Can a South Carolina town spend accommodations tax money on workforce housing, and give it to private builders?
Official title
Opinion addressing the expenditure of local accommodation tax revenues for the development of workforce housing.
Requester
Requested by Curtis Coltrane, Esq., Attorney for the Town of Hilton Head Island.
Plain-English summary
Hilton Head Island's attorney asked the Attorney General how the town could use accommodations tax money, and general fund money, to develop workforce housing after Act 57 of 2023 added workforce housing to the list of allowed uses. The questions came down to: how is the 15% spending cap measured, can the money go to private (nonprofit or for-profit) developers, and does a general-fund grant to a nonprofit homebuilder square with the state constitution?
On the cap, the AG read § 6-4-10(4)(b)(ix) two ways at once. Workforce housing is a "tourism-related expenditure," so it is paid out of the 65% special fund. But the 15% limit is calculated on the total annual local accommodations tax revenue the local government receives, not on the smaller tourism fund, because the statute plainly says "fifteen percent of its annual local accommodations tax revenue." The AG also noted this provision sunsets after December 31, 2030.
On private developers, the AG concluded the money can go to nonprofit or for-profit entities. Section 6-4-10(4) does not restrict tourism-related spending to nonprofits (unlike the advertising allocation, which does), and an Administrative Law Court decision (City of Myrtle Beach v. Tourism Expenditure Review Committee) confirmed that reading. Either way, the expenditure must satisfy the four-part public-purpose test from Nichols v. South Carolina Research Authority and the statute's requirements. The same analysis applies to a town's separate locally imposed accommodations tax under § 6-1-520 and § 6-1-530(A)(7).
Finally, on general-fund grants, the AG concluded a donation or grant to a nonprofit homebuilder (the letter gave Habitat for Humanity as an example) is permissible under Article X, §§ 5 and 11 of the constitution, so long as it serves a public purpose, the funds carry out a public function within the government's authority, and the government keeps some control to ensure the money is used as intended.
What this means for you
City and town councils funding workforce housing
The opinion supports spending local accommodations tax revenue on workforce housing as a tourism-related expenditure, with the 15% cap measured against your total annual local accommodations tax revenue rather than the tourism fund alone. It also reads the law to allow grants to nonprofit and for-profit developers, provided each expenditure meets the Nichols public-purpose test and the statute's terms. Keep in mind the workforce-housing authorization sunsets after December 31, 2030.
Local government attorneys structuring grants
The recurring requirement is public purpose plus oversight. The AG repeatedly tied permissible private grants to the four-part Nichols test and to the constitutional rule that public funds serve a public function with the government retaining control over how the money is spent. A grant that meets those conditions is defensible; one that hands public money to a private interest without those guardrails is not.
Workforce-housing developers and nonprofits
Both nonprofit and for-profit builders can receive these funds under the opinion's reading, but the local government must be able to show the project serves a public purpose and that it keeps oversight. The workforce-housing programs are also supposed to include programs to promote home ownership, per the statute.
Common questions
Q: Can a South Carolina local government spend accommodations tax money on workforce housing?
A: Yes. Act 57 of 2023 added "development of workforce housing" as a tourism-related expenditure, so local accommodations tax revenue can be used for it, subject to a 15% cap and a 2030 sunset.
Q: Is the 15% cap based on all the accommodations tax or just the tourism fund?
A: On all of it. The AG read § 6-4-10(4)(b)(ix) to cap workforce-housing spending at 15% of the total annual local accommodations tax revenue, not 15% of the 65% tourism-related fund.
Q: Can the money go to a private company, or only a nonprofit?
A: Either. The AG concluded the statute does not restrict tourism-related spending to nonprofits, so funds may go to nonprofit or for-profit developers, as long as the Nichols public-purpose test and statutory requirements are met.
Q: Can the town give general-fund money to a group like Habitat for Humanity?
A: Yes, per the opinion, if the grant serves a public purpose, carries out a public function within the town's authority, and the town keeps oversight of how the money is spent, consistent with Article X, §§ 5 and 11.
Q: Does this authorization last forever?
A: No. The workforce-housing provisions in § 6-4-10(4)(b)(ix) and § 6-1-530(A)(7) are no longer effective after December 31, 2030.
