Research Study Shows Inequity in the South Carolina Property Tax System
A research study conducted by Professor Tim Allen, Ph.D., Director of the Carter Real Estate Center at the College of Charleston, concludes there is considerable inequity in South Carolina’s property tax system. The inequity in the system is attributable to provisions in the tax system, including the controversial “Point of Sale Assessment” issue, that lead to different effective tax rates for property owners.
Under the South Carolina Real Property Valuation Reform Act assessors must appraise real property that is involved in an assessable transfer of ownership interest in the year of transfer to determine its assessed value for the coming year (commonly referred to as Point of Sale Assessment). Whereas assessed values of properties not involved in an assessable transfer of interest are limited to an increase of 15% within regular 5-year assessment cycles, this limit does not apply to changes in assessed value as a result of appraisals triggered by assessable transfers of interest. Properties involved in an assessable transfer of interest are assessed at their market values at the time of the transfer of interest.
Point of Sale Assessment results in different effective property tax rates for properties of the same fair market value when property values are rising between the five-year assessment cycles or occasional equalization assessments. When properties of similar value are taxed at different effective tax rates, the property tax system is classified as “inequitable.” The inequity can influence market participants’ decisions to enter into real estate transactions, thus affecting supply and demand conditions in the real estate market. The primary conclusions of this study are summarized as follows.
“Under the current property tax system in South Carolina, not all property owners face the same real property tax burdens relative to their properties’ values. Thus, the system is “inequitable,” says Allen.