Real estate agents and local governments have struck a compromise on a bill changing how much properties are taxed when they are sold.
The issue, known as point of sale, has simmered since lawmakers and voters approved a series of property tax law changes in 2006 and 2007. Real estate agents have argued point of sale has scuttled real estate sales after buyers learned of their new, higher tax bills and makes South Carolina property more expensive than neighboring states. Local governments have argued that eliminating point of sale would cut their revenue by $52 million, and that other parts of the property tax law prohibits tax increases to make up the difference.
Nick Kremydas, president of the South Carolina Association of Realtors, said the bill should spur commercial real estate sales and help the economic recovery.
The compromise would only affect commercial properties, rental, second homes and other properties taxed at 6 percent of their value. The compromise makes no changes to owner-occupied homes, which only pay a portion of their property tax value under the property tax reform law.
According to the compromise, properties would receive a 25 percent discount from the new market value for tax purposes. However, to minimize the impact on local governments, that discount could not reduce the new tax value to less than the property's current market value. For instance, a property assessed at a fair market value of $100,000 which sold for $125,000 would be taxed based on its $100,000 value.
The compromise also allows local governments who choose not to raise their property tax rates to their annual maximum -- the rate of population growth plus inflation -- to tap the difference, if needed, in future years.
"We're not ecstatic," said Robert Croom, attorney for the South Carolina Association of Counties. "Fortunately the people around the table thought there was some win in it."
Time is running short for the legislation to pass prior to Thursday's scheduled adjournment. The Senate must approve the bill today and give final approval tomorrow, and the House must vote to agree or disagree with the Senate version before 5 p.m. Thursday.