to sales and use taxes, is amended in Code Section 48-8-6, relating to prohibition of political subdivisions from imposing various taxes, ceiling on local sales and use taxes, and taxation of mobile telecommunications, by revising subsection (a) as follows:

"(a)(1) Except as provided in this subsection, on and after July 1, 2024, there shall not be imposed in any jurisdiction in this state or on any transaction in this state local sales taxes, local use taxes, or local sales and use taxes in excess of 2 percent. For purposes of this such 2 percent limitation, the taxes affected are any sales tax, use tax, or sales and use tax which is levied in an area consisting of less than the entire state, however authorized, including such taxes authorized by or pursuant to constitutional amendment, and regardless of whether another provision of law purports to the contrary, except for the following:

(A) A 1 percent sales and use tax for educational purposes exempted from such limitation under Article VIII, Section VI, Paragraph IV of the Constitution;

(B) Up to 1 percent in aggregate of any of the transportation related sales and use taxes authorized under Articles 5, 5A, and 5B of this chapter and Article 2 of Chapter 9 of Title 32, and in a county in which a tax is levied and collected pursuant to Part 2 of Article 2A of this chapter, any tax levied for purposes of a metropolitan area system of public transportation, as authorized by the amendment to the Constitution set out at Georgia Laws, 1964, page 1008, the continuation of such amendment under Article XI, Section I, Paragraph IV(d) of the Constitution, and the laws enacted pursuant to such constitutional amendment; and

(C) Up to 1 percent in aggregate of any sales and use taxes authorized under Code Section 48-8-96, Code Section 48-8-97, Article 2B of this chapter, Part 3 of Article 3 of this chapter, and Article 4 of this chapter.

(2) Notwithstanding any provision of law to the contrary, any tax that does not comply with the limitations provided in paragraph (1) of this subsection as of July 1, 2025, but was initiated in compliance with the law in effect prior to January 1, 2025, shall be allowed to continue as authorized under laws that existed prior to July 1, 2025; provided, however, that, upon the expiration or termination of any such tax, such tax shall not be renewed and the jurisdiction that levied such tax shall be fully subject to the limitations imposed by this subsection.

(3) This subsection shall not limit the imposition of any local excise tax, which is separately authorized under Chapter 13 of this title.

(4) Except as provided in paragraph (2) of this subsection, if If the imposition of any otherwise authorized local sales tax, local use tax, or local sales and use tax would result in a tax rate in excess of that authorized by this subsection, then such otherwise authorized tax shall not be imposed."

SECTION 2-2.

Said chapter is further amended by revising Code Section 48-8-109.31, relating to imposition of special sales and use tax within special district and limited time and purpose, as follows:

"48-8-109.31.

(a) Subject to the requirement of approval by local referendum and the other requirements of this article, to impose there may be imposed within any given special district a special sales and use tax for a limited period of time for the limited purpose of property tax relief.

(b) Except as to rate, a tax imposed under this part shall correspond to the tax imposed by Article 1 of this chapter. No item or transaction which is not subject to taxation under Article 1 of this chapter shall be subject to a tax imposed under this article, except that a tax imposed under this article shall apply to sales of motor fuels as prepaid local tax as defined in Code Section 48-8-2 and shall be applicable to the sale of food and food ingredients and alcoholic beverages as provided for in Code Section 48-8-3.

(c) The special sales and use tax provided for in subsection (a) of this Code section may be imposed by a special district in 0.05 percent increments, but in no event shall such tax exceed 1 percent in total. The levy of such tax upon sales of motor fuels as defined in Code Section 48-9-2 shall only be imposed on the retail sales price of the motor fuel which is not more than $3.00 per gallon.

(d)(1) As a condition precedent to the issuance of the call for the referendum: (A)(1) The governing authority of the county whose geographical boundary is conterminous with that of the special district and the governing authority or authorities of all municipalities that levy an ad valorem tax on property, other than those municipalities that are excluded from the special district pursuant to paragraph (3) subsection (f) of this subsection Code section, shall have in effect a base year value homestead exemption or adjusted base year value homestead exemption; and (B)(2) The governing authority of the county whose geographical boundary is conterminous with that of the special district and the governing authority or authorities, if any, that represent at least 50 percent of the special district's residents of municipalities that levy an ad valorem tax on property, other than those municipalities that are excluded from the special district pursuant to paragraph (3) of this subsection (f) of this Code section, shall enter into an intergovernmental agreement calling for the tax authorized under this article and specifying the proposed rate of the tax, the proposed maximum period of time that the tax is to be levied, and the proposed distribution of the tax. (e)(1) As used in this subsection, the term 'absent municipality' means any municipality that levies an ad valorem tax on property, other than those municipalities that are excluded from the special district pursuant to subsection (f) of this Code section, and that did not enter into the intergovernmental agreement provided for in paragraph (2) of subsection (d) of this Code section.

