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COMMITTEE REPORT
February 19, 2004
H. 4271
Introduced by Reps. Townsend, Thompson, Cooper, Martin, Stille, White and E.H. Pitts
S. Printed 2/19/04--H.
Read the first time May 22, 2003.
To whom was referred a Bill (H. 4271) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-37-223 so as to eliminate increases in fair market value of owner-occupied, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking Section 12-37-223, as contained in SECTION 1, beginning on page 1, and inserting:
/ "Section 12-37-223. (A) For purposes of this section, real property means real property classified for property tax purposes pursuant to Section 12-43-220.
(B) There is exempted from property tax an amount of fair market value of real property located in the county sufficient to eliminate any valuation increase attributable to a countywide appraisal and equalization program conducted pursuant to Section 12-43-217. An exemption allowed by this section does not apply to:
(1) value attributable to property or improvements not previously taxed, such as new construction, and for renovation of existing structures;
(2) real property transferred in fee simple after the year in which the most recent countywide equalization program was implemented pursuant to Section 12-43-217; and
(3) Real property valued for property tax purposes by the unit evaluation method.
(C)(1) Notwithstanding subsection (B)(2), the exemption provided in subsection (B) applies to property which has been transferred in a transfer that is not subject to income tax pursuant to Sections 102, limited to transfer to a spouse or surviving spouse, (Gifts and Inheritances), 1033 (Conversions--Fire and Insurance Proceeds to Rebuild), 1041 (Transfers of Property Between Spouses or Incident to Divorce), 351 (Transfer to a Corporation Controlled by Transferor), 355 (Distribution by a Controlled Corporation), 368 (Corporate Reorganizations), 721 (Nonrecognition of Gain or Loss on a Contribution to a Partnership) of the Internal Revenue Code as defined in Section 12-6-40; and to distributions of real property out of corporations, partnerships, or limited liability companies to persons who initially contributed the property to the corporation, partnership, or limited liability company.
(2) Notwithstanding Subsection (B)(2), and in addition to the nondisqualifying transfers allowed pursuant to item (1) of this subsection, the transfer of any interest in real property to a spouse, whether inter vivos, testamentary, or by operation of law, is a nondisqualifying transfer, and the exemption allowed pursuant to Subsection (B)(2) continues to apply to the interest transferred.
(D) Once the taxable value of a property is reduced because of the exemption provided in subsection (B), that reduced value remains in effect, except as otherwise provided in subsection (B)(2), until the implementation of the next equalization and reassessment program. The effect of this exemption is, that upon the implementation of each subsequent equalization and reassessment program, the value of the property as determined under Section 12-37-930, reduced by the amount of any exemption granted under this section, may not increase except in the year following a disqualifying transfer in ownership.
When a property is transferred such that the property is no longer eligible for the exemption provided for in subsection (B), the property is subject to being taxed in the tax year following the transfer at its value, as determined under Section 12-37-930, at market value based on the sale or transfer of ownership or at the appraised value determined by the county assessor.
(E) The closing attorney involved in a real estate transfer shall provide the following notice to the buyer(s):
THE INTEREST IN REAL PROPERTY TRANSFERRED AS A RESULT OF THIS TRANSACTION MAY BE SUBJECT TO PROPERTY TAXATION DURING THE NEXT TAX YEAR AT A VALUE THAT REFLECTS ITS FAIR MARKET VALUE.
(F) To qualify for the exemption authorized under subsection (B), the owner of the property for which the exemption is sought or the owner's agent must apply to the county assessor where the property is located and establish eligibility for the exemption. The time period for making application for the exemption provided for in subsection (B), or for seeking a refund of taxes paid as a result of a subsequent determination of eligibility for the exemption, is the same as provided for in Section 12-43-220(c) for administering the special legal residence assessment ratio, mutatis mutandis.
Under penalty of perjury, the taxpayer must certify that the property meets the qualifications established in subsection (B) for eligibility for the exemption and provide such other proof required by the county assessor. The burden is on the taxpayer to establish eligibility for the exemption. The Department of Revenue shall assist the applicant and the assessor to the extent practicable in providing information necessary or helpful in determining eligibility. If the assessor determines the applicant ineligible, the value of the property must be determined by the assessor.
No further application is necessary from the owner who qualified the property for the exemption while the property continues to meet the eligibility requirements. If a change in ownership occurs, the owner who had qualified for the exemption shall notify the assessor within six months of the transfer of title. Another application is required by the new owner if the new owner seeks to qualify for the exemption provided by this section.
