South Carolina Supreme Court docket holds 2019 Tax Act unconstitutional

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South Carolina Supreme Court holds 2019 Tax Act unconstitutional

The South Carolina Supreme Court yesterday published its tripartite opinion in Mercury Funding, LLC, against Beaufort County’s tax collector, Kimberly Chesney, a case concerning the constitutionality of a 2019 tax repayment deadline extension act. The court’s opinion is likely to affect the portfolios of tax-sales buyers who participated in the 2019 tax sale by challenging the validity of the tax sale or any tax deed a county might issue in connection with a 2019 tax-selling property.

In September 2020, the South Carolina General Assembly passed House Bill 3755, which became Act 174 the next month. The law dealt primarily with motor insurance, but it also contained a provision that affected the sale of property tax. Under South Carolina law before Law 174, defaulting taxpayers and other interested parties had one year from the date of the tax sale to repurchase property. Law 174 extended this repayment period for another year, but only for properties sold in the 2019 tax sale.

The petitioner Mercury Funding bought property in the 2019 tax sale that was affected by the extended repayment period. It sued the constitutionality of the law under the South Carolina Constitution. The parties generally admitted that the law was unconstitutional but disagreed on how to deal with the implications of a Court ruling that the law was unconstitutional, including:

  1. Property rights in real estate redeemed during the extended redemption period;

  2. whether defaulting taxpayers would have additional time to repurchase properties that were not repurchased under the law; and

  3. whether additional written notices to defaulting taxpayers were required before the repayment period expired and a tax return could be issued.

Although the parties explained to the court during the argument that they had reached an agreement on many of these issues, the court declined to address these issues in its opinion. Instead, it ruled the law unconstitutional, stating that these other issues “should first be examined by a court”. Since the case was brought in the original jurisdiction of the court, it likely means that related issues will need to be resolved in another lawsuit in the district court, which will later be dealt with by the appellate courts as part of the regular litigation.

Copyright © 2021 Nelson Mullins Riley & Scarborough LLPNational Law Review, Volume XI, Number 182