Hidden in the 23 pages of legislation that will raise South Carolina's gas tax on July 1 to help pay for road repairs is a property tax cut for manufacturers. Experts say, however, its impact will be limited.

That's because most manufacturers don't even pay the 10.5% assessment rate on industrial property that's mandated by the state's constitution. They pay what's known as a fee-in-lieu of taxes, or FILOT, that essentially reduces the assessment rate to 6%. Big manufacturers can get a reduction to 4% — the same rate applied to a homeowner's primary residence.

South Carolina's FILOT legislation was passed 20 years ago, and counties rely on it as an incentive to lure tax-averse manufacturers and other employers.

But a few manufacturers do still pay property taxes the old-fashioned way, and they are the ones targeted by the gas tax law.

The gas tax legislation will exempt 19.05% of the value of manufacturing property for tax purposes, with the exemption implemented in two equal installments in tax years 2019 and 2020. Once fully implemented, the exemption will reduce property tax bills by about $48.7 million statewide, according to an analysis by the state Revenue and Fiscal Affairs Office.

The state fiscal office projects the tax bill savings will decrease in succeeding years as the number of manufacturers paying traditional property taxes continues to decline.

The state will reimburse counties that lose property tax revenue because of the new legislation, with that money coming from the 12-cent per gallon gas tax increase that will be phased in over the next six years. South Carolina currently has the nation's second-lowest gas tax, behind Alaska, at 16.75 cents a gallon.

While the gas tax has been low, the property tax rate for manufacturers is among the nation's highest, which was why FILOT was passed originally.

Many wonder why state legislators don't lower the property tax rate to 6% for manufacturers, thereby eliminating special fee-in-lieu deals and all the associated paperwork and approvals, pointing out that it’s unfair that homegrown manufacturers have to pay a 10.5% assessment while those lured here from out-of-state usually get a better deal.

While fee-in-lieu agreements can freeze property assessments — good news when values rise, bad news when they decline — proponents of a lower property tax rate say manufacturers would be lured to South Carolina just as much by a lower overall rate.

The reduction mandated by the gas tax law has its critics. The South Carolina Policy Council, a Columbia-based research group that called the property tax break "ill-defined, complicated and narrowly targeted."

But proponents, such as the Manufacturers Alliance, say it helps level the playing field for companies that weren't able to take advantage of fee-in-lieu legislation.

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