(2) If the combined total of the populations of all such absent municipalities is less than one-half of the aggregate population of all municipalities located within the special district that levy an ad valorem tax on property, the political subdivisions governing authorities entering into the such intergovernmental agreement shall, on in behalf of such absent municipalities, specify a percentage of that portion of the remaining proceeds which each municipality that levies an ad valorem tax on property shall receive, which percentage shall not be less than that proportion which each such absent municipality's population bears to the total population of all municipalities that levy ad valorem taxes on property within the special district multiplied by that portion of the remaining proceeds which are received by all such municipalities within the special district. No portion of the tax shall be apportioned to counties and or municipalities that do not levy an ad valorem tax on property or do not have a base year value homestead exemption or adjusted base year value homestead exemption in effect.

(3)(f) Subject to the limitation provided for in Code Section 48-8-6, any special district which wholly or partially contains a jurisdiction levying the tax provided for under Article 4 of this chapter is authorized to levy the tax authorized under this article. Such tax authorized under this article may only be levied in the areas of the special district outside of the jurisdiction levying the tax provided for under Article 4 of this chapter. Any jurisdiction levying the tax provided for under Article 4 of this chapter shall not be considered within the procedure necessary to levy the tax under this article and shall not be entitled to any portion of said tax."

SECTION 2-3.

Said chapter is further amended in Code Section 48-8-109.32, relating to maximum period of time of the tax, submission to voters to determine imposition of tax, ballot language, and expenses of election, by adding a new subsection to read as follows: "(e) If no intergovernmental agreement is required pursuant to this article, the governing authority of the county or consolidated government whose geographical boundary is conterminous with that of the special district shall adopt a resolution which meets the requirements provided for in this Code section for intergovernmental agreements."

SECTION 2-4.

Said chapter is further amended in Code Section 48-8-109.33, relating to timing for imposition of tax following approval and termination of tax, by revising paragraph (2) of subsection (a) and subsection (c) as follows:

"(2) With respect to services that are regularly billed on a monthly basis, however, the resolution or ordinance imposing the tax shall become effective and the tax shall apply to the first regular billing period coinciding with or following the effective date specified in paragraph (1) of this subsection. A certified copy of the ordinance intergovernmental agreement or resolution imposing required to impose the tax authorized by this article shall be forwarded to the commissioner to ensure it is received within five business days after certification of the election results."

"(c) For any special district in which a tax authorized by this article is in effect may, while such tax is in effect, the General Assembly may pass a local Act calling for a reimposition of a tax as authorized by this article upon the termination of the tax then in effect, and a referendum may be held for this purpose while the tax is in effect. Proceedings for such reimposition shall be in the same manner as proceedings for the initial imposition of the tax as provided for in Code Section Sections 48-8-109.31 and 48-8-109.32. Such newly authorized tax shall not be imposed until the expiration of the tax then in effect."

PART III

SECTION 3-1.

Said chapter is further amended in Article 2, relating to joint county and municipal sales and use tax (LOST), by revising Code Section 48-8-89, relating to distribution and use of proceeds, negotiated certificate of distribution for political subdivisions, absent municipalities, filing of certificates, and renegotiations, as follows:

"48-8-89.

(a) The proceeds of the tax collected by the commissioner in each special district under this article shall be disbursed as soon as practicable after collection as follows:

(1) One percent of the amount collected shall be paid into the general fund of the state treasury in order to defray the costs of administration; and

(2) Except for the percentage provided in paragraph (1) of this subsection, the remaining proceeds of the tax shall be distributed to the governing authority of each qualified municipality within the special district and to the governing authority of the county whose geographical boundary is conterminous with that of the special district for the purpose of assisting such political subdivisions in funding all or any portion of those services which are to be provided by such governing authorities pursuant to and in accordance with Article IX, Section II, Paragraph III of the Constitution of this state.

