On Wednesday, the South Carolina Court of Appeals issued an opinion that could provide relief to owners of commercial and investment properties, many of whom are already experiencing turbulence in development and acquisition due to COVID-19.
At issue in Fairfield Waverly, LLC v. Dorchester County Assessor is the deadline by which a taxpayer must apply for a property tax exemption enacted by the South Carolina legislature in 2010. Known as the 25% assessable transfer of interest (ATI) exemption, it allows a taxpayer to reduce the property tax value of a newly acquired property by as much as 25%. In short, the Court of Appeals’ decision effectively extends the deadline for taxpayers to file for it.
The 25% ATI exemption was enacted to provide relief to certain real estate investors whose property tax values could be increased significantly by their county assessor under South Carolina’s ATI rules enacted in 2006.
In South Carolina, county assessors are required by law to revalue all property in their jurisdictions at least once every five years. Generally, county assessors are prohibited from increasing the taxable value of a specific parcel of real property by more than 15% relative to the parcel’s taxable value prior to the five-year revaluation. However, this 15% cap on revaluation does not apply if the parcel’s ownership has changed hands in an ATI. Consequently, the property tax value of two otherwise similar parcels – one that has not changed hands and has thereby benefitted from the 15% cap and the other that has been transferred and has not benefited from the 15% cap – can diverge significantly. This is the type of disparity that the 25% ATI exemption was enacted to address.
In Fairfield Waverly, the taxpayers acquired real property in late 2012, failed to file for the ATI exemption by January 30, 2013, and then subsequently filed for the exemption by January 30, 2014. The Dorchester County Assessor’s Office denied the exemption requests based on a highly technical reading of the statute. The taxpayers pointed to the part of the statute that requires the taxpayer to notify the assessor “before January 31 of the tax year for which the owner first claims eligibility for the exemption.”
The South Carolina Court of Appeals held that a taxpayer need not claim the 25% ATI exemption by January 30 of the tax year immediately following the tax year in which the ATI occurred.
The court held that county assessors must grant the exemption even if claimed after the first year of eligibility. In its opinion, the court described the statutory language at issue as “implicitly, if not directly acknowledg[ing] an owner might not claim the exemption immediately.” The court concluded, “we believe the legislature intended all purchasers would have a meaningful opportunity to claim the ATI Exemption.”
The court disagreed with the taxpayers’ argument that the deadline is completely open-ended. The court’s opinion seems to suggest that the taxpayer must, at minimum, seek the 25% ATI exemption prior to the next countywide reassessment.
It is unclear at this point if the Dorchester County Assessor’s office will seek further appeal to the South Carolina Supreme Court.
What This Means for Taxpayers
If you have acquired real property in South Carolina in the last few years, check with your property tax advisor to see if you may qualify for the 25% ATI exemption under the Fairfield Waverly case. Keep in mind the exemption does not apply to property that is treated as agricultural property, personal residences, or property that is valued and assessed by the South Carolina Department of Revenue such as manufacturing property, utility property, or other types of property used in certain large industries.
We have a team at Parker Poe that is constantly tracking South Carolina property tax developments. For more information, please contact us or your regular Parker Poe contact.