In The Wizard of Oz, the main character Dorothy’s home was swept out of Kansas by a tornado, flung over the rainbow, and plopped into the land of Oz. She only had to click her heels three times and chant, “there’s no place like home,” and the ordeal was over. She was back in Kansas. No such luck for Carolinians. Beginning January 2017, several South Carolina homeowners will become North Carolina residents, with no moving trucks, boxes, or packing tape required. The two states recently clarified boundary lines that were set during the colonial era, and, as a result, a small number of homes and businesses have a new state. Property tax, income tax, and excise tax, (oh my) will all be subject to change. As discussed by Bloomberg BNA’s Laura Lieberman, North Carolina’s S.B. 575 and South Carolina’s S.B. 667 are meant to lead the taxpayers down the yellow brick road to their new state and ease some of the discomfort resulting from the boundary move.
The businesses affected by the boundary move are none too happy about the change. For example, in local news coverage, WFAE 90.7 (Charlotte’s NPR news source affiliate) recently interviewed the owner of South Carolina’s Lake Wylie Mini Mart about the impending change. The business owner stated, “[w]e invested based on the location of the property, tax rates, underground storage tank rules, alcohol availability- had this property been in North Carolina, had we known when we purchased it in the early 1990s, we certainly would not have purchased.” The bright side is that the states are working together to ease the transition for the business and allowing them to operate as they had in South Carolina, including maintaining lower gas prices, and selling fireworks and alcohol. They will be allowed to continue with these advantages until the business is sold.
Taking a closer look at South Carolina’s S.B. 667, there are two notable provisions for property tax assessment and exemption purposes. New North Carolina taxpayers affected by the boundary clarification must apply for all property tax exemptions, special valuations, and special assessment ratios in accordance with and by the dates specified in South Carolina law. Also, if as a result of the differing lien dates for North Carolina and South Carolina, property is subject to property taxes in both states, the taxpayer is liable for property taxes only in the state where the property is deemed located after the boundary clarification.
North Carolina’s S.B. 575 details that land receiving a property tax benefit at the time of boundary certification that fails to meet the requirements for the property tax benefit solely because of boundary certification, will be no longer entitled to receive the property tax benefit unless it meets the statutory requirements, but the lien on the land for the deferred taxes is extinguished as if it has been paid in full.
I think most people can agree that when they purchase a home or a business in one state, they reasonably expect it to stay there. However, this boundary move was a long time coming and now both North and South Carolinians have discovered that the great and powerful legislature has the power to grant wishes (or exemptions) and change state lines.
Continue the discussion on LinkedIn: Have the states done enough to ease the boundary transition for residents and businesses?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
By Cynthia N. Wells
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