South Carolina Department of Revenue Issues Final Revenue Ruling Addressing Key FILOT Timing Issues

The final ruling retains the key conclusion in the draft, which is that a failure of a company to place assets in service on or before the last day of the property tax year that is three years after a fee in lieu of tax (“FILOT”) agreement is entered into does not result in an automatic termination of the agreement or give the county the right to terminate the agreement. Rather, it means that the last day of the third year is the “Commencement Date” to which the expiration of the “Investment Period” is tied. Most FILOT agreements other than those governing “mega-projects” provide that the Investment Period ends five years after the Commencement Date. DOR explains that “[r]eading Chapter 44 of Title 12 as a whole, the Department believes the Legislature did not intend for the failure to place property in service during the three-year period to result in an automatic termination of the FILOT.”

The ruling clarifies in a footnote that a FILOT agreement may contain contractual language that differs from the default statutory language. For example, a FILOT agreement may include a contractual term that a failure to place assets in service by a specified date is an event of default that allows the county to terminate the agreement. However, absent specific contractual language, under the statutory definitions in Title 12, Chapter 44, the failure to place assets in service by the end of the third year following the execution of the FILOT agreement does not result in automation termination or give the county the right to terminate the agreement.

The final ruling provides welcome clarity for both companies and counties subject to FILOT agreements for properties with longer construction and development timelines. Please contact Will Johnson or a member of the HSB Economic Development Team with any questions.