The Legislature passed a bill to change the point of sale tax adjustment on commercial property today—a compromise that got overwhelming support in both houses and suited most stakeholders.
But, the bill’s sponsor Representative Jim Merrill (R-Charleston), dislikes the fact that residential real estate is still subject to a higher tax at sales time:
It is a compromise on how to tax commercial real estate when it is sold. Right now, it is re-assessed and billed at the time of sale.
The legislation began as a remedy for Act 388, a law that changed how property taxes are levied. Changes to the law last year ended in a less-than-cordial stand-off. Ed Parler, who represents commercial realtors says they finally worked it out by:
…just open dialogue, and the counties and municipalities and the school boards–I think all of us came to the conclusion that there is a problem. And it’s at what cost was it going to be. And, I commend all of them for coming together, because there are some fiscal sacrifices they’re making, and quite frankly, trusting the development community to make up those dollars, by increased investment, jobs, and growth in the tax base.
Robert Croom, attorney for the South Carolina Association of Counties, says the change allows counties three years to raise property taxes, without losing money for waiting:
When you only can go up a very limited amount each year on the millage rate, there’s a great pressure to use it, or you lose it. And you’re concerned that you need additional revenue next year, or that the increase won’t be sufficient. There’s a tremendous amount of pressure to go ahead and go up the maximum amount. This allows you on a close call–you say, people are out of work, they’re having a hard time, we can scrape by this year. If we need to go up more than we’re allowed next year, we can go back and borrow from what we didn’t do the previous year.
Croom and Parler say they were in a group that was holed up on Memorial Day to hammer out a compromise. After years of trying to reach an agreement, it came down to business:
At the time of the point of sale, in most cases, the property taxes skyrocket, and as a result on the balance sheet, it throws everything out of whack–reducing profits and making South Carolina less friendly in order to invest. So, we’re extremely pleased, because this gives us at least a cap, where we know exactly what the taxes are going to be, and business plans can be made accordingly.
County governments and schools depend on this tax money. Robert Crooms says this law provides for that:
It struck the right balance between trying to encourage economic development and preserving revenue for services that we all depend on, and it was just the product of good, open, honest numbers-crunching dialogue.
Senator Hugh Leatherman was a key player in making this happen. He pushed the Point of Sale bill in the final hours of the session:
This issue’s been around for, like, three years, and believe me, it is really hurting our state. The developers I heard in that Monday afternoon meeting, I’m talking about the big developers–$50 to $100 million–are going to other states. They said, no longer are we going to make an investment here with this unknown hanging over our head.
The bill got unanimous support in the Senate and only four votes against it in the House.