A nearly 7-acre beachfront lot on Kiawah that just sold for $22 million may be the Charleston area's most expensive home site, but prior to the sale last week the property had one of Charleston County's lowest tax bills.

Due to a South Carolina tax break for agricultural property, that beachfront lot qualified as timber land, resulting in an annual property tax bill for just $12.75.

That may sound surprising, but it's legal.

"This is how the law works," said Charleston County Assessor Toy Glennon.

Vacant lots are taxed based on what they are worth, unless they have a qualifying agricultural use. That means at least 5 acres of marketable timber, 10 acres of crops, or a commercial aquaculture business such as shrimping or crabbing.

Those that qualify get a tax break that all but eliminates property tax bills. It's meant to keep farmers and shrimpers from being driven off their land or docks by high taxes.

Farms on Johns Island, huge timber properties owned by MeadWestvaco, and Lowcountry icons such as Shem Creek shrimp docks and Boone Hall Plantation, are examples of those that benefit from the agricultural use tax break. Developers also take advantage of the break, routinely classifying large tracts of land as timber farms, until it's time to cut down the trees and build houses.

Less common are situations like the Kiawah beach property.

Many, including those in the forestry industry, have suggested five acres is too low a threshold for a timber property, and a state tax commission unsuccessfully recommended changing the rules in 2010, as part of a larger tax reform package.

The Kiawah property met the rules, however, as did a similar one nearby that was sold two years ago. Both lots were among the Kiawah properties long owned by members of the Royal family, an Aiken timber family that once owned the entire island.

"The Royals have timber management plans, and they work their timber management plans," said Glennon. "The statute is, you have to have at least five acres of timber, you have to have a timber management plan, and you have to be actively managing it."

The late C.C. Royal purchased the island in 1950 for the timber, and soon after developed the first summer homes there. His heirs sold most of the land in 1974 to investors, but retained a number of attractive parcels, such as the nearly 7-acre beachfront lot that was owned by C.C. Royal's son, Dennison, who died in 2011.

An LLC associated with the family briefly owned Dennison Royal's property between his death and the $22 million sale to Footprint Properties last week.

According to officials that were managing the property, proceeds from the sale will go to charities as Dennison Royal had directed.

A very similar lot, just down the beach, was owned until late 2012 by Dennison's sister, Sandra Royal. That lot was sold for just under $11 million. Before it was sold, the annual property tax bill was $12.97; last year, the bill was $124,873.80.

When a property loses its agricultural use exemption, typically due to a sale or development, the property is then taxed based upon the full value previously determined by the county, and five years of "roll-back" taxes are due. The following year, the taxable value is further adjusted to reflect the sale.

Glennon said Charleston County is already processing the roll-back for the property that was sold for $22 million on Kiawah's Flyway Drive. The county had valued that property at $7 million during the last reassessment, so six years of property tax on that $7 million value - the current year plus five prior years - will be due because the agricultural exemption was removed. Buyers and sellers typically negotiate who will pay roll-back taxes as part of a property sale.

Next year, the property's taxable value will increase because it was sold, presumably to an amount close to the sale price. The tract formerly owned by Sandra Royal is now valued at $10,950,000 for tax purposes, which is the price for which it sold. That's half the price her late brother's similar lot fetched less than two years later.

Kiawah Island Real Estate spokesman Mike Touhill said the soaring prices for multi-acre beachfront tracts can be explained by economics.

"There aren't very many left, so it's the supply and demand equation," he said.

In 2006, just before the real estate market froze for several years, more than 21,000 properties in Berkeley, Charleston, Colleton and Dorchester counties were receiving the agricultural break, exempting $3.6 billion in property values from taxation. As population growth continues in the greater Charleston area, more properties will lose the agricultural tax break as they are developed.

"We do rollbacks every year," said Glennon. "Think of something like (Mount Pleasant development) Carolina Park."

Reach David Slade at 937-5552