South Carolina Alphabet Soup: ATI and FILOT After South Carolina Tax Code Changes | Womble Bond Dickinson
Whether South Carolina commercial properties are sold directly or indirectly through the sale of shares in the owning entity, the sale is generally considered a taxable transfer of interest or “ATI”. An ATI allows county tax assessors to reassess the value of the sold property for tax purposes within one year of closing, which can result in a significant tax increase (especially if the property has been owned by the same owner for a certain amount of time). time). Following the sale triggering an ATI, the purchaser of the property may apply for a 25% reduction/waiver of the total impact of the new tax value caused by the ATI by submitting an application to the County Tax Assessor in which the property is located. This request is not mandatory, but it can result in significant tax savings. The request for exemption on the form prescribed by the county must be submitted before January 30 (not the 31st) of the year following that in which the sale took place. This exemption/reduction is only available for certain properties that are taxed at a 6% assessment for the year for which the exemption is granted.
While there are certainly other advantages to obtaining a FILOT (see our previous Client Alert on this), following the new tax law reducing the assessment rate for manufactured properties from 10.5% to 6% Starting in 2022, manufacturers no longer need to obtain a FILOT to secure the 6% valuation ratio. This is a great advantage for small manufacturers who otherwise would not be able to meet the statutory eligibility requirements to obtain a FILOT.
Although the ATI Exemption is now more widely available than it was before, there remains another potential ATI trap for the unwary. If a buyer acquires property in South Carolina through a indirect transfer (without deed) of more than 50% of the participation of an entity which owns real estate in SC, the law on the “transfer of taxable interest” requires the taxpayer to notify the county after the transfer closes, even if a FILOT is in place. The notice must be given within 45 days of the transfer.