Background
The Assessable Transfer of Interest (ATI) exemption in South Carolina—created by § 12-37-3135 of the South Carolina Code—provides buyers of real property a twenty-five percent discount off the ATI fair market value for property tax purposes. When a buyer purchases property, the sale triggers a new appraisal at the purchase price, and the exemption shields a portion of that step-up in assessed value from immediate taxation. But the statute also contains a floor: the exemption value (ATI fair market value reduced by twenty-five percent) cannot be less than the property’s current fair market value—defined as the value already on the assessor’s books for the current tax year.
Mt. Pleasant Investments purchased a Charleston condominium at 10 West Edge Street, Unit 4, in July 2021 (an ATI). For tax year 2021, the Assessor had valued the property at $6,063,000 (as of December 31, 2020). Shortly before the sale, the prior owner completed improvements valued at $758,000. The parties agreed the ATI fair market value—reflecting the purchase price and including improvements—was $8,034,000 for year-end 2021 (applicable to tax year 2022). Applying the twenty-five percent ATI exemption yielded an exemption value of $6,025,500.
The dispute arose over the statutory floor. The Assessor argued the pre-sale improvements had never been separately taxed and must be added to the pre-sale value to compute the floor: $6,063,000 + $758,000 = $6,821,000 as “current fair market value.” Because the exemption value ($6,025,500) was less than $6,821,000, the Assessor set the taxable value at $6,821,000. The taxpayer countered that “current fair market value” simply means the value already on the assessor’s books—$6,063,000—making the taxable value $6,063,000. The Administrative Law Court sided with the Assessor. Mt. Pleasant Investments appealed.
The Court’s Holding
Reversed. Writing for a unanimous three-judge panel, Judge Thomas held that “current fair market value” under § 12-37-3135(A)(2) means the pre-sale value already reflected on the assessor’s books—$6,063,000—not that figure inflated by pre-ATI improvements. The court applied de novo review to this question of statutory interpretation.
The analysis addressed both statutes the Assessor invoked. Section 12-37-3140(A)(2) requires the fair market value of “subsequent improvements and additions” to be added to the property’s previously appraised value. But the improvements here were completed in April 2021—before the July 2021 ATI and before year-end 2021—and were already incorporated into the ATI fair market value of $8,034,000. They were not “subsequent” improvements in the relevant sense; they were part of the same valuation cycle. Section 12-37-3140(E) states that improvement values are first subject to taxation in the following tax year; because the improvements were completed in 2021, they properly appear in the 2022 tax-year ATI appraisal. Neither provision required adding the improvements again to the current fair market value floor.
The court found the Assessor’s approach effectively double-counted the improvements: they were embedded in the $8,034,000 ATI fair market value used to compute the exemption value, yet the Assessor also added them back into the floor calculation. The court noted that the parties’ own stipulations confirmed $6,063,000 as the pre-sale value, and that the ATI exemption’s purpose is to protect buyers from sudden tax-assessed-value spikes triggered by the purchase price. While tax exemption statutes are strictly construed against the taxpayer, that rule “does not mean that we will search for an interpretation in [the Department of Revenue’s] favor where the plain and unambiguous language leaves no room for construction.”
Key Takeaways
- “Current fair market value” for ATI exemption purposes (§ 12-37-3135(A)(2)) is the pre-sale value already on the assessor’s books—not that value augmented by improvements the prior owner completed during the same tax year as the ATI.
- Pre-ATI improvements completed before year-end of the ATI year are not “subsequent improvements” under § 12-37-3140(A)(2) and may not be separately added to the current fair market value floor if they are already incorporated into the ATI fair market value.
- Adding improvements to both the ATI fair market value and the current-fair-market-value floor double-counts them; the court will not endorse that result even where the assessor argues the improvements would otherwise escape taxation.
- Legislation was pending at the time of decision (H.R. 3803, 126th General Assembly) to eliminate point-of-sale valuation from the ATI statutes entirely; practitioners advising commercial buyers should check whether that bill has since been enacted.
Why It Matters
The ATI exemption is one of South Carolina’s most significant property tax benefits for real estate buyers, but disputes over the current-fair-market-value floor arise frequently when sellers make improvements shortly before a sale closes. The Assessor’s interpretation would have significantly eroded the exemption in exactly those situations—pushing the taxable value from $6,063,000 to $6,821,000 by counting the same improvements twice. The reversal preserves the exemption’s intended function.
For South Carolina commercial real estate practitioners and property tax counsel, Mt. Pleasant Investments provides a clear answer when improvements straddle a closing date: if those improvements are completed before year-end of the ATI year and are already reflected in the ATI appraisal, the assessor cannot separately add their value to the current-fair-market-value floor. Documenting the timing and value of any pre-closing improvements—and citing Fairfield Waverly, LLC v. Dorchester County Assessor (Ct. App. 2020), which first defined current fair market value as the “pre-sale fair market value”—should be standard practice when challenging an ATI calculation before the Board of Assessment Appeals or the Administrative Law Court.