In 2021, the Georgia Tax Tribunal ruled that a non-profit hospital was entitled to use Quality Jobs Tax Credits (QJTC) against its unrelated business income tax and its payroll withholding tax. Floyd Healthcare Mgmt., Inc. v. Crittenden, Tax-CI-200300 (Sept. 22, 2021). As a non-profit, the hospital did not file Georgia corporate income tax returns for the years at issue but did report and pay taxes on its unrelated business income. The Department argued that non-profits are not ‘taxpayers” and do not file “tax returns,” and therefore do not qualify for the QJTC. The Tribunal rejected the Department’s position, saying the plain language of the QJTC statute does not support a limitation on who qualifies as a taxpayer so long as the taxpayer meets the criteria of creating “new quality jobs” under the QJTC statute.
The Tribunal’s decision was affirmed by the Fulton County Superior Court. Crittenden v. Floyd Health Care Mgmt., Inc., No. 2021CV356445 (Aug. 30, 2022). As the Superior Court explained: “the statute does not contain an explicit or implicit exclusion of tax-exempt organizations. Likewise, the statute does not contain any explicit or implicit language that would create an additional requirement for a tax-exempt employer to qualify a job as a ‘new quality job’ for purposes of the [QJTC].” Id. at *8. Although the Georgia Court of Appeals granted the Department’s application for appeal, the appeal was dismissed without a decision.
In response to these court decisions, the Department has proposed legislation, to purportedly “clarify” the plain language of the QJTC statute. HB 482 adds new language which says that organizations exempt from tax (either as non-profits or insurance companies) may not qualify for the QJTC unless the new jobs are not related to the entities’ primary trade or business. However, HB 482 is not a “clarification.” While the bill’s caption—introductory language to the legislation never codified into the law—states that the legislation intends to “clarify” existing law, the text of the legislation states that it will not be effective until July 1, 2023. In Georgia (and elsewhere), retroactive laws are unconstitutional. Ga. Const. art. I, § 1, ¶ X. Accordingly, it would be improper to rely on this legislation to deny non-profits the QJTC for prior years.
Rather than a mere clarification, HB 482 changes the existing law. The Tribunal’s and Superior Court’s decisions interpreting the QJTC statute make clear that HB 482 would change the plain language of the statute. Indeed, in holding as they did that the plain language provides no exclusions or limitations on eligibility for the credit, both the Tribunal and the Superior Court relied on the maxim that they must presume that the legislature meant what it said and not read in limitations to the plain statutory text that do not exist.
While the legislature is entitled to make prospective changes and declare what the law will be, HB 482 cannot retroactively deprive taxpayers of rights. Any attempt to do so through a legislative “clarification” would set a troubling precedent that the Department can ask the legislature to “clarify” the law to undercut unfavorable court decisions. This would undermine the separation of powers between the branches of government and create an uncertain environment for taxpayers.
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