(b) It is the intent of the General Assembly that no agreement as to the distribution of the proceeds of the tax shall enrich any political subdivision beyond a sum which in the absence of the distribution would be raised through other sources of revenue. The distribution shall be in accordance with a certificate which shall be executed in behalf of each respective governing authority, except as otherwise provided in this subsection, and which shall encompass all respective political subdivisions, shall be filed with the commissioner, and shall specify by percentage that portion of the remaining proceeds of the tax available for distribution which each such political subdivision shall receive. On or after July 1, 1995, the distribution of proceeds of the tax as specified in the certificate shall be based upon, but not be limited to, the following criteria:

(1) The service delivery responsibilities of each political subdivision to the population served by the political jurisdiction and served during normal business hours, conventions, trade shows, athletic events and the inherent value to a community of a central business district and the unincorporated areas of the county and the obligation of all residents of the county for the maintenance and prosperity of the central business district and the unincorporated areas of the county;

(2) The service delivery responsibilities of each political subdivision to the resident population of the subdivision;

(3) The existing service delivery responsibility of each political subdivision;

(4) The effect of a change in sales tax distribution on the ability of each political subdivision to meet its short-term and long-term debt;

(5) The point of sale and use which generates the tax to be apportioned;

(6) The existence of intergovernmental agreements among and between the political subdivisions;

(7) The use by any political subdivision of property taxes and other revenues from some taxpayers to subsidize the cost of services provided to other taxpayers of the levying subdivision; and

(8) Any coordinated plan of county and municipal service delivery and financing. Notwithstanding the fact that a certificate shall not contain an execution in behalf of one or more qualified municipalities within the special district or an execution of the county whose boundaries are conterminous with that of the special district, if the combined total of the populations of all such absent municipalities political subdivisions is less than one-half of the aggregate population of all qualified municipalities located within the special district, the submitting political subdivisions shall, in behalf of the absent municipalities political subdivisions, specify a percentage of that portion of the remaining proceeds which each such municipality or county shall receive, which percentage shall not be less than that proportion which each absent municipality's population or absent county's unincorporated population bears to the total population of all qualified municipalities within the special district multiplied by that portion of the remaining proceeds which are received by all qualified municipalities political subdivisions within the special district. For the purpose of determining the population of the absent municipalities, only that portion of the population of each such municipality which is located within the special district shall be computed. No certificate may contain a total of specified percentages in excess of 100 percent. The certificate shall be filed with the commissioner by March 1, 1980, for those special districts in which the tax authorized by this article is being levied on January 1, 1980. For all other special districts in which the tax shall be imposed subsequent to January 1, 1980, the certificate shall be filed with the commissioner within 60 days after the tax is imposed within the district. The commissioner shall continue to distribute the proceeds of the tax as otherwise provided in this Code section until the first day of the next calendar year following the month in which the commissioner receives a certificate as provided in this Code section, which certificate shall provide other percentages upon which the commissioner shall make the distribution to the political subdivisions entitled to the proceeds of the tax. At such time, the commissioner shall thereafter distribute the proceeds of the tax in accordance with the directions of the certificate.

(c) If the certificate provided for in subsection (b) of this Code section is not received by the commissioner by the required date, the authority to impose the tax authorized by Code Section 48-8-82 shall cease on the first day of the second calendar month following the month in which the tax was initially imposed and the tax shall not be levied in the special district after such date unless the reimposition of the tax is subsequently authorized pursuant to Code Section 48-8-85. When the imposition of the tax is so terminated, the commissioner shall retain the proceeds of the tax which were to be distributed to the governing authorities of the county and qualified municipalities within the special district until he or she receives a certificate in behalf of each such governing authority specifying the percentage of the proceeds which each such governing authority shall receive. If no such certificate is received by the commissioner within 120 days of the date on which the authority to levy the tax was terminated, the proceeds shall escheat to the state and the commissioner shall transfer the proceeds to the state's general fund. (d)(1) A certificate providing for the distribution of the proceeds of the tax authorized by this article shall expire on December 31 of the second year following the year in which the decennial census is conducted. No later than December 30 of the second year following the year in which the census is conducted, a new distribution certificate meeting the requirements for certificates specified by subsection (b) of this Code section shall be filed with and received by the commissioner. The General Assembly recognizes that the requirement for government services is not always in direct correlation with population. Although a new distribution certificate is required within a time certain of the decennial census, this requirement is not meant to convey an intent by the General Assembly that population as a criterion should be more heavily weighted than other criteria. It is the express intent of the General Assembly in requiring such renegotiation that eligible political subdivisions shall analyze local service delivery responsibilities and the existing allocation of proceeds made available to such governments under the provisions of this article and make rational the allocation of such resources to meet such service delivery responsibilities. Political subdivisions in their renegotiation of such distributions shall at a minimum consider the criteria specified in subsection (b) of this Code section.

