New vacation rentals laws in South Carolina

Summer time.  It is the time of the year when we pack up the family and take a trip down to the beach for that well deserved vacation.  Or maybe not.  Perhaps you are one of those people that owns a home down at the beach, and summer time is when you take that opportunity to rent out your home to all of those beach goers in search of that family vacation.  Well if you are, there has been a lot of talk in the last month about the impact of two new laws, which Gov. Nikki Haley signed into law this past month, that may affect how you handle the rental of your home.

On June 9, 2014, Gov. Nikki Haley signed into law the Fairness in Lodging Act (SB 985).  Basically, the law gives municipalities and counties additional enforcement authority with respect to accommodations tax laws.  The underlying concern was that some individuals that provide residential accommodations to tourist are failing to collect and remit the appropriate accommodations taxes associated with these rentals.  Below is an article from the Sun News written by Dawn Bryant that talks a little about the issue and why the law was put into place.

On that same date Gov. Haley also signed into law SB 437.  SB 437 provides property tax relief to home owners that rent their personal residences by allowing them to keep their eligibility for the four percent property tax assessment. As always, there are certain requirements that have to be met with the key issue being the length of time the property is rented.  With the enactment of SB 437 that time frame has now been expanded to 72 days.  Below is an article from the Post and Courier written by David Slade that talks about some of the concerns related to SB 437.  Bear in mind his article was written before the law was signed by Gov. Haley.

At Burch, Oxner, Seale Co., we diligently strive to help you keep pace with the ever changing tax environment.  That environment often includes changes to local and state laws similar to these.  If you have a question or concern in regards to how your rental property is being handled or whether you are taking advantage of all the tax breaks that are available to you, we ask that you give us a call at your convenience.  We will be glad to discuss, among other things, your obligations related to the South Carolina Accommodations Tax and review your property tax assessment to ensure you are paying the appropriate amount of property taxes.  As always, we look forward to hearing from you.           

New law aims to enforce tax collections on vacation rentals by owner

June 23, 2014

By Dawn Bryant

South Carolina has a new law aiming to crack down on homeowners who rent their properties to tourists but don’t collect accommodations and sales taxes, a problem local tourism leaders say has grown since the Great Recession.

The Fairness in Lodging Act, introduced by Sen. Ray Cleary and signed by Gov. Nikki Haley earlier this month, gives cities and counties more means to go after homeowners they suspect aren’t collecting the required taxes by sharing info on them with the S.C. Department of Revenue, giving notice in property tax bills, assessing fines and asking “rental by owner” websites to post that the rentals must include local and state taxes.

Supporters of the law say it will help local and state governments collect taxes they are owed. It also could take away an advantage homeowners who don’t collect the taxes have over rental companies in price, they say. Horry County officials don’t know how much money the county might be missing out on, and a county committee plans to talk about the new law in early August.

“Because tax avoiders don’t identify themselves, it’s difficult to quantify the impact but we estimate there are several million dollars of taxes owed but not paid,” said Brad Dean, president of the Myrtle Beach Area Chamber of Commerce, which supports the new law. “The Fairness in Lodging Act won’t end tax avoidance, but it will enhance the ability of local and state government to enforce the law and collect taxes owed by commercial property owners.”

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Owner-occupied homes in desirable vacation destinations such as Isle of Palms could be rented for up to 72 days per year and still maintain the tax status of a primary residence – if Gov. Nikki Haley signs legislation changing the limit from the current 14 days.

June 4, 2014

By David Slade

The state Legislature has approved a tax break meant for people who live at the beach but rent out their homes for part of the year.

The bill, which awaits action by Gov. Nikki Haley, would allow people to pay “owner-occupant” property taxes even if their homes are rented out up to 72 days yearly.

Currently, homeowners pay sharply higher property taxes if they rent out their homes for more than 14 days each year because the property would be taxed as a rental property.

The 72-day rule would apply to any property in the state, but beach house rentals have been the focus of the legislation.

Lawmakers supporting the rule change said some coastal homeowners need to rent their residences for longer periods of time in order to afford soaring flood, wind and hail insurance costs.

The bill originally allowed 100 rental days but was changed to allow 72 days – roughly the length of summer vacation – as it went through a series of amendments.

Melinda Mitchell, who lives on Isle of Palms, said Haley should veto the bill because it doesn’t go far enough. Mitchell said South Carolina should treat a property the same as the federal government – as a residence as long as it’s rented for less than half the year.

“I usually rent my home for four to five months each year to help pay bills, including over $10,000 per year for insurance,” she said.

If the home is taxed as a commercial property, Mitchell said that would add $20,000 to her tax bill.

“How is this (legislation) being sold as a tax break?” she said.

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