Tax Law Insights

The South Carolina General Assembly has clarified how outdoor advertising signs (i.e. billboards) are taxed in the state for property tax purposes. The new law amends South Carolina Code Section 12-43-230, and applies to property tax years after 2014. See House Bill 4712.

Billboards are treated as personal property in most states, although a few treat billboards as improvements to real property. The new law provides that all "off-premises outdoor advertising signs" will be treated as personal property for South Carolina property tax purposes. "Off-premises outdoor advertising signs" are defined as lawfully erected permanent signs which relate to advertisements for products, accommodations, services, or activities sold or offered somewhere other than the location of the sign (i.e. billboards).

Under the new law, the owner of a billboard must file a business personal property tax return annually with the South Carolina Department of Revenue. The billboard will be taxed based upon the original cost of the sign structure less allowable depreciation. Any permits are ignored for purposes of determining the value of a billboard.

The new law also contains an important provision clarifying how the underlying land at a billboard site is taxed. Income from leasing a billboard site that is one-quarter of an acre or less will generally be disregarded when valuing the underlying land. Importantly, leasing a billboard site will also not result in an "assessable transfer of interest" (which allows property to be revalued). A billboard site will continue to be taxed as it was before the billboard was installed (e.g. commercial, manufacturing, agricultural, or utility).

Landowners and billboard owners should review their current property tax filings and determine what now needs to be done to comply with the new law. Landowners whose billboard property has not been taxed in the past under the methods now required under this new law can notify their county assessor of any inconsistency and potentially have the value of their property reduced (although no refund is allowed). Billboard owners will need to make sure they have filed personal property tax returns with the Department of Revenue. While the Department of Revenue can generally assess personal property taxes for the prior 10 years if returns have not been filed, billboard owners may have an opportunity to come into compliance by filing returns for a shorter period of time given the clarifications made by the new law.