D. Exemptions

• Library: Practical Guide to Commercial Real Estate in South Carolina (SCBar) (2012 Ed.)

D. Exemptions

S.C. Code Ann. § 12-37-220 provides numerous exemptions and partial exemptions from the ad valorem property tax.²³

Unless otherwise stated, a taxpayer claiming the exemption must file an application for exemption (PT-401-1) with the South Carolina Department of Revenue. The exemption is usually effective for the first year following the year in which the exemption is applied for.

1. Multiple Lot Discount

A multiple lot discount is available to developers for ten (10) or more recorded subdivided plats if an application is filed with the assessor's office before May 1^st of the year in which the applicant is claiming the discount. For tax years after December 31, 2011, a taxpayer may make a late application for the discount by filing an application within thirty (30) days of the mailing of the property tax bill for the year in which the discount is claimed. The application must be accompanied by a One Hundred Dollar ($100) late application penalty.²⁴ The discount from the appraised fair market value is the difference between two (2) values calculated as follows: The first value is the discounted value of the lots determined by discounting the appraised value of each lot to reflect carrying costs and sales velocity (the discount rate includes the developer's projected holding period, the effective tax rate for the taxing district in which the lots are located and the local mortgage interest rate). The second value is determined by dividing the value of the entire parcel, valued as undeveloped real property, by the total number of platted building lots. This discount is available for five (5) years or until the lot is sold or a certificate of occupancy is issued for the improvements on the lot.²⁵ If the lot is sold to a homebuilder or residential general contractor, the discount continues for the first tax year which ends twelve (12) months from the date of sale if the purchaser files a written application for the discount with the assessor before May 1^st of the year for which the applicant is claiming the discount.²⁶ For lots which received the one (1) year homebuilder/residential general contractor discount during the period beginning after December 1, 2008 and before January 1, 2012, an additional three (3) years of eligibility for the discount is available for tax years 2012, 2013 and 2014 if the homebuilder/residential general contractor files an application with the assessor no later than thirty (30) days after mailing of the property tax bill. If the lot receiving the additional three (3) years of eligibility for the lot is transferred to another owner in the business of residential development or construction, the remaining portion of the discount period is available to the new owner if an application is filed with the assessor within thirty (30) days of the mailing of the tax bill.²⁷ If the lots are sold in bulk, some assessors took the position that the multi-lot discount is not available to the new purchaser.²⁸ It is clear for tax years beginning after December 31, 2011 "if ten or more lots receiving the discount under this section are sold to a new owner primarily in the business of real estate development, the new owner may make written application within sixty days for the remaining eligibility period."²⁹

2. Homeowner's Association Property

The valuation of homeowner's association property³⁰ is based on the "nonqualified earnings" value of the property. This value is determined by capitalizing the property's "nonqualified gross receipts" to determine fair market value. "Nonqualified gross receipts" are gross receipts less membership dues, fees and assessments from members and amounts received from the developer of the property. Such number is then capitalized using a capitalization rate of 20%. If the resulting value is less than Five Hundred Dollars ($500) per acre, then Five Hundred Dollars ($500) per acre is used. As with other exemptions, application for special valuation for homeowners' associations must be made before the first penalty date for taxes due (usually January 15^th) for the first year in which the special valuation is claimed.
The special valuation applicable to homeowners' associations only applies to a homeowners' association where: (i) the property owned by the homeowners' association is held for the use, benefit and enjoyment of members of the homeowners' association; (ii) each member of the homeowners' association has an irrevocable right to use and enjoy, on an equal basis, property owned by the homeowners' association, subject to restrictions, rules, regulations or bylaws of the homeowners' association; (iii) each irrevocable right to use and enjoy property owned by the homeowners' association is appurtenant to taxable real property owned by a member of the homeowners' association.

