Fee-in-Lieu of property taxes (FILOT)
South Carolina’s Fee-in-Lieu of Property Taxes (FILOT) program allows qualifying companies making significant capital investments to negotiate reduced property tax obligations with the county where a project is located.
A FILOT agreement can reduce the assessment ratio applied to qualifying property and provide greater predictability in millage rates over the life of the agreement.
Overview
A FILOT is a contractual property tax incentive negotiated between a company and the county where its project is located.
Instead of paying standard ad valorem property taxes on qualifying property, the company makes negotiated fee payments based on terms established in the FILOT agreement. Those terms may include a reduced assessment ratio, a fixed or periodically adjusted millage rate and an extended fee period.
Both real and personal property may qualify under a FILOT agreement, subject to applicable statutory requirements and the terms negotiated with the county.
FILOT benefits
Reduced assessment ratio
A standard FILOT may reduce the assessment ratio on qualifying property from the 10.5% ratio generally applicable to manufacturing property to as low as 6%.
Certain qualifying large-investment projects may be eligible for an assessment ratio as low as 4% under a Super FILOT arrangement.
Millage rate stability
The county and company may negotiate how the millage rate will apply during the agreement period.
Depending on the FILOT structure, the millage rate may be:
- Fixed for the applicable agreement period
- Adjusted every five years based on changes in local millage rates
Property valuation
Under a FILOT agreement:
- Qualifying personal property generally depreciates according to South Carolina property tax depreciation schedules
- Real property is generally valued using its original South Carolina income tax basis without depreciation
- The county and company may instead agree to have qualifying real property appraised for property tax purposes, generally no more than once every five years.
Eligibility and investment
A company generally must invest at least $2.5 million in a qualifying project to be eligible for a FILOT agreement.
The minimum investment may be reduced to $1 million in certain qualifying counties or sites under state law.
Investment period
For a standard FILOT, the company generally has five years to meet the required minimum investment.
The county may approve additional time for the company to complete the project and place qualifying property into service. Different investment and completion periods apply to certain large-investment projects.
Existing property
Property that has previously been subject to South Carolina property tax generally does not qualify as new FILOT property.
Certain exceptions may apply, including for projects involving substantial additional new investment. Companies considering existing buildings or previously taxable property should review eligibility with the county and SCDOR before assuming the property can be included.
Replacement property
A FILOT agreement may allow replacement property to receive fee treatment when it replaces property already subject to the agreement.
The amount of replacement property that may receive FILOT treatment is generally limited by the value of the property being replaced and the terms of the applicable agreement.
Agreement term
The duration of FILOT treatment depends on the applicable statutory structure and terms negotiated with the county.
Qualifying property may remain subject to FILOT treatment for an extended period, subject to statutory limits and county approval.
Super FILOT
Certain large-investment projects may qualify for enhanced FILOT treatment, including a lower assessment ratio than is available under a standard FILOT.
Eligibility is subject to higher investment and, in some cases, job-creation requirements.
Negotiating a FILOT
FILOT agreements are granted at the discretion of the county where the project is located.
Companies considering a FILOT should work with county officials and SC Commerce early in the project evaluation process to determine eligibility, identify qualifying property and establish potential agreement terms.
After the agreement is in place, FILOT property is reported through SCDOR as part of the applicable property tax filing process.
