Did RR 98-17 allow state reimbursement for extra depreciation on manufacturers' machinery in joint industrial parks or fee-in-lieu arrangements?

Plain-English summary

South Carolina Revenue Ruling 98-17 said the state reimbursement for manufacturer machinery and equipment depreciated below 20 percent of original cost also covered property in a joint industrial or business park and property under a negotiated fee-in-lieu-of-property-tax arrangement.

The Department focused on the wording of S.C. Code Section 12-37-935(B). That provision reimbursed local taxing entities for revenue not collected because of the additional depreciation above 80 percent allowed under subsection (A). The ruling said this language was not limited to lost ad valorem tax revenue.

That distinction mattered because industrial-park property and negotiated fee-in-lieu property were exempt from ordinary property tax and instead generated fee payments. Section 12-37-930 nevertheless included manufacturer assets reported on property-tax and fee-in-lieu filings in the depreciation calculation. The Department therefore concluded that lost fee revenue caused by the additional depreciation qualified for reimbursement too.

What the ruling covered

• Manufacturer machinery and equipment located in a joint industrial or business park.
• Manufacturer machinery and equipment subject to a negotiated fee-in-lieu arrangement under the statutes identified in the ruling.
• State reimbursement to local taxing entities for revenue lost because depreciation exceeded 80 percent of original cost.
• Fee revenue as well as ordinary property-tax revenue; the reimbursement was not limited to lost "tax monies."

Common questions

Q: Did the property have to be subject to ordinary ad valorem tax? No. The ruling included property exempt from ordinary property tax but subject to a fee in lieu.

Q: Why did industrial-park property qualify? The Department read the reimbursement statute as covering revenue lost from the additional depreciation and found no limitation excluding fee-in-lieu property.

Q: Did the ruling reimburse the manufacturer? No. It described reimbursement from a state fund to local taxing entities for revenue they did not collect.

Q: Are the 1998 depreciation percentages current? This page does not establish that. The ruling listed the schedule then in effect; current depreciation and reimbursement rules should be verified separately.

Citations and references

• S.C. Code Ann. § 12-37-930 (manufacturer machinery valuation and filings discussed)
• S.C. Code Ann. § 12-37-935 (maximum depreciation schedule and reimbursement fund)
• S.C. Code Ann. §§ 4-12-30, 4-29-67, and 12-44-10 et seq. (negotiated fee-in-lieu arrangements identified)
• S.C. Constitution art. VIII, § 13(D) (joint industrial or business parks and fee payments quoted)
• Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988); Home Health Serv. v. S.C. Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (1994); Medlock v. 1985 Ford F-150 Pick Up, 308 S.C. 68, 417 S.E.2d 85 (1992); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977) (plain-language principles cited)

Subject

Reimbursement of the Additional Depreciation Allowed for Manufacturer’s Machinery and Equipment

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR98-17.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING #98-17

SUBJECT:

Reimbursement of the Additional Depreciation
Allowed for Manufacturer’s Machinery and Equipment

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-37-935 (Supp. 1997)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1997)
S. C. Revenue Procedure #97-8

SCOPE:

A Revenue Ruling is the Department of Revenue’s official
advisory opinion of how laws administered by the
Department are to be applied to a specific issue or a specific
set of facts, and is provided as guidance for all persons or a
particular group. It is valid and remains in effect until
superseded or modified by a change in the statute or
regulations or a subsequent court decision, Revenue Ruling or
Revenue Procedure.

Question:
S.C. Code Ann. Section 12-37-935(B) (Supp. 1997) provides for the State to reimburse
all local taxing entities the amount of revenue not collected as a result of the additional
depreciation of more than eighty percent allowed for manufacturer’s machinery and
equipment under Section 12-37-935(A).

