Keeping you informed

Property Tax Incentives for Manufacturers: New Reimbursement Changes the Game

  • Client Alerts
  • February 02, 2024

A modest change in the law in 2022 is now having a significant impact on how South Carolina counties negotiate property tax incentive packages for manufacturers. With one of the highest manufacturing property tax rates in the country (10.5%), South Carolina has aggressively sought ways to reduce this burden: first with incentives like the fee-in-lieu of tax (FILOT) and special source revenue credits (SSRCs) and now through a statutory change that effectively reduces the assessment ratio for all eligible manufacturers in the state to 6%. This reduction is accompanied by an obligation on the part of the state to reimburse local governments for "lost" property taxes resulting from the implementation of the new law. Neither the reduction nor the reimbursement obligation applies if a manufacturer is subject to a FILOT.

So, do we still need the FILOT and SSRCs? Well, the answer is complicated! Suffice it to say that counties now have a number of new factors to consider when negotiating incentive packages for manufacturers.

If you would like to learn more, our team has taken a deep dive that you can read below. We are also available to discuss if you have questions.


Property taxes are the lifeblood of local governments. They are also a significant expense for South Carolina manufacturers. Our state is known to have some of the highest property tax rates for manufacturers in the country. To counteract these high property tax rates, the General Assembly has crafted a number of tools over the years that enable counties to negotiate reductions for eligible manufacturers. In 2022, the General Assembly created a new tool that provided a blanket reduction for manufacturing property taxes. There are now many questions regarding how to effectively utilize the available tools — old and new — to achieve the best outcome for counties and manufacturers.

The Shiny New Tool

Property taxes in South Carolina are calculated as follows:

Property Tax Amount = A x B x C

A = Taxable Value

B = Assessment Ratio

C = Millage Rate

The South Carolina Constitution establishes the assessment ratio for manufacturing property, both real and personal, at 10.5%. In 2022, the General Assembly adopted legislation to change the property tax calculation methodology for all manufacturing property except property subject to a negotiated FILOT arrangement. Because changing the assessment ratio for manufacturers would require an amendment to the state constitution, the General Assembly focused on the first part of the equation: value. While the legislation did not impact the assessment ratio for manufacturers — it remains at 10.5% — the effective result of the legislation is that manufacturing property is taxed as if the assessment ratio is 6.0%.

The legislation, codified at Section 12-37-220(B)(52) (PVE Act), provides a "partial value exemption" for eligible manufacturing property (PVE). The PVE is equal to 42.8571% of the value of the property. In other words, only the value of the property remaining after the application of the PVE is taxed. The PVE equals the same percentage difference between 10.5% and 6%. Therefore, by applying the PVE to the property tax equation, the property tax amount is equal to the property tax amount that would have resulted from a reduction in the assessment ratio from 10.5% to 6%, without the need to amend our constitution.

Example #1:

Property Tax Amount = A x B x C

Assume a taxable value of $100, an assessment ratio of 10.5%, and local millage of 500 mills. Here’s the calculation of property tax liability:

$100 x 10.5% x .500 = $5.2

What happens if the assessment ratio is reduced to 6%?

$100 x 6% x .500 = $3.00

If the PVE is applied and the assessment ratio remains at 10.5%, the same tax liability is assessed as if a 6% assessment ratio were being used:

[100 x (1-42.8571%)] x 10.5% x .500 = $3.00

So, effectively, the PVE gives a manufacturer the same tax benefit as a commercial taxpayer.

Of course, if the PVE is applied to all manufacturing property (other than property subject to a FILOT) that means the local taxing entities (i.e., counties, cities, and school districts) with taxing jurisdiction over the property would receive lower property tax payments from eligible manufacturers located within their taxing jurisdiction. Fear not! Under the PVE Act, the state is obligated to reimburse the local taxing entities for the amount of property taxes lost due to the application of the PVE.

From our example above, here’s how we would calculate the reimbursement:

Property tax with no PVE: $5.25

Property tax with PVE: $3.00

Difference: $5.25 - $3.00 = $2.25

Reimbursement: $2.25

But the reimbursement is not unlimited. In any year, the total reimbursement paid to all local taxing entities may not exceed $170 million. If in any year, projections show that the application of the full PVE would require a reimbursement in excess of that cap, then the PVE percentage would be reduced proportionally until the projected reimbursement does not exceed the cap.

How does the cap affect local taxing entities?

Example #2:

Assume the projections for 2028 show the reimbursement required from application of the full PVE would exceed the cap by 10%. The result would be a 10% adjustment to the PVE:

Full PVE x (1-10%) = Adjusted PVE


42.8571% x (90%) = 38.571%

How would this affect the property tax calculation?

