Bill would allow homeowners to rent out their properties for up to 100 days and still claim lower tax rate

dbryant@thesunnews.comMarch 26, 2013 

— Grand Strand homeowners would be able to rent out their houses to vacationers for the summer – up to 100 days a year – and still pay the lower, owner-occupied tax rate if a bill is approved in Columbia.

Now, homeowners wanting to keep the lower tax rate can rent out their properties for no more than 14 days. Sen. Ray Cleary, one of the bill’s sponsors, said allowing the longer rental time is needed to give struggling homeowners some relief as their costs – especially wind and flood insurance – have skyrocketed while incomes for many have dropped because of the tough economy, leaving them trying to find a way to hang on.

More Grand Strand homeowners want to rent their properties during the in-demand summer tourist season while they live in an apartment or with relatives to offset those rising costs, said Cleary, R-Murrells Inlet. The properties would have to be in areas that already allow vacation rentals.

“A lot of people find themselves having difficulty making those payments in addition to their mortgage payments,” Cleary said. “People were seeking relief. They are doing what they can to survive and keep their home.”

South Carolina has two tax assessment rates for homes: 4 percent for owner-occupied homes, which cannot be rented out for more than 14 days, and 6 percent for second homes, investment property and properties that are rented out for more than two weeks.

Concern about homeowners renting out their houses during in-demand times has grown recently following a ruling last year by the S.C. Court of Appeals. A couple in Hilton Head Island rented out their house for 91 days during the summer 2008 – they earned $76,500 – but wanted to still claim the 4 percent tax assessment. The appeals court ruled that the couple were no longer eligible for the lower rate because the house was rented out for more than 14 days.

The bill would have more of an effect in the coastal counties, where there’s enough demand for rental units during the summer. Officials aren’t sure how many homeowners in Horry and Georgetown counties would rent out their properties for the summer if given the chance.

But a number of homeowners in Georgetown County, especially in the Waccamaw Neck area, already rent out for more than two weeks, but don’t file using the higher, 6 percent rate, the county says.

Georgetown county, which supports the bill, is working to identify homeowners who are claiming discounts they shouldn’t be – including the 4 percent even though they are renting out the properties for more than two weeks. Property owners can fess up by Sunday and not face penalties. They should call the county assessor’s office at 545-3017.

Allowing homeowners to rent out for up to 100 days instead of just two weeks would help, Georgetown County spokeswoman Jackie Broach said.

“We believe that 14 days is not enough,” she said.

Pawleys Island Mayor Bill Otis said homeowners in his town need the option. Many have had the house in their family for years, but have struggled during the last decade as their insurance costs have increased, he said.

“I am very much in favor of it,” Otis said. “This is important to retain the ability of longtime residents to be able to keep their residences. People are doing the best they can to hang on to their properties.”

The change also could help level the playing field by requiring homeowners who already are renting out to start charging the same accommodations and sales taxes as rental properties, said Lee Hewitt, co-owner and broker-in-charge at Garden City Realty.

“They are renting them now, they are just not paying and claiming all the taxes,” he said. “It does hurt our business. … Hopefully this will give them a way to help keep people in compliance.”

The Myrtle Beach Area Hospitality Association, which has been concerned about the growing number of vacation rentals by owners, is still sorting through the bill’s potential implications, said Stephen Greene, the association’s president.

Myrtle Beach spokesman Mark Kruea said, even if approved, the action likely won’t change much because most homeowners can’t afford to move out of their house for the summer just to rent it out.

“I’m not sure that is a problem that needs a solution,” he said. “If approved, it would apply to a pretty limited number of properties. How many people can afford to move out of their house for 90 days and sublet it?”

If the bill passes, Horry County homeowners who want to rent out their properties would need to re-apply for the legal residence and say how many days they plan to rent the property out, as well as provide copies of their federal income tax return confirming their rental status, Horry County Assessor Rendel Mincey said.

“I am not sure this will be welcomed by other taxpayers that are paying 6 percent on rental properties,” Mincey said in an email. “We already get complaints on those that are renting 14 days or less. I would think this would increase should this pass. This bill probably doesn’t have much impact on the non-coastal counties and therefore we probably won’t see much opposition throughout the state.”

The bill still has a ways to go. It was heard by a Senate committee last week, but still must be considered by the full Senate and House.

Contact DAWN BRYANT at 626-0296 or at dbryant@thesunnews.com or follow her at Twitter.com/TSN_dawnbryant.

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