Background and statutory framework
South Carolina imposes a statewide accommodations sales tax (§ 12-36-920(A)); two percent of it is the "local accommodations tax" credited to political subdivisions under § 12-36-2630 and Chapter 4 of Title 6. Section 6-4-10 sets how a county or municipality allocates that revenue: the first $25,000 and 5% of the balance go to the general fund, 30% goes to a tourism-advertising special fund, and the remaining 65% goes to a special fund for "tourism-related expenditures." Act 57 of 2023 added "development of workforce housing" (with home-ownership programs) to that list, capped at 15% of annual local accommodations tax revenue and sunsetting after December 31, 2030. A separate, locally imposed accommodations tax of up to three percent is governed by § 6-1-520 and § 6-1-530, which Act 57 amended in parallel.
The AG applied standard construction canons (Fullbright v. Spinnaker Resorts; Wade v. Berkeley County; Beaufort County v. S.C. State Election Comm'n) and prior opinions and cases on funding private entities. The key public-purpose authority is Nichols v. South Carolina Research Authority, which set a four-part test for financing through private entities, alongside Bolt v. Cobb and Gilbert v. Bath (public funds may flow to nonprofits performing public functions). On for-profit recipients, the AG followed the Administrative Law Court's reading in City of Myrtle Beach v. Tourism Expenditure Review Committee, which relied on the Court of Appeals' description of the statute's flexibility in Thompson v. Horry County. The constitutional limits come from Article X, § 5 (public purpose) and § 11 (no pledge of credit), which the AG read to permit public-purpose grants to private entities with adequate government oversight.
Citations and references
Statutes and constitutional provisions:
- S.C. Code Ann. § 6-4-10 (allocation of state-shared local accommodations tax; 65% tourism fund; 15% workforce-housing cap; 2030 sunset)
- S.C. Code Ann. § 12-36-920(A) (statewide accommodations sales tax)
- S.C. Code Ann. § 12-36-2630 (two-percent local accommodations tax credited to subdivisions)
- S.C. Code Ann. § 6-1-520 and § 6-1-530 (locally imposed accommodations tax; § 6-1-530(A)(7) workforce housing)
- Act 57 of 2023 (added workforce housing as a tourism-related expenditure)
- S.C. Const. art. X, § 5 (public purpose) and art. X, § 11 (no pledge of credit)
Cases:
- Nichols v. South Carolina Research Authority, 290 S.C. 415, 351 S.E.2d 155 (1986) (four-part public-purpose test)
- Bolt v. Cobb, 225 S.C. 408, 82 S.E.2d 789 (1954) (public funds to nonprofit performing public function)
- Gilbert v. Bath, 267 S.C. 171, 227 S.E.2d 177 (1976) (grant to nonprofit hospital builder served a public function)
- Thompson v. Horry County, 294 S.C. 81, 362 S.E.2d 646 (Ct. App. 1987) (statute gives counties flexibility on tourism spending)
- Fullbright v. Spinnaker Resorts, Inc., 420 S.C. 265, 802 S.E.2d 794 (2017) (statutory construction)
- Wade v. Berkeley County, 348 S.C. 224, 559 S.E.2d 586 (2002) (construing ambiguous statutes)
- Beaufort County v. S.C. State Election Comm'n, 395 S.C. 366, 718 S.E.2d 432 (2011) (in pari materia)
Source
- Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-the-expenditure-of-local-accommodation-tax-revenues-for-the-development-of-workforce-housing/
- Original PDF: https://www.scag.gov/media/4gej5cfl/03413978.pdf
Original opinion text
ug
V
Alan Wilson
attorney General
October 1 6, 2023
Curtis L. Coltrane, Esq.
Coltrane & Wilkins, LLC
Post Office Box 6808
Hilton Head Island, SC 29938
Dear Mr. Coltrane:
We received your letter requesting an opinion of this Office concerning Act 57 of 2023 and “the
ability of local governments to utilize general fund money in the form of grants or donations to
private entities for the development workforce housing.”
Your letter contains three questions,
which we will address in turn.
Law/Analysis
1.
Does section 6-4-10(4)(b)(ix) authorize the dedication of fifteen percent of the entire
amount of the accommodations tax allocation to a local government, or does it authorize
the dedication of fifteen percent of the “65%” fund described in 6-4-10(4)?
