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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.
