This document summarizes a seminar on property tax basics and incentives in South Carolina. It covers: (1) basic property tax calculations; (2) fee-in-lieu of tax agreements; (3) manufacturer's property tax abatements; (4) comparisons of FILOT vs. ad valorem taxes plus abatements; (5) multi-county parks and special source revenue credits/bonds; (6) pollution control property exemptions; and (7) property tax return filing deadlines for manufacturers.

2. December 1, 2011
Property Tax Basics and Incentives
Nexsen Pruet Seminar
Tushar V. Chikhliker
Nexsen Pruet, LLC
1230 Main Street, Suite 700
Columbia, SC 29201
803-253-8261
Tushar@nexsenpruet.com

3. Property Tax Basics and Related
Incentives
I. Property Taxes
II. Fee-in-Lieu
III. Manufacturer’s Abatement
IV. FILOT vs. Ad Valorem plus Manufacturer’s Abatement
V. MCPs/SSRCs/SSRBs
VI. Pollution Control Facilities or Equipment
VII. Filing Property Tax Return – Timing Issues for
Manufacturers

4. I. Property Taxes
Property Subject to Tax:
• Real Property – land and all structures and other things
contained in the land or annexed or attached to the land (e.g.,
buildings and other improvements)
• Personal Property – all things, other than real estate, which have
any pecuniary value (e.g., M&E)
• See S.C. Code § 12-37-10 & 12-37-210 and S.C. Code of
Regulations 117-1700.1
• Example – Air Conditioning
– Building air conditioning, incl. refrigeration equipment – Real Property
– Air conditioning window units & package units – Personal Property

5. I. Property Taxes
Equation to calculate your property tax bill:
FMV * Assessment Ratio * Millage =

6. I. Property Taxes
Fair Market Value (FMV):
• Real Property (other than agricultural real property and FILOT real
property) – appraised to determine FMV.
– Generally, reassessed every 5 years, though county can delay reassessment
by 1 year.
– Property Tax Years after 2006 – maximum increase in FMV due to
countywide reassessment is 15% in a 5-year period.
– FMV of improvements added to FMV of land upon completion.
– Can also be reassessed for assessable transfer of interest.
– See S.C. Code § § 12-37-3120 – 12-37-3170; § 12-43-217
• Personal Property
– Manufacturers – From cost, fixed annual statutory depreciation down to
residual value. See S.C. Code § 12-37-930.
– Merchants and other Businesses – From cost, income tax depreciation down
to residual value.

7. I. Property Taxes
Assessment Ratio (AR):
AR’s are found in the SC Constitution:
• Manufacturing and Utility: 10.5%
• Commercial Personal Property: 10.5%
• Warehouse & Distribution: 6%
• Commercial Real Property: 6%
• Primary Residences: 4%
• Farm: 4%

8. I. Property Taxes
Millage:
• Millage includes the combined millage for all taxing
entities within jurisdiction.
– Always includes county and school district; sometimes
includes municipalities or special purpose districts.
– Determined by each taxing jurisdiction by dividing cost
of its annual budget by the total assessed value within
taxing jurisdiction.
– Restrictions in millage increases.

9. II. FILOT
The Basics:
• 3 FILOT Statutes/Acts – Most commonly used today –
Title 12, Ch. 44 of S.C. Code (Simplified FILOT)
• Procedure – Inducement & Ordinance
• Minimum Requirements:
– Standard FILOT
• $2.5M ($1M for certain counties or in Brownfields Voluntary
Cleanup Scenarios)
– Super Fee/Enhanced Investment FILOT
• $150 M and 125 new full-time jobs or $400M

10. II. FILOT
• Investment Periods
– Standard FILOT – 5th anniversary of end of property tax year in
which FILOT property initially placed in service.
– Super Fee/Enhanced Investment FILOT – 8th anniversary of end of
property tax year in which FILOT property initially placed in service.
– Extensions – both periods may be extended by up to 5 more years
(but not to reach statutory minimums).
– 15-year investment period available for very large investors in SC.
• FILOT Term – (up to?) 30 year rolling payment period
– possible extension of 10 years
• Other “rifle shot” qualifiers
• FILOT arrangement affects all 3 variables in property tax formula
– (1) FMV; (2) AR; and (3) Millage.