In order to provide some background to your question, we note that South Carolina law
imposes a statewide seven percent sales tax on “the gross proceeds derived from the rental or
charges for any rooms, campground spaces, lodgings, or sleeping accommodations furnished
to transients by any hotel, inn, tourist court, tourist camp, motel, campground, residence, or
any place in which rooms, lodgings, or sleeping accommodations are furnished to transients
for a consideration.” S.C. Code Ann. § 12-36-920(A) (Supp. 2022). Section 12-36-2630 of
the South Carolina Code (2014) explains that two percent of this tax is “local accommodations
tax, which must be credited to the political subdivisions of the State in accordance with Chapter
4, Title 6.” Section 6-4-10 of the South Carolina Code (2014 & Supp. 2022) governs the
allocation of such revenue in county areas collecting more than fifty thousand dollars from the
local portion of the accommodations tax and reads as follows:
(1) The first twenty-five thousand dollars must be allocated to the general fund
of the municipality or county and is exempt from all other requirements of this
chapter.
(2) Five percent of the balance must be allocated to the general fund of the
municipality or county and is exempt from all other requirements of this
chapter.
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Curtis L. Coltrane, Esq.
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October 16, 2023
(3) Thirty percent of the balance must be allocated to a special fund and used
only for advertising and promotion of tourism to develop and increase tourist
attendance through the generation of publicity. To manage and direct the
expenditure of these tourism promotion funds, the municipality or county shall
select one or more organizations, such as a chamber of commerce, visitor and
convention bureau, or regional tourism commission, which has an existing,
ongoing tourist promotion program. If no organization exists, the municipality
or county shall create an organization with the same membership standard in
Section 6-4-25. To be eligible for selection the organization must be organized
as a nonprofit organization and shall demonstrate to the municipality or county
that it has an existing, ongoing tourism promotion program or that it can
develop an effective tourism promotion program. Immediately upon an
allocation to the special fund, a municipality or county shall distribute the
tourism promotion funds to the organizations selected or created to receive
them. Before the beginning of each fiscal year, an organization receiving funds
from the accommodations tax from a municipality or county shall submit for
approval a budget of planned expenditures. At the end of each fiscal year, an
organization receiving funds shall render an accounting of the expenditure to
the municipality or county which distributed them. Fees allocated pursuant to
this subsection must not be used to pledge as security for bonds and to retire
bonds. Also, fees allocated pursuant to this subsection must be allocated to a
special fund and used only for advertising and promotion of tourism to develop
and increase tourist attendance through the generation of publicity, and not used
to pledge as security for bonds and to retire bonds.
(4)(a) The remaining balance plus earned interest received by a municipality or
county must be allocated to a special fund and used for tourism-related
expenditures. This section does not prohibit a municipality or county from using
accommodations tax general fund revenues for tourism-related expenditures.
(b) The funds received by a county or municipality which has a high
concentration of tourism activity may be used to provide additional
county and municipal services including, but not limited to, law
enforcement, traffic control, public facilities, and highway and street
maintenance, as well as the continual promotion of tourism. The funds
must not be used as an additional source of revenue to provide services
normally provided by the county or municipality but to promote tourism
and enlarge its economic benefits through advertising, promotion, and
providing those facilities and services which enhance the ability of the
county or municipality to attract and provide for tourists.
“Tourism-related expenditures” include:
Curtis L. Coltrane, Esq.
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October 16, 2023
(i) advertising and promotion of tourism so as to develop and
increase tourist attendance through the generation of publicity;
(ii) promotion of the arts and cultural events;
(iii) construction, maintenance, and operation of facilities for
civic
and
cultural
activities
including
construction
and
maintenance of access and other nearby roads and utilities for
the facilities;
(iv)
the
criminal
justice
system,
law
enforcement,
fire
protection, solid waste collection, and health facilities when
required to serve tourists and tourist facilities. This is based on
the estimated percentage of costs directly attributed to tourists;
(v) public facilities such as restrooms, dressing rooms, parks,
and parking lots;
(vi) tourist shuttle transportation;
(vii) control and repair of waterfront erosion, including beach
renourishment;
(viii) operating visitor information centers;
(ix) development of workforce housing, which must include
programs to promote home ownership. However, a county or
municipality may not expend or dedicate more than fifteen
percent of its annual local accommodations tax revenue for the
purposes set forth in this item (4)(b)(ix). The provisions of this
item (4)(b)(ix) are no longer effective after December 31, 2030.
