Senate subcommittee pauses bill to require annual verification for low‑income housing tax exemption

Senate Finance Committee property tax subcommittee members heard detailed testimony on S.125, a bill to amend property‑tax exemptions for nonprofit housing and to require annual certifications to the South Carolina Department of Revenue (DOR). The panel agreed to carry the bill over for further work.

The bill would amend statutory language (cited in testimony as “12 37 2 20”) to change how the exemption is calculated when a nonprofit holds a direct or indirect ownership interest. Under the draft, a nonprofit that owns 50% or more of a qualifying property would qualify for a full exemption; smaller ownership percentages would produce a proportional credit. The bill would also require an initial certification of ownership percentage and rent roll by the first penalty date (described in testimony as January 15) and an annual certification to DOR by October thereafter.

Why it matters: supporters and opponents framed S.125 as an accountability measure that could preserve the exemption’s incentive value for true affordable housing — or as a vehicle that could let market‑rate apartments obtain tax breaks without delivering deeply affordable rents. Jeremy Winkler, director of government affairs for the City of Rock Hill, told the subcommittee that because the bill ties eligibility to the federal “low‑income” limits, market rents in parts of the state could still be unaffordable for teachers and other public servants.

"We need affordable housing in York County and Rock Hill, but this bill as currently drafted creates an easy pathway for apartments across our state to become tax exempt without offering truly affordable rent rates," Winkler said, adding that for a teacher with a $49,829 starting salary, 30% of income would be about $1,245 per month for rent and utilities. He said the bill’s current low‑income rent limits could permit units charging roughly $1,590 for a one‑bedroom in York County — a level he argued would still be unaffordable for many local workers.

Supporters of the bill urged caution about tightening the income threshold statewide. Ray Jones, an attorney with Parker Poe who advised the committee, noted that the existing South Carolina statute mirrors widely used federal definitions and IRS revenue guidance. "The national standard for affordability as determined by the IRS is 80% of area median income," Jones said, and he warned that moving the statewide threshold down to 60% AMI could reduce the number of projects that can attract private financing and thereby shrink affordable housing production.

Jones described S.125’s accountability features — annual filings to DOR and thresholds tied to ownership percentage — as measures intended to prevent abuse while maintaining incentives that developers say are necessary to build affordable units.

The South Carolina Housing Authority, represented by General Counsel Leanne Watson and Executive Director Richard Hutto, urged a one‑year delay in the bill’s effective date if it becomes law. Watson said the agency’s low‑income housing tax credit (LIHTC) financing and bonding timelines require about a year of lead time and that a delay would allow agency underwriting and pending applications to be examined for unintended funding gaps.

Discussion vs. decision: committee members pressed for additional analysis and stakeholder negotiation — particularly on whether the qualifying AMI level should be 80% (current federal/IRS standard) or set lower (60%) for deeper affordability in high‑cost localities. Several senators and stakeholders asked for more localized modelling of potential revenue impacts on school districts and municipalities.

Outcome: the subcommittee agreed to carry S.125 over for further subcommittee consideration and stakeholder work. No formal recorded roll‑call on final passage of the bill occurred at this hearing.

Ending: Sponsors and stakeholders were invited to provide updated proposed language and to meet with staff and local governments ahead of the next subcommittee meeting.