11. II. FILOT
Fair Market Value (FMV):
Real Property
• Outside of FILOT: Based on assessment by DOR or county
assessor
• Inside of FILOT: Traditionally, original cost over the life of the
FILOT (recent legislation allows for value to be based on
appraisal by SCDOR)
Machinery & Equipment (M&E)
• Generally, same outside and inside FILOT, but if in FILOT not
entitled to extraordinary obsolescence.

12. II. FILOT
Assessment Ratio:
• Outside of FILOT
– Manufacturing - 10.5% on both real and personal property
(chiefly M&E)
– Commercial – 10.5% on personal property and 6% on real
property
• Inside of FILOT
– Down to 6% on both real and personal property
– 4% on Super Fees/Enhanced Investment FILOTs

13. II. FILOT
Millage:
• Outside of FILOT
– Millage is set annually. Can actually go down in
reassessment years but tends to increase.
• Inside of FILOT
– Millage is fixed for the life of the FILOT or subject to 5-
year rate reset.

14. II. FILOT
Advantages of FILOT to Taxpayers:
 Reduction in Assessment Ratio
 Elimination of Rollback Taxes (if Real Estate is AG Use)
 Freezing of Tax Millage
 Greater predictability in forecasting FILOT payments
 Super Fee/Enhanced Investment FILOT
• 4% AR (verses 6%)
• Company has 8 years to meet minimum job and/or investment requirements
and can obtain another 5 to complete project for total of 13 years.
• If 40-year FILOT payment period is granted, millage can be frozen as to
some portion of project for 53 years.

15. II. FILOT
Disadvantage of FILOT to Taxpayers:
 Possible Clawback
 Freezes the FMV of the Real Property (though now can be
unfrozen)
 Lose Extraordinary Obsolescence
 Generally, can’t include property previously subject to tax
• Limited exceptions
• May be addressed through special source revenue credit

16. II. FILOT
Advantages of FILOT to County:
 Eliminate Manufacturer’s Abatement
 County doesn’t lose first 5 years of property taxes

17. II. FILOT
Additional Notes:
• Transfers of FILOT agreements or property under a FILOT
– Allowed if pre-approved or subsequently ratified by county
– Transferee assumes basis of transferor – IMPORTANT
• Affiliates, lessors, and other investors may be able to also
benefit.
• Amendment of FILOT Agreements – Can NOT lower the
millage rate or AR.
• Transition to Simplified Fee from other 2 FILOT statutes is
allowed.

18. III. Manufacturer’s Abatement
• All new manufacturing establishments as well as all additions of at least
$50,000.
• Abates (exempts) the county portion of the millage for five years for
manufacturers – Automatic (County consent NOT required).
• Typically between 20% (in a city) and 40% (not in a city) of the millage.
• Cities (by Ordinance) may also abate their portion of the millage.
• Not available if benefiting from FILOT
• Similar abatements available for corporate headquarters, distribution
facilities, and R&D facilities.
– Corporate HQ and distribution facilities also required to create 75 or more
new full-time jobs (or 150 substantially equivalent) in SC.

19. III. Manufacturer’s Abatement
Extension of Abatement to Unrelated Purchasers – S.C.
Code § 12-37-220(C) and SC Revenue Ruling #04-14
• Facility must be acquired in arms-length transaction
• Existing facility and # of jobs must be preserved (possibly
zero jobs)
• County Council must approve
• If transferee makes $50,000 or more of additional investment,
5-year period may re-start.

20. IV. FILOT vs Ad Valorem plus
Manufacturer’s Abatement
Spreadsheet Example

21. V. MCPs/SSRCs/SSRBs
MCP - Article VII, Section 13(D) of the SC Constitution:
• Counties may jointly develop a MCP with other counties within the
geographical boundaries of one or more of the member counties.
• The area comprising the MCP and all property having a situs therein
is exempt from all ad valorem taxation.
• The owners or lessees of any property situated in the MCP shall pay
an amount equivalent to the property taxes or other in-lieu-of
payments that would have been due and payable except for the
exemption herein provided.
• Written agreement to share expenses and revenues of the MCP.