Property Tax Amount = A x B x C

Assume a taxable value of $100, an assessment ratio of 10.5%, and local millage of 500 mills. Here’s the calculation of property tax amount:

$100 x 10.5% x .500 = $5.25

Now let’s apply the adjusted PVE and leave the assessment ratio at 10.5%:

[100 x (1-38.571%)] x 10.5% x .500 = $3.23

Compare this to the property tax calculated using an assessment ratio to 6%:

$100 x 6% x .500 = $3.00

Here’s how we would calculate the reimbursement:

Property tax with no PVE: $5.25

Property tax with PVE: $3.23

Difference: $5.25 - $3.23 = $2.02

Reimbursement: $2.02

So, when the cap is in effect (Example #2), the PVE property tax payment is $3.23 and the reimbursement is $2.02. When the cap is not in effect (Example #1), the PVE property tax payment is $3 and the reimbursement is $2.25.

In either case, the total amount received by the local taxing entities is $5.25.

How Does the PVE Differ From a FILOT?

Because the PVE provides a similar outcome to a traditional FILOT (i.e., effectively reducing the property tax rate applicable to manufacturers), many counties and companies are asking whether we recommend a FILOT or PVE. Initially, the PVE seems to offer the best of both worlds: the company pays the same amount it would under a traditional FILOT and the county has the chance to receive additional revenues in the form of the reimbursement.

However, there are a few key differences between a FILOT and the PVE:

  • The reimbursement is subject to being adjusted downward if and when the cap is reached.
  • The reimbursement must be distributed to all of the taxing jurisdictions pro rata according to millage. This distribution cannot be changed by a multicounty park (MCIP) agreement because the reimbursement is not FILOT revenue.
  • Because the reimbursement is distributed pro rata according to millage, the reimbursement is subject to the five-year abatement from county operational millage. This means that the county’s portion of the reimbursement for its operational millage in the first five years is $0.
  • In a FILOT, the millage rate and value of the property are set for the term of the FILOT. The PVE does not provide the benefits of a locked millage or set property values.

SSRCs in Combination with the PVE?

The PVE does not apply if a company has a traditional FILOT. But the PVE will apply if SSRCs are utilized to mimic the benefits of a FILOT. This SSRC alternative to a traditional FILOT is becoming an increasingly popular option. Under this arrangement, a company may seek to "stack" SSRCs. The first SSRC would ensure the taxes paid by the company do not exceed an effective 6% assessment ratio (like a FILOT) and would only take effect if the PVE was reduced due to the cap. Importantly, the first SSRC would insulate the company from any adjusted PVE.

Reference Example #2 above, if the adjusted PVE yielded a property tax calculation of $3.23 (higher than the $3.00 that would be due if the PVE was applied), then the first SSRC would be applied to reduce the property tax due from the company from $3.23 to $3.00. Therefore, the taxing entities would bear the brunt of the adjusted PVE because the reimbursement would be reduced ($2.02 instead of $2.25). The reimbursement, however, still represents "found money" for the local taxing entities as all they would expect to receive from the company under "normal incentive" circumstances is $3.00 — and now they would receive $2.02 on top of that.

Companies are using the "found money" concept to request a second SSRC to further reduce property tax payments. In a traditional incentive arrangement, it is not unusual for companies to stack an SSRC on top of a traditional FILOT. However, for companies that want to utilize the PVE and SSRCs, companies are often seeking a second SSRC that is frequently higher than the stacked SSRC/FILOT on the theory that the local taxing entities are experiencing a "windfall" due to the reimbursement. Effectively, in PVE deals, companies are seeking greater reductions utilizing a second SSRC and arguing local taxing entities are still better off than they would be under a stacked SSRC/FILOT because the combination of property taxes and the reimbursement would be greater than the net FILOT payments.

But this may not always be the case! Remember, the reimbursement must be distributed based on millage, just like normal taxes. So, in the first five years, a county would not receive any portion of the reimbursement for operational millage due to the manufacturer’s abatement. This fact must be accurately portrayed in any incentive modeling to enable county councils to make educated decisions about the amount of SSRCs to be awarded in PVE deals.


Under the PVE Act, counties are left with a choice: offer a traditional, stacked SSRC/FILOT deal or choose a stacked SSRC/PVE deal in order to benefit from the reimbursement. There are pros and cons to both options. To accurately consider these pros and cons, it is important to make sure the financial modeling illustrating these scenarios shows the benefits to the county as well as the other local taxing entities.

Additionally, counties need to be aware that the reimbursement may decline over time. Finally, counties should consider the additional challenges of administering a stacked SSRC/PVE deal. If the PVE is the best fit for a project, the incentive documents and provisions will look different from the traditional stacked SSRC/FILOT deal. A stacked SSRC/PVE deal may also require additional monitoring (and expense) that should be accounted for in the incentive documents.

Our team has modeled these scenarios and advised counties on both structures. For more information, please contact us or your regular Parker Poe contact. You can also subscribe to our latest alerts and insights here.

Parker Poe's Ray Jones, Emily Luther, David Epperson, Emily Zackon, and Ryan Romano also co-authored this alert.