S.C. Code Ann. § 6-4-10 & 57 S.C. Acts 2023 (emphasis added).
You ask whether section 6-4- 1 0(4)(b)(ix) allows a local government to spend fifteen percent of
the entire accommodations tax it receives under section 12-36-2630(a) on the development of
workforce housing or whether it may only spend fifteen percent of the sixty-five percent of
accommodations tax allocated to the special fund created under section 6-4-10(4)(a). To answer
your question, we must employ the rules of statutory construction, the primary of which to
effectuate the intent of the Legislature. Fullbright v. Spinnaker Resorts, Inc., 420 S.C. 265, 272,
802 S.E.2d 794, 797 (2017). As you mentioned in your letter, the Legislature added section 6-410(4)(b)(ix) to section 6-4-10 via act 57 of 2023 to allow local accommodations tax revenue to be
for the development of workforce housing. Certainly, either interpretation could serve this purpose.
Curtis L. Coltrane, Esq.
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October 1 6, 2023
Thus, we turn to the statute to determine which interpretation a court is likely to find correct. As
our Supreme Court instructs:
“If a statute’s language is plain, unambiguous, and conveys a clear meaning[,]
‘the rules of statutory interpretation are not needed and the court has no right to
impose another meaning.’” Id. (quoting Hodges v. Rainey, 341 S.C. 79, 85, 533
S.E.2d 578, 581 (2000)). “On the other hand, where a statute is ambiguous, the
Court must construe the terms of the statute.” Wade v. Berkeley County, 348
S.C. 224, 229, 559 S.E.2d 586, 588 (2002). “A statute as a whole must receive
practical, reasonable, and fair interpretation consonant with the purpose, design,
and policy of lawmakers.” State v. Henkel, 413 S.C. 9, 14, 774 S.E.2d 458, 461
(2015) (citation and internal quotation marks omitted). “Moreover, it is well
settled that statutes dealing with the same subject matter are in pari materia and
must be construed together, if possible, to produce a single, harmonious result.”
Beaufort County v. S.C. State Election Comm’n, 395 S.C. 366, 371, 718 S.E.2d
432, 435 (2011).
Id. at 272, 802 S.E.2d at 797-98.
The Legislature laid out the allocation of funds by numbering the order of the allocation (1) through
(4), clearly noting that the first twenty-five thousand goes to the local government’s general fund.
Of the remaining balance, the Legislature instructs that five percent of that balance also goes to
the local government, thirty percent goes to a special fund for advertising and promotion, and the
remaining amount, which mathematically amounts to the remaining sixty-five percent after the
initial twenty-five-thousand-dollar allocation, is allocated to a special fund to be used from
“tourism-related expenditures.” The Legislature then provides a definition of what is considered
“tourism-related expenditures” in section 6-4-10(4)(b). Act 57 added to this list “development of
workforce housing.” Therefore, given the design of section 6-4-10 as laid out by the Legislature
and reading section 6-4-10(4)(b)(ix) in the context of the provision as a whole, a court will likely
find the Legislature intended any allocations for the development of workforce housing be
included in the sixty-five percent allocation allowed for “tourism-related expenditures.” However,
we do not believe the fifteen percent limitation is based on this amount.
Section 6-4-10(4)(b)(ix) clearly states local governments “may not expend or dedicate more than
fifteen percent of its annual local accommodations tax revenue for the purposes set forth in this
item (4)(b)(ix).” A plain reading of this provision indicates the fifteen percent limitation is
calculated based on the total annual local accommodations tax a local government receives, not on
the amount allocated for tourism-related expenditures. As such, we believe the plain language of
the statute best expresses the intent of the Legislature to base the fifteen percent limitation on the
annual local accommodations tax received rather than the amount allocated for tourism-related
expenditures under section 6-4-10(4)(a).1
1 The basis for this calculation of the allowable amount for workforce housing under section 6-4- 1 0(4)(b)(ix) does not
change the amount allocated under section 6-4-10(4)(a).
