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TO AMEND TITLE 12, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING ARTICLE 25 IN CHAPTER 37, ENACTING THE "SOUTH CAROLINA PROPERTY TAX ASSESSMENT REFORM ACT," SO AS TO PROVIDE FOR A "POINT OF SALE" VALUATION OF REAL PROPERTY FOR PURPOSES OF THE PROPERTY TAX AND TO PROVIDE ALTERNATE METHODS WHICH MAY BE USED IN COUNTIES FOR THE VALUATION OF REAL PROPERTY FOR PURPOSES OF PROPERTY THAT INCLUDE A CURRENT FAIR MARKET VALUE METHOD, A CURRENT FAIR MARKET VALUE METHOD SUBJECT TO ANNUAL LIMITS IN INCREASES IN THE VALUE OF SUCH VALUE ATTRIBUTABLE TO INFLATION, AND A FAIR MARKET VALUE METHOD DETERMINED IN COUNTYWIDE APPRAISALS IMPLEMENTED EVERY FIFTH YEAR; TO AMEND SECTION 4-9-1210, RELATING TO THE INITIATIVE METHOD OF ENACTING COUNTY ORDINANCES, SO AS TO ALLOW THIS PROCESS TO INCLUDE ORDINANCES ENACTING A REAL PROPERTY VALUATION METHOD PERMITTED BY THIS ACT; TO AMEND SECTION 6-1-50, RELATING TO FINANCIAL REPORTS, SO AS TO REQUIRE SUBMISSION OF FINANCIAL REPORTS TO THE BUDGET AND CONTROL BOARD, OFFICE OF RESEARCH AND STATISTICS, ECONOMIC RESEARCH SECTION; TO AMEND SECTION 12-37-251, RELATING TO THE RESIDENTIAL PROPERTY TAX EXEMPTION, SO AS TO DELETE REFERENCES TO THE ROLLBACK CALCULATIONS REQUIRED AFTER REASSESSMENT; TO AMEND SECTION 12-43-220, AS AMENDED, RELATING TO THE CLASSIFICATION OF AND VALUATION OF PROPERTY FOR PURPOSES OF PROPERTY TAX, SO AS TO CONFORM VALUATION REFERENCES FOR REAL PROPERTY; TO REPEAL SECTION 12-37-223A, RELATING TO THE COUNTY OPTION PROPERTY TAX EXEMPTION LIMITING INCREASES IN VALUE DUE TO REASSESSMENT; AND TO REPEAL SECTIONS 12-43-210, 12-43-217, 12-43-250, 12-43-260, AND 12-43-295, ALL RELATING TO PROPERTY TAX AND ALL MADE OBSOLETE BY THE PROVISIONS OF THIS ACT.
Whereas, as a consequence of the explosive growth in residential and commercial property values in many parts of the State, the assessment process often results in exorbitant increased values being assigned to residences and businesses that have been owned by a single owner or family for a substantial number of years; and
Whereas, these increased values to real property result in increased property taxes and are an unfair burden on the residents of the State in contravention of the philosophy underlying Act 208 of 1975; and
Whereas, the General Assembly has determined that protections from escalating real property taxes must be provided to all classes of property; and
Whereas, this legislation is the statutory implementation for amendments proposed to Articles III and X of the South Carolina Constitution to allow taxable assessments of real property to occur by different methods in different counties. Now therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 37, Title 12 of the 1976 Code is amended by adding:
Section 12-37-3110. This article may be cited as the 'South Carolina Property Tax Assessment Reform Act.'
Section 12-37-3120. Nothing in this article affects the provisions of Section 12-43-220(d) with regard to 'fair market value for agricultural purposes' for real property in agricultural use, nor does this article affect the eligibility requirements for agricultural use or the imposition of rollback taxes when real property is changed from agricultural use, except as provided in Section 12-37-3340(A)(9).
Section 12-37-3130. Nothing in this article affects the appropriate methods of appraising real property for purposes of the property tax by county assessors and officials of the South Carolina Department of Revenue, as applicable. However, with respect to Subarticle 3 of this article, the regular periodic appraisal of real property for real property is eliminated and is replaced with a 'point of sale' or 'transfer' appraisal system that produces a value of the real property for purposes of property tax that remains in effect until the ownership of the property is transferred, except for adjustments for the value of additions and improvements, adjustments to affect a measure of inflation as the General Assembly may provide by law, or by appeal.
