Taxation – Real Property – Rate – Residence – Summer Rental

Ford v. Beaufort County Assessor (Lawyers Weekly No. 011-085-12, 9 pp.) (Paula H. Thomas, J.) Appealed from Administrative Law Court (Ralph K. Anderson III, ALJ) S.C. App. Full-text opinion.

Holding: Since petitioners rented out their Hilton Head home for more than 14 days a year, the respondent-assessor properly taxed their home at the rate applicable to rental property rather than at the lower rate applicable to residences.

Affirmed.

S.C. Code Ann. § 12-43-220(c) governs the eligibility of a legal residence to be taxed on an assessment ratio equal to four percent of the fair market value of the property. A residence that does not qualify is generally taxed based on an assessment ratio equal to six percent of its fair market value. S.C. Code Ann. § 12-43-220(e).

The next-to-last sentence of subsection (c)(1) says, “If this property has located on it any rented mobile homes or residences which are rented or any business for profit, this four percent value does not apply to those businesses or rental properties.”

We agree with the Administrative Law Court that “this property” includes the property on which the legal residence of an owner-occupant is located and that a legal residence of an owner-occupant is therefore subject to the six-percent assessment ratio if it is one of “any residences which are rented” and located on “this property.”

Although a taxpayer may be entitled to have property taxed at the four-percent assessment ratio based on a showing that the property for which the lower assessment ratio is sought has been that taxpayer’s legal residence for some part of the tax year, the right to be taxed at the lower rate is subject to qualifications within the same statute.

The taxpayers contend S.C. Code Ann. § 12-43-220(c)(7) is only a “safe-harbor” and their failure to meet the requirements in this subsection should not prevent them from receiving the preferred assessment ratio. We disagree.

Section 12-43-220(c)(7) provides, “Notwithstanding any other provision of law, the owner-occupant of a legal residence is not disqualified from receiving the four percent assessment ratio allowed by this item if the taxpayer’s residence meets the requirements of Internal Revenue Code Section 280A(g) … and the taxpayer otherwise is eligible to receive the four percent assessment  ratio.”

Internal Revenue Code section 280A(g) reads, “Special rule for certain rental use.— Notwithstanding any other provision of this section … , if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then (1) no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and (2) the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.”

The ALC reasoned that because (1) a statute providing that “a thing shall be done in a certain way carries with it an implied prohibition against doing that thing in another way” and (2) a court should interpret a particular provision in conjunction with the whole statute and the policy of the law rather than in isolation, it follows that the legislature intended for § 12-43-220(c)(7) to state the sole exception under which a legal residence that is rented during the tax year can receive the four-percent assessment ratio. We agree with the ALC’s analysis.

Furthermore, where § 12-43-220 is a tax exemption statute, the ALC correctly construed any uncertainty in the statute against the taxpayers.

Affirmed.