However, we note section 6-4-10(4)(a) specifies “[t]his
Curtis L. Coltrane, Esq.
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October 1 6, 2023
2.
May a local government allocate all or any part of the fund described in section 6-41 0(4)(b)(ix) to a non-profit organization to be used to develop workforce housing, so long
as the non-profit organization complies with the requirements of the statute?
Initially, we note in section 6-4-10(3), pertaining to the thirty percent allocation for advertising
and promotion, the Legislature specifies that the local government must select an organization to
manage and direct the expenditure of these funds and that it must be organized as a nonprofit
organization. The allocation of funds for tourism-related expenditures in section 6-4-10(4) does
not contain such a requirement and simply provides that such funds must be allocated to a “special
fund” and must be spent within two years receipt unless certain requirements are met. Therefore,
section 6-4-10(4) does not specifically allow or require the allocation of tourism-related
expenditures to non-profit organizations.
In a 2003 opinion, we addressed using accommodations tax revenue allocated for tourism-related
expenditures for the construction, maintenance, and operation of facilities owned by a nonprofit
entity. Op. Att’v Gen., 2003 WL 21043497 (S.C.A.G. Apr. 2, 2003). We noted the fundamental
rule that “the expenditure of public funds must be for a public purpose” and further explained:
This
Office
has
consistently
recognized
that
“[p]ublic
funds
may
be
appropriated to a private nonprofit, nonsectarian organization if the funds are
to be expended in the promotion of a valid public purpose. See Op. S.C. Atty
Gen., dated July 12, 1984. This opinion is based on and supported by decisions
of our Supreme Court. In Bolt v. Cobb, 225 S.C. 408, 82 S.E.2d 789 (1954), the
Court recognized the validity of the appropriation of public funds for the
performance of a public function through the agency
of a nonprofit,
nonsectarian entity, such as organizations which provide health services,
welfare services, and other public purposes for which appropriations are made.
Moreover, in Nichols v. South Carolina Research Authority, 290 S.C. 415, 351
S.E.2d 155 (1986), the Court established the following four part test to
determine the constitutionality of a statute for financing industrial development:
The Court should first determine the ultimate goal or benefit to the
public intended by the project. Second, the Court should analyze
whether public or private parties will be the primary beneficiaries.
Third, the speculative nature of the project must be considered. Fourth,
the Court must analyze and balance the probability that the public
interest will be ultimately served and to what degree.
In the August 2, 1988 opinion referenced above, this Office concluded that an
expenditure of accommodation tax revenues by the City of Charleston for the
section does not prohibit a municipality or county from using accommodations tax general fund revenues for tourism-
related expenditures.” Therefore, a local government may use the funds it receives under sections 6-4-10(1) and (2)
on tourism-related expenditures including the development of workforce housing.
Curtis L. Coltrane, Esq.
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October 16, 2023
protection of the facade of a privately owned building was a “tourism related
expenditure” and was primarily related to a public purpose. The opinion
concluded that the expenditure met the standard established by the Court in
Nichols even though there would be some benefit to the private owner as the
historical nature of the building promoted tourism thereby principally
benefitting the public. See also Anderson v. Baehr, 265 S.C. 153, 217 S.E.2d
43 (1975). Further, in an opinion dated October 9, 1989, this Office concluded
that the expenditure of Accommodations Tax monies to a non-profit
corporation was permissible as a “tourism-related expenditure,” so long as the
organization involved was “non-sectarian in nature and nonprofit and ...
performfed] a service which the political subdivision is authorized to perform.”
Additionally, the Accommodations Tax statute does not appear to prohibit
disbursing funds to nonprofit, nonsectarian organizations for the purpose of
constructing, maintaining, or operating facilities that are used for civic and
cultural activities. Nor does it seem that the Constitution would prohibit such a
disbursement. An opinion of this Office dated, April 17, 1985, noted that the
South Carolina Supreme Court has approved the expenditure of public funds to
procure public services from a non-profit corporation in cases such as Gilbert
v. Bath, 267 S.C. 171, 227 S.E.2d 177 (1976); Elliott v. McNair, 123 S.C. 272,
115 S.E. 596 (1967); and Haesloop v. City of Charleston, 123 S.C. 272, 115
S.E. 596 (1923). Specifically, this Office noted that the case of Bolt v. Cobb,
supra, holds that county funds can be used to build a hospital to be leased to a
nonprofit, nonsectarian corporation, at no cost to the corporation, without
infringing any constitutional provisions. The Court stated that the county was
merely using the instrumentality of such a corporation to accomplish a
legitimate purpose. See Op. Atty. Gen., January 6, 1970.
