georgia department of revenue: changes to intangible tax ... · effort by the georgia general...
TRANSCRIPT
As most lenders know, the Georgia Department of Revenue imposes an
intangible recording tax on all deeds to secure debt securing long term
loans (i.e. loans with a term greater than three years) at a rate of $1.50 per each $500
of indebtedness secured thereby.1 Certain deeds to secure debt are exempt from this
tax, including: (i) deeds to secure debt for which the grantee is the United States, the
State of Georgia or other public authorities, a church
or a state chartered credit union; (ii) deeds to secure
debt which secure an obligation other than a note
(e.g. guaranty agreement, indemnity agreement,
etc.); and (iii) deeds to secure debt which are being
given as additional collateral if the intangible tax has
previously been paid for the same indebtedness.2
The Georgia Department of Revenue oversees
the collection of the tax, and is responsible for
promulgating rules and regulations relating to the payment and collection of the tax.
Effective January 23, 2013, the Georgia Department of Revenue made changes to one
of the rules governing payment of the intangible tax as it relates to property located in
more than one county in Georgia. This article describes these changes.
Georgia Department Of Revenue: Changes To Intangible Tax Payment Requirements For Multi-County Properties
F A L L 2 0 1 3 / I S S U E 1 3 . 3
GAVELTOGAVELy o u r s o u r c e f o r l e g a l n e w s a n d g o v e r n m e n t u p d a t e s
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Heather D. Hestleyo f c o u n s e l
page 3 STRICT CONSTRUCTION OF INDUSTRY-SPECIFIC STATUTES BY THE GEORGIA SUPREME COURT
page 4 CROWDFUNDING IN GEORGIA:RECENT CHANGES TO GEORGIA SECURITIES LAWS
insidethis issue continued on page 2
RULE 560-11-8-.08 (Multi-County ProPerty)Under the prior rule, if a loan was secured by a deed to secure debt with property located in more than
one county, the collecting officer in the county where the deed to secure debt was first recorded would
collect the entire amount of the intangible tax and would then distribute the tax to the other counties
where the real property was located in proportion to the relative values of the real property. The lender
would then be free to record original counterparts of the deed to secure debt in the other counties without
paying the tax as long as the counterparts were accompanied by
an affidavit stating that the tax had already been paid in another
county.3 The burden has now shifted, however, so that the
lender, not the collecting officer, is responsible for allocating and
paying the taxes to the various counties in which the collateral
is located.
Under the new rule promulgated by the Georgia Department of
Revenue, the intangible tax must now be paid to the collecting
officer in each county where the real property is located.4 To
enable the collecting officer to ascertain the proportionate
amount of intangible recording tax to be collected for its county,
the deed to secure debt must be accompanied by an affidavit
setting forth the value of the real property encumbered in every
county being secured by the deed to secure debt.
Although the overall tax burden remains the same, since the intangible tax will be paid in separate
payments county by county, the lender (or its attorney/title company) should take care to ensure that it
pays only the required proportionate amount to each county to avoid any overpayment of the tax.
If you have questions regarding Georgia’s intangible recording tax or
other related concerns, please contact Heather Hestley at
(404) 997-6032 or [email protected] n
Changes to Intangible Tax Payments continued from page 1
Under the new rule
promulgated by the Georgia
Department of Revenue, the
intangible tax must now be
paid to the collecting officer
in each county where the
real property is located.
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1) O.C.G.A §48-6-61 (2012). 2) Ga. Comp. R. & Regs. r. 560-11-8-.14 (Exemptions) (2012). 3) Ga. Comp. R. & Regs. r. 560-11-8-.08 (Multi-County Property) (2011). 4) Ga. Comp. R. & Regs. r. 560-11-8-.08 (Multi-County Property) (2012)
Changes to Intangible Tax Payments continued from page 1
3
The Georgia Supreme Court recently signaled a departure from the Georgia Court of
Appeals’ prior interpretation of the law regarding protections for car franchises under the
Georgia Motor Vehicle Franchise Practices Act (the “Act”).
