SC Administrative Law Court Decisions

This contested case brought by J. M. Hare (taxpayer) against the Orangeburg County Assessor (assessor) concerns the imposition of roll back taxes based upon the assessor's determination in 1996 that a change in use of property occurred in 1994. The alleged 1994 change is a conversion of the previously classified agricultural use property to property held for sale as residential lots. The assessor seeks to impose a roll back tax for the tax year 1994.

The taxpayer exhausted the prehearing remedies with the assessor and the Orangeburg County Board of Assessment Appeals (County Board) and now seeks a contested case hearing before the Administrative Law Judge Division (ALJD). Section 12-60-2540(A) grants jurisdiction to the ALJD with this matter heard on August 5, 1997. The only tax year before me is 1994. No finding is made on whether a roll back tax can be made for a different year. Such a decision must wait for action, if any, directed to another tax year. Rather, the only holding here is that no roll back tax can be imposed for the closed tax year of 1994.

Is a roll back tax due on the taxpayers' properties for the tax year 1994?

1. Positions of Parties:

The taxpayer asserts his property did not change from agricultural use in the 1994 tax year. The assessor, however, argues the property was subdivided into residential lots, a street cut into the property, and restrictive covenants filed on the subdivided lots. Accordingly, the assessor asserts he may impose a roll back tax for the change in use in 1994. The assessor argues he can impose a roll back tax during the 1996 tax year for the tax year 1994 even after that tax year has closed.

2. Findings of Fact:

I find, by a preponderance of the evidence, the following facts:

1. The taxpayer is the owner of five parcels of property in Orangeburg County identified as TMS 0176-00-01-020, 057, 060, 061, and 062.

2. The assessor argues a change in use from agricultural to non-agricultural use occurred on the taxpayer's property during tax year 1994.

3. The assessor's argument that a change in use occurred in 1994 is vigorously denied by the taxpayer, and that denial gave rise to this dispute.

4. The assessor seeks a roll back tax for the 1994 tax year.

5. The assessor entered a roll back assessment during 1996 for the 1994 tax year.

6. The 1994 tax year is closed.

7. No issue of excessive valuation occurred in 1994.

8. No error of a county official resulted in an incorrect 1994 duplicate.

3. Discussion

A. Imposition of Roll Back Property Taxes⁽¹⁾

The State is free to statutorily select a date or an event that creates the roll back tax liability. 84 C.J.S. Taxation § 60 (1954). Under the applicable statutes, a roll back tax liability arises upon a change in use from agricultural use to any other use. § 12-43-220(d)(4). Here, the allegation is that the change in use occurred in 1994 and that the assessor seeks a roll back tax for that year. While certainly a roll back tax may give rise to a liability, the ability to levy such a tax in a closed tax year is limited by statutes governing the collection of property taxes.

A roll back tax is a property tax since the tax is imposed upon the value of property. S.C. Code Ann. § 12-43-220(d)(4) (Supp. 1996); Arthur v. Johnston. 185 S.C. 324,194 S.E.151 (1937). While the traditional property tax is imposed based upon the mere ownership of real property, a roll back tax is an additional property tax imposed upon the change in use of agricultural property. See § 12-43-220(d)(4) and § 12-37-210 (1976). As a property tax, the tax may not be imposed until there is a valid assessment by the official required to value property. S.C. Const. art. III, § 29. Simkins v. City of Spartanburg, 269 S.C. 243, 237 S.E.2d 69 (1977). Further, since § 12-43-220(d) does not provide the date the roll back tax is due nor how it is collected, § 12-45-60 requires roll back taxes to be entered on the tax duplicate as other ad valorem property taxes since the Treasurer may not collect a tax that does not appear on the county duplicate. See 1985 S.C. Op. Atty. Gen. 153. Thus, the roll back tax requires both a timely assessment and a proper entry upon the tax duplicate.

B. Timely Assessment

Timely property tax assessments must be made within thirty-six months from the date any part of the tax is paid. § 12-54-85(B) as amended by Act 86, Acts of 1997. Here, an assessment made in 1996 is well within the thirty-six months allowed for property taxes of a 1994 tax year.

C. Timely Entry on Duplicate

In this case no entry on the 1994 duplicate can be made, and thus the tax cannot be imposed for the 1994 tax year. The assessor determines the assessment of real property, including roll back assessments. § 12-37-90; § 12-43-220(d). The assessor provides the information to the auditor who utilizes such information to compile the tax books of the county. § 12-39-350. Unless otherwise extended, the tax books for the county generally close on September 30 of the tax year, and the taxes become a fixed charge. § 12-39-140, Town of Myrtle Beach v. Holliday, 203 S.C. 25, 26 S.E.2d 12 (1943). The auditor transmits the duplicate to the treasurer to enable the treasurer to prepare the tax bills. § 12-39-150 (1976). The treasurer may not collect taxes unless ordered by the auditor or unless specifically listed on the duplicate. § 12-45-60 (1976). Upon receiving the duplicate, the treasurer prepares tax bills sufficient to raise the taxes required by the duplicate. § 12-45-70; County of Lee v. Stevens, 277 S.C. 421, 289 S.E.2d 155 (1982).