Id. We noted whether to disburse Accommodations Tax funds to a nonprofit is ultimately the
decision of the municipality or the county. Id. However, we concluded “it is our opinion that a
municipality possesses the discretion, pursuant to the state Constitution and the Accommodations
Tax statute, to disburse funds to a nonprofit, nonsectarian organization to be used in furtherance
of ‘tourism-related expenditures’ such as you describe in your letter.” Id.
While the Legislature amended section 6-4-10(4) to specify that development of workforce
housing is a “tourism-related expense,” we believe the reasoning of our 2003 opinion applies and
a local government may allocate such funds to a non-profit, nonsectarian organization so long the
allocation complies with the four-part test expressed in Nichols and satisfies the requirements
under section 6-4-10(4).
You ask whether the answer to this question changes if the entity is for-profit. We do not believe
it does. While we have not addressed this question in an opinion, we found a 2005 decision by the
South Carolina Administrative Law Court (the “ALC”) discussing whether a municipality could
Curtis L. Coltrane, Esq.
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October 1 6, 2023
disburse accommodation tax revenues to entities that were not organized as a non-profit. City of
Myrtle Beach v. Tourism Expenditure Review Committee, No. 04-ALJ-30-0382-CC, 2005 WL
3308567 (Nov. 7, 2005). The ALC noted the purpose of section 6-4-10 as expressed by the Court
of Appeals in Thompson v. Horry County, 294 S.C. 81, 362 S.E.2d 646 (Ct. App. 1987):
“In our view, the statute reflects a practical recognition by the Legislature that
expenditures which promote tourism will generally enlarge the economic
benefits for an entire geographic area of the county without regard to municipal
boundary lines.... For this reason, it makes sense to give counties some
flexibility as to how and where they spend accommodations tax revenues.” Id.
at 648.
Id. Following the rules of statutory construction, the ALC determined:
The Court does not find that § 6-4-10(4) is ambiguous. It contains no reference
to any limitation upon the type of entity which may receive disbursements of
accommodations tax revenues under that subsection; it only requires that
expenditures there under be “tourism-related.” Thus, the logical interpretation
of the plain language of the statute is that no such limitation exists.
Furthermore, our Supreme Court enunciated the Latin principal of ital ex
scripta est (“so the law is written”) in Beaty v. Richardson, 56 S.C. 173, 180,
34 S. E. 73, 76 (1899), stating that “the legislature must have intended to mean
what it has plainly expressed, and consequently there is no room for
construction... Where the words of a statute are plainly expressive of an intent,
not rendered dubious by the context, the interpretation must conform to and
carry out that intent. It matters not, in such a case, what the consequences may
be.” Section 6-4-10(4) is plain and clear. The application of its words will not
lead to an absurd result. It is not appropriate for this Court to search for
legislative intent beyond the borders of the statute. A logical interpretation is
that an expenditure must be “tourism-related” but is not required to be made to
a non-profit organization. In the present case, the plain language of the statute
does not contain any requirement that the funds in question be disbursed to a
non-profit entity. If the legislature had intended to restrict the expenditure of
funds in question to non-profit corporations it could have easily done so. In fact,
the legislature did restrict the expenditure of certain funds to organizations
specifically organized as non-profit organizations in the section immediately
preceding the section in question. Cf. S.C. Code Ann. §§ 6-4-10(3) & 6-410(4)(a). Petitioner correctly contends that Respondent is not authorized to
create
additional
restrictions
on
the
discretionary
authority
of
governments in connection with disbursing accommodations tax funds.
local
Curtis L. Coltrane, Esq.
