How did South Carolina define fair market value when calculating real property tax?

Plain-English summary

A legislator asked whether two provisions of the South Carolina Constitution conflicted over the value used to calculate real property tax. The Attorney General said in 2012 that they could be read together. The assessment ratio applied to fair market value, while the Constitution authorized the legislature to define that term and determine when value changes would be recognized for tax purposes.

The opinion distinguished an appraisal method from the resulting tax value. An assessor could use a method suited to the property to estimate market value. A separate statute then fixed the value used for tax at specified events, including a base year, an assessable transfer, an appeal, or countywide reassessment. A constitutional increase limit could leave the value used for taxation different from market value for other purposes. The AG referred the requester to an enclosed earlier opinion for detailed treatment of the cap rather than deciding every remaining calculation question in this letter.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did the Constitution require tax value always to equal the property's current sale price? A: The AG said the tax assessment used fair market value as defined by the legislature, including rules about when that value was reset and how much it could rise at reassessment. That could differ from market value used for other purposes.

Q: Did the two constitutional provisions conflict?
A: The AG read them together: one applied the assessment ratio to fair market value, and the other allowed state law to define the tax meaning of fair market value and its adjustment rules.

Q: Was one appraisal method mandatory for every property?
A: No. The opinion repeated earlier guidance that sales comparison, income, and cost methods could be used, with the property's characteristics affecting which gave the most reliable estimate.

Q: What events could reset the tax value?
A: The opinion listed statutory dates and events: the base year, an assessable transfer of interest, an appeal, or adjustment in a countywide reassessment program, subject to the increase limit.

Background and statutory framework

The opinion discussed article X of the state Constitution and the General Assembly's authority over real-property tax assessment. It quoted Section 12-37-930's true-value standard and Section 12-37-3140's tax valuation timetable. It described the increase cap as a limit on tax value, not as a change in the appraisal methods available to an assessor.

Citations and references

Statutes: Section 12-37-930; Section 12-37-3140; Section 12-43-217.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/may-25-2012/
• Original PDF: https://www.scag.gov/wp-content/uploads/2012/05/hixon-w-m-os-9450-5-25-12-fair-market-value-calculating-ad-valorem-tax-on-real-property.pdf

Original opinion text

ALAN WILSON

ATIORNEY GENERAL

May 25, 2012

The Honorable William M. Hixon
Representative, District No. 83
416-A Blatt Building
Columbia, South Carolina 2921 1
Dear Representative Hixon:
You have submitted a request to this Office questioning the meaning of "fair market value'' for the purposes of calculating the ad valorem tax on real property. In particular, you question whether there is a conflict between sections 1(3) and 6 of article X of the South Carolina Constitution with regard to the value to be used in calculating this tax. You then ask several questions regarding the proper method for determining fair market value.

Article X, section I provides, in relevant part:
The General Assembly may provide for the ad valorem taxation by the State or any of its subdivisions of all real and personal property. The assessment of all property shall be equal and uniform in the following classifications:

(3) The legal residence and not more than five acres contiguous thereto shall be taxed on an assessment equal to four percent of the fair market value of such property. Article X, section 6 provides, in relevant part: Except as otherwise provided in this section, the General Assembly may vest the power of assessing and collecting taxes in all of the political subdivisions of the State . . . . Property tax levies shall be uniform in respect to persons and property within the jurisdiction of the body imposing such taxes .... For the tax year beginning 2007, each parcel of real property in this State shall have a maximum value for ad valorem taxes that does not exceed its fair market value. The General Assembly is authorized, by general law, to define "fair market value" and to define when property has been improved or when losses have occurred to change the value of the real property.