In the absence of a contrary controlling statute, changes to a duplicate cannot be made for prior closed tax years or even the current tax year but rather must be made when the next annual county duplicate is prepared. Osborne v. Vallentine, 196 S.C. 90, 12 S.E.2d 856 (1941). In short the statutory scheme establishes a general prospective imposition of taxation rather than a retroactive levy, and only limited statutory authority exists to authorize changes to prior closed duplicates.

A prior duplicate may be changed, for example, for valuations that are so excessive as to be invalid or for "errors" made by county or state officials. § 12-39-250 (Supp. 1996). Here, however, no issue of excessive valuation occurred in 1994, and no error of a county official resulted in an incorrect duplicate. Rather, the alleged 1994 change in use (which the taxpayer vigorously denies and thus is not in the nature of an error) created the dispute. Thus, no statutory authority allows reopening the 1994 duplicate.

Here, the assessment was not made until 1996. Thus, no roll back tax could have been entered on the 1994 duplicate. Since the tax was not entered on the 1994 duplicate and since no statute allows a retroactive entering of a tax on the 1994 duplicate, the roll back tax cannot be levied as a part of the 1994 property tax liability. Accordingly, the taxpayer is not liable for a roll back tax as part of his 1994 tax liability. I make no determination on whether a roll back tax can be imposed for a subsequent tax year since only the 1994 tax year is before me.

4. Conclusions of Law

Based on the foregoing Findings of Fact and Discussion, I conclude the following as a matter of law:

1. The State is free to statutorily select a date or an event that creates the roll back tax liability. 84 C.J.S. Taxation § 60 (1954).

2. A roll back tax liability arises upon a change in use from agricultural use to any other use. § 12-43-220(d)(4) (Supp. 1996).

3. A roll back tax is a property tax since the tax is imposed upon the value of property. S.C. Code Ann. § 12-43-220(d)(4) (Supp. 1996); Arthur v. Johnston. 185 S.C. 324,194 S.E.151 (1937).

4 A roll back tax is an additional property tax imposed upon the change in use of agricultural property. See § 12-43-220(d)(4) (Supp. 1996) and § 12-37-210 (1976).

5. As a property tax, the roll back tax may not be imposed until there is a valid assessment by the official required to value property. S.C. Const. art. III, § 29 Simkins v. City of Spartanburg, 269 S.C. 243, 237 S.E.2d 69 (1977).

6. Since § 12-43-220(d) does not provide the date the roll back tax is due nor how it is collected, § 12-45-60 requires roll back taxes to be entered on the tax duplicate as other ad valorem property taxes since the Treasurer may not collect a tax that does not appear on the county duplicate. See 1985 S.C. Op. Atty. Gen. 153; § 12-45-60 (1976).

7 A roll back tax requires both a timely assessment and a proper entry upon the tax duplicate.

8. Timely property tax assessments must be made within thirty-six months from the date any part of the tax is paid. § 12-54-85(B) as amended by Act 86, Acts of 1997.

9. The roll back assessment in 1996 is timely.

10. The assessor determines the assessment of real property, including roll back assessments. § 12-37-90; § 12-43-220(d).

11. The assessor provides the information to the auditor who utilizes such information to compile the tax books of the county. § 12-39-350.

12 Unless otherwise extended, the tax books for the county generally close on September 30 of the tax year, and the taxes become a fixed charge. § 12-39-140, Town of Myrtle Beach v. Holliday, 203 S.C. 25, 26 S.E.2d 12 (1943).

13. The auditor transmits the duplicate to the treasurer to enable the treasurer to prepare the tax bills. § 12-39-150 (1976).

14. The treasurer may not collect taxes unless ordered by the auditor or unless specifically listed on the duplicate. § 12-45-60 (1976).

15. Upon receiving the duplicate, the treasurer prepares tax bills sufficient to raise the taxes required by the duplicate. § 12-45-70; County of Lee v. Stevens, 277 S.C. 421, 289 S.E.2d 155 (1982).

16. In the absence of a contrary controlling statute, changes to a duplicate cannot be made for prior closed tax years or even the current tax year but rather must be made when the next annual county duplicate is prepared. Osborne v. Vallentine, 196 S.C. 90, 12 S.E.2d 856 (1941).

17. A prior duplicate may be changed, for example, for valuations that are so excessive as to be invalid or for "errors" made by county or state officials. § 12-39-250 (Supp. 1996).

18. In this case no statutory authority allows reopening the 1994 duplicate.

19. In this case no roll back tax may be entered on the 1994 duplicate, and no roll back tax may be levied as a part of the 1994 property tax liability.

20. The taxpayer is not liable for a roll back tax as part of his 1994 tax liability.

21. No determination is made on whether a roll back tax can be imposed for a subsequent tax year since only the 1994 tax year is before me.

Based upon the foregoing Findings of Fact and Conclusions of Law, the following ORDER is issued:

The assessor may not direct the auditor to alter the 1994 duplicate so as to levy a roll back tax as part of the 1994 tax liability of the taxpayer. No part of this order addresses the rights of the parties to impose or dispute a levy of a roll back tax for any other tax year.

IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

This 15th day of September, 1997

Columbia, South Carolina

1. I do not reach the issue of whether a change in use occurred for the taxpayer's property during 1994 since, even if true, no authority exist in 1996 to assess a roll back tax for the previously closed 1994 tax year.