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COMMITTEE REPORT
January 11, 2006
S. 960
Introduced by Senators McConnell, Leatherman, Thomas, Hayes, Martin, Short, Alexander, Richardson, Ritchie, Sheheen, Campsen, Williams, Ford and O'Dell
S. Printed 1/11/06--S. [SEC 1/12/06 3:13 PM]
Read the first time January 10, 2006.
To whom was referred a Joint Resolution (S. 960) proposing an amendment to Section 29, Article III of the Constitution of South Carolina, 1895, relating to the legislative department, so as to provide that taxes upon real property, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the joint resolution, as and if amended, page 3, beginning on line 18, in Section 6, as contained in SECTION 1 (D), by striking lines 18-19 in their entirety and inserting:
/ reassessment occurred prior to 2004. In the year that this constitutional amendment becomes effective, local governments may increase millage for that year only, so that the revenue of the local government resulting from the millage levy is no more than the revenue of the previous tax year and the effect of this constitutional amendment is revenue neutrality for the millage levy for the first year of implementation. The maximum assessed value for the base tax year may be increased by the lesser of: (1) /
Amend the joint resolution further, as and if amended, page 3, beginning on line 29, in Section 6, as contained in SECTION 1 (D), by striking lines 29-31 in their entirety and inserting:
/ of the Constitution of this State and for purposes of computing the full market value of all taxable property within a school district as these provisions applied prior to the ratification of this amendment. /
Amend the joint resolution further, as and if amended, page 4, beginning on line 11, in Section 6, as contained in SECTION 1 (D), by striking lines 11-13 in their entirety and inserting:
/ county, by initiating an ordinance pursuant to statutory requirements, elect, in the current tax year or a future tax year, to assess real property at fair market value on an annual /
Renumber sections to conform.
Amend title to conform.
GLENN F. McCONNELL for Committee.
REVENUE IMPACT 1/
This joint resolution is not expected to impact state or local revenue. Although the amount of value used to calculate property taxes would be decreased from the fair market value that would be used under current law, local governments are expected to adjust their millages to make up for the lower fair market values from the base tax year in order to keep revenue growth at its historical rate. The rollback is expected to reduce property taxes $552 million of which $287 million will be shifted to properties within the categories and the "net impact" on all classes is shown below.
Category Property Tax Shift to Net Impact on
Change from Properties All Classes
Rollback Within Class
Owner-Occupied -183 106 -77
Agricultural 5
Commercial /
Rental -369 181 -188
Personal
Property
(Vehicles) 89
Other Personal
Property 10
Manufacturing 60
Utility 66
Business
Personal 32
Motor Carrier 3
TOTAL -552 287 0
Explanation
Under current law, each county is required to reassess real property in the 4.0% and 6.0% category every five years. This joint resolution would roll back the value of all real property to a base tax year. Base tax year is defined in this resolution as a properties' fair market value in Tax Year 2004 or the tax year in which the most recent reassessment occurred prior to 2004. The General Assembly is authorized, by general law, to define 'fair market value', to define when property has been improved or when losses have occurred to decrease the value of the real property, and to change the tax year used to determine the base of the maximum assessed value of real property for ad valorem tax purposes. Through the enactment of general law, the General Assembly must establish a system for assessment of real property, based on the fair market value of the real property at the time an assessable transfer of interest has occurred, to define when an assessable transfer of interest occurs, and to provide, through general law, that the taxable value of each parcel of real property, adjusted for improvements and losses, must not increase each year unless an assessable transfer of interest has occurred. For these projections, we calculated the change in property tax revenues based on new properties coming on to the tax rolls and existing real property parcels to only increase in value when it is sold. The General Assembly may provide, by general law, an annual percentage increase of the taxable value of real property for inflationary purposes. For these projections, we did not use any annual percentage increase for existing real property. Data from the Index of Taxpaying Ability shows the total assessed value of real property increased from 5.9 billion in Tax Year 1998 to 9.0 Billion in Tax Year 2003 on the 4.0% and 6.0% categories. This would equate to about $900 million of increased property tax revenue from existing properties as well as new properties. We estimate there are approximately 60,000 new parcels of real property added to the tax rolls each year. In addition, we estimate there are approximately 50,000 homes sold in South Carolina each year. These new parcels of real property would be added to the tax rolls at their fair market value. The homes sold would add their incremental increase in value from the selling price above the value from the base tax year. The value of the new parcels and the increase in value from home sales would be added to the base values. We project there would be a total increase of $967 million of property tax revenue from real property, both existing and new, from the base tax year defined in this resolution and Tax Year 2007 under current law. New parcels of real property are expected to account for $343 million of the increased property tax revenue. The incremental increase in value of homes sold is expected to account for $72 million of the increased property tax revenue. Subtracting the $343 million and the $72 million from the total increase of $967 million leaves $552 million. The base value of all other real property would remain the same until an assessable transaction occurs. Based on this data, data from the Census Bureau, the Realtor's Association, building permits data and conversations with county assessors, we estimate this bill would change the incidence of local property taxes by shifting $552 million among and within the classes of property in Tax Year 2007.
