TO BUILD A POND: Does it impact your agricultural use exemption?

December 16, 2022 - Scott Y. Barnes
A landowner inherited a family timber tract located in Charleston County originally purchased by their grandfather as a timber investment property in 1936. Since that initial purchase, the family, through three (3) generations, has managed the property for timber production.

In 2018, the family was approached by a road contractor to purchase sand on the property. The Contractor proposed digging 3 ponds on the property of 5, 7, and 9 acres and paying the family $14 a truckload for the sand. It seemed like a win/win proposition to the family until they heard from the Charleston County Assessor. The Assessor, upon learning that the Contractor had pulled a mining permit to “mine” sand on the property, informed the family that they were no longer in the business of farming on that portion of the property covered by the mining permit (which was in the name of the Contractor, not the family), but rather in the business of mining. The agricultural exemption was revoked for tax year 2018 and rollback taxes were imposed for 2018 and the five (5) previous years. The Assessor based her position on the language of S.C. Code § 12-43-30, which provides:

For the purposes of this article, unless otherwise required by the context, the words “agricultural real property” shall mean any tract of real property which is used to raise, harvest, or store crops, feed, breed, or manage livestock, or to produce plants, trees, fowl, or animals useful to man…

In the Assessor’s eyes the property, which had continuously been used for timber production since 1936 and had always been categorized as agricultural use property, was no longer agricultural because ponds were being built and the taxpayers were now in the trade or business of mining because the Contractor had pulled a mining permit on the property.

While the matter was ultimately resolved successfully for the landowners, the Assessors in Charleston and Dorchester, and perhaps other counties, continue to take the position that the construction of a pond on an agricultural property pursuant to a mining permit constitutes mining which will result in the loss of the agricultural exemption on that portion of the property and the imposition of rollback taxes.

Taxpayers planning to construct or have constructed ponds on their property should be aware of the Assessor’s position and the appropriate response to the imposition of rollback taxes.

If you have questions about how this might impact your property or other tax law questions, please contact Scott Barnes.