Does such reimbursement apply to revenues lost as result of the excess depreciation of
property that is located in a Joint Industrial or Business Park1 or property that is under a
negotiated fee-in-lieu of property tax arrangement pursuant to S.C. Code Ann. Sections
4-12-30, 4-29-67, and 12-44-10 et seq.?
Conclusion:
Property located in a Joint Industrial or Business Park and property that is under a
negotiated fee-in-lieu of property tax arrangement pursuant to S.C. Code Ann. Sections
4-12-30, 4-29-67, and 12-44-10 et seq., will qualify for the state reimbursement provided
for under S.C. Code Ann. Section 12-37-935(B) (Supp. 1997).
Statutes:
Section 12-37-930 provides in relevant part:
Fair market value of manufacturer’s machinery and equipment used in the
conduct of the manufacturing business, . . ., must be determined by
reducing the original cost by an annual allowance for depreciation as stated
in the following schedule...[subject to a maximum floor as provided in
Section 12-37-935].
. . . Cost investment will be based upon the gross cost of assets in South
Carolina as shown on the manufacturer’s property tax and fee-in-lieu of
property tax filings. . . . (Emphasis added.)

Section 12-37-935 provides in relevant part:
(A) [T]he original cost must not be reduced more than the percentage
provided in the following schedule:
1

Article VIII, §13(D) of the S.C. Constitution provides in part:

(D) Counties may jointly develop an industrial or business park with other
counties within the geographical boundaries of one or more of the member
counties. The area comprising the parks and all property having a situs therein is
exempt from all ad valorem taxation. The owners or lessees of any property
situated in the park shall pay an amount equivalent to the property taxes or other
in-lieu-of payments that would have been due and payable except for the
exemption herein provided.
2

Property Tax Year
Before 1997
1997
1998
After 1998

Maximum Percentage Depreciation
80 percent
83.3 percent
86.6 percent
90 percent.

(B) There is established in the State Treasury a fund separate and distinct
from the general fund of the State and all other funds styled The
Depreciation Property Tax Reimbursement Fund. Annually, the General
Assembly shall appropriate to this fund an amount sufficient to reimburse
all local taxing entities the amount of revenue not collected as a result of
the additional depreciation more than 80 percent allowed for
manufacturer’s machinery and equipment pursuant to this section. . . .
Reimbursement must be paid from the fund in the manner provided in
Section 12-37-270, mutatis mutandis. (Emphasis added.)
Discussion:
S.C. Code Ann. Section 12-37-935(B) provides for reimbursement by the State to “local
taxing entities the amount of revenue not collected as a result of the additional
depreciation of more than eighty percent allowed for manufacturer’s machinery and
equipment pursuant to” Section 12-37-935(A). (Emphasis added.) Questions have arisen
concerning whether such reimbursement applies to negotiated fee-in-lieu of property
taxes and property located in a joint industrial or business park since in neither case is the
property subject to a property tax. Rather, the taxpayer pays a fee in lieu of property tax.
In construing statutes, the language used in a statute should be given its plain and
ordinary meaning, without resort to subtle or forced construction to limit or expand the
statute’s operation. Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988);
Home Health Serv. v. S.C. Tax Comm’n, 312 S.C. 324, 440 S.E.2d 375 (1994). Where
terms of a statute are clear and unambiguous, they must be applied according to their
literal meaning. Medlock v. 1985 Ford F-150 Pick Up, 308 S.C. 68, 417 S.E.2d 85
(1992); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977).
S.C. Code Ann. Section 12-37-930 makes it clear that all machinery and equipment of
manufacturers, including machinery and equipment subject to a fee-in-lieu of property tax
arrangement or located in a joint industrial or business park are subject to depreciation as
provided for in Section 12-37-935(A).
S.C. Code Ann. Section 12-37-935(B) makes it clear that reimbursement under that
section is for revenue lost as a result of the excess depreciation allowed under Section
3

12-37-935(A). The reimbursement is not limited to tax monies lost; if it were there
would be no reimbursement for the excess depreciation of property subject to a fee-inlieu of property taxes or for property located in a joint industrial or business park since
those properties are exempt from property taxes, although a fee is levied and collected.
Accordingly, we conclude that property under a negotiated fee-in-lieu of property tax
arrangement, and property located in a joint industrial or business park are eligible for the
state reimbursement for excess depreciation under Section 12-37-935(B).

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/
Burnet R. Maybank, III, Director
Columbia, South Carolina
, 19 98
July 8

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