Agricultural Qualifications and Rollback Taxes

Agricultural Qualifications And Rollback Tax Explanations

Definition of Agricultural Real Property

Agricultural real property shall mean any tract of real property which is used to raise, harvest or store crops, feed, breed, or manage livestock, or to produce plants, trees, fowl, or animals useful to man, including the preparation of the products raised thereon for man's use and disposed of by marketing or other means. It includes, but is not limited to, such real property used for agricultural, grazing, horticulture, forestry, dairying, and mariculture. In the event at least 50% of real property tract shall qualify as "agricultural real property", the entire tract shall be so classified, provided no other business for profit is being operated thereon. The term "agricultural real property" shall not include any property used as the residence of the owner or others in that the taxation of such property is specifically provided for in Section 2 (C) and (E) of Act 208.

Agricultural Use Qualifications - Requirements:

Agricultural real property which is actually used for such purposes and meets certain size or income restrictions, not including, however, a corporation which is the owner or lessee except for certain corporations which do not:

1. Have more than 10 shareholders
2. Have as a shareholder a person (other than an estate) who is not an individual
3. Have a nonresident alien as a shareholder, and
4. Have more than one class of stock
    

Timberland tracts must be at least five acres. Tracts of timberland must be devoted actively to growing trees for commercial use. Tracts of timberland less than five acres may be eligible for agricultural classification if any of the following conditions are met.

1. The tract is contiguous to another timberland tract of at least five acres.
2. The tract is under the same management system as another qualifying timberland tract.
3. The tract is owned in combination with non-timberland tracts that qualify as agricultural real property.
   
   Non-timberland (cropland) tracts must be at least 10 acres. Tracts of non-timberland less than 10 acres may be eligible for agricultural classification if any of the following conditions are met:

1. Contiguous tracts with identical ownership meet the minimum acreage requirement when added together.
2. The person making the application earned at least $1,000 gross farm income in at least three of the past five years or at least three of the first five years if this is an initial application.
3. The property has been owned by current owner or immediate family member of the current owner for at least ten years ending January 1, 1994 and the property is classified as agricultural real property for tax year 1994.

Q. Is there a tax break for agricultural property?

A. Yes, SC Law provides for a substantial tax break on agricultural real property which is actually used for a bona fide agricultural use. There are two parts to this benefit. First, if qualified, the property's taxable value is based on "Use Value", which is less than the property's "Market Value". The "Use Value" is based on the productive capability of the soil type or types of the property. Second, the assessed value is 4% of the "Use Value", unless the property is owned by a corporation with ten (10) or more stockholders, then the applicable ratio is 6%.

Q. What must an agricultural real property owner do to get this tax benefit?

A. The owner must file an application with the Jasper County Assessor. The filing period is January 1 through January 15 of the following year. Once the initial application is filed, it will automatically be renewed each year until there is a change in the property use/or a change in title. If a new application is required, one will be mailed on each previously qualified property to the owner's last known address. It is the owner's responsibility to make sure applications are timely filed.

Rollback Taxes

The Rollback tax is a requirement codified in South Carolina state law. Anytime a property changes its use from agricultural use to any other use, it causes rollback taxes to be assessed and billed to that portion of the property. Changes that can trigger the rollback provision may be the addition of a new house or mobile home, an additional commercial building or activities, new subdivision lots, new parcels below certain sizes, etc. (vacant land lying dormant is not agricultural use). It is calculated by determining the difference between what taxes had been paid at the agricultural use rate and what would have been paid if the property had been taxed no matter if the current owner of the property is not the same as the owner that received the agricultural classification for the previous five years, the tax is still due for the year it is levied as a current year tax for that year. Often times when a property sells, the rollback taxes are allocated between the buyers and seller by the sales contract or during the closing, by the closing attorney. The county does not prorate rollback taxes between buyers and sellers as that is a function of an agreement, or lack of an agreement, between the buyer and seller and/or the closing attorney. Because failure to pay the tax can result in sale of the property, the new owner of the property (if any) is the notified party since the new owner’s interest would be the most affected by the tax sale.

Rollback Tax Estimation Formula:

1. Find the current Market Value of subject property .
2. Multiply the Market Value X .06.
3. Find the current Assessed Value of subject property.
4. Compute the difference of Line 2 & Line 3.
5. Multiply this difference by the Millage Rate, for each tax year being rolled back on.
   
   Note: Rollback tax estimates should be computed for five (5) years. Start with year property was split, and work backward four (4) years.
   Applications are timely filed.

Law referring to roll-back from Code of Laws of South Carolina 1976, Taxation, Title 12: 12-43-220, Paragraph (4)

(4) When real property which is in agricultural use and is being valued, assessed, and taxed under the provisions of this article, is applied to a use other than agricultural, it is subject to additional taxes, hereinafter referred to as roll-back taxes, in an amount equal to the difference, if any, between the taxes paid or payable on the basis of the valuation and the assessment authorized hereunder and the taxes that would have been paid or payable had the real property been valued, assessed, and taxed as other real property in the taxing district, in the current tax year (the year of change in use) and each of the five tax years immediately preceding in which the real property was valued, assessed, and taxed as herein provided. If in the tax year in which a change in use of the real property occurs the real property was not valued, assessed, and taxed under this article, then the real property is subject to roll-back taxes for each of the five tax years immediately preceding in which the real property was valued, assessed, and taxed hereunder. In determining the amounts of the roll-back taxes chargeable on real property which has undergone a change in use, the assessor shall for each of the roll-back tax years involved ascertain.