Gregory and Leslie Ford were feeling pinched by the recession and hoped to make some extra money by renting our their Hilton Head Island home.
But doing so cost them a tax advantage they've been fighting to get back, to no avail.
The S.C. Court of Appeals ruled Wednesday that the Beaufort County assessor was right to deny the Fords' application for a 4-percent assessment ratio on their home. The courts and assessor determined that because the Fords rented out their home for 91 days in 2008 they must be assessed at 6 percent instead. They could have kept the lower rate if they had rented their home for no more than 14 days.
The couple did pay accommodations taxes on their rental income of $76,500. While their house was rented out, they lived in a rented apartment in Sea Pines, according to the court decision.
The Assessor's Office received an anonymous letter stating the Fords claimed the house as their permanent residence while renting it out weekly during the summer. It investigated and assessed the Fords' home at 6 percent.
The Fords appealed to the county's Tax Equalization Board, which sided with the assessor. The Fords were rebuffed again by the S.C. Administrative Law Court.
The Fords contend they're still entitled to the lower assessment, because they occupy their home nine months a year. They also believe that the law is intended to make sure people pay accommodations taxes on homes rented longer than 14 days and is not designed to require such homeowners to pay the higher property-tax assessment rate.
"Losing the 4-percent ratio is an excessive burden and feels like taxation on top of taxation," the Fords wrote in an email to The Island Packet of having to pay the higher assessment on top of accommodations taxes on their rental income.
County Assessor Ed Hughes called the court's decision "a correct and fair reading" of state law.
Had his office not received the anonymous tip, it's unlikely it would have discovered the Fords' situation, Hughes said.
"It has happened in the past, and we reacted in the same manner ... but we do not have a monitoring process in place," he said. "We have considered conducting an audit (of properties claiming the 4-percent ratio), but didn't have the manpower. Even if we were to hire an independent firm, that would still require a bit of additional workload on staff."
Instead, the office relies on outside reports, which it investigates through homeowner inquiries, on-site inspections, searches of online rental sites and a national database to see whether someone owns a home in another state or elsewhere in South Carolina.
Hughes said he does not know how many primary residences in Beaufort County are being used as rentals and avoiding the higher assessment ratio.
- S.C. Court of Appeals opinion: Ford v. Beaufort County Assessor
- Chalk plan offers some homeowners tax relief: March 7, 2009