Southeast Affordable Housing Administration, Inc. — Client Alert · May 2026

Key Points

• Governor McMaster signed S. 853 into law on May 19, 2026. A floor amendment adopted in the closing days of the session added a new Section 5 that temporarily suspends SCDOR's final approval of certain applications for the nonprofit low-income housing property tax exemption under S.C. Code Section 12-37-220(B)(11)(e) (the "Exemption Statute").

• The operative deadline is June 30, 2026. Applications filed before that date are not subject to the freeze and will be processed in the ordinary course. Applications filed on or after that date will be held in abeyance through June 30, 2027 and evaluated under the law then in effect.

• Filing, not approval, is the deadline. SCDOR is not required to approve applications by June 30. The statute requires only that the application be filed before that date.

• A narrow carve-out preserves normal processing for wholly nonprofit-owned property. Applications concerning property owned entirely by a nonprofit housing corporation, either directly or through a wholly owned instrumentality, are not subject to the freeze. Joint venture structures, in which a nonprofit serves as managing member but is not the sole owner, do not qualify.

• Properties already in the program are not affected. Existing abatements continue undisturbed. A change in ownership, however, requires a new application for the following tax year, which would be subject to the freeze if filed on or after June 30, 2026.

Background

The Exemption Statute exempts 100% of the property of a nonprofit housing corporation or its instrumentality when the property is devoted to housing for low or very low income residents and the project satisfies the safe harbor provisions of Revenue Procedure 96-32. A 2020 amendment removed the word "solely-owned" before "instrumentalities" and extended the exemption to property of a nonprofit housing corporation "or its instrumentality." As a result, a property has qualified for the full exemption so long as a nonprofit serves as general partner, managing member, or the equivalent, even where the nonprofit holds only a fractional economic interest.

Over the following years, municipalities reported sudden reductions in property tax revenue as for-profit owners increasingly used the structure to remove multifamily properties from local tax rolls. Substantive legislation tying the exemption to the nonprofit's actual ownership percentage moved through the General Assembly across several sessions but stalled in committee in 2026. With those bills stalled, the relevant policy reemerged through two end-of-session floor amendments to unrelated tax vehicles: H. 5006, which would rewrite the exemption on a proportionate-ownership basis, and S. 853, which imposes the temporary freeze.

S. 853 was introduced in January 2026 as a measure addressing the Abandoned Buildings Revitalization Act and moved through both committees without any provision affecting the Exemption Statute. Section 5 was added on the House floor on May 13, 2026, the bill passed 112-0, the Senate concurred the following day, and the Governor signed it into law on May 19, 2026.

What Section 5 Does

Section 5 does not amend the Exemption Statute itself. It is a temporary procedural suspension layered on top of the existing statute.

For property tax years 2026 and 2027, SCDOR may not grant final approval of any application under the Exemption Statute filed on or after June 30, 2026. Affected applications are held in abeyance rather than denied, and are evaluated upon expiration of the freeze under the law then in effect.

The freeze is subject to one exception: it does not apply to an application concerning property owned entirely by a nonprofit housing corporation, either directly or through a wholly owned instrumentality, that is devoted to providing housing to low or very low income residents and that satisfies the Revenue Procedure 96-32 safe harbor. SCDOR may process and approve those applications normally during the freeze period.

Section 5 also forecloses any vested-rights argument. It expressly provides that no applicant acquires a vested right to an exemption by filing an application subject to the freeze, by expending funds in reliance on the exemption, or by receiving any preliminary determination from SCDOR.

Section 5 expires June 30, 2027.

Practical Implications

For most projects relying on the Exemption Statute, the operative deadline is June 30, 2026, and the gating constraint is not the application itself but the underlying transaction. An application cannot be filed until the deed is recorded, so the closing and recordation timeline drives everything.

Projects in the pipeline. A property that closes and records before June 30 can be filed with SCDOR in the ordinary course, regardless of ownership structure. Closings targeting May or June 2026 should confirm that the schedule leaves adequate time to prepare and submit the application before the cutoff.

Transactions that cannot close in time. An application filed on or after June 30 will not be processed until the moratorium expires or is lifted. Filing in that scenario remains worthwhile: it holds the applicant's place in SCDOR's queue, but the application is subject to whatever framework the General Assembly enacts during the freeze window, and the vested-rights waiver in Section 5 means there is no reliance-based fallback. Alternative structures, including ownership configurations that bring the nonprofit's interest to sole ownership, should be evaluated on a deal-by-deal basis.

Existing abatements. Properties already approved and in the program are not affected. An existing abatement continues undisturbed. The freeze becomes relevant only on a change in ownership, which requires a new application for the following tax year.

Lender consent. Properties with existing financing remain eligible to apply before the deadline, provided lender consent is obtained as part of the normal process. Agency lenders like Fannie Mae, Freddie Mac, and HUD typically take longer to process consent requests, and that lead time is especially tight with the June 30 deadline approaching. Note that Fannie Mae does not currently permit properties with existing Fannie loans to apply for the abatement at all.

Outlook

S. 853 is now law. A separate and more sweeping measure, H. 5006, would have rewritten the Exemption Statute itself on a proportionate-ownership basis, tying the exemption to the nonprofit's actual percentage of direct or indirect ownership, and preserving a full 100% exemption only where the nonprofit owns more than half of the project or every unit is devoted to low-income residents. The Senate amended H. 5006 to add that language, but when the bill returned to the House, the House recommitted it to the Committee on Ways and Means on May 14, 2026. H. 5006 has not been enacted.

The two measures are best understood as companion efforts. The freeze holds non-qualifying applications in abeyance until June 30, 2027 and provides that they will be evaluated "under the law then in effect." If a proportionate-ownership framework along the lines of H. 5006 is enacted during that window, an application held in abeyance could be judged under it. For a typical joint-venture project, where a nonprofit serves as managing member while holding a minority interest, and not all units are restricted to low-income residents, that shift would reduce what is today a full exemption to a fractional one. That risk is the practical reason to file before June 30, 2026 wherever possible.

SAHA will continue to monitor any renewed effort to rewrite the Exemption Statute and any further developments affecting the exemption, and will issue updates as warranted.

How SAHA Can Help

SAHA handles the full application process, from structuring through SCDOR filing, for nonprofit and joint venture affordable housing projects throughout South Carolina. If you have a property that could benefit from the exemption, or you are in a transaction that depends on it, the window to file under the current framework is closing. A short email is enough to start the conversation.



anthony@sahahousing.org · laura@sahahousing.org

Southeast Affordable Housing Administration, Inc. · 104 S. Main St., Suite 800, Greenville, SC 29601 ·

(864) 704-8008 · sahahousing.org

This alert is intended to inform SAHA clients and friends about legal developments. Nothing in this alert should be construed as legal advice or a legal opinion. Please contact SAHA for guidance specific to your situation.