The sale of real property and certain other transactions in South Carolina subjects the real property to a reassessment for ad valorem property tax purposes (an “assessable transfer”). This reassessment of real property can create a significant increase in the value of the property for ad valorem property tax purposes if the property had been held by the seller for a long period of time at a much lower value.
In 2011, to ameliorate the economic impact, the legislature enacted Act 57 which added new Section 12-37-3135 to Title 12 of the South Caroline Code. Act 57 provides for a 25% exemption from the purchase price of commercial property taxed at 6% undergoing an assessable transfer. The exemption cannot, however, reduce the value of the property below the fair market value of the property on the books of the Assessor at the time of transfer. The Act also established a notice provision whereby the taxpayer gives notice to the Assessor of its intention to claim the exemption.
Following the enactment of Act 57, Assessors, at the prompting of the Department of Revenue, took the position that if the notice to claim the exemption was not given to the Assessor before January 31st of the year following the assessable transfer, that the election was invalid. A number of taxpayers following the enactment of Act 57 failed to file the election timely and were denied the benefit of the election.
On August 26, 2020, the Court of Appeals in the companion cases of Fairfield Waverly, LLC vs. Dorchester County and GS Windsor Club, LLC ruled that taxpayers purchasing commercial property may elect at any time following an assessable transfer up until the date of a County wide reassessment to claim the exemption. (Haynsworth Sinkler Boyd, P.A. filed an Amicus Curiae Brief in the Court of Appeals supporting the taxpayer’s position.)
This ruling is good news to purchasers of commercial real estate who claimed the election and had the claim deferred pending the outcome of the Fairfield Waverly/GS Windsor Club case. The ruling may also be good news for purchasers of commercial property who failed to claim the election or who claimed the election and were denied the benefit of the election by the County Assessor. If a reassessment year has not yet occurred between the assessable transfer date and this year (2020), commercial property owners should consider filing a protective election to claim the 25% exemption in the year of the election (2020).
Please contact Scott Barnes for additional information.