22. V. MCPs/SSRCs/SSRBs
MCP (Cont.)
• Written agreement must include provisions which: (1) address
sharing expenses of the MCP; (2) specify by percentage the
revenue to be allocated to each county; (3) specify the manner in
which revenue must be distributed to each of the taxing entities
within each of the participating counties.
• If the MCP encompasses all or a portion of a municipality, the
counties must obtain the consent of the municipality prior to the
creation of the MCP.
• All multi-county parks must consist of contiguous counties – passed
in 1995.
• Relevance? Facilitates provision of special source revenue credits
and special source revenue bonds.

23. V. MCPs/SSRCs/SSRBs
Special Source Revenue Credits (SSRCs)/Special Source Revnue
Bonds (SSRBs)
• Through the use of a SSRC or SSRB, a county may equalize (or
lower) its property tax rate with any other county or state
• FILOT agreement not requirement for SSRCs
• Typically, presented as a % of FILOT payment or a flat $ amount
and applied against FILOT payment due for a defined period of time.
• Examples:
 25% SSRC for 10 years
 $50,000 SSRC per year for 20 years
 33% SSRC per year until SSRC cap of $250,000

24. V. MCPs/SSRCs/SSRBs
SSRCs/SSRBs (Cont.)
• Real and personal property are eligible expenditures payable through
SSRCs or SSRBs
– Traditionally limited to infrastructure and improved or unimproved real estate
– SC Economic Development Competitiveness Act of 2010
• If SSRCs/SSRBs used to pay for personal property and personal property is
removed from project, must pay taxes for 2 years as to that personal property
as if still located at project.
• DOR to remit 2 year residual payment.
• If SSRC used to pay for both real and personal property or both infrastructure
and a personal property, presumed to have been first used for personal
property.
• Removed personal property can be replaced.

25. V. MCPs/SSRCs/SSRBs
SSRCs/SSRBs (Cont.)
• Why not just rely on FILOT statute’s provision regarding
Infrastructure Improvement Credits? Why bother with a MCP?
– Distribution of FILOT Revenues
• If not in a MCP – pursuant to pro rata portion of millage
• If in MCP – pursuant to MCP Agreement (County has much more
flexibility)
– Use of FILOT Revenues for Infrastructure Improvement Credit
• Limits to portion of revenue received and retained by the County.
– In a MCP, amounts due for SSRCs are typically deducted prior
to any distribution to taxing entities.

26. V. MCPs/SSRCs/SSRBs
Advantages of SSRCs/SSRBs:
• Additional decrease of FILOT payments – especially helpful
for cash flow in early years.
• Hard dollar incentive.
• Allows high millage counties flexibility to be competitive.
• County can effectively “split” the manufacturer’s abatement
with other taxing entities.
• Can be drafted precisely to cure specific ills.

27. V. MCPs/SSRCs/SSRBs
Disdvantages of SSRCs/SSRBs:
• Clawbacks can be severe.
– Retroactive or prospective?
– Complete or partial? Pro-rata?
• Can be difficult to track and calculate.

28. VI. Pollution Control Facilities or
Equipment
• Complete exemption for facilities or equipment which are
designed for the elimination, mitigation, prevention, treatment,
abatement or control of internal or external water, air, or noise
pollution required by the state or federal government.
– Upon request of DOR, DHEC can investigate property and
provide DOR with listing of pollution control property.
– Dual purpose equipment – production and pollution control –
value eligible for exemption is difference between cost of
equipment with vs. without pollution control ability.
– See S.C. Code § 12-37-220(A)(8)

