South Carolina Property Tax Update Archive

Updated June 2008

Roll Back Taxes On South Carolina Agricultural Real Property

The South Carolina Tax Code (the “Code”) requires each county to appraise and equalize properties once every fifth year.* In 2007, the South Carolina General Assembly enacted the South Carolina Real Property Valuation Reform Act (the “Act”) which limited increases in reappraisals to fifteen percent in most circumstances.** The limitation does not apply when title is transferred or when use classifications change.

The Code establishes classifications of property for ad valorem taxation.*** Property classified as “agricultural” real property is assessed based on the fair market value of the property when used for agricultural purposes.**** Because agricultural real property is assessed at the “fair market value for agricultural purposes,” taxpayers owning agricultural real property and classified as such, pay significantly less in yearly ad valorem taxes than they would if the property were classified as residential or commercial properties.

The Act has created substantial difficulties for governments looking to replace lost revenues from property tax collections. One of the areas where county governments appear to be looking to recover lost revenues appears to be from large acreage tracts which had been classified as agricultural prior to development into residential and commercial projects.

The Code provides that a change in use of a property to any use other than agricultural triggers the assessment of roll back taxes. Roll back taxes allow the county to assess and collect taxes against the property in an amount equal to the difference, if any, between the taxes paid or payable on the basis of the valuation and the assessment of the property as agricultural and the taxes that would have been paid or payable had the property been classified, valued, assessed, and taxed for other uses such as residential.***** South Carolina statutes allow the taxing authority to collect roll back taxes for the year in which the use of the property changed and each of the five tax years immediately preceding in which the real property was valued, assessed, and taxed as agricultural real property.****** The amount can be substantial.

In the current economy, some taxing authorities are seeking to increase current tax revenues by reclassifying agricultural properties and potential future tax revenues by reappraising non-agricultural values of agricultural properties. The Code does not limit reassessment for roll back purposes. The practice is particularly difficult to track in that the agricultural property owner often does not notice the increase since the current agricultural taxes are subject to the fifteen percent (15%) limitation. By using this practice, counties appear to be looking to collect substantial roll back taxes when the property’s classification changes from an agricultural use. Taxpayers should be cognizant of any increase in the appraised value of agricultural property even in circumstances where the immediate impact will not be felt since such an increase may significantly increase a taxpayer’s roll back tax liability upon a change in use of the property.

*S.C. Code Ann. § 12-43-217 (Supp. 2008).
** S.C. Code Ann. § 12-37-3140(B) (Supp. 2008).
*** S.C. Code Ann. § 12-43-220 (Supp. 2008).
**** S.C. Code Ann. § 12-43-220(d)(1)(A) & (B) (the assessment ratio is determined by the taxpayer’s ownership structure).
*****S.C. Code Ann. § 12-43-220(d)(4).
****** S.C. Code Ann. § 12-43-220(d)(4).

Morris A. Ellison
William T. Dawson
Womble Carlyle
American Property Tax Counsel (APTC)