Commercial Property Tax Exemption for 2011 and After Available

MEMORANDUM
Commercial Property Tax Exemption
S.C. Code Ann. Section 12-37-3135 was enacted in 2011 and creates an exemption from
property taxes applicable to certain transfers of commercial real estate occurring during or after
calendar year 2011. The exemption is not available for all properties and is determined by an
evaluation of a number of factors. Generally, if the property qualifies, it could be assessed at a
25% discounted value. This memorandum briefly outlines the exemption procedures.
Application Deadline
In order to be eligible to receive the exemption, the purchaser of the property must apply
for the exemption by January 31 of the tax year in which the exemption first applies.
Accordingly, for commercial real estate purchased in calendar year 2011, the first year the
exemption would apply would be 2012 and, therefore, the purchaser must apply for the
exemption by January 31, 2012 in order to receive the exemption for tax year 2012. If this
deadline is missed, the exemption would not apply for tax year 2012; however, the purchaser
could apply prior to January 31, 2013 to receive the exemption for the 2013 tax year. A
purchaser only has to apply for the exemption once.
The application process is relatively straightforward, as the statute only requires the
purchaser to notify the county tax assessor that it intends to claim the exemption. The applicant
is not required to make any calculations to determine if the property qualifies before applying; all
calculations will be performed by the assessor. Various counties have established guidelines for
the notification, and we recommend that you contact the applicable county’s tax assessor to
determine what information is required to be in the notification (also referred to as the
application.) As an example, the Charleston County tax assessor requires the application to
contain the following information:
1. The Parcel ID (aka, PIN, TMS)
2. Street address of the property
3. A specific request for the 25% exemption
4. A daytime phone number (multiple phone numbers allowed)
5. The original signature of the owner
6. Date signed
A template for a notification letter is attached to this memo. As another example,
Lexington County has developed a standard application form to submit. A copy is attached to
this memo for your review.
Exemption Determination
The purchase of commercial real estate in South Carolina is defined for property tax
purposes as an “assessable transfer of interest,” which is commonly called an “ATI.” The
occurrence of an ATI allows the assessor to reassess the property during the year the ATI occurs
to determine a new value of the property used to compute the property tax, which is called the
“assessed value.”
The ATI law was revised during 2011, and the intent of the change is to give commercial
purchasers a break on their property taxes. Very generally, and with two exceptions, the
assessed value resulting from an ATI for property tax purposes will be 75% of the value of the
property during the year purchased. Specifically, the “exemption” allowed to be claimed by the
purchaser is equal to 25% of the “ATI Fair Market Value” of the property.
The ATI Fair Market Value is a term defined by the statute as “the fair market value of a
parcel…as determined by appraisal at the time the parcel last underwent an assessable transfer of
interest.” Generally, this could mean the purchase price of the property, because the purchase
price is a good indicator of what the value would be as determined by appraisal during that year.
However, it does not necessarily mean the purchase price, because the statute’s language allows
the county assessor’s office to re-appraise the property based on its value as of December 31 of
the year in which the property is transferred. This appraised value could be different from the
purchase price. Some county assessors may use the purchase price for the ATI Fair Market
Value, and others may not.
The “Exemption Value” is a term defined by the statute as the ATI Fair Market Value
reduced by the exemption amount of 25%. Generally, the Exemption Value will be 75% of the
value of the property during the year of transfer.
There are two exceptions to the 25% exemption:
1. If the ATI Fair Market Value is less than the “current fair market value” of the
property, the 25% exemption does not apply, and the ATI Fair Market Value becomes the
assessed value for property tax purposes. The Current Fair Market Value is defined by the
statute as the “fair market value of a parcel of real property as reflected on the books of the
[county’s] assessor for the current property tax year.” Note that the definition of Current Fair
Market Value used in the statute has a special meaning, and does not have the traditional
meaning of “current fair market value” in the normal, business sense. Also note that the “fair
market value as reflected on the assessor’s books” may not mean the taxable assed value on the
assessor’s books.
2. Additionally, the statute states that the Exemption Value cannot be less than the
Current Fair Market Value of the property.
As illustrations of two county assessors’ approach to the new exemption, attached for
your review are memoranda from the Lexington County tax assessor and the Charleston County
tax assessor.
January ___, 2012
VIA CERTIFIED MAIL,
RETURN RECEIPT REQUESTED
_________________________
__________ County Tax Assessor
________________________
____________, South Carolina 29_____
Re: Notice of Exemption Pursuant to S.C. Code Sec. 12-37-3135
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