REMBERT C. DENNIS BUILDING

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Posr OFFICE Box 11549 •

COLUMBIA, SC 29211-1549

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TELEPHONE 803-734-3970

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facSIMJLE 803-253-6283

The Honorable William M. Hixon
Page 2
May 25, 20 12

The General Assembly shall establish, through the enactment of general law ... the method of assessment of real property within the State that shall apply to each political subdivision within the State. Each political subdivision shall value real property by a method in which the value of each parcel of real property, adjusted for improvements and losses, does not increase more than fifteen percent every five years unless, as defined by the General Assembly, an assessable transfer of interest occurs. Notwithstanding any other provision of law, for the purposes of calculating the limit on bonded indebtedness of political subdivis ions and school districts . . . the assessed values of all taxable property within a political s ubdi vis ion or school district shall not be lower than the assessed values of tax year 2006 . (Emphasis added). The most recent amendment to this section was ratified in 2007. Act No. 12, 2007 S.C. Acts 39. At the same time, article Ill, section 29 was amended to read, in relevant part: Taxes on personal property must be laid upon the actual value of the property taxed, as the same shall be asce1tained by an assessment made for the purpose of laying such tax. Taxes on real property must be ascertained by the methods provided by the General Assembly by general law as prescribed in Article X of this Constitution. Analysis "A constitution is not to be construed item by item, but must be harmonized . Notwithstanding, it is apparent that where the Constitution has been amended, the provisions of the amendment contro l in the event of a conflict with preexisting provisions." Knight v. Salisbury, 262 S.C. 565, 570, 206 S.E.2d 875, 877 ( 1974). You questio n whether article X, sectio n 6 " indicates that some value other than 'fair market value'can be used for ad valorem taxes so long as that value is less than the fair market value." In this regard, we would read article X in harmony with itself, such that section 6 gives additional detail and qualification to section I. Purs uant to section I, the assessment ratio must be applied to the fair market value of the property. However, pursuant to section 6, " fair market value" has a particular legal meaning in the context of ad valorem taxation that might differ from the ordinary use of that term. This intent is apparent throughout section 6. Section 6 empowers the General Assembly to define "fair market value" and to define the time at which changes to that value will be recognized for ad valorem tax purposes. It limits the amount by which the value of property for ad valorem tax purposes can increase. Finally, it states that, for certain purposes and in certain factual scenarios, these values and/or limits might not apply. Accordingly, it is clear that the assessment ratio must be applied to the fair market value, but the term "fair market value" must be read in light of the substance given to it by the General Assembly pursuant to sect ion 6. We turn now to the meaning given by the General Assembly to the term "fair market value." In this regard, we look to sections 12-37-930 (2000 & Supp. 2011) and 12-3 7-3 140 (Supp. 2011) of the South

The Honorable William M. Hixon
Page 3
May 25, 2012

Carolina Code. In a recent opinion of this Office, we explained as follows: Section 12-37-930 of the South Carolina Code provides, in relevant part: All property must be valued for taxation at its true value in money which in all cases is the price which the property would bring following reasonable exposure to the market, where both the seller and the buyer are willing, are not acting under compulsion, and are reasonably well informed of the uses and purposes for which it is adapted and for which it is capable of being used. In this context, "true value in money" means fair market value. Long Cove Home Owners ' Assoc. v. Beaufort County Tax Equalization Bd., 327 S.C. 135, 142, 488 S.E.2d 857, 861 (1997) ("All real property in South Carolina must be assessed according to its 'true value in money,' which has been held to mean fair market value."); S.C. Tax Comm 'n v. S.C. Tax Bd of Review, 287 S.C. 415, 418, 339 S.E.2d 131, 133 (Ct. App. 1985) ("[l]t is the market place value of the real property which determines its value for ad valorem taxes."). However, section 12-37-930 permits an exercise of discretion as to the proper method for ascertaining fair market value. Available methods for determining the fair market value of real property include, but are not limited to, the sales comparison method, the income capitalization method, and the cost method.... As stated in a recent opinion of this Office, the particular characteristics of a property will determine which valuation method (or methods) will provide the most reliable estimate of its fair market value. Letter to the Honorable Donald C. Smith, Op. S.C. Att'y Gen. (Jan. 29, 2007) ("[O]nly a court may decide which method is appropriate[] in a given case . . . . However, we believe a court would consider the particular circumstances surrounding the property in order to determine which method presents the most reliable indication of the property's fair market value."); see also 27 S.C. Code Ann. Regs. 117-1740.3(5) (Supp. 20 I 0) ("The Assessor will, to the best of his or her ability, estimate the fair market value for all real property under his or her jurisdiction as of the assessment date ...." (emphasis added)). Letter to The Honorable Tom Young, Jr., Op. S.C. Att'y Gen. (Oct. 20, 2011) (footnote omitted). Section 12-37-3140, enacted as part of the South Carolina Real Property Valuation Reform Act, does not affect the proper method for appraising real property pursuant to section 12-37-930. Letter to The Honorable Torn Young, Jr., supra. However, it does impact the definition of "fair market value" for tax years "beginning after 2006." Specifically, section 12-37-3140(A) provides, in relevant part: (A)( I) For property tax years beginning after 2006, the fair market value of real property is its fair market value applicable for the later of: (a) the base year, as defined in subsection (C) of this section;

The Honorable William M. Hixon
Page4
May 25, 2012

(b) December thirty-first of the year in which an assessable transfer of interest has occurred; (c) as determined on appeal; or (d) as it may be adjusted as determined in a countywide reassessment program conducted pursuant to Section 12-43-217, but limited to increases in such value as provided in subsection (B) of this section. Section 12-37-3140(8) then sets forth the fifteen percent cap required by article X, section 6 of the state 1 constitution. In our recent letter to Representative Young, referenced above, we discussed in detail the proper interpretation of this section as it concerns the calculation of the fifteen percent cap. A copy of that letter is enclosed for your convenience, and we trust it will answer the remainder of your questions. Very truly yours,

Dana E. Hofferber
Assistant Attorney General
REVIEWED AND APPROVED BY:

Robert D. Cook
Deputy Attorney General

As you have recognized, the fifteen percent cap might result in a fair market value for ad valorem tax purposes that differs from the fair market value that would apply for other purposes.