If a person signs the certification, obtains the exemption, and is, thereafter, found not eligible, a penalty may be imposed equal to one hundred percent of the tax paid, plus interest on that amount at a rate of one-half of one percent a month, but in no case less than thirty dollars nor more than the current year's taxes assessed on the value of the property without regard to the exemption."
SECTION 2. Section 12-37-223A. of the 1976 Code, is repealed for property tax years beginning after 2003.
SECTION 3. Article 1, Chapter 37, title 12 of the 1976 Code is amended by adding:
"Section 12-37-130. The Speaker of the House of Representatives and the President Pro Tempore of the Senate shall appoint, by January 14, 2014, a task force to study the effects of this chapter on homeowners and the real estate industry and recommend changes to this chapter, and shall report its findings to the General Assembly no later than January 13, 2015."
SECTION 4. Section 6-1-320(A) of the 1976 Code, as last amended by Act 114 of 1999, is further amended to read:
"(A) Notwithstanding Section 12-37-251(E), a local governing body may increase the millage rate imposed for general operating purposes above the rate imposed for such purposes for the preceding tax year only to the extent of the increase in the consumer price index for the in the average of the twelve monthly consumer prices indexes for the most recent twelve-month period consisting of January through December of the preceding calendar year. However, in the year in which a reassessment program is implemented, the rollback millage, as calculated pursuant to Section 12-37-251(E), must be used in lieu of the previous year's millage rate."
SECTION 5. This act takes effect upon approval by the Governor and applies for countywide reassessment values implemented after 2003. Amounts exempted pursuant to the former provisions of Section 12-37-223(A). are deemed to have been exempted pursuant to Section 12-37-223 of the 1976 Code, as added by this act.
Renumber sections to conform.
Amend title to conform.
ROBERT W. HARRELL, JR. for Committee.
REVENUE IMPACT 1/
This bill has no impact on state or local revenue. Although the amount of fair market value would be decreased, local governments are expected to adjust their millages to make up for the shortfalls. This bill would change the incidence of local property taxes by shifting $18 million among the classes of property in the first year. By the fifth year when all the counties have been reassessed, the total dollar amount shifted among the classes of property rises to $97 million. Those changes from the levels that would occur in the absence of this bill are as follows:
Category ($ Million) First Year Fifth Year
Owner Occupied -15.4 -85.0
Agricultural .2 1.2
Commercial/Rental 5.6 30.9
Personal Property (Vehicles) 3.3 17.9
Manufacturing 2.9 16.1
Utility 2.3 12.8
Business Personal 1.1 5.8
Explanation
Under current law, each county is required to be reassessed every five years. This bill would exempt owner-occupied residential real property from any increases in value attributable to reassessment as long as a person stays in the same house. This exemption would not apply to new construction or renovation of existing structures not previously taxed. This exemption would also not apply to property transferred after the most recent countywide equalization program with some exceptions such as transfers between immediate family members. This bill would change the incidence of local property taxes by shifting $18 million among the classes of property in the first year. By the fifth year when all the counties have been reassessed, the total dollar amount shifted among the classes of property rises to $97 million.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-37-223 SO AS TO ELIMINATE INCREASES IN FAIR MARKET VALUE OF OWNER-OCCUPIED RESIDENTIAL PROPERTY ATTRIBUTABLE TO QUADRENNIAL REASSESSMENT IN THE COUNTY, AND PROVIDE THE PERIOD FOR WHICH THIS EXEMPTION APPLIES; AND TO AMEND SECTION 12-37-223A., RELATING TO THE COUNTY OPTION PROPERTY TAX EXEMPTION LIMITING TO FIFTEEN PERCENT INCREASES IN FAIR MARKET OF REAL PROPERTY AS A RESULT OF QUADRENNIAL REASSESSMENT IN A COUNTY, SO AS TO CONFORM THIS OPTIONAL EXEMPTION TO THE PROVISIONS OF SECTION 12-37-223 OF THE 1976 CODE AS ADDED BY THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 3, Chapter 37, Title 12 of the 1976 Code is amended by adding:
"Section 12-37-223. (A) For purposes of this section, real property means owner-occupied residential real property classified for property tax purposes pursuant to Section 12-43-220(c).
(B) There is exempted from property tax an amount of fair market value of real property located in the county sufficient to eliminate any valuation increase attributable to a countywide appraisal and equalization program conducted pursuant to Section 12-43-217. An exemption allowed by this section does not apply to:
(1) value attributable to property or improvements not previously taxed, such as new construction, and for renovation of existing structures; and
(2) property transferred after the most recent countywide equalization program implemented pursuant to Section 12-43-217.
