Capital stack and soft money — South Carolina

A needs-based state credit, not a percentage match — and its dollar pool is bigger than the statute's own floor

South Carolina's state Housing Tax Credit (STC) is codified at S.C. Code Ann. § 12-6-3795, added by Act 137 of 2020 and substantially rewritten by Act 202 of 2022 (H.5075, signed by the Governor May 16, 2022, effective for tax years beginning after 2021). The 2022 rewrite exists because the original 2020 program blew far past its own fiscal projections — public legislative materials on Act 202 describe post-2020 preliminary eligibility determinations running to roughly $100 million a year against an original ten-year fiscal-impact estimate of about $20.6 million — and Act 202 responded by converting the credit into an explicitly capped, needs-based gap tool rather than a formula match tied to the federal award.

The statute's own mechanics section is direct: the credit "allowed for any project must supplement but not supplant the federal housing tax credit and must be limited to an amount necessary only to achieve financial feasibility of the project" (§ 12-6-3795(B)(5)(a)). Appendix C3 of the QAP restates the same discipline procedurally: an applicant must "request the maximum amount of federal LIHTC before requesting STC," and "STCs are only meant to be the last resource in the application and only meant to cover any gap remaining after all other sources have been maximized." The credit amount can never exceed the federal credit allowed on the project (§ 12-6-3795(B)(1)), it is nonrefundable, and any unused STC carries forward up to five years with no carryback (§ 12-6-3795(B)(3)).

The QAP's March 9, 2026 update also sets underwriting floors relevant to sizing the STC piece of a stack: a minimum federal syndication rate of .80 and a minimum state syndication rate of .45. Appendix C3 sets a $300,000 minimum STC request "unless the requested is supported by a syndicator or investor letter of interest noting their willingness to purchase at the specific lower amount," caps STC awards to developments with less than a 100% applicable fraction at zero, and limits each developer to one STC application per project.

Ranking among eligible STC requests is not scored on the QAP's own point table — it runs on a separate statutory ranking system required by § 12-6-3795(C)(3) and Act 202, using four efficiency ratios (state resources per heated residential square foot, per bedroom, per dollar of total project cost, and per potential tenant, each ranked lowest to highest), with a 30% favorable adjustment to a project's state-resource figure for USDA-designated rural sites and a 10% adjustment for new-construction units — adjustments used "for the sole purpose of establishing project rankings," not to change the actual award. Ties break first to whichever project's STC ask fits inside the remaining statutory limitation, then to rural location, then to the lowest state-resources-to-tenants ratio.

Only one scored leverage line, and only one South Carolina Housing Trust Fund program actually built for a rental LIHTC deal

Appendix C1's own scoring table gives soft money exactly one entry point: Section III.F, "Leveraging," worth up to 6 points. Only five source categories qualify — HOME or CDBG funds; an established local-government housing development program; public foundation funds affiliated with a local government or health-care institution; the documented value of governmental infrastructure built on or bordering the site and completed before placement in service; or another source the Authority pre-approves at least 30 days before the application deadline. The funding must come from a party independent of the Development Team, must be documented as a loan with a term of at least 20 years at a rate at or below the long-term Applicable Federal Rate, and points scale with dollars committed per low-income unit — from 1 point at $1,000–$1,999/unit up to the full 6 points at $10,000/unit or more.

SC Housing itself directly administers two federal gap sources — the HOME Investment Partnerships Program (Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990) and the National Housing Trust Fund (Title I of the Housing and Economic Recovery Act of 2008, § 1131), for which "SC Housing is the designated administrator" and NHTF-assisted units carry "a minimum affordability period of 30 years," targeted to extremely low income households. Unlike some states where HOME runs on a wholly separate calendar, SC Housing's own HOME/LIHTC Implementation Manual ties the two together directly: the HOME implementation schedule "is intended to coincide with the Tax Credit Program's Awarded Development Timeline," and where the two conflict, "the requirements identified in the LIHTC Timeline shall take precedence" — with one carve-out: HOME developments must still begin construction within 12 months of executing the HOME award agreement regardless of what the LIHTC timeline allows. Appendix C2 closes HOME off entirely for the bond side: "Tax exempt bond developments are not eligible to apply for Authority HOME funds."

The state-funded South Carolina Housing Trust Fund (SC HTF) is a separate, third source, but only one of its three current program lines is structured as rental-development gap financing. The Housing Preservation Initiative funds owner-occupied home repairs (grants under $15,000, forgivable loans above that) and the Disaster Assistance Program is a homeowner repair block grant (up to $30,000 per home, capped at 80% AMI) — neither reaches a new-construction or rehab rental LIHTC deal. The Supportive Housing Program (SHP) is the one that does: it funds new construction, acquisition, and acquisition/rehab rental housing serving people with disabilities or homelessness, with up to $20 million set aside statewide per year (of which $1 million is reserved for South Carolina Department of Disabilities and Special Needs affiliates), no county allowed more than 20% of a given year's SHP dollars, a maximum HTF subsidy of $300,000 per unit, and a developer fee capped at $25,000 per unit.

