Tax Law Insights

For property tax purposes, the South Carolina Department of Revenue has the sole responsibility for appraising real and personal property used by specified businesses, including utilities, manufacturers, and transportation businesses (e.g. railways and airlines).  The South Carolina Department of Revenue is authorized to use any accepted or recognized valuation method which reflects property’s fair market value, including methods with the unit valuation concept, when appraising real and personal property for property tax purposes.

The unit valuation method is not set forth statutorily or in a regulation.  In practice, the Department of Revenue attempts to determine the fair market value of a business as a whole by considering cost, income, and stock and debt approaches to determining fair market value.  The weight given to values determined under the various approaches to determining fair market value is subjectively determined, as are many of the assumptions that must be made in the approaches.

The cost approach generally is based on the original cost of property less a depreciation allowance.

There are varying income valuation methods, including the yield capitalization method and the direct capitalization method.  The Department of Revenue generally uses the direct capitalization method.

The stock and debt approach to valuation is -

The Department of Revenue has issued limited guidance concerning the use of a composite depreciation rate for valuing electric companies for purposes of property tax, as well as for a fee in lieu of property tax.  The Department of Revenue generally uses the composite depreciation rate for purposes of the cost approach aspect of the unit valuation method when property is not subject to a fee, but determines the value of property subject to a fee using only the composite depreciation rate.