(C) Notwithstanding subsection (A)(2), the limitation provided in subsection (A) applies to property transfers that are not subject to income tax pursuant to Sections 102 (Gifts and Inheritances), 1033 (Conversions--Fire and Insurance Proceeds to Rebuild), or 1041 (Transfers of Property Between Spouses or Incident to Divorce) of the Internal Revenue Code, as defined in Section 12-6-40. The limitation also applies to property transfers between immediate family members which means spouse, parents, children, sisters, brothers, grandparents, and grandchildren.
(D) Once the taxable value of a property is reduced because of the exemption provided for in subsection (A), that reduced value remains in effect, except as otherwise provided in subsection (A)(2), until the implementation of the next equalization and reassessment program. The effect of this exemption is, that upon the implementation of each subsequent equalization and reassessment program, the value of the property as determined under Section 12-37-930, reduced by the amount of any exemption granted under this section, may not increase.
When a property is transferred such that the property is no longer eligible for the exemption provided for in subsection (A), the property is subject to being taxed in the tax year following the transfer at its value, as determined under Section 12-37-930, at market value based on the sale or transfer of ownership or at the appraised value determined by the county assessor.
Property transferred on or after January first of the year of implementation of an appraisal and equalization program conducted pursuant to Section 12-43-217 receives this exemption and the exemption remains in effect until a subsequent disqualifying transfer.
(E) The closing attorney involved in a real estate transfer shall provide the following notice to the buyer(s):
REAL PROPERTY TRANSFERRED AS A RESULT OF THIS TRANSACTION MAY BE SUBJECT TO PROPERTY TAXATION DURING THE NEXT TAX YEAR AT A VALUE THAT REFLECTS ITS FAIR MARKET VALUE.
(F) To qualify for the exemption authorized under subsection (A), the owner of the property for which the exemption is sought or the owner's agent must apply to the county assessor where the property is located and establish eligibility for the exemption. The time period for making application for the exemption provided for in subsection (A), or for seeking a refund of taxes paid as a result of a subsequent determination of eligibility for the exemption, is the same as provided for in Section 12-43-220(c) for administering the special legal residence assessment ratio, mutatis mutandis.
Under penalty of perjury, the taxpayer must certify that the property meets the qualifications established in subsection (A) for eligibility for the exemption and provide such other proof required by the county assessor. The burden is on the taxpayer to establish eligibility for the exemption. The Department of Revenue shall assist the applicant and the assessor to the extent practicable in providing information necessary or helpful in determining eligibility. If the assessor determines the applicant ineligible, the value of the property must be determined by the assessor.
No further application is necessary from the owner who qualified the property for the exemption while the property continues to meet the eligibility requirements. If a change in ownership occurs, the owner who had qualified for the exemption shall notify the assessor within six months of the transfer of title. Another application is required by the new owner if the new owner seeks to qualify for the exemption provided by this section.
If a person signs the certification, obtains the exemption, and is, thereafter, found not eligible, a penalty may be imposed equal to one hundred percent of the tax paid, plus interest on that amount at a rate of one-half of one percent a month, but in no case less than thirty dollars nor more than the current year's taxes assessed on the value of the property without regard to the exemption."
SECTION 2. Section 12-37-223A. of the 1976 Code, as added by Act 283 of 2000, is amended to read:
"Section 12-37-223A. (A) As authorized by Section 3, Article X of the South Carolina Constitution, the General Assembly hereby authorizes The governing body of a county by ordinance to may exempt an amount of fair market value of real property located in the county sufficient to limit to fifteen percent any valuation increase attributable to a countywide appraisal and equalization program conducted pursuant to Section 12-43-217. An exemption allowed by this section does not apply to:
(1) real property subject to the exemption allowed pursuant to Section 12-37-223;
(2) real property valued for property tax purposes by the unit valuation method;
(2)(3) value attributable to property or improvements not previously taxed, such as new construction, and for renovation of existing structures;
(3)(4) property transferred after the most recent countywide equalization program implemented pursuant to Section 12-43-217; provided, however, at the option of the governing body of a county which is in the process of first implementing a countywide equalization program under Section 12-43-217, property transferred on or after January first of the year of implementation of the most recent countywide equalization program.
