The Georgia Supreme Court ruled that local governments may impose business occupational tax on practicing attorneys within their jurisdiction. The Court upheld the constitutionality of the City of Dunwoody's ordinance as a means for generating revenue.
In Moss et al. v. City of Dunwoody(S13A1105), which was decided October 21, 2013, the Georgia Supreme Court unanimously ruled that lawyers are subject to local Business Occupancy Taxes. The Court clarified that Business Occupancy Taxes are taxes and not an attempt to regulate the practice of law.
Brief Summary of the Holding
This case involved two lawyers who appealed a trial court decision holding that the City of Dunwoody could collect business occupational taxes from lawyers, as long as they were imposed for generating revenue and not as a license for practicing law.
The two attorneys, who maintain an office and practice law in the city, argued that the ordinance imposing the occupation tax was unconstitutional and placed a precondition on the practice of law. They also contend that the ordinance operates as an improper attempt to regulate the practice of law in violation of O.C.G.A. § 15-19-30 et seq. and violates equal protection, since the tax does not apply to lawyers practicing outside the city limits.
The Supreme Court of Georgia affirmed the trial court ruling and the ordinance is upheld.
Brief Summary of the Reasoning
In regards to the argument that the ordinance is unconstitutional and places a precondition on the practice of law:
Only the Supreme Court of Georgia has the authority to regulate the practice of law and licensing of attorneys in the state of Georgia. 1983 Ga. Const., Art. III, Sec. VI, Par. IV; O.C.G.A. § 15-19-30 et seq. Local governments, like the City of Dunwoody, are prohibited from subjecting attorneys to regulatory fees. O.C.G.A. § 48-13-9 (c) (1).
However, local governments are permitted to impose and enforce occupational taxes on attorneys practicing within their jurisdiction, so long as the tax is meant as a revenue booster rather than as a precondition or license for practicing law (thereby rendering it as a business regulatory fee, which the local government is barred from imposing). See Sexton v. City of Jonesboro, 267 Ga. 571, 572 (1997); Chanin v. Bibb County, 234 Ga. 282, 285 (1975); Brown v. City of Atlanta, 221 Ga. 121, 124 (1965).
The question for this Court was to determine the constitutionality of City of Dunwoody’s ordinance. The Court examined the statute at issue not only for its stated purpose but also for its operative effect. Sexton, supra at 572. The Court determined that this ordinance did not display the effects of a regulatory ordinance (such as criminal sanctions for violations or the requirement to display the tax certificate) and thus, it is not an unconstitutional regulation of the practice of law.
Nevertheless, the appellant lawyers argued that the ordinance’s registration requirement is a precondition to their practice of law, essentially acting as an issuance of a business license which can be suspended or revoked. The Court did not accept this argument, but instead explained that the registration is a method to assist the City of Dunwoody with the assessment and collection of taxes due. The ordinance by no means serves to regulate attorneys; it does not give the City of Dunwoody any authority over the practice of law or the power to suspend or revoke an attorney’s law license if they violate the ordinance.
Lastly, the Court goes on to explain that an attorney may be required to pay a municipal revenue tax, where such tax is enforced by civil penalties only, without such a tax regulating the practice of law. Gleason v. City Council of Augusta, 242 Ga. 796, 797 (1979); see also Boswell v. City of Valdosta, 229 Ga. 752 (1972). Such practices by the local government do not impede attorneys ability to practice law, nor do they interfere with material protected by the attorney-client privilege. Furthermore, the documents that may need to be produced to assist the City to determine the correct amount of tax due are protected from disclosure. See O.C.G.A. § 48-13-15. Therefore, the Court stated that the City inspecting an attorney’s financial records does not interfere with their ability to practice law, as it is neither a precondition to the practice of law nor an attempt to regulate such practice.
In regards to the argument that the ordinance violates equal protection and is arbitrary and capricious:
The appellant lawyers argued that the ordinance violated equal protection because it did not apply uniformly to all attorneys practicing law in Georgia. However, the Court reasoned that there is no fundamental right to practice law and that attorneys are not considered as a suspect class. Accordingly, a rational basis test was the appropriate analysis for this case. See Pawnmart v. Gwinnett County, 279 Ga. 19, 21 (2005). So long as the purpose of the ordinance is legitimate and there is some reasonable relation to further that goal, then the ordinance passes the rational basis test. See also Smith v. Cobb County-Kennestone Hosp. Authority, 262 Ga. 566, 570 (1992).
The Court held that the City of Dunwoody showed that the occupational tax paid for a variety of city services that benefits the city and its inhabitants, including the attorneys practicing in the area. Also, since the tax ordinance is applied equally to all attorneys practicing within the City’s jurisdiction, there is no valid equal protection argument. See Coolidge v. Mayor & Alderman of Savannah, 128 Ga. App. 704, 705 (1973) (finding that the Georgia Constitution requires uniform taxation on the same class of subjects within the territorial limits of the authority levying the tax). Thus, the Court found that the ordinance does not violate the equal protection clauses of the Georgia or federal Constitutions.
A note regarding Justice Melton’s special concurrence:
Justice Melton wrote separately to emphasize that the key question in the case was whether the ordinance acted as a regulatory scheme or as simply a means to generate revenue. Furthermore, he stressed that the factors discussed in the Sexton case that are used to determine if an ordinance is improperly regulatory (e.g., criminal sanctions for violations or the requirement to display the tax certificate) are not exhaustive or conclusive. The main consideration is the operative effect of the ordinance and whether it is essentially acting as a regulatory fee. Justice Melton explained that the City of Dunwoody ordinance acts as a revenue generator, treats all attorneys like every other taxpayer, and provides benefits to all Dunwoody citizens; therefore, the ordinance can in no way be considered as an unconstitutional attempt to regulate the practice of law.
The law office of A. Bishop Law can assist clients throughout Northeast Georgia including: Hall County (Gainesville, Oakwood, Flowery Branch), Jackson County (Jefferson, Braselton) White County (Helen, Cleveland), Lumpkin County (Dahlonega), Dawson County (Dawsonville), Habersham County (Demorest, Cornelia), and all of Northeast Georgia.
This article should not be considered nor relied upon as legal advice since it is only intended for general overview and informational purposes. Please consult with an attorney on your specific situation in order to determine an appropriate legal course of action.