The Act provides that a franchisee car dealer may petition the Superior Court to enjoin or
prohibit the opening of a new franchise by a franchisor within its “relevant market area.”1 In
2011, the Georgia Court of Appeals held that a corporate car dealer’s “relevant market area,”
for purposes of the Act, is based on the corporation’s principal place of business.2 In that case,
the American Honda Motor Company, Inc. decided to allow a new franchisee to open a new
Honda dealership in Cumming, Georgia, and WMW, Inc., an existing franchisee, decided to
sue, seeking to prevent the location of the new franchise in its “relevant market area” under the
Act.3 WMW, Inc. operated a sales location more than eight miles away from the proposed new franchise as well as a service
location less than eight miles away from the new franchise.4 The Court of Appeals interpreted the phrase “relevant market
area” with reference to the location of the corporation as a “person,” which was the location
of the corporate franchisee’s principal office or place of business, which in this case was
at the sales location.5 This put the new franchise outside of the plaintiff’s “relevant market
area” and the court affirmed the trial court’s grant of a motion to dismiss the suit.6
In 2012, the Supreme Court of Georgia upheld the Court of Appeals’ ruling but disagreed
with the rationale applied to the determination of the “relevant market area” for a corporate
franchisee under the Act.7 Instead of looking to the location of the corporation as a legal
“person,” the Supreme Court of Georgia looked to the definition of “dealer” contained in
the Act, which is any person “engaged in the business of selling...new motor vehicles...”8
or engaged “exclusively in the repair of motor vehicles....” Justice Nahmias, writing for the majority, explained that because
WMW, Inc. was a “car-selling dealer,” the most natural reading of the Act was to determine WMW, Inc.’s “relevant market area”
based on where its car sales took place.9 A “car-repairing dealer,” on the other hand, would have a “relevant market area”
under the Act based on the location where its car repairing activity took place.10 The Court of Appeals erred by looking too
much to general principles of a corporation’s residence for venue purposes, rather than the definitional provisions of the Act,
but because the result was the same in spite of the erroneous reasoning, the Supreme Court of Georgia affirmed the Court of
Appeals’ judgment.11
In light of the Supreme Court of Georgia’s opinion, in the future Georgia courts will need to focus on the Act’s specific definitions
as opposed to general principles when evaluating a dealer or repair shop’s “relevant market area.” Of greater importance is
the Georgia Supreme Court’s clear preference to focus on the specific statutory language rather than general legal principles
in deciding cases. As such, industry specific statutes will have an ever increasing impact on the way Georgians do business.
Attention needs to be given to the often overlooked definition sections of statutes and regulations.
Should you have inquiries regarding business associations or similar topics, Kort Petersoncan be reached at (478) 749-9924 or [email protected] n
Kort D. L. Petersona s s o c i a t e
Strict Construction of Industry-Specific Statutes by the Georgia Supreme Court
1) O.C.G.A. § 10-22-664. 2) WMW, Inc. v. Am. Honda Motor Co., Inc., 311 Ga. App. 1, 714 S.E.2d 689 (2011). 3) Id. 4) WMW, Inc., at 2, 714 S.E.2d at 690. 5) WMW, Inc., at 5, 714 S.E.2d at 692. 6) Id. 7) WMW, Inc. v. Am. Honda Motor Co., Inc., 291 Ga. 683, 683, 733 S.E. 2d 269, 272 (2012). 8) WMW, Inc., at 687-688, 733 S.E.2d at 274 (quoting O.C.G.A. § 10-1-622(1)). 9) WMW, Inc., at 688, 733 S.E.2d at 275. 10) WMW, Inc., at 691, 733 S.E.2d at 277. 11) WMW, Inc., at 691-692, 733 S.E.2d at 277.
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Christopher E. Gilmorea s s o c i a t e
Crowdfunding In Georgia: Recent Changes To Georgia Securities Laws
G A V E L T O G A V E L | F A L L 2 0 1 3 | J A M E S B A T E S L L P . C O M
More than a year has passed since the Jumpstart Our Business Startups Act (the “JOBS Act”)
was signed into law. Many of the JOBS Act’s provisions are important to the technology and
start up communities because they provide for a much discussed crowdfunding exemption
from securities registration requirements and repeal the prohibition on general solicitation of investors in
connection with certain private offerings. Currently, many of the JOBS Act’s provisions are in limbo as they
wait for the Securities and Exchange Commission (“SEC”) to issue regulations to bring them into full force
and effect.
The statutory deadline of December 12, 2012 established by the JOBS Act for the SEC to issue regulations
has come and gone. As the deadlines for the issuance of final rules continues to be pushed back, certain
states such as Georgia have taken it upon themselves to construct their own avenues to achieve the JOBS
Act’s goal of increasing job creation and
making it easier for small businesses and
entrepreneurs to raise capital.1 One such
effort by the Georgia General Assembly
is the “Invest Georgia Exemption” (“IGE”),
which, among other things, opens the door
for crowdfunding in Georgia.