(B) Under either option chosen by a county pursuant to subsection (A)(3), the fifteen percent limitation authorized in subsection (A) shall apply to property transfers that are not subject to income tax pursuant to Sections 102 (Gifts and Inheritances), 351 (Transfer to a Corporation Controlled by Transferor), 355 (Distribution by a Controlled Corporation), 368 (Corporate Reorganizations), 721 (Nonrecognition of Gain or Loss on a Contribution to a Partnership), 1031 (Like-Kind Exchanges), 1033 (Conversions--Fire and Insurance Proceeds to Rebuild), or 1041 (Transfers of Property Between Spouses or Incident to Divorce) of the Internal Revenue Code, as defined in Section 12-6-40; and to distributions of property out of corporations, partnerships, or limited liability companies to persons who initially contributed the property to the corporation, partnership, or limited liability company. The fifteen percent limitation shall also apply to property transfers between immediate family members which means spouse, parents, children, sisters, brothers, grandparents, and grandchildren.
(C) Assessed value exempted from ad valorem taxation by an ordinance enacted pursuant to this section is nevertheless considered taxable property for purposes of computing the bonded indebtedness limit for a political subdivision or school district.
(D) Once the taxable value of a property is reduced because of the exemption provided for in subsection (A), that reduced value shall continue and remain in effect, except as otherwise provided in subsection (A)(3), until the implementation of the next equalization and reassessment program, provided the ordinance authorizing such exemption remains in effect. The effect of this exemption is, that upon the implementation of each subsequent equalization and reassessment program, the value of the property as determined under Section 12-37-930, reduced by the amount of any exemption granted under this section, may increase no more than fifteen percent.
When a property is transferred such that the property is no longer eligible for the exemption provided for in subsection (A), the property is subject to being taxed in the tax year following the transfer at its value, as determined under Section 12-37-930, at market value based on the sale or transfer of ownership or at the appraised value determined by the county assessor.
Property transferred on or after January first of the year of implementation of an appraisal and equalization program conducted pursuant to Section 12-43-217 but prior to before the effective date of the ordinance implementing the exemption authorized in subsection (A) shall be is eligible for the exemption; such and the exemption shall remain remains in effect until a subsequent disqualifying transfer.
(E) For counties adopting an ordinance as authorized in subsection (A), the closing attorney involved in a real estate transfer occurring subsequent to such enactment shall provide the following notice to the buyer(s):
REAL PROPERTY TRANSFERRED AS A RESULT OF THIS TRANSACTION MAY BE SUBJECT TO PROPERTY TAXATION DURING THE NEXT TAX YEAR AT A VALUE THAT REFLECTS ITS FAIR MARKET VALUE.
(F) To qualify for the exemption authorized under subsection (A), the owner of the property for which the exemption is sought or the owner's agent must apply to the county assessor where the property is located and establish eligibility for the exemption. The time period for making application for the exemption provided for in subsection (A), or for seeking a refund of taxes paid as a result of a subsequent determination of eligibility for the exemption, shall be the same as provided for in Section 12-43-220(c) for administering the special legal residence assessment ratio, mutatis mutandis.
Under penalty of perjury, the taxpayer must certify that the property meets the qualifications established in subsection (A) for eligibility for the exemption and provide such other proof as may be required by the county assessor. The burden is on the taxpayer to establish eligibility for the exemption. The Department of Revenue shall assist the applicant and the assessor to the extent practicable in providing information necessary or helpful in determining eligibility. If the assessor determines the applicant ineligible, the value of the property shall be determined by the assessor.
No further application is necessary from the owner who qualified the property for the exemption while the property continues to meet the eligibility requirements. If a change in ownership occurs, the owner who had qualified for the exemption shall notify the assessor within six months of the transfer of title. Another application is required by the new owner if the new owner seeks to qualify for the exemption provided by this section.
If a person signs the certification, obtains the exemption, and is, thereafter, found not eligible, a penalty may be imposed equal to one hundred percent of the tax paid, plus interest on that amount at a rate of one-half of one percent a month, but in no case less than thirty dollars nor more than the current year's taxes assessed on the value of the property without regard to the exemption.
(G) An ordinance allowed by this section may be given retroactive effect but shall not affect taxes due prior to its enactment. A county governing body may repeal an ordinance adopted pursuant to this section but the repeal may only apply prospectively to tax years subsequent to the year of repeal."
SECTION 3. This act takes effect upon approval by the Governor and applies for countywide reassessment values implemented after 2002. Amounts exempted pursuant to the former provisions of Section 12-37-223A. are deemed to have been exempted pursuant to Section 12-37-223 as added by this act or Section 12-37-223A. as amended by this act, as applicable.
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