What TRAC Should Mean To You

During its 2009 session, the General Assembly created the TAX REALIGNMENT COMMISSION (“TRAC”) for the purpose of conducting a comprehensive study of South Carolina’s tax system.  TRAC consists of eleven members, ten of whom were appointed by legislative leaders with the eleventh member being the Director of the Department of Revenue.  On Wednesday, September 9, TRAC held its first meeting.

With only one exception, all state and local taxes and fees can be studied and have recommendations made for change.  The recommendations from TRAC are to be delivered to the General Assembly by March 15, 2010 and all will be considered during its 2010 Session.

Those recommendations could be to:

ALTER

ELIMINATE

or

ADD LANGUAGE AND EXEMPTIONS

to the current tax system.

Specifically included is an examination of sales tax exemptions and local property taxes.

The only matter which was deemed untouchable was the property tax exemption for owner occupied residences.  At the first meeting of TRAC, the first unchallenged words out of the mouth of one of the commission members was that Act 388 of 2006 is “OFF LIMITS.”

In 2006, following the trend of recent years in South  Carolina, Act 388 shifted $250 Million in sales tax to the backs of businesses.  It disproportionately shifted the responsibility of property taxes for school purposes to businesses and away from homeowners.  Further, it distorted one of South Carolina’s largest economic engines – real estate – by adding a point of sale requirement for all properties, thereby chilling any new sales due to dramatic increases in property taxes.  The critical requirement of a fundamentally-sound tax structure is its competitiveness.  Under no circumstances do the changes brought about by Act 388 meet the test of competitiveness.  That should be a strong warning that businesses are in harm’s way unless they have solid representation at future public meetings of TRAC.

EVERY TAXPAYER IN SOUTH CAROLINA NEEDS TO BE ON ALERT

At McNair, our government relations professionals and tax attorneys will be closely monitoring the work of TRAC.  We are available to assist you in understanding the implications of the Commission’s recommendations.  And, more importantly we are equipped to help you develop a responsive strategy to deal with the Commission’s proposals before they become law.  We understand how to preserve your personal or business well being.  Let us know how we can help you.

About the Author

Erik P. Doerring
Erik leads the firm's economic development and tax practices. He is a business lawyer, with the skills of a tax litigator. Prior to joining McNair, Erik was an attorney with the IRS Office of Chief Counsel and the U.S. Department of Justice, Tax Division.