The South Carolina legislature recently amended the abandoned building tax credit statute, marking the first substantive update since 2018.
With the governor’s signature on May 19, Senate Bill 853 became law. The taxpayer-friendly law provides investors, commercial and residential real estate developers, and other real estate practitioners clarity on a number of issues going forward. Its principal provisions clarify the types of properties eligible for the tax credit as well as certain timing considerations for taxpayers filing a notice of intent to rehabilitate an eligible abandoned building. It also prohibits loan collateralization.
The tax credit statute allows taxpayers, including developers and others, to receive a credit equal to 25% of expenses incurred in the redevelopment of an abandoned building. The building has to have been unoccupied for at least five years and the statute caps credits at $700,000 per abandoned building site.
Eligibility Issues
In January 2026, prior to the passage of the bill into law, the South Carolina Department of Revenue (SCDOR) published guidance requiring, for the very first time, a taxpayer to prove that an abandoned building had an income-producing use before the required five-year period of abandonment began. In the same guidance, SCDOR also appeared to take the position that many buildings owned by governmental entities would not be eligible unless they exceeded 50,000 square feet under the statutory definition of a "state-owned abandoned building." This prior income-producing use requirement and the 50,000 square foot minimum threatened to severely limit eligibility for many types of buildings, including those owned and operated by nonprofit organizations before abandonment and those owned by governmental entities at any time in the past. The January guidance was concerning because the marketplace had come to expect that such buildings could be eligible if they otherwise met the statutory requirements.
To address the prior income-producing use issue, the bill clarifies the statutory definition of abandoned building by removing all references to "income producing" and "business" and by substituting "unoccupied" for "closed." As a result, a building now qualifies if "at least sixty-six percent of the space…has been unoccupied continuously or otherwise nonoperational for a period of at least five years" measured from the time the taxpayer files its notice of intent to rehabilitate with SCDOR. To be eligible, the statute still requires an abandoned building to be put to an income-producing use post-rehabilitation, but the statute no longer references any historical income-producing use.
To further address the eligibility of governmentally owned buildings, the bill removed all references to "state-owned abandoned buildings," including the 50,000 square foot minimum from the statute. Consequently, all buildings in the state, regardless of ownership, are subject to the same eligibility rules going forward.
Notice of Intent Timing
In order to receive the credit, developers and others are required to file a notice of intent with SCDOR about their plans to redevelop these types of properties. The bill makes it clear that when a filing party submits a notice of intent before building permits are pulled, then all their eligible rehabilitation expenses qualify for the tax credit. This is an important change since developers spend a significant amount before a project goes vertical on design, site remediation, and other project needs. This change also brings SCDOR’s policy for the abandoned building tax credit into alignment with its policy for the textile revitalization tax credit.
Loan Collateralization Restrictions
The statute now prohibits the abandoned building tax credits from being used as collateral for a loan. However, standard loan structures used in tax credit transactions involve pledges of equity contributions, membership interests, and other property, not the tax credits directly, and are not impacted by this change.
Final Takeaway for Developers Going Forward
The May 19 passage of Senate Bill 853 provides developers and others in the real estate industry with updated guidance on utilizing South Carolina’s abandoned building tax credit program. Developers that have a project that could benefit from these tax credits should consider partnering with outside counsel on questions of eligibility, calculation of potential tax credits, and ongoing compliance.
To read more about the state’s textile revitalization tax credits, check out our previous client alerts:
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