Section 12-37-3310. Except as provided in Subarticle 5 of this article, the value of real property and additions and improvements to real property for purposes of the property tax is determined as provided in this subarticle.
Section 12-37-3320. As used in this subarticle:
(1) 'Additions' or 'improvements' mean an increase in the value of an existing parcel of real property because of new construction, reconstruction, major additions, remodeling, renovation and rehabilitation, including installation; additions or improvements do not include minor construction or ongoing maintenance and repair of existing structures. The repair or reconstruction of a structure damaged or destroyed by a disaster is not an addition or improvement if the structure as repaired or reconstructed is similar in size, utility, and function of the structure damaged or destroyed.
(2) 'Adjustments' mean:
(a) the fair market value of additions or improvements made to real property after the determination of base year value, transfer value, or appeal value which must be added to those values for purposes of the fair market value component of the annual property tax assessment for the parcel of property; and
(b) a measure of inflation as the General Assembly may provide by law for property tax years beginning after 2006.
(3) 'Appraisal' or 'appraised' means the process provided by law for the property tax assessor to determine the fair market value of real property and additions and improvements to real property.
(4) 'Assessable transfer of interest' means a transfer of an existing interest in real property, including the beneficial use of the property when the fair market value of that beneficial use is substantially equal to the fair market value of the real property or the fee interest, including life estate interests, that subjects the real property to appraisal.
(5) 'Beneficial use' means the right to possession, use, and enjoyment of property, limited only by encumbrances, easements, and restrictions of record.
(6) 'Property tax assessor' means the county assessor or the Department of Revenue, as applicable.
(7) 'Property tax assessment' has the meaning provided in Section 12-60-30(19).
(8) 'Fair market value' has the meaning provided in Section 12-37-930 as determined by the property tax assessor at one of three times as follows:
(a) 'base year value' is the fair market value of the real property as determined by the assessor in the countywide reassessment program most recently implemented before 2004. If the property has undergone an assessable transfer of interest after the base year, the base year value for that parcel is its value for property tax year 2006;
(b) 'transfer value' is the fair market value of the real property at the time the property last underwent an assessable transfer of interest after 2006; or
(c) 'appeal value' is the fair market value of the real property determined on appeal of base year value plus adjustments or transfer value plus adjustments.
Section 12-37-3330. Except as provided in Subarticle 5 of this article, the fair market value component of the property tax assessment for a parcel of real property for a property tax year beginning after 2006 is either:
(1) its base year value, plus adjustments;
(2) its transfer value, plus adjustments, if the real property has undergone an assessable transfer of interest after 2006; or
(3) its appeal value, plus adjustments.
Section 12-37-3340. (A) For purposes of determining when a parcel or real property must be appraised to arrive at transfer value, an assessable transfer of interest in real property includes, but is not limited to, the following:
(1) a conveyance by deed;
(2) a conveyance by land contract;
(3) a conveyance to a trust, except if the settlor or the settlor's spouse, or both, conveys the property to the trust and the sole present beneficiary or beneficiaries are the settlor or the settlor's spouse, or both;
(4) a conveyance by distribution from a trust, except if the distributee is the sole present beneficiary or the spouse of the sole present beneficiary, or both;
(5) a change in the sole present beneficiary or beneficiaries of a trust, except a change that adds or substitutes the spouse of the sole present beneficiary;
(6) a conveyance by distribution under a will or by intestate succession, except if the distributee is the decedent's spouse;
(7) a conveyance by lease if the total duration of the lease, including the initial term and all options for renewal, is more than ten years or the lease grants the lessee a bargain purchase option. As used in this item, 'bargain purchase option' means the right to purchase the property at the termination of the lease for not more than eighty percent of the property's true cash value at the termination of the lease. This item does not apply to personal property or that portion of the property not subject to the leasehold interest conveyed;
(8) a conveyance of fifty percent or more of the shares or ownership interest in a corporation, partnership, sole proprietorship, limited liability company, limited liability partnership, or other legal entity if the ownership interest conveyed is fifty percent or more of the applicable fair market value of the real property. The corporation, partnership, sole proprietorship, limited liability company, limited liability partnership, or other legal entity shall notify the applicable property tax assessor on a form provided by the Department of Revenue not more than forty-five days after a conveyance of an ownership interest that constitutes a transfer of ownership under this item; or
(9) a change of use of agricultural real property which subjects it to the rollback tax.