Crowdfunding is essentially the pooling
of capital, typically via an internet-based
platform, to fund companies, organizations,
or projects. Under the current regime of
federal securities laws, raising capital in
exchange for equity (or debt, or any security)
through crowdfunding violates the Securities
Act of 1933’s (the “Act”) restriction on general
solicitation of securities.2 Therefore, most crowdfunding platforms are rewards based in that they do not
offer and or sell securities to investors; rather, these platforms provide funding for projects in exchange for
a promise to receive a pre-determined reward resulting from the project.
On August 29, 2012, the SEC proposed an amendment to Rule 506 of Regulation D to make the prohibition
against general solicitation or general advertising contained in Rule 502(c) of Regulation D inapplicable to
offers and sales under Rule 506, provided that all purchasers are accredited investors. However, more than
a year later and with a new Chairman, the SEC has yet to adopt its proposed amendment to allow general
solicitation and advertisement of securities to accredited investors.
In December 2012, the Georgia Commissioner of Securities made it easier for Georgia businesses to raise
capital by amending and adopting the IGE.3 The IGE utilizes the intrastate exemption under the Act to
While businesses across the country impatiently wait for
the SEC to adopt its proposed amendment to Rule 506, the
IGE puts Georgia well ahead of the equity-based crowdfunding game by authorizing intrastate
general solicitation of securities for both accredited and non-
accredited investors.
5
create a state security regulation exemption that allows for-profit Georgia companies to raise a limited amount of capital through a general
solicitation offering from accredited and or non-accredited Georgia resident investors without state or federal registration.
While businesses across the country impatiently wait for the SEC to adopt its proposed amendment to Rule 506, the IGE puts Georgia
well ahead of the equity-based crowdfunding game by authorizing intrastate general solicitation of securities for both accredited and
non-accredited investors.
How tHe iGe worksTo qualify under the IGE, a company offering equity must (1) be a for-profit business, (2) be formed under Georgia law and registered with
the Georgia Secretary of State, (3) have its principal office in Georgia, (4) carry out a significant amount of its business in Georgia, and (5)
must not be an investment company.4 Limitations on the offer or sale of securities under the IGE by a qualifying company are as follows:
Other than the ability to generally solicit to accredited as well as non-accredited investors, one big advantage for a company offering its
securities under the IGE rather than the JOBS Act’s provisions is that the IGE does not require a company using the exemption to provide
audited financials, which often can serve as a high financial bar to companies seeking additional funds.
The obvious limitation on the IGE is its intrastate nature. Though the IGE prevents Georgia entrepreneurs’ and companies’ ability to reach
outside Georgia for their planned capital raises, for many small businesses, the ability to do a public solicitation in their local area may be
enough to raise the needed level of capital. And thinking outside of the typical crowdfunding scenario of funding a technology start-up,
the IGE is a great tool for residents to invest in their neighborhoods and have a true stake in their communities’ surrounding businesses.
While the IGE creates an opportunity for investment in Georgia, remember to always consult legal counsel prior to offering securities.
Please contact Christopher Gilmore with general business transaction questions at (404) 997-7503 or [email protected] n
n Each sale of securities is limited to a total $1,000,000 raised within
a 12 month period, not including sales to controlling persons;
n The issuer of the securities may only accept up to $10,000 from any
single unaccredited investor (individuals with an annual income less than
$200,000 and a net worth of less than $1,000,000) per offer or sale;
n Accredited investors (individuals with annual income greater than $200,000 or
net worth exceeding $1,000,000) have no investment limitation under the IGE;
n All funds received from investors must be deposited into a bank or
depository institution authorized to do business in Georgia;
n A notice filing with the Georgia Commissioner of Securities is required prior
to any general solicitation of securities to an unaccredited investor or prior to
the 25th sale of a security in the offering or sale under the IGE; and
n Investors must be informed by the issuer that the securities are
unregistered and may not be resold to non-Georgia residents for a
period of nine months after completion of the offering.5
1) Kansas has also enacted and implemented an intrastate securities exemption. In addition, state representatives in North Carolina and Washington State introduced bills in April, 2013 similarly designed to facilitate investment by state residents in state start-ups. 2) See 15 U.S.C. § 77a et seq; Regulation D. 3) Ga. Comp. R. & Regs. 590-4-2-.08. 4) Id. 5) Id.
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