Tax Law Insights

In what can only be considered a "game-changer" for South Carolina property owners, the South Carolina Court of Appeals in Taylor v. Aiken County Assessor, ___ S.E.2d ___, 2013 WL 1223185 (S.C. Ct. App., March 27, 2013) has recently ruled that a current owner of property can "look back" and challenge the county assessed value of real estate not owned in the prior year.

For over half a century, tax practitioners in South Carolina have assumed, without much comment, that South Carolina law imposed responsibility to pay current property taxes on the owner of property as of December 31^st of the preceding tax year and only the person owning the property on such date had the right to challenge or contest the assessed value for the tax year. S.C Code Ann. § 12-37-610 (2012 Supp.) (and prior statutory versions). Thus, if property was sold after the end of the year, only the owner of the property on the preceding December 31^st could appeal or seek to challenge a property tax assessment and not a subsequent purchaser. See e.g., S.C. Op. Atty. Gen (July 20, 2011). For example, if John owned property on December 31, 2012 and sold the property to Sue on March 1, 2013, and Sue owns the property as well today, only John could contest the 2013 property tax assessment (based on the December 31, 2012 value as well), and not Sue, even though Sue currently owns the property.

In Taylor v. Aiken County Assessor, Michael Taylor purchased real property located in Aiken County on September 7, 2010 at a foreclosure sale. The same day, Taylor emailed the Aiken County Tax Assessor ("Assessor") to "protest the appraised fair market value and resulting assessment of the referenced property for tax year 2010." In response, the Assessor reduced the property's market value for the 2011 tax year but did not reduce the market value or assessment for the 2010 tax year. Taylor appealed to the Aiken County Board of Assessment Appeals ("Board"), arguing that his property's value for the 2010 tax year should also be reduced. The Board denied the appeal because Taylor was not the property owner at the time the Assessor levied the 2010 tax.

Taylor appealed to the South Carolina Administrative Law Court (ALC). The ALC found that Taylor lacked standing to appeal the property tax assessment for the 2010 tax year because he did not own the property as of December 31, 2009, the date the 2010 tax was assessed. Taylor appealed to the South Carolina Court of Appeals, and the Court of Appeals reversed the decision of the ALC.

The ALC determined that Taylor lacked standing to appeal the 2010 assessment because he was not the owner of the property as of December 31, 2009. Relying upon Section 12-37-610, the ALC determined that Taylor was "not the person legally liable for payment of the taxes for the year 2010." Thus, the ALC reasoned that "he [wa]s not the 'property taxpayer' as defined by the statute."

Section 12-37-610 states that:

Each person is liable to pay taxes and assessments on the real property that, as of December thirty-first of the year preceding the tax year, he owns in fee, for life, or as trustee, as recorded in the public records for deeds of the county in which the property is located....

The South Carolina Revenue Procedure Act ("SCRPA") provides that "[i]n years when there is no notice of property tax assessment [non reassessment years], the property taxpayer may appeal the fair market value ... and the property tax assessment of a parcel of property at any time." S.C.Code Ann. § 12-60-2510(A)(4) (Supp. 2012). Under the SCRPA, " '[p]roperty taxpayer' means a person who is liable for, or whose property or interest in property, is subject to, or liable for, a property tax imposed by this title." S.C.Code Ann. § 12-60-30(22) (Supp. 2012).

The Court of Appeals in Taylor interpreted the definition of "property taxpayer" to include individuals fitting into two categories: (1) "a person who is liable for ... any property tax imposed by this title"; and (2) "a person ... whose property or interest in property[ ] is subject to ... a property tax imposed by this title." S.C.Code Ann. § 12-60-30(22). Turning then to Michael Taylor, the Court of Appeals found Taylor to be a "property taxpayer" under this second category as a "person whose property is subject to the property tax". The Court of Appeals noted that under Section 12-49-10 of the South Carolina Code, unpaid property taxes become a lien upon the real property at the time when they are assessed. S.C.Code Ann. § 12-49-10 (2000) ("All taxes, assessments and penalties legally assessed ... shall be a first lien in all cases whatsoever upon the property taxed, the lien to attach at the beginning of the fiscal year during which the tax is levied."), and found that Taylor's interest in the property was subject to the 2010 tax by virtue of this lien.

The Court of Appeals then ruled that subsequent property owners, whose properties are "subject to ... a property tax" by virtue of a tax lien, have the right to appeal their property's valuation and resulting tax assessment, and that Taylor, as a property taxpayer, has standing to appeal the valuation and assessment of the Aiken County property purchased at foreclosure sale on September 10, 2010.

Taxpayer Impact:

The Court of Appeals decision in Taylor now gives all South Carolina owners of real property the right to potentially go back and challenge the property tax valuation of their property. While the reasoning of Taylor would not apply in county-wide reassessments, in non-reassessment years, particularly the current 2013 tax year, if owners of real property who purchased their property this year believe the assessed value of the property is too high, the current owner (as well as the prior owner as of December 31^st) now has the right to appeal. Whether the same rationale applies to tax periods prior to 2013 may depend on the applicable statute of limitations.