What follows is a sample of what the tax rate cuts will be worth, on average, based on taxable income ranges, and how many tax filers are in each group: The remaining current tax brackets – 4%, 5% and 6%- have all been reduced to 3% immediately. The Act reduces the IIT rate to 6.5% for taxable years after 2021, and beginning with tax year 2023, the top rate decreases by one-tenth of one percent if General Fund revenues increase by at least 5% until it reaches 6% in tax year 2027. This has continued to cause perception problems for the State and efforts have been underway for years to reduce the rate. While South Carolina has a very pro-taxpayer individual income tax (IIT) base ( i.e., federal taxable income), it has historically had a very high IIT tax rate with a 7% tax rate for its highest tax bracket. Despite the Act, there are still advantages to both manufacturers and, even, counties in entering into fee in lieu of tax arrangements with manufacturers. Additionally, as the increased exemption applies to both existing and new manufacturing property in the State, it is likely to impact both existing and new property tax incentive arrangements (i.e., fee in lieu of tax and special source revenue credit arrangements) throughout the State. The Act further increases the prior 2021 revenue loss reimbursement cap for taxing entities from $85 million to $170 million. With the Act, the General Assembly has now amended the prior exemption and, again, reduced the property tax value such that the effective assessment ratio applicable to manufacturers is, effective immediately, 6% (the applicable assessment ratio in many fee in lieu of tax arrangements). However, in 2021, and in light of the challenges in amending the State Constitution, the General Assembly adopted a workaround to effectively reduce the assessment ratio applicable to manufacturers by adopting a phased-in property tax exemption applicable to the taxable value of “manufacturing property”, which effectively reduced the applicable assessment ratio to 9% over a six-year period. Accordingly, for decades, the actual, and effective, assessment ratio applicable to manufacturers was 10.5%. “Manufacturing property” includes “all real and personal property owned by or leased to manufacturers and used by the manufacturer in the conduct of business.” Actual property tax assessment ratios are found in the State Constitution. Below is high-level summary of the legislation, which has already taken effect in South Carolina.įirst, and most importantly to York County and its manufacturer taxpayers, the Act effectively lowers the standard/non-incentivized assessment ratio (one of the three variable in the property tax calculation) for “manufacturing property” down to 6%. The Act significantly impacts the State and local tax regime in South Carolina, both with respect to property taxes as well as State income taxes. Governor McMaster signed the Act into law two days later on June 17, 2022. Maynard Nexsen PC Maynard Nexsen PC Main Content Main Menu Menu
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