Salvation Army v. Strickland

Weltner, Justice. The Salvation Army, as trustee of various intangible personal properties, appeals from a ruling of the superior court which sustained the position taken by the Revenue Commissioner of Georgia that such properties were not exempt from taxation under the provisions of OCGA § 48-6-22 (3). As the record reveals, The Salvation Army, a charitable and religious organization, has received by gift certain intangible personal properties, for which the several donors received a charitable deduction under the federal income tax laws. The Salvation Army holds legal title, but the incomes from the properties are paid to the several donors, or to their designees, during specified lifetimes. Thereafter, the legal and equitable interests in the properties are merged in The Salvation Army, and the trusts terminate. Additionally, some of the trust agreements provide for encroachment for the benefit of the donor or other designee. OCGA § 48-6-22 provides that the state intangible tax shall not apply to “[i]ntangible personal property owned by or irrevocably held in trust for the exclusive benefit of a religious, educational, or charitable institution, no part of the net profit from the operation of which inures to any private person.” This section was authorized by the Constitution of Georgia of 1976, Art. VII, Sec. I, Par. IV, and was [759] continued in effect by the Constitution of Georgia of 1983, Art. VII, Sec. II, Par. IV. Under the statute, three questions arise: (1) whether the properties in question are devoted to the “exclusive benefit” of a qualifying institution — in view of the payment of income to private beneficiaries; (2) whether the properties are “irrevocably held” by The Salvation Army — in view of the potential of encroachment; and (3) whether The Salvation Army is an institution as defined in the statute — in view of the payment by it to private persons of income which might be considered as “part of the net profit from [its] operation.” We need look no further than the provisions of our Constitution which authorized the exemption contained in the statute. Art. VII, Sec. I, Par. IV of the Constitution of Georgia of 1976 provides that “The General Assembly may, by law, exempt from taxation ... all intangible personal property owned by or irrevocably held in trust for the exclusive benefit of religious, educational and charitable institutions, no part of the net profit from the operation of which can inure to the benefit of any private person.” (Emphasis supplied.) It will be seen that there is a minor variance between the constitutional grant and the legislative exemption. That becomes immaterial, however, in the light of yet another constitutional condition for the exemption, not reflected in the statute, as follows: “and also provided that such donations of property shall not be predicated upon an agreement, contract, or otherwise that the donor or donors shall receive or retain any part of the net or gross income of the property.” Constitution of Georgia of 1976, Art. VII, Sec. I, Par. IV. Hence, if the legislative provisos do not defeat the exemption in these cases, there is no question that the exemption must be denied, as each donation is specifically “predicated upon an agreement that the donor or donors [or their designees] shall receive or retain . . . part of the net or gross income of the property.” Finally, we reaffirm this long-standing principle, of unquestioned wisdom: “It is a cardinal rule in the construction of grants of exemptions from taxation, whether such grants be by statute or the constitution, that such exemptions should be strictly construed in favor of the public, and that nothing passes by implication.” City of Columbus v. Muscogee Mfg. Co., 165 Ga. 259 (1) (140 SE 860) (1927), quoted in Brandywine Townhouses v. Tax Assessors, 231 Ga. 585, 587 (203 SE2d 222) (1974). Judgment affirmed. All the Justices concur, except Hill, C. J., and Smith J., who concur in the judgment only, and Gregory, J., who concurs specially. [760] Decided January 30, 1985. Hurt, Richardson, Garner, Todd & Cadenhead, A. Paul Cadenhead, Michael A. O’Quinn, Harry V. Lamon, Jr., for appellant. Michael J. Bowers, Attorney General, Grace E. Evans, Assistant Attorney General, Albert Sidney Johnson, Wade H. Watson III, for appellees.