A new law that would fatten county treasuries by curbing tax breaks for owners of new homes and businesses is unconstitutional, according to the S.C. Attorney General’s office.

That opinion has stopped some counties, including Lexington, from tightening a loophole that allows property owners to postpone paying local taxes for up to two years.

Others, such as Horry, are pressing ahead despite the legal cloud.

Delayed tax payments cost counties and schools millions of dollars in lost tax revenue. Meanwhile, they still must provide taxpayer-funded services such as education, police and fire protection to new homeowners and businesses.

The attorney general’s Oct. 27 opinion has county officials and legislators wondering what to do next.

Some legislators want to rewrite the law; others want to ignore the opinion until a lawsuit is filed and a judge decides the issue.

An opinion from the attorney general does not carry the weight of a court ruling but sometimes is heeded on questions of law.

“I would give great credence to the attorney general’s advice,” said Ray Stevens, director of the state Department of Revenue, which sought the opinion.

PROCEED WITH CAUTION

Stevens, a lawyer and former judge, asked for legal advice after Lexington County asked his agency about the law.

The Revenue Department has notified counties of the opinion, Stevens said.

Counties that choose to make the change anyway and collect taxes sooner could have to refund the money if a judge upholds the opinion, Stevens said.

Lexington was about to approve a change that could have generated about $1.1 million in new taxes in one year by restricting tax breaks on 1,243 new construction projects in 2006 alone.

Lexington was among at least five counties weighing the tax option, which the Legislature created this year.

However, since the attorney general’s opinion, Richland, Kershaw, Beaufort and Horry counties have taken a go-slow approach to enacting the tax.

“We did not kill (collecting the tax),” said Beaufort administrator Gary Kubic. “We have just deferred it.”

Beaufort, which issued about 3,600 building permits in 2005, stood to gain about $5.5 million in new taxes, Kubic estimated. About $4 million of that would have gone to schools, he said.

The law in question allows counties to pass local laws so they could collect up to six months of taxes on new construction occupied by an owner by June 30 of each year.

But the attorney general’s opinion said the local option could result in the same kinds of property being taxed differently among counties.

“We believe a court could find (the new law) is of questionable constitutionality due to the uniformity requirement,” the opinion states, referring to Article 10, section 1 of the S.C. constitution.

CHOICE OF SOLUTIONS

State Rep. Mike Anthony, D-Union, was a member of the conference committee that hammered out the final version of the tax overhaul bill.

He said the six-month provision did not get as much attention as other parts of the complex, disputed measure.

If the six-month provision must be changed, Anthony said he leans toward requiring all counties to close the loophole.

“I do not believe it’s going to be that controversial,” he said. “I may be wrong.”

Rep. Mac Toole, R-Lexington, favors ignoring the attorney general’s opinion.

“I don’t see any unfairness to it,” he said. “If they want to use that issue (uniformity in tax laws) they have a wide open field of other property tax” laws to question.

But state Rep. Nikki Haley, also a Lexington representative and a backer of the provision, said the large amounts of money involved make it worth trying to fix the local option question raised by the opinion.

“The (revenue) numbers lost outweigh the cost aspect of this,” Haley said, referring to complaints from some counties about the expense of hiring more staff and upgrading property assessment procedures to collect taxes faster.

Generally, growing counties support closing the loophole because it means collecting taxes sooner to pay for services to new homeowners and businesses.

Counties where growth is stagnant do not have enough new construction to make the change worthwhile.

An indication of how much counties want the new revenue is that the S.C. Association of Counties plans to lobby for the money.

The association’s legislative committee decided Dec. 1 that the local-option law could withstand a legal challenge, said Robert Croom, its lobbyist. “We prefer ... to preserve the flexibility,” he said.

But if legislators decide the law likely will fall, the association would work to require the change in all counties, he said.

Horry County, which two years ago was the first county in the state to seek such a change, is reviewing its tax plan, assessor Rendel Mincey said.

If enacted, the change could produce about $4 million in added tax revenue in the tourism-rich county, he said.

Horry school officials are so interested in closing the loophole they pledged $225,000 in money for more property appraisers and other expenses, said county spokeswoman Lisa Bourcier.

Council is slated to give the change an initial vote in January, she said.

Reach LeBlanc at (803) 771-8664.

County cash registers

Closing a loophole on when property taxes are due on new construction would mean millions in new tax dollars for county governments. Here’s what the change would have meant to several county treasuries if it had been enacted in 2006:

Lexington County

$1.1 million, of which $753,000 would have gone to schools

Richland County

$7.2 million, of which $5.7 million would have gone to schools

Beaufort County

$5.5 million, of which $4 million would have gone to schools

Horry County

$3.9 million, of which $2.9 million would have gone to schools