On June 15, the SC General Assembly passed legislation to lower the assessment ratio for manufacturers from 10.5% to 6% to provide property tax relief to manufacturers. The lowering of the ratio affects a company’s property tax liability which is calculated as follows: Property Value * Assessment Ratio * Local Millage Rate. The assessment ratio was set at 10.5% in the SC Constitution, which was then lowered by the Gas Tax Bill to 9% over a six-year period. The new legislation change immediately lowers it to 6%.
This new change benefits manufacturers (a) with assets predating fee in lieu of tax (FILOT), (b) who acquired assets after their fee investment period had run, (c) whose FILOT is expiring, and (d) small and medium size manufacturers who never got a FILOT. Companies may still be able to negotiate a FILOT, which can greatly reduce their property tax liability.
The advantages of the FILOT for manufacturers are the lowering of the assessment ratio to 6%, freezing the millage rate, freezing the value of the building, eliminating roll back taxes, and Special Source Revenue Credits for the largest projects. The disadvantage of FILOT is the elimination of manufacturers’ abatement (county portion of the millage, typically 20-30%), freezing the value of the manufacturer’s building (which could decline in value) and elimination of the Local Option Sales Tax Credit.
Overall, this is great for manufacturers because it now has a 6% assessment ratio plus the manufacturer’s abatement for new investments and lost credits. Since the FILOT is a contract, many manufacturers may still prefer that route in case the new statute is later amended or repealed in future years.
The act applies to property tax years after 2021, so the reduction goes into effect this year. Manufacturers who are not in a FILOT agreement need to file a PT-300 (due date for calendar year taxpayer was April 30, 2022). They will then receive a Proposed Assessment from the DOR in the summer/fall. Once received, they will then need to make sure their proposed assessment contains the reduction.
Thanks to Mr. Burnet R. Maybank, III at Nexsen Pruet for his assistance with this article.
By Jesse Swearingen