(B) An assessable transfer of interest does not include the following:
(1) a transfer of real property from one spouse to the other spouse or from a decedent to a surviving spouse;
(2) a transfer from a husband, a wife, or a husband and wife creating or disjoining a tenancy by the entireties in the grantors or the grantor and the grantor's spouse;
(3) a transfer of that portion of property subject to a life estate or life lease retained by the transferor, until expiration or termination of the life estate or life lease;
(4) a transfer through foreclosure or forfeiture of a recorded instrument or through deed or conveyance in lieu of a foreclosure or forfeiture, until the mortgagee or land contract vendor subsequently transfers the property;
(5) a transfer by redemption by the person to whom taxes are assessed of property previously sold for delinquent taxes;
(6) a conveyance to a trust if the settlor or the settlor's spouse, or both, convey the property to the trust and the sole present beneficiary of the trust is the settlor or the settlor's spouse, or both;
(7) a transfer pursuant to a judgment or order of a court of record making or ordering a transfer, unless a specific monetary consideration is specified or ordered by the court for the transfer;
(8) a transfer creating or terminating a joint tenancy between two or more persons if at least one of the persons was an original owner of the property before the joint tenancy was initially created and, if the property is held as a joint tenancy at the time of conveyance, at least one of the persons was a joint tenant when the joint tenancy was initially created and that person has remained a joint tenant since the joint tenancy was initially created. A joint owner at the time of the last transfer of ownership of the property is an original owner of the property. For purposes of this item, a person is an original owner of property owned by that person's spouse;
(9) a transfer for security or an assignment or discharge of a security interest;
(10) a transfer of real property or other ownership interests among members of an affiliated group. As used in this item, 'affiliated group' means one or more corporations connected by stock ownership to a common parent corporation. Upon request of the applicable property tax assessor, a corporation shall furnish proof within forty-five days that a transfer meets the requirements of this item. A corporation that fails to comply with such a request is subject to a civil penalty of two hundred dollars for this failure;
(11) a transfer of real property or other ownership interests among corporations, partnerships, limited liability companies, limited liability partnerships, or other legal entities if the entities involved are commonly controlled. Upon request by the applicable property tax assessor, a corporation, partnership, limited liability company, limited liability partnership, or other legal entity shall furnish proof within forty-five days that a transfer meets the requirements of this item. A corporation, partnership, limited liability company, limited liability partnership, or other legal entity that fails to comply with such a request is subject to a civil penalty of two hundred dollars for this failure;
(12) a direct or indirect transfer of real property or other ownership interests resulting from a transaction that qualifies as a tax-free reorganization under Section 368 of the Internal Revenue Code as defined in Section 12-6-40(A). Upon request by the applicable property tax assessor, a property owner must furnish proof within forty-five days that a transfer meets the requirements of this item. A property owner who fails to comply with such a request is subject to a civil penalty of two hundred dollars for this failure; or
(13) a transfer of real property or other ownership interest not subject to federal income tax pursuant to Section 1033 of the Internal Revenue Code as defined in Section 12-6-40(A). Upon request by the applicable property tax assessor, the property owner must furnish proof within forty-five days that a transfer meets the requirements of this item. A property owner who fails to comply with such a request is subject to a civil penalty of two hundred dollars for this failure. The fair market value of the qualifying real property or interest in real property pursuant to this item is the base year value, or transfer value, or appeal value of the replaced property plus adjustments, at the time of the replacement.
Section 12-37-3350. Notwithstanding any other provision of law, for purposes of calculating the limit on bonded indebtedness provided pursuant to Article X, Sections 14 and 15 of the constitution of this State with respect to all general obligation debt authorized before the effective date of this article, the values used in the 2006 property tax assessment apply.
Section 12-37-3510. As used in this subarticle:
(1) 'Additions' or 'improvements' mean an increase in the value of an existing parcel of real property because of new construction, reconstruction, major additions, remodeling, renovation, and rehabilitation, including installation; additions or improvements do not include minor construction or ongoing maintenance and repair of existing structures. The repair or reconstruction of a structure damaged or destroyed by a disaster is not an addition or improvement if the structure as repaired or reconstructed is similar in size, utility, and function of the structure damage or destroyed.
