Post and Courier on Property Tax Credits

The Post and Courier published a good article about the property tax credits here.

Unfortunately, it included, "Under state law, the town could keep the money and use it for operating expenses, Woolsey said."

If I said that, I misspoke.

State law is unclear.   The practice in South Carolina  has been for municipalities without a property tax to spend all LOST funds.   

However, nothing in the LOST statutes authorizes that practice.   It has never been litigated, so no court has approved spending the money.   There is no Attorney General opinion on the practice.   And the SCDOR has never given an official legal opinion on the matter.   

The most "official" guidance is an SCDOR draft opinion from 1995.   That opinion at least implied that it would be illegal for a municipality to spend the funds and further, it specifically states that mailing out rebate checks is illegal.  Intererstingly, it was requested by the first Town, and the draft opinion "approves" of a plan for the Charleston County Auditor to place a credit against JIPSD taxes on the bills, with the Town directly paying the amount of the credit to the JIPSD.    However, it was only a draft opinion that was never finalized.

Here is what the statute says: SC 4-10-40 states in part:

(B)(1) All of the revenue received by a county and municipality from the Property Tax Credit Fund must be used to provide a credit against the property tax liability of taxpayers in the county and municipality in an amount determined by multiplying the appraised value of the taxpayer's taxable property by a fraction in which the numerator is the total estimated revenue received by the county or municipality from the Property Tax Credit Fund during the applicable fiscal year of the political subdivision and the denominator is the total of the appraised value of taxable property in the county or municipality as of January 1 of the applicable taxable year.

Note that is says "must be used."    It doesn't say that it must be used to provide a credit against the property tax imposed by the municipality.   It rather it says it must be used to provide a credit against the property tax liability of taxpayers "in" the county and municipality.   We have been working on that angle, but are seeking guidance from SCDOR.

The most straightforward approach is for the Town to provide a credit against its own property tax.    By having the Town collect a millage in its own jurisdiction and pay the JIPSD for fire protection and solid waste collection, the credit can be applied exactly as it does in other municipalities.    The taxpayers pay less to the County Treasurer, the County Treasurer sends less to the Town, and then the Town uses the funds from the Property Tax Credit Fund along with the property tax receipts to pay for services.   The Town can pay the JIPSD for the services we currently receive.

JIPSD Chairman was quoted as saying:

Engelman said the commission's attorney has said that would be illegal. And he simply doesn't like the idea. "I like to keep things separate," he said.

The Town has asked for an SCDOR legal opinion on Trent Kernodle's argument that it is illegal for the Town to pay the JIPSD for services.    However, Chairman Engelman makes it clear that the real problem is that he doesn't want it to happen.   "I like to keep things separate."    Commissioner Welch said about the same at the joint Town Council/Commissioner meeting last month.    He said that the Town's proposal is "just silly."    I had hoped that he would agree to reconsider based upon the legal guidance we were seeking from the state.   But it was clear that it didn't matter what the Attorney General or SCDOR says.   The majority of JIPSD Commissioners just don't want to work with the Town to provide a tax credit.

David Engelman, chairman of the James Island PSD, said he thinks the town should again send checks. If that's a difficult task, the town should hire a consultant to do it."

During the third incorporation, the Town always paid a contractor to print and mail property tax rebate checks.   The administrative nightmare wasn't printing or mailing the checks.   It was correcting all of the errors in the aftermath.   Yes the IRS mails out rebate checks.   They make everyone file, right?    They audit people and put them in jail for misrepresenting their income.   

Worse, the Town never attempted to mail property tax rebate checks for cars and boats.   But the LOST statute mandates tax credits for all property subject to tax. 

In my view, spending money that the statute states must be used for tax credits would be irresponsible without better legal guidance.  Also, mailing out rebate checks when the closest thing we have to a legal opinion from the SCDOR says that it would be illegal is a mistake.   Hopefully, we will get further legal guidance from SCDOR.   If necessary, we will return to the Attorney General.   Finally, we may need a declaratory judgement from a court.   And then we will go forward.

The people in the Town of James Island pay 54 mils property tax to the JIPSD.   While this is lower than the property tax millage imposed by the City of Charleston, it is higher than that levied by the City of Folly Beach or the Town of Mount Pleasant.    The people of the Town of James Island deserve the full property tax relief promised when the sales tax was increased due to LOST.   I remain committed to proving that tax relief to the people of the Town.