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October 16, 2023
In Thompson, supra, the Court of Appeals interpreted an earlier version of the
accommodation tax statutes. That case involved taxpayers’ challenge to Horry
County’s expenditure of accommodation tax funds in certain geographical
areas. The appellate court found the legislature had prescribed two requirements
for expenditures from the special fund: (1) they must be “tourism-related” and
(2) they must be made “primarily in the geographical areas of the county in
which the proceeds of the tax are collected where it is practical.” Id. The circuit
court had held most of the challenged expenditures were unlawful because, in
its opinion, the Act prohibited the County from spending taxes collected in the
unincorporated areas of the county. The appellate court reversed the trial court
finding no such prohibition appeared in the text of the statute. Id. The appellate
court further found that if the Legislature had intended to restrict the
expenditure of accommodation tax funds to certain geographical areas it could
have easily done so. In light of the foregoing, I conclude that Section 6-4-10(4)
does not preclude disbursements of accommodations tax revenues to entities
that are not organized as “non-profit.” However, the Court agrees that it is
reasonable for Respondent to question expenditures that result in public funds
being distributed to private interests unrestrained by the limitations applicable
to non-profit entities.
We agree with the ALC’s analysis finding no evidence that the Legislature intended to restrict
disbursements of tourism-related expenses, including those for the development of workforce
housing, to non-profit entities. Nonetheless, as we concluded regarding disbursements to non
profit entities, we stress that the local government must ensure compliance with the four-part test
expressed in Nichols and satisfy the requirements under section 6-4-10(4)(ix).
3.
May a local government allocate all or any part of the fund described in section 6-1530(A)(7) to a non-profit organization to be used to develop workforce housing, so long as
the non-profit organization complies with the requirements of the statutes?
You ask this question as a sub-part to your prior question, but we find it is important to address it
separately because it is part of a different statutory scheme. In addition to the state-wide
accommodations tax, which includes a local component as previously discussed, South Carolina
law also provides local governments with the ability to impose their own local accommodations
tax of up to three percent. S.C. Code Ann. § 6-1-520 (2004). Section 6-1-530 of the South Carolina
Code (2004), as amended by act 57 of 2023, addresses the use this locally imposed
accommodations tax and provides as follows:
(A) The revenue generated by the local accommodations tax must be used
exclusively for the following purposes:
(1) tourism-related buildings including, but not limited to, civic centers,
coliseums, and aquariums;
Curtis L. Coltrane, Esq.
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October 1 6, 2023
(2) tourism-related cultural, recreational, or historic facilities;
(3) beach access, renourishment, or other tourism-related lands and
water access;
(4) highways, roads, streets, and bridges providing access to tourist
destinations;
(5) advertisements and promotions related to tourism development;
(6) water and sewer infrastructure to serve tourism-related demand; or
(7) development of workforce housing, which must include programs to
promote home ownership. However, a county or municipality may not
expend or dedicate more than fifteen percent of its annual local
accommodations tax revenue for the purposes set forth in this item. The
provisions of this item are no longer effective after December 3 1 , 2030.
Similar to section 6-4-10(4), this provision does not expressly restrict a local government from
allocating its local accommodations tax revenue to a non-profit entity.
Therefore, we similarly
conclude that if the expenditure satisfies the public purpose requirement as well as the Nichols
factors and the requirements set forth in section 6-1 -520(A)(7), we believe it is within the local
governments discretion to allocate funds to a non-profit, nonsectarian entity.
4.
Would making a donation or grant from the local government’s general fund to a non-profit
entity that develops affordable housing for the workforce (i.e.. Habitat for Humanity or
similar) meet the public purpose requirement of article X, section 5 of the South Carolina
Constitution?
5.
Would making a donation or grant from the local government’s general fund to a non-profit
entity that develops affordable housing for the workforce (i.e.. Habitat for Humanity or
similar) violate the prohibition against pledging the credit of the State set out in article x,
section 11 of the South Carolina Constitution?
We find it useful to address these questions together. Article X, section 5 of the South Carolina
Constitution (2009) provides:
No tax, subsidy or charge shall be established, fixed, laid or levied, under any
pretext whatsoever, without the consent of the people or their representatives
lawfully assembled. Any tax which shall be levied shall distinctly state the
public purpose to which the proceeds of the tax shall be applied.
Article X, section 1 1 of the South Carolina Constitution (2009) provides in pertinent part:
Curtis L. Coltrane, Esq.