29. VII. Filing Property Tax Return –
Timing Issues for Manufacturers
• Special Filing Rules for Manufacturers - SC Code § 12-37-970; SC Revenue Ruling #05-20
– Property Tax Return usually due 4 months after the last day of accounting year
Manufacturing Accounting Property Return Due Date Estimated County Billing Dates Final Tax
Year Ending Tax Year for Taxes Payment Date
12/31/2011 2012 04/30/2012 Fall 2012 01/15/2013
01/31/2012 2013 05/31/2012 Fall 2013 01/15/2014
02/28/2012 2013 06/30/2012 Fall 2013 01/15/2014
03/31/2012 2013 07/31/2012 Fall 2013 01/15/2014
04/30/2012 2013 08/31/2012 Fall 2013 01/15/2014
05/31/2012 2013 09/30/2012 Fall 2013 01/15/2014
06/30/2012 2013 10/31/2012 Fall 2013 01/15/2014
07/31/2012 2013 11/30/2012 Fall 2013 01/15/2014
08/31/2012 2013 12/31/2012 Fall 2013 01/15/2014
09/30/2012 2013 01/31/2013 Fall 2013 01/15/2014
10/31/2012 2013 02/28/2013 Fall 2013 01/15/2014
11/30/2012 2013 03/31/2013 Fall 2013 01/15/2014

30. VII. Filing Property Tax Return –
Timing Issues for Manufacturers
Manufacturer’s First Year in Business in SC
• Required to file a return – as of what date depends on date
business begins and date accounting year ends.
– Scenario 1 – manufacturer begins business, manufacturer’s
accounting year ends
• Required to file first property tax return based on assets it holds in SC as of
end of accounting year.
– Scenario 2 – manufacturer’s accounting year ends, manufacturer’s
business begins
• Required to file first property tax return based on assets it holds as of end of
calendar year.

31. VII. Filing Property Tax Return –
Timing Issues for Manufacturers
Existing Manufacturer Places Property in Service in SC After end
of Accounting Year but Before End of Calendar Year
• Manufacturer not required to file another property tax return for
property placed in service after end of accounting year.
• Advantage to existing manufacturers over new manufacturers

32. VII. Filing Property Tax Return –
Timing Issues for Manufacturers
Mid-Year Sale of Property – Responsibility to File Return and Pay
Taxes
• Based on (1) seller’s accounting year end, (2) date of sale, and (3) purchaser’s
accounting year end
• General Rules
– For the calendar year of sale, if the seller owns the property as of the close of its accounting
year, the seller reports the property for the next property tax year and is liable for the
property taxes on the sold property (in some instances, the purchaser is jointly liable for the
taxes on that property).
– For the calendar year of sale, if the seller does not own the property as of the close of its
accounting year but the purchaser does own such property as of the end of its accounting
year, the purchaser reports the property for taxation and is liable for the taxes on that
property for the next property tax year.
– For the calendar year of sale, if neither the seller or the purchaser own the property as of the
end of their accounting years for the calendar year of sale, then the manufacturer that owns
the property on December 31st of that year, must report the property and is liable for
property taxes on that property for the next property tax year.

33. VII. Filing Property Tax Return –
Timing Issues for Manufacturers
Mid-Year Sale of Property (Cont.)
• Revenue Ruling discusses 6 scenarios – Transitional Property Tax Year
• Scenario 1 - the seller’s accounting year ends, the sale occurs, the purchaser’s accounting year ends.
• Scenario 2 - the seller’s accounting year ends, the purchaser’s accounting year ends, the sale occurs.
• Scenario 3 - the purchaser’s accounting year ends, the sale occurs, the seller’s accounting year ends.
• Scenario 4 - the sale occurs, the seller’s accounting year ends, the purchaser’s accounting year ends.
• Scenario 5 - the sale occurs, the purchaser’s accounting year ends, the seller’s accounting year ends.
• Scenario 6 - the purchaser’s accounting year ends, the seller’s accounting year ends, the sale occurs.
– Scenarios 1 and 2 – seller required to file return; purchaser jointly liable for taxes due.
– Scenario 3 – no responsibilities of seller; purchaser must file 2 returns – 1 as of end of
accounting year and 1 for purchased property as of 12/31 (assuming ownership) – and is
liable for taxes.
– Scenarios 4 and 5 – no responsibilities of seller; purchaser required to file return and pay
taxes.
– Scenario 6 – seller required to file return and pay taxes; no liability to purchaser.

34. Nexsen Pruet
Tushar V. Chikhliker
Member
Nexsen Pruet, LLC
T: 803-253-8261
F: 803-727-1469
Tushar@nexsenpruet.com
www.nexsenpruet.com