On August 11, 2026, the South Carolina Department of Revenue (SCDOR) confirmed that a fee in lieu of ad valorem tax (FILOT) arrangement does not automatically terminate if a company fails to place economic development assets in service within three property tax years following execution of the governing incentive agreement, commonly referred to as a "fee agreement." The ruling (SC Revenue Ruling #26-4) carries significant consequences for companies considering a South Carolina investment and for those that have signed fee agreements but have yet to make their property or equipment ready and available for its intended use, which SCDOR refers to as placing assets in service.

Chapter 44 of Title 12 ties FILOT benefits to a statutory timeline. A project’s commencement date is the last day of the property tax year in which the company first places assets in service, and the statute provides that this date may be no later than the last day of the property tax year three years after the year in which the parties execute the fee agreement. The commencement date is a fundamentally important concept for any fee agreement because it starts the clock on the investment period: the period during which investments placed in service by the taxpayer qualify for the FILOT benefits.

Any assets placed in service after the close of the investment period do not qualify for the FILOT benefits. The statute does not state what happens when a sponsor places no assets in service within this three-year period. The ruling addresses the question directly: does the missed deadline automatically terminate the FILOT and thus subject any project property to ad valorem taxation?

SCDOR has confirmed that the answer is no unless the governing fee agreement states otherwise. That answer is consistent with SCDOR's prior, informal guidance. Failure by a company to place economic development property in service by the end of the commencement period does not automatically terminate the fee agreement absent specific language to the contrary. Instead, the default commencement date becomes the last day of the property tax year three years after the fee agreement date, and the company then has five years from that date to place all of its economic development property in service. The SCDOR ruling applies to all current fee agreements.

For companies evaluating South Carolina to locate, expand, or restructure operations, the ruling removes a timing risk. Long equipment lead times, phased construction, or supply chain delays will not forfeit negotiated benefits, and project teams can account for that flexibility in their schedules from the start.

For companies with existing fee agreements, they should review their fee agreements for county termination rights or negotiated deadlines stricter than the statute and consider conferring with legal counsel on how SCDOR’s ruling may impact their projects.

For more information, please contact a member of Parker Poe's Business Expansion + Location Solutions (BELS) Team or your regular Parker Poe contact. Click here to subscribe to our latest alerts and insights.