(2) 'Assessable transfer of interest' means a transfer of an existing interest in real property, including the beneficial use of the property when the fair market value of that beneficial use is substantially equal to the fair market value of the real property or the fee interest, including life estate interests, that subjects the real property interest to appraisal and as specifically provided for in Section 12-37-3340.
(3) 'Fair market value' has the meaning provided in Section 12-37-930 except when limited pursuant to Section 12-37-3530(1).
(4) 'Property tax assessor' means the county assessor or the Department of Revenue, as applicable.
(5) 'State personal income growth' is a percentage equal to the average of state personal income growth over the three most recently completed successive calendar years for which data is available as calculated by the Budget and Control Board, Office of Research and Statistics from data supplied by the United States Department of Commerce.
Section 12-37-3520. In lieu of the method of determining the value of real property and improvements and additions to real property provided in Subarticle 3 of this article, the governing body of a county or the qualified electors of the county acting pursuant to Article 15, Chapter 9 of Title 4, by ordinance may provide one of the alternate methods of determining the value of real property and improvements and additions to real property provided in Section 12-37-3530(A).
Section 12-37-3530. (A) The ordinance enacted pursuant to Section 12-37-3510 may choose one of the following alternate methods:
(1) provide for the annual appraisal of real property for purposes of the property tax and the annual adjustment of the fair market value of each parcel of real property to reflect this annual appraisal subject either to:
(a) a three percent limit on the annual increase in fair market value of any one parcel of real property; or
(b) an annual limit equal to state personal growth.
This limit does not apply to the fair market value of improvements and additions to the real property in the year the value of the improvements and additions are first subject to property tax. When a parcel of real property undergoes an assessable transfer of interest, the property must then be appraised at fair market value;
(2) provide for the annual appraisal of real property for purposes of the property tax and the annual adjustment of the fair market value of each parcel of real property to reflect this annual appraisal; or
(3) provide for the appraisal of real property for purposes of the property tax at fair market value as determined in a countywide appraisal program implemented every fifth succeeding property tax year.
(B) The values used in the initial property tax year to which an ordinance allowed by this subarticle is effective must be the fair market value as defined in Section 12-37-930 of each parcel of real property situated in the county determined in a countywide appraisal program begun and completed by the property tax assessor within twenty-four months of the start of the initial property tax year to which the ordinance applies. These values may not be implemented and the alternate valuation ordinance may not take effect unless the South Carolina Department of Revenue first certifies in writing to the governing body of the county that the appraisal program and the values determined in the program meet property appraisal standards used by the department in its appraisal. For the year that the values determined in this initial countywide appraisal and equalization program first apply, millage rates for operating purposes imposed by all property taxing entities in the county must be rolled back so as to produce no more property tax revenue than the prior tax year's operating millage imposed by these entities raised plus an amount representative of average annual growth of such revenues over the preceding five years.
(C) An ordinance enacted as provided pursuant to this subarticle may be repealed by the governing body of the county if a majority of the qualified electors of the county voting in an advisory referendum held at the time of the general election approve the repeal. An ordinance enacted as provided pursuant to this subarticle may be repealed by the qualified electors of the county acting pursuant to Article 15, Chapter 9, of Title 4. An ordinance adopted pursuant to this subarticle may not affect the real property tax liability on any parcel of real property in the county for a prior property tax year, nor may repeal of an ordinance allowed by this article have other than prospective effect. Nothing in this subsection prohibits moving from one alternate method to another in the manner provided in this article. In a county in which an alternate valuation method allowed by this subarticle has once been effective and by operation of law the method of valuation of real property applicable in that county reverts to the method provided in Subarticle 3 of this article, the fair market value of each parcel of real property in the county used in the last property tax year to which the ordinance applied is deemed the transfer value of the property for purposes of the valuation method provided in Subarticle 3 of this article.
Section 12-37-3540. In a county using an annual valuation method allowed by this article, the property tax assessor shall establish and maintain a continuing program of countywide appraisal of the real property situated in the county to value such property annually for purposes of property tax. This program may be conducted by means of sales ratio studies, sampling, and modeling conducted in a manner that best determines fair market value without an individual appraisal annually of each parcel of real property."