3. State Property Used Exclusively For Public Purposes

Property of the state and its political subdivisions is exempt from ad valorem taxation if it is used exclusively for public purposes.³¹ Not surprisingly, much has been made of the phrase "exclusively for public purposes." In the seminal case of Charleston County Aviation Authority v. Wasson,³² the Charleston County Assessor reasoned that since the Aviation Authority leased property to for-profit entities servicing the airport such as airlines, rent-a-car companies, food service companies, general aviation service providers, and an air freight company, that the property was not being used exclusively for public purposes and that it was in fact being used by some companies as a means to derive profits. Our Supreme Court held that "property may be used exclusively for a public purpose notwithstanding an incidental private use of the property."³³

4. Property of Schools, Colleges and Other Institutions of Learning and All Charitable Institutions in the Nature of Hospitality and Institutions Caring For the Infirmed, the Handicapped, the Aged, Children and Indigent Persons, Except Where the Profits of Such Institutions Are Applied to Private Use³⁴

5. Public Libraries, Churches, Parsonages and Burying Grounds³⁵

6. Property of Charitable Trusts and Foundations Used Exclusively For Charitable and Public Purposes³⁶

7. Manufacturing Facilities

New manufacturing establishments and additions to existing manufacturing establishments with a cost of $50,000 or more may qualify for a five-year exemption from county ad valorem property taxes.³⁷ For purposes of satisfying the $50,000 requirement, additions to existing establishments includes additional machinery and equipment installed in the plant. A manufacturing establishment is defined as an "establishment where tangible personal property is produced or assembled."³⁸
An unrelated, subsequent purchaser of a manufacturing establishment exempt under the five-year exemption above may qualify to use the remaining time available to the seller under the five-year exemption.³⁹ An unrelated, subsequent purchaser may also qualify for a whole, new five-year exemption.⁴⁰

8. Homestead Exemption⁴¹

A homestead exemption is available for taxpayers 65 years and older, and taxpayers totally and permanently disabled or legally blind.⁴² The first $50,000 of the fair market value of a dwelling unit is exempt from county, municipal, school and special assessment real property taxes when a person (i) has been a resident of the state for one (1) year and has reached the age of 65 on or before December 31^st, (ii) has been classified as totally and permanently disabled by a state or federal agency having the function of classifying persons, (iii) is legally blind⁴³ preceding the tax year in which the exemption is claimed and holds complete fee simple title or a life estate to the dwelling unit. An application for exemption must be filed with the County Auditor prior to July 15^th of the year in which the exemption is claimed. If the exemption is made after that date, but before January 15^th of the following year, the taxes for the year of application will be reduced "to reflect the exemption."

9. Public Benefit Corporations Used Exclusively For Economic Development Purposes⁴⁴

10. Principal Residence of Disabled Veteran, Law Enforcement Officer or Firefighter

The principal residence of a disabled veteran, law enforcement officer or firefighter or a surviving spouse of such a person is exempt from ad valorem property taxes. To qualify, the taxpayer must be permanently and totally disabled as a result of a service-connected disability or the surviving spouse of service man, law enforcement officer or firefighter killed in the line of duty.⁴⁵

11. Principal Residence of a Paraplegic or Hemiplegic Person

The principal residence and not more than one (1) acre of land owned by a paraplegic or hemiplegic taxpayer in fee, for life or jointly with his or her spouse is exempt from ad valorem property taxes. The exemption is also allowed to the surviving spouse so long as the surviving spouse does not remarry, continues to reside in the dwelling and obtains a fee or life estate in the dwelling. This exemption applies as well to taxpayers with Parkinson's disease, Multiple Sclerosis or Amyotrophic Lateral Sclerosis if it causes the same ambulatory difficulties as a person with paraparesis or hemiparesis. Proof of such disability must be provided to the Department of Revenue.⁴⁶

12. Property of A Nonprofit Corporation Formed For the Purpose of Providing Water, Sewage Disposal or Both⁴⁷

The nonprofit corporation must be financed in whole or in part by a loan made under the provisions of the Consolidated Farmers Home Administration Act of 1961, as amended by the Food and Agriculture Act of 1962, and acts amending it, and by the State Revolving Fund for Water and Sewer.

13. Veteran Organization

Property of veteran organizations chartered by Congress (American Legion, Fleet Reserve Association) "used exclusively for the purpose of such organization and not used for any purpose other than club rooms, offices, meeting places, or other

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