Changing law remedy for rental taxing issue

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Changing law remedy for rental taxing issue

Published Saturday, July 7, 2012   |  444 Words  |  

A Hilton Head Island couple face a hefty tax bill <2009>after four consistent rulings concluded that renting out their home for 91 days during the summer of 2008 disqualified them for the owner-occupied assessment rate.

Given the law, it's the right conclusion. The remedy for Gregory and Leslie Ford and others who want to rent their homes out for more than 14 days -- and not be subject to a 6 percent assessment ratio and the school operating taxes that go along with it -- is to change the law.

The S.C. Court of Appeals ruled June 27 that the Beaufort County assessor, the county's Tax Equalization Board and an Administrative Law Court judge were right to deny the Fords' application for a 4-percent assessment rate on their home after renting it out for 91 days.

The Fords did pay accommodations taxes on the $76,500 they earned renting out their home.

Two attempts to change the law have failed in recent years. A bill sponsored this year by state Sen. Chip Campsen of Charleston stalled after it left the Senate Finanmmittee with a favorable report and a couple of changes. The bill would have allowed owners to rent out their homes for up to 90 days without losing the favorable 4 percent owner-occupied ratio.

County and school district officials objected to the bill because of its impact on the tax base. Beaufort County Assessor Ed Hughes told County Council's Finance Committee that 13,600 homes, mostly on Hilton Head, could move to the lower 4 percent ratio if the bill became law. Hughes told the committee that if 10 percent of those 13,600 homes moved to the lower rate, the county could lose about $5.1 million.

State Sen. Tom Davis of Beaufort said in March that he supported the bill, but recognized its potential impact on school funding.

"I understand there's a ripple effect," Davis said, "but my direction is to attack the problem at its source, and that's a faulty school-funding formula. In a matter of fairness and equity, you're getting rid of an unreasonable restriction (with the proposed change from 14 days to 90 days.)"

He said the school funding issue should be dealt with separately.

We suggest lawmakers deal with the two issues in tandem because one could have a big impact on the other. Fix the school funding formula, then look at allowing more homes and villas to be assessed at the lower rate. And at the same time, look at the impact on all local government funding.

There would be a ripple effect and lawmakers must recognize and account for it.