Hundreds urge change in tax law

Hundreds of real estate agents from across South Carolina gathered in the freezing shadow of the State House steps Wednesday to urge the Senate to fix the "unintended consequences" of a property tax reform bill that took effect three years ago.

Agents argue the law unfairly taxes home buyers, especially those purchasing second homes, and penalizes businesses attempting to locate in the state.

"It's time we put a message out that South Carolina is open for business again," said Nick Kremydas, chief executive of the S.C. Realtors trade group.

He urged Realtors to ask their senators to adopt a so-called "point of sale" bill that would cap the amount taxes can increase when a home is purchased.

Local governments say the bill would take away money they need to operate schools and provide other government services.

"We also understand the need to spur the economy during these challenging times," Miriam Hair, executive director of the Municipal Association of S.C., said in a statement. "However, the point-of-sale bill as currently written does nothing except make another piecemeal change to the tax policy that causes more problems than it solves."

Hair said the association is in discussions with the Realtors group and "remains committed to compromise that will bring jobs and economic growth to our state."

Real estate and local government lobbyists huddled with lawmakers throughout Wednesday afternoon discussing a compromise, with one lawmaker warning both sides that if they could not work out a deal, the Senate would hash one out on the floor that neither side might like.

Both sides plan to meet Friday, and again next week to try to find a compromise.

The key issue is changing the law to remove or delay the initial tax hit once the property is reassessed, while making sure a property's tax value eventually rises to its market value to maintain county, city and school property tax collections.

The property tax reform that took effect in 2007 lowered some property taxes, raised the sales tax statewide and capped tax increases on property that had not been sold or substantially improved at 15 percent every five years.

But if a home is sold, it is immediately taxed at full value the following tax year, which means a family living in a home for 20 years could have a higher tax bill on a new home even if they downsized.

Second-home buyers and business owners are harder hit because they are taxed at a higher rate. The new plan would extend the 15 percent cap on the amount taxes can rise to all homes purchased starting in 2009.

Ben Brantley, a partner with commercial real estate firm C.B. Richard Ellis, called the tax "catastrophic" to the real estate industry in South Carolina.

He said one business owner - whose lease required him to pay taxes on the building - saw a 200 percent increase in taxes to $9,000 after the owner of the building he was renting sold it.

Rep. Alan Clemmons, R-Horry and a real estate attorney, said that shortly after the law was adopted, one investor scrapped plans to buy an apartment complex after he found out taxes would increase by $600,000.

"They went next door to Georgia," said Clemmons, who introduced the original point of sale bill in 2008. "I saw the handwriting on the wall then."