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Proposal would exclude utilities from property tax breaks awarded in SC roads legislation

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A gas-tax law passed by S.C. legislators in 2017 provided property tax reductions to manufacturers. Those legislators are now revising the law to exclude public utilities from the tax breaks. File/Brad Nettles/Staff

A bill that would fix a property tax break mistakenly given to public utilities will be considered by the state Senate following passage by the House.

A senate committee this week unanimously recommended approval of the bill, sending it to the Senate floor April 13. The proposal would exclude public utilities from tax breaks that were part of the gas-tax legislation passed in 2017 to fix South Carolina's roads.

The gas tax and several related fees are expected to raise about $600 million a year once they're fully implemented in 2023.

The original legislation included a tax break for manufacturers that haven't already received a tax break under what's known as a fee-in-lieu agreement, in which a business pays a fixed amount that's typically lower than what it would pay through property taxes. Those arrangements are widely used as an incentive to lure industry that might balk at the state's 10.5 percent property tax rate — one of the highest rates for manufacturers in the nation.

The gas-tax reduces the value of a manufacturer's property — including land, buildings and depreciated equipment — for tax purposes.

The law, however, did not explicitly exclude property owned or leased by regulated public utilities, such as Dominion Energy and Duke Energy. Their industry has been under heavy scrutiny by South Carolina legislators since the failed $9 billion expansion of the V.C. Summer nuclear plant in mid-2017.  

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Moncks Corner-based Santee Cooper is not included because it is not regulated by the S.C. Public Service Commission.

Murrell Smith, chairman of the House Ways and Means Committee, said during a meeting last month that legal concerns have been raised about whether the gas-tax law includes utilities, "so we're just clarifying the legislative intent without having to go through litigation and have the Supreme Court determine it."

The bill that's working its way through the Legislature would be retroactive to tax years beginning in 2020. It would require any regulated utilities that benefited from the original law to pass the savings along to customers through credits or reduced rates.

The reduction for manufacturers drew criticism from the S.C.Policy Council, a Columbia-based research group, which called the property tax break "ill-defined, complicated and narrowly targeted."

The S.C. Manufacturers Alliance supported the reduction, saying it helped to level the playing field for companies that weren’t able to take advantage of fee-in-lieu agreements.

Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_

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