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 by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
PROPOSING AN AMENDMENT TO SECTION 29, ARTICLE III OF THE CONSTITUTION OF SOUTH CAROLINA, 1895, RELATING TO THE LEGISLATIVE DEPARTMENT, SO AS TO PROVIDE THAT TAXES UPON REAL PROPERTY MUST BE ASSESSED IN ACCORDANCE WITH THE METHODS AS PROVIDED BY THE GENERAL ASSEMBLY IN ARTICLE X OF THE STATE CONSTITUTION; TO AMEND SECTIONS 1 AND 3 OF ARTICLE X, RELATING TO FINANCE AND TAXATION, SO AS TO PROVIDE THAT THE REQUIREMENT THAT TAXATION OF REAL PROPERTY MUST BE UNIFORM APPLIES TO PROPERTY WITHIN A TAXING JURISDICTION RATHER THAN STATEWIDE; AND BY AMENDING SECTION 6 OF ARTICLE X, SO AS TO PROVIDE THAT THE BASE TAX VALUE FOR REAL PROPERTY IS ROLLED BACK TO THE TAXABLE VALUE OF THE 2004 TAX YEAR OR THE TAX YEAR IN WHICH THE MOST RECENT REASSESSMENT OCCURRED PRIOR TO 2004, TO REQUIRE THAT THE GENERAL ASSEMBLY ESTABLISH A STATEWIDE SYSTEM FOR ASSESSMENT OF REAL PROPERTY BASED ON REASSESSMENTS AT THE TIME OF ASSESSABLE TRANSFERS OF INTEREST, TO PROVIDE FOR COUNTIES TO SELECT FROM SEVERAL METHODS OF ASSESSMENT AS ESTABLISHED BY THE GENERAL ASSEMBLY, AND TO PROVIDE THAT THE GENERAL ASSEMBLY BY LAW SHALL PROVIDE FOR THE TERMS, CONDITIONS, AND PROCEDURES TO IMPLEMENT THE ABOVE PROVISIONS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. A. It is proposed that Section 29 of Article III of the Constitution of this State be amended to read:
"Section 29. All taxes upon property, real and personal, shall be laid upon the actual value of the property taxed, as the same shall be ascertained by an assessment made for the purpose of laying such tax. Taxes on personal property must be laid upon the actual value of the property taxed, as the same shall be ascertained by an assessment made for the purpose of laying such tax. Taxes on real property must be ascertained by the methods provided by the General Assembly as prescribed in Article X of this Constitution."
B. It is proposed that the first paragraph of Section 1 of Article X of the Constitution of this State be amended to read:
"Section 1. The General Assembly may provide for the ad valorem taxation by the State or any of its subdivisions of all real and personal property. The assessment of all property shall be equal and uniform within the class of property being taxed and within its taxing jurisdiction in the following classifications:"
C. It is proposed that the penultimate paragraph of Section 3 of Article X of the Constitution of this State be amended to read:
"The exemptions provided in subitems (c) and (d) for real property shall not extend beyond the buildings and premises actually occupied by the owners of such real property. Homestead exemptions from ad valorem taxation not specifically provided for in this section may be provided for by the General Assembly by general law. In addition to the exemptions listed in this section, the General Assembly may provide for exemptions from the property tax, by general laws applicable uniformly to property throughout the State and in all political subdivisions, but only with the approval of two-thirds of the members of each House. All exemptions not specifically provided for or authorized in this article shall be repealed March 1, 1978. The General Assembly shall provide for methods and procedures in applying for the exemption of any property as is described in this section."
