Homeowners could rent their homes for up to three months and still get a break on their property taxes under a billthe state Senate is considering.
The bill, now sidelined in the Senate, could be bad news for local governments and school districts, however, because it could reduce income they get from property taxes.
Currently, a townhouse, condominium or single-family home is considered a second home and assessed at a higher rate if it's rented for more than 14 days each year. The proposed bill would change state law and allow such properties to be rented for up to 90 days and still avoid the higher rate.
About 60 percent of Beaufort County's homes, excluding apartments, don't qualify as owner-occupied, according to county assessor Ed Hughes. Property taxes on those homes are based on 6 percent of their appraised value. Taxes on owner-occupied homes are based on 4 percent of their appraised value.
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The difference can add up to hundreds or thousands of dollars on a tax bill, depending on the home's appraisal and location.
Sen. Chip Campsen, R-Charleston, is a sponsor of S.B. 40, which he says would allow more homeowners to save on their tax bills while earning extra rental income.
"I have some constituents who do not technically have a primary residence because, while they only own one home ... they rent for more than 14 days," he said. "There are people who lease their homes for a month or two so they can pay insurance and property taxes."
Sens. Glenn McConnell, R-Charleston, and Luke Rankin, R-Horry, also are sponsors.
Hilton Head Island Realtor Andy Klepchick said the bill would be "amazingly helpful" in bringing more home buyers to the area.
"It would be a life-saving change," he said. "The North Carolina and Georgia tax system doesn't differentiate primary and secondary homes. ... Their markets hurt our consideration."
Hughes told the county Finance Committee last month that 13,600 homes, mostly on Hilton Head, would move to the lower 4 percent ratio if the bill became law. He said that would almost certainly cost the county, particularly the school system, because property taxes collected on homes assessed at the 4 percent rate cannot be used for school operating costs.
Hughes told the committee that if 10 percent of those 13,600 homes moved to the lower rate, the county could lose about $5.1 million. If 1 percent moved to the lower rate, the impact would be about $500,000.Sen. Tom Davis, R-Beaufort, said he supports the bill. He recognizes the effect it could have on school funding, but that flaw should be dealt with separately, he said.
"I understand there's a ripple effect ... but my direction is to attack the problem at its source, and that's a faulty school-funding formula," Davis said. "In a matter of fairness and equity, you're getting rid of an unreasonable restriction."
The S.C. Association of Counties has not taken a stance on the bill but its 2012 policy report says it opposes any legislation that would allow rentals to receive the 4 percent assessment ratio.
The bill was recommended by the state Finance Committee in January but blocked from debate in the Senate by Sen. Dick Elliott, a Democrat who represents several counties in the Pee Dee region.
Before the legislation can be debated, Elliott would have to lift the block he has placed on it.
Follow reporter Anne Christnovich at twitter.com/EyeOnBeaufortCo.