(2) The commissioner shall be notified in writing of the commencement of renegotiation proceedings by the county governing authority on behalf of all eligible political subdivisions within the special district. The eligible political subdivisions shall commence renegotiations at the call of the county governing authority before July 1 of the second year following the year in which the census is conducted. If the county governing authority does not issue the call by that date, any eligible municipality may issue the call and so notify the commissioner and all eligible political subdivisions within the special district.

(3) Following the commencement of such renegotiation, if the parties necessary to an agreement fail to reach an agreement within 60 days, such parties shall submit the dispute to nonbinding arbitration, mediation, or such other means of resolving conflicts in a manner which attempts to reach a resolution of the dispute. Any renegotiation agreement reached pursuant to this paragraph shall be in accordance with the requirements specified in paragraph (1) of this subsection.

(4) Reserved.

(5) If a new distribution certificate as provided for in this Code section is not received by the commissioner, the authority to impose the tax authorized by Code Section 48-8-82 shall cease, and the tax shall not be levied in the special district after such date unless the reimposition of the tax is subsequently authorized pursuant to Code Section 48-8-85. When the imposition of the tax is so terminated, the commissioner shall retain the proceeds of the tax which were to be distributed to the governing authorities of the county and qualified municipalities within the special district until the commissioner receives a certificate on behalf of each such governing authority specifying the percentage of the proceeds which each such governing authority shall receive. If no such certificate is received by the commissioner within 120 days of the date on which the authority to levy the tax was terminated, the proceeds shall escheat to the state, and the commissioner shall transfer the proceeds to the state's general fund.

(6) If the commissioner receives a new distribution certificate by the required date, the commissioner shall distribute the proceeds of the tax in accordance with the directions of the new distribution certificate commencing on January 1 of the year immediately following the year in which such certificate was executed by the parties or the judge or the first day of the second calendar month following the month such certificate was executed by the parties or the judge, whichever is sooner.

(7) Costs of any conflict resolution under paragraph (3) or (4) of this subsection shall be borne proportionately by the affected political subdivisions in accordance with the final percentage distributions of the proceeds of the tax as reflected by the new distribution certificate.

(8) Political subdivisions shall be authorized, at their option, to renegotiate distribution certificates on a more frequent basis than is otherwise required under this subsection.

(9) No provision of this subsection shall apply to any county which is authorized to levy or which levies a local sales tax, local use tax, or local sales and use tax for educational purposes pursuant to a local constitutional amendment or to any county which is authorized to expend all or any portion of the proceeds of any sales tax, use tax, or sales and use tax for educational purposes pursuant to a local constitutional amendment."

SECTION 3-2.

Said chapter is further amended in said article by revising subsection (c) of Code Section

48-8-89.1, relating to procedure for certifying additional qualified municipalities, issuance of new distribution certificate, and cessation of authority to collect tax, as follows: "(c) Except as otherwise provided in this subsection, a distribution certificate required by this Code section must be executed by the governing authorities of the county within which the special district is located and each qualified municipality located wholly or partially within the special district, including the new qualified municipality. Notwithstanding the fact that a certificate shall not contain an execution in behalf of the county within which the special district is located or one or more qualified municipalities within the special district, if the combined total of the populations of all such absent municipalities and the absent county's unincorporated population is less than one-half of the aggregate population of all qualified municipalities located within the special district, the submitting political subdivisions shall, in behalf of the absent municipalities political subdivisions, specify a percentage of that portion of the remaining proceeds which each such municipality political subdivision shall receive, which percentage shall not be less than that proportion which each absent municipality's and any absent county's unincorporated population bears to the total population of all qualified municipalities within the special district multiplied by that portion of the remaining proceeds which are received by all qualified municipalities political subdivisions within the special district. For the purpose of determining the population of the absent municipalities, only that portion of the population of each such municipality which is located within the special district shall be computed."

SECTION 3-3.

Said chapter is further amended in said article by adding a new subsection to Code Section 48-8-91, relating to condition precedent to authority to impose tax after first year, annual adjustment of millage rate formula, and information required on tax bills, to read as follows: "(c) This Code section shall not be applicable to the county whose geographical boundary is conterminous with that of the special district for any period of time that such county is treated as an absent county under Code Section 48-8-89 or 48-8-89.1."

PART IV

SECTION 4-1.

Part III of this Act shall only apply with respect to distribution certificates entered into on or after January 1, 2028.

SECTION 4-2.

All laws and parts of laws in conflict with this Act are repealed.