D. It is proposed that Section 6 of Article X of the Constitution of this State be amended to read:
"Section 6. The Except as otherwise provided in this section, the General Assembly may vest the power of assessing and collecting taxes in all of the political subdivisions of the State, including counties, municipalities, special purpose districts, public service districts, and school districts. Property tax levies shall be uniform in respect to persons and property within the jurisdiction of the body imposing such taxes; provided, that on properties located in an area receiving special benefits from the taxes collected, special levies may be permitted by general law applicable to the same type of political subdivision throughout the State, and the General Assembly shall specify the precise condition under which such special levies shall be assessed. For the tax year beginning 2007, each parcel of real property in this State shall have a maximum assessed value for ad valorem tax purposes that does not exceed its fair market value for a base tax year. Effective upon ratification of this amendment, the base tax year is to be the tax year 2004 or the tax year in which the most recent reassessment occurred prior to 2004. The maximum assessed value for the base tax year may be increased by the lesser of: (1) the amount that the fair market value of the property was increased by all improvements completed after the base tax year, excluding ordinary repairs and maintenance; or (2) the actual cost of all improvements completed after the base tax year, excluding ordinary repairs and maintenance. Notwithstanding any other provision of law, the reduction of these taxable values does not alter or amend the valuation of the taxable property as it was calculated prior to tax year 2007 for purposes of bonded indebtedness pursuant to Section 14 and Section 15 of this Article of the Constitution of this State and for purposes of computing the 'index of taxpaying ability' pursuant to Section 59-20-20(3) as these provisions applied prior to the ratification of this amendment. The General Assembly is authorized, by general law, to define 'fair market value', to define when property has been improved or when losses have occurred to decrease the value of the real property, and to change the tax year used to determine the base of the maximum assessed value of real property for ad valorem tax purposes. Through the enactment of general law, the General Assembly must establish a system for assessment of real property, based on the fair market value of the real property at the time an assessable transfer of interest has occurred, to define when an assessable transfer of interest occurs, and to provide, through general law, that the taxable value of each parcel of real property, adjusted for improvements and losses, must not increase each year unless an assessable transfer of interest has occurred. The General Assembly may provide, by general law, an annual percentage increase of the taxable value of real property for inflationary purposes. A county is considered to have adopted the aforementioned system of assessing real property at the time an assessable transfer of interest has occurred, as provided by the General Assembly, unless (1) the governing body of a county, through enactment of an ordinance or pursuant to a majority vote of the qualified electors voting in a referendum held at the time of the November general election, or (2) the qualified electors of a county, by initiating an ordinance pursuant to the requirements of Section 4-9-1210, et seq. elect, in the current tax year or a future tax year, to assess real property at fair market value on an annual basis, or adopt an alternate method of assessing real property from the methods provided by the General Assembly. Neither the governing body of a county nor the qualified electors of a county are prohibited from choosing in subsequent tax years a different method of reassessment from the methods provided by the General Assembly.
Whenever there is a merger of governments authorized under Section 12 of Article VIII, tax districts may be created, based upon the services rendered in each district, but tax levies must be uniform in respect to persons and property within each such district."
SECTION 2. The proposed amendments must be submitted to the qualified electors at the next general election for representatives. Ballots must be provided at the various voting precincts with the following words printed or written on the ballot:
"Must Article III and Article X of the Constitution of this State be amended so as to provide that taxation of real property must be in accordance with procedures provided by the General Assembly, to provide the requirement that ad valorem taxes be applied uniformly to property is applicable within a taxing jurisdiction rather than statewide, to add that the base tax value for real property is rolled back to the tax year 2004 or a tax year in which the most recent reassessment has occurred prior to 2004, to require that the General Assembly establish a system for assessment of real property based on the fair marker value of the real property at the time an assessable transfer of interest occurs, as defined by the General Assembly, to provide that a county, through ordinance or general referendum or qualified electors through an initiative ordinance, may utilize annual reassessments of property at fair market value or a different method of assessment established by the General Assembly, to provide that different reassessment methods may be chosen in subsequent tax years, and to provide that the General Assembly by law shall provide for the terms, conditions, and procedures to implement the above provisions?
Those voting in favor of the question shall deposit a ballot with a check or cross mark in the square after 'Yes', and those voting against the questions shall deposit a ballot with a check or cross mark in the square after the word 'No'."
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