## Facts

- Zach, Inc., a nonprofit corporation created by a national fraternity to hold real property, owned a fraternity house near and surrounded by the Georgia Institute of Technology campus.
- The house was used to lodge fraternity members and for fraternity social and recreational activities.
- Zach sought an ad valorem tax exemption under OCGA § 48-5-41(a)(6) for buildings “erected for and used as a college.”
- Zach also sought refunds of taxes paid since 1989.
- Prior Georgia decisions had recognized the exemption for fraternity houses owned by a university and, in limited circumstances, by an entity functioning as an “arm and extension” of the university.

## Issues

1. Whether OCGA § 48-5-41(a)(6) exempts a fraternity house owned by a nonprofit created by a national fraternity, rather than by the university or an “arm or extension” of the university.
2. Whether denying the exemption to Zach, while allowing it for university-owned or university-affiliated (“arm or extension”) fraternity housing, violates equal protection.

## Decision

- The Supreme Court of Georgia affirmed the judgment that the property was taxable.
- The educational-use exemption was held to apply to residential fraternity property only when owned by the educational institution or its “arm or extension.”
- Because Zach was not created by Georgia Tech and was not shown to be an arm or extension of the institution, the property did not qualify for the exemption.
- The Court rejected the equal-protection challenge, concluding the ownership-based classification limiting the exemption was constitutionally permissible.

## Legal Principles

- Ad valorem tax exemptions are exceptions to the general rule of taxation and are strictly construed against the taxpayer claiming the exemption.
- Property used for purely residential purposes does not fall within the educational-use exemption merely because students live there.
- Under OCGA § 48-5-41(a)(6), fraternity housing qualifies for the educational exemption only when ownership is vested in the educational institution or an entity so closely affiliated that it operates as the institution’s “arm or extension.”
- In the tax-classification context, the state may rationally distinguish between institutionally owned/controlled property and property owned by independent entities formed for member convenience, without violating equal protection.

## Conclusion

A fraternity house owned by an independent nonprofit formed by a national fraternity is not exempt from Georgia ad valorem taxation under the educational-use exemption absent ownership by the university or its “arm or extension,” and limiting the exemption on that basis does not violate equal protection.


Zach, Inc. v. Fulton County, 271 Ga. 411, 520 S.E.2d 899 (1999)