Two bills that would extend the state's 4 percent property-tax assessment ratio to more homeowners were unanimously approved by a S.C. House subcommittee last week.
The first would allow homeowners to apply for the 4 percent rate if the residence is occupied by a relative 65 or older, according to Rep. Bill Herbkersman, R-Bluffton. That could help some save on assisted-care expenses.
The second would increase to 72 days the amount of time homeowners who live in South Carolina can rent out their residence and still qualify for the 4 percent rate. That could allow some to make additional income during holidays and vacations, Herbkersman said.
Real estate property taxes are determined by applying the assessment ratio to the market value of the property to determine its assessed value.
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Each county and municipality then applies its millage rate to the assessed value to determine the tax due.
A 4 percent assessment ratio is applied to homes that serve as their owners' primary residences; for other homes, a 6-percent assessment is applied.
Currently, owners who rent out their homes for more than 14 days must pay property taxes at a 6 percent rate. That provision was confirmed by a 2012 S.C. Court of Appeals decision against a Hilton Head Island couple who rented out their house for 91 days in the summer of 2008 while still claiming it as their primary residence.
Both bills now head to the House Ways and Means Committee. If approved by the committee, Herbkersman hopes to match the first bill with a similar measure in the S.C. Senate and pass it before the General Assembly's regular session ends June 5.
Herbkersman is not a sponsor of the bill that would allow homeowners to rent out their property for 72 days. However, he said he probably will support it.
Although a similar bill was approved by the Senate last year, previous attempts to pass it have failed.
Beaufort County Assessor Ed Hughes said that if the bill becomes law, it could continue a trend in which more homeowners seek the 4 percent ratio. During the past nine years, the number of owner-occupied homes in Beaufort County has risen by 10 percent, so that one in every three homes is now taxed at 4 percent, according to Assessor's Office data.
That trend and the overall drop in property values has led to a sharp decrease in the county's taxable value, Hughes said. That's particularly painful for the Beaufort County School District, which relies heavily on taxes paid on those 6-percent homes to fund school operations, he added.
Hughes said it's already difficult for the county to determine how long property owners rent out their homes -- it relies mostly on tipsters to investigate fraudulent tax claims. A change in the law could make such audits all the more difficult.
"It puts the onus on the Assessor's Office that now we have to wear the property tax policemen hat because of the huge, huge tax benefits people get by getting the 4 percent rate," Hughes said.
Herbkersman counters that existing safeguards used to establish primary residency should quell attempts to abuse the law.
Hilton Head Island real estate agent Andy Twisdale agrees.
"You can't just wink an eye and say, 'This is my primary residence,'" Twisdale said.
'UNCLE PRESTON'S LAW'
The other measure approved by the subcommittee last week would help families trying to provide a home for their elderly family members who want to remain independent.
Herbkersman introduced the bill -- known as "Uncle Preston's Law" -- in the S.C. House earlier this year.
It's named for a family that purchased a home for their uncle in South Carolina but didn't live in the state, Herbkersman said. The family wanted to avoid placing their uncle in an assisted-living facility, but could not afford the 6 percent rate charged to rental property and second homes.
The bill would be especially helpful to families in similar situations in Beaufort County, which has a growing retirement community and where most homes are owned by people who have a primary residence elsewhere in the state or country, Herbkersman said.
The bill would not apply to family members who are paying rent.
"It's not a novel idea of letting people stay in their homes, but people putting their family member up can't always afford that (higher tax rate)," Herbkersman said. "It's just a common sense kind of way of keeping older folks in a home of their own."
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