Special Property Tax Assessments For Rehabilitated Historic Buildings
State law (SC Code of Laws, as amended, Sections 4-9-195 and 5-21-140) allows county and municipal governments to offer special property tax assessments for rehabilitated historic property and low and moderate income rental property. State regulations for the program (12-120 thru 12-125) were amended in 2011.
The following highlights key provisions of the law. Please note that the amendments allow local governments to set different minimum expenditure levels, to set the length of time the special assessment is in effect, to review the rehabilitation work in most cases, and to require approval (preliminary certification) before work begins. Please check with your local government(s) to find out if it has adopted the special property tax assessment and the details of its program.
What is the incentive?
The property is assessed on the pre-rehabilitation fair market value for the length of the ‘special assessment period’. This means that the owner continues to pay property tax on the pre-rehab value of the property, but does not pay tax on the increased value due to the rehabilitation during a set time period (up to 20 years – local governments can set lower time limits.)
What buildings qualify?
Income-producing real property and owner-occupied property are both eligible.
The building must have received ‘historic designation’ from the local governing body (county or municipal government) for the purpose of the special assessment. Property is eligible for historic designation if:
It is listed in the National Register of Historic Places; or
It is at least 50 years old and designated historic by the local governing body based on local criteria for what is historic; or
It is at least 50 years old and is located in a historic district designated by the governing body.
What are the other requirements to qualify?
The rehabilitation work on the building must be approved ‘as appropriate for the historic building and historic district in which it is located.’ Approval is made by the ‘reviewing authority.’ Note: Local governments may require that work receive preliminary approval before it begins.
The ‘reviewing authority’ is the local board of architectural review (BAR) with jurisdiction over historic properties. If there is not a BAR with jurisdiction over historic properties, the governing body may designate another qualified entity with historic preservation expertise to be the reviewing authority. If there is not a BAR or other designated entity, the State Historic Preservation Office of the SC Department of Archives and History will review the work.
The costs of the project must exceed the ‘minimum expenditures for rehabilitation’ set by the local government. State law allows the minimum to be between twenty and one hundred percent of the fair market value of the building.
What is the application process?
Please check with the local government(s) in which the building is located for specific application procedures.
In general, state law allows local governments to set up a ‘preliminary certification’ and ‘final certification’ process.
‘Preliminary certification’ means that:
The property has received ‘historic designation’ from the governing body.
The proposed rehabilitation work has been approved by the reviewing authority.
Work can then proceed. The property is assessed on the fair market value of the property at the time preliminary certification is made. In general the owner has two years to complete the project, although the law allows additional time if the minimum expenditures have been made during the first two years.
Once work is completed, the owner applies for ‘final certification’.
‘Final certification' means that:
The property has received historic designation.
The completed rehabilitation work is approved by the reviewing authority.
The minimum expenditures for rehabilitation were incurred and paid.
When property has received ‘final certification’ the property continues to be assessed on the fair market value of the property at the time the preliminary certification was made. The owner applies to the auditor for the special assessment once the governing body has granted the special property tax assessment.
Note: If a local government does not require preliminary certification, it is possible for a completed project or one already underway to apply for the special assessment. However, the property would be assessed on the fair market value of the building at the time the final certification was made, and thus could include the added value of the rehabilitation to the property.
This website does not provide legal, tax or accounting advice; the information provided is intended to be general in nature; and visitors to the website are strongly encouraged to consult their own professional tax, accounting and legal advisors on individual tax matters, or consult the SC Department of Revenue or the Internal Revenue Service (IRS). The SHPO is not responsible for the information or advice provided here as it may affect the specific tax consequences to any individual (including sole proprietor), corporate, partnership, estate or trust taxpayer, which will depend on many other facts and circumstances. The information is for the general benefit of persons interested in obtaining certifications from the SHPO that may allow them to qualify for federal and/or state historic income tax credits. Given the frequency of changes in federal and state tax laws, regulations and guidance, the information represents a good faith effort to reference controlling laws and regulations as accurately as possible.