SECTION 2. A. Section 4-9-1210 of the 1976 Code is amended to read:
"Section 4-9-1210. The qualified electors of any county may propose any ordinance, except an ordinance appropriating money or authorizing the levy of taxes, and adopt or reject such ordinance at the polls. Any initiated ordinance may be submitted to the council by a petition signed by qualified electors of the county equal in number to at least fifteen percent of the qualified electors of the county. The enactment or repeal of ordinances allowed pursuant to Subarticle 5, Article 25, Chapter 37 of Title 12 may be the subject of an ordinance proposed pursuant to this section."
B. Section 6-1-50 of the 1976 Code is amended to read:
"Section 6-1-50. Counties and municipalities receiving revenues from state aid, currently known as Aid to Subdivisions, shall submit annually to the Comptroller General Budget and Control Board, Office of Research and Statistics, Economic Research Section a financial report detailing their sources of revenue, expenditures by category, indebtedness, and other information as the Comptroller General requires Budget and Control Board, Office of Research and Statistics, Economic Research Section requires. Counties and municipalities receiving revenues from state aid must ensure that their financial reporting systems will provide the information requested by the Office of Research and Statistics, Economic Research Section. The federal revenue sharing document may be substituted for the financial report as long as it is required by the Federal Office of Revenue Sharing. The Comptroller General, in conjunction with the The Budget and Control Board, Division Office of Research and Statistical Services, Statistics, Economic Research Section shall determine the required contents content and format of the report. and the date of submission. Failure to submit the report shall result in the withholding of ten percent of the current year's state aid The financial report for the most recently completed fiscal year must be submitted to the Budget and Control Board, Office of Research and Statistics, Economic Research Section by November fifteenth of each year. Notification by the Director of the Office of Research and Statistics to the Comptroller General that an entity has failed to file the report as required must result in the withholding of ten percent of subsequent payments of state aid to the entity until the report is filed. The Budget and Control Board, Division of Research and Statistical Services, Statistics, Economic Research Section is responsible for collecting, maintaining, and compiling the existing financial data bases as exists with the Federal Office of Revenue Sharing. In conjunction with the Comptroller General, Advisory Commission on Intergovernmental Relations, and the University of South Carolina Bureau of Governmental Research and Service, the Division of Research and Statistical Services of the Budget and Control Board shall produce a comprehensive report of this data and submit it to the General Assembly no later than June first of each year provided by counties and municipalities in the annual financial report required by this section."
C. Section 12-37-251 of the 1976 Code, as last amended by Act 226 of 2004, is further amended by deleting subsection (E) which reads:
"(E) Rollback millage is calculated by dividing the prior year property tax revenues by the adjusted total assessed value applicable in the year the values derived from a countywide equalization and reassessment program are implemented. This amount of assessed value must be adjusted by deducting assessments added for property or improvements not previously taxed, for new construction, and for renovation of existing structures."
D. Section 12-43-220 of the 1976 Code, as last amended by Act 145 of 2005, is further amended by adding a new undesignated paragraph at the end of the section to read:
"As used in this section, fair market value with reference to real property means fair market value determined in the manner provided pursuant to Article X of the Constitution of this State and Article 25, Chapter 37 of this title."
E. Section 12-37-223A of the 1976 Code is repealed.
F. Sections 12-43-210, 12-43-217, 12-43-250, 12-43-260, and 12-43-295, all of the 1976 Code, are repealed.
SECTION 3. If any article, subarticle, section, subsection, item, subitem, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of the chapter, the General Assembly hereby declaring that it would have passed each and every article, subarticle, section, subsection, item, subitem, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other articles, subarticles, sections, subsections, items, subitems, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 4. The repeal or amendment by this act of any law, whether temporary or permanent or civil or criminal, does not affect pending actions, rights, duties, or liabilities founded thereon, or alter, discharge, release or extinguish any penalty, forfeiture, or liability incurred under the repealed or amended law, unless the repealed or amended provision shall so expressly provide. After the effective date of this act, all laws repealed or amended by this act must be taken and treated as remaining in full force and effect for the purpose of sustaining any pending or vested right, civil action, special proceeding, criminal prosecution, or appeal existing as of the effective date of this act, and for the enforcement of rights, duties, penalties, forfeitures, and liabilities as they stood under the repealed or amended laws.
SECTION 5. This act takes effect upon ratification of amendments to Articles III and X of the Constitution of this State allowing its terms as proposed to the qualified electors of this State at the 2006 general election. However, the provisions of Section 2D of this act take effect upon approval of this act by the Governor.
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