Call it a stimulus plan, South Carolina style.
The state Senate has given key approval to property tax breaks for anyone who buys commercial property or a second home this year.
Such properties would get smaller tax breaks if they change hands after 2010.
The goal is to encourage commercial property sales. The costs would be borne by local governments and schools, rather than the state.
The way it would work is if a property other than an owner-occupied home or an industrial property changes ownership in 2010, that property would be taxed based upon the previous owner's assessment. For example, if a property assessed at $200,000 sells for $250,000, it would continue to be taxed as if it were worth $200,000.
That's a big change from current law, which requires that properties be reassessed after an ownership change. For a buyer, the legislation could mean locking in property values, for tax purposes, that are years out of date. And for multimillion- dollar commercial deals, the difference could be worth a lot.
The tax break would cost an estimated $35 million this year, but there would be no loss in state revenue. Instead, local governments and schools would lose the money, and might need to consider cutting services or raising tax rates as a result.
After 2010, commercial properties and second homes would be reassessed when sold, but the new assessment would then be reduced by 20 percent. Second homes were included because they are taxed as commercial property, and excluding them could have raised legal challenges.
The plan is a compromise between the S.C. Association of Realtors and groups representing municipalities, counties and school districts. The Realtors group has been pushing hard to reduce or eliminate the point-of-sale reassessments, and pulled out of a previously announced compromise deal after deciding it didn't go far enough.
Sen. Thomas Alexander, R-Walhalla, led the talks that resulted in the current plan. "We still have to do a third reading tomorrow, and hopefully we'll have the votes," he said Tuesday night. "It's tremendously significant, because it (the legislation) says that South Carolina is open for business and open for investment."
Local government and school associations were concerned about the loss of property-tax revenues, but agreed to the deal. "We all agree the economy of our state should be our top priority," said Miriam Hair, executive director of the Municipal Association of South Carolina.
The effect of the Senate plan would vary dramatically from county to county, depending on when reassessments were conducted. For example, Berkeley and Dorchester counties both just completed reassessments, so the value of locking in a prior owner's assessment would be limited there. In Charleston County, being taxed on property values from 2003 could represent a big discount.
A final vote is expected this afternoon in the Senate, and the legislation would then go back to the House, which passed a different plan last year.
By David Slade
The Post and Courier
Wednesday, February 10, 2010