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October 16, 2023
The credit of neither the State nor of any of its political subdivisions shall be
pledged or loaned for the benefit of any individual, company, association,
corporation, or any religious or other private education institution except as
permitted by Section 3, Article XI of this Constitution ....
In 2009, we summarized various prior opinions addressing the ability of local governments to
allocate funds to private entities under these provisions. Op. Att’v Gen., 2009 WL 3658276
(S.C.A.G. Oct. 6, 2006).
In each opinion, we stressed that our Constitution, pursuant to article X, section
5 and article X, section 1 1, requires that public funds only be used for public
purposes. Ops. S.C. Atty. Gen., July 28, 2008; March 20, 2007; January 11,
- However, our courts recognize that public funds may be expended for the
benefit of private non-profit entities without violating our Constitution, so long
as the non-profit uses such funds for the performance of a public function. See
Gilbert v. Bath, 267 S.C. 171, 227 S.E.2d 177 (1976) (finding a grant by
Florence County to a private, non-profit corporation for the purpose of building
a hospital served a public function of Florence County); Bolt v. Cobb, 225 S.C.
408, 82 S.E.2d 789 (1954) (determining that Anderson County could issue
general obligation bonds for the benefit of the Anderson County Hospital
Association, a non-profit corporation, because it provided “a public, corporate
function”).
Id.
In that opinion, we cited a 1983 opinion further explaining that should a local government
transfer funds to a private entity, it must maintain oversight to ensure the constitutionality of the
appropriation. Id.
“The appropriation of public funds to these private entities is, in effect, an
exchange of value which results in the performance by those entities of a public
function for the state. Cromer v. Peoria Housing Authority, 78 N.E.2d 276, 284
(Ill. 1948). Generally, however, some public control is also required on those
expenditures by the private entities in order for the constitutionality of the
appropriation to be upheld. O’Neill v. Bums, 198 So.2d 1, 4 (Fla. 1967);
Dickman v. Defenbacher, supra; State v. City of New Orleans, 24 So. 666, 671
(La. 1898). In our opinion, such control could be accomplished, at least in part,
by including in each such appropriations act the provision set out in § 135 of
the
1983-84 General Appropriations Act, which requires those private
organizations to submit to certain accounting and review procedures by the
State.”
Id. (quoting Op. Att’y Gen„ 1983 WL 182057 (S.C.A.G. Nov. 16, 1983)).
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October 16, 2023
In accordance with this opinion, if the donation to the non-profit entity is for a public purpose and
facilitates accomplishment of what is a public function in keeping with the local government’s
authority, it would likely not violate sections 5 or II
of article X of the South Carolina
Constitution. However, as we explained in our 2009 opinion, the local government must maintain
some control over these expenditures to ensure the funds are used for the purposes for which they
are expended.
Conclusion
Based on the analysis provided above, the plain language of section 6-4-10(4)(b)(ix) indicates the
Legislature’s intent for the fifteen percent limitation on expenditures of accommodation tax
revenue on the development of workforce housing to be based on fifteen percent of the annual
local accommodations tax revenue allocated to the local government under section 6-4-10, rather
than the amount of funds allocated just for tourism-related expenditures.
We arc also of the
opinion that a local government can allocate funds for the development of workforce housing to
non-profit and for-profit entities so long as the expenditure satisfies the four-part test expressed by
our Supreme Court in Nichols v. South Carolina Research Authority, 290 S.C. 415, 351 S.E.2d
155
(1986) and the expenditure complies with the requirements set forth in section 6-4-
10(4)(b)(ix). We also come to the same conclusion regarding the expenditure of accommodation
tax revenues imposed by the local government pursuant to section 6-1-520 of the South Carolina
Code. Lastly, we believe a donation or grant to a non-profit entity for the development of
workforce housing from a local government’s general fund is permissible under sections 5 and 1 1
of article X so long as the donation or grant serves a public purpose and the funds are used in the
performance of a public function which is within the authority of the local government and the
local government maintains some level of control to ensure the funds are used for the purposes for
which they were allocated.
Sincerely,
Cydney Milling
Assistant Attorney General
REVIEWED AND APPROVED BY:
Solicitor General