In tax year 2022, South Carolina Department of Revenue updated its policy on partial tax exemptions for both real and personal manufacturing property.
Beginning in tax year 2018, the South Carolina Department of Revenue began the process of phasing in a partial value exemption to all manufacturing real and personal property. The full amount of the exemption was to be phased in over a 6-year period, with the partial exemption fully phased in by 2023. The fully phased-in exemption percentage was to be 14.2857%. The revenue loss resulting from the exemption was to be reimbursed and allocated to the counties from the South Carolina Trust Fund for Tax Relief.
However, Act 39 which was signed into law in 2021, amended the South Carolina Code of Laws, Section 12-37-220(52)(a)(i), to increase the partial value exemption percentage from 14.2857% to 42.8571% of the property tax value for all real and personal manufacturing property beginning with the 2022 tax year and beyond. The revision per the SC statutes reads in part:
SECTION 12-37-220. General exemption from taxes. (52)(a)(i) 42.8571 percent of the property tax value of manufacturing property assessed for property tax purposes pursuant to Section 12-43-220(a)(1). The exemption allowed by this item does not apply to property owned or leased by a public utility, as defined in Section 58-3-5, that is regulated by the Public Service Commission, regardless of whether the property is used for manufacturing.
SECTION 12-43-220(a)(1) All real and personal property owned by or leased to manufacturers and utilities and used by the manufacturer or utility in the conduct of the business must be taxed on an assessment equal to ten and one-half percent of the fair market value of the property.
In addition to the change in the allowable exemption, the state also increased the reimbursement to the counties for revenues lost from $85,000,000 to $170,000,000. The partial exemption will apply to all property used in the conduct of a manufacturing business, not just the property used directly in the manufacturing process. This includes items such as machinery and equipment, office equipment, computers, and real property that are not directly used in the manufacturing process.
Manufacturers will not need to apply for the partial value exemption. The partial value exemption will automatically be applied when the manufacturer files its manufacturing return, the PT-300.
For more information, please contact Baden Tax Management to talk about the impact of this and other exemptions and property tax planning opportunities that could apply to your property.