Property tax: a valuation rule that reaches every LIHTC deal, and an exemption that's mid-freeze

South Carolina has two distinct property-tax mechanisms relevant to a LIHTC deal, and they should not be confused. The first, S.C. Code § 12-37-225, applies to every LIHTC property regardless of ownership structure: "Federal or state income tax credits for low income housing may not be taken into consideration with respect to the valuation of real property or in determining the fair market value of real property for property tax purposes. For properties that have deed restrictions in effect that promote or provide for low income housing, the income approach must be the method of valuation to be used." The section defines "low income housing" for this specific purpose as housing for households at or below 80% of AMI — a broader band than LIHTC's own set-asides, so this valuation rule reaches essentially every restricted unit in a SC LIHTC deal. This is a universal assessment-methodology rule, not an exemption — the property still pays tax, just on an income-approach valuation that excludes the tax credit itself.

The second mechanism, § 12-37-220(B)(11)(e), is a full exemption, not a valuation rule, and it is narrower: "all property of nonprofit housing corporations or instrumentalities of these corporations when the property is devoted to providing housing to low or very low income residents. A nonprofit housing corporation or its instrumentality must satisfy the safe harbor provisions of Revenue Procedure 96-32 issued by the Internal Revenue Service for this exemption to apply. For purposes of this subitem, property of nonprofit housing corporations or instrumentalities of these corporations includes all leasehold interests in property owned by an entity that provides housing accommodations to persons of low or very low income, and in which a wholly owned affiliate or wholly owned instrumentality of a nonprofit housing corporation is the general partner, managing member, or the equivalent." As currently written, the statute contains no proportional-ownership limitation — a qualifying nonprofit GP structure can carry the full property exemption regardless of how small its actual equity share is, which is the mechanism a 2026 Post and Courier investigation characterized as a "loophole" producing outsized tax breaks on investor-owned LIHTC properties.

Two 2025–2026 legislative efforts targeted that gap and neither is current law. Senate Bill 125 and House Bill 5006 would have made the exemption "proportionate to the nonprofit housing corporation's percentage of direct or indirect ownership in the qualifying property" (full exemption only above 50% ownership or where all units serve low-income residents) — but H.5006 was recommitted to the House Ways and Means Committee on May 14, 2026 and did not pass. What did pass and is now current law is Act 227 of 2026 (S.853, signed May 19, 2026): a temporary freeze providing that "[f]or property tax years 2026 and 2027, notwithstanding Section 12-37-220(B)(11)(e)..., the Department of Revenue shall not grant final approval of any application for an exemption under that subsection filed on or after June 30, 2026," with the freeze lifted only for property "owned entirely by a nonprofit housing corporation...that satisfies the safe harbor provisions of Revenue Procedure 96-32." A standard investor-LP/nonprofit-GP syndication structure — where the nonprofit typically holds a small GP interest rather than 100% ownership — does not fit that exception, so a new exemption application filed on or after June 30, 2026 for a conventionally syndicated deal will not receive final DOR approval before the freeze expires June 30, 2027.

Two adjacent statutes are enabling, not automatic: § 12-37-230 lets (but does not require) a county or municipality contract with an exempt nonprofit housing corporation for payments for services rendered, and § 12-37-240 is the same discretionary mechanism for property exempted by a specific act of the General Assembly rather than under § 12-37-220 generally. Neither creates a right to a negotiated payment — each is a local option.

FILOT: a real economic-development tool, applied to housing in at most a couple of counties — not a housing program

South Carolina's Fee in Lieu of Tax program (FILOT, S.C. Code Title 12, Chapter 44) is a general economic-development incentive: an investment of at least $2.5 million negotiated with a county in exchange for a fixed fee (often a reduced 6% or 4% assessment ratio in place of the standard 10.5% for commercial property) instead of ordinary ad valorem tax, typically for 20–30 years with a possible 10-year extension. It was not written with rental housing in mind, and most FILOT agreements are manufacturing, distribution, or corporate-facility deals.

As reported by the Post and Courier, Charleston and Colleton counties formed a Joint Multi-County Industrial Park in 2023 (under Title 4, Chapter 1) specifically to extend a FILOT-style abatement to "attainable housing" — its first use financed a 129-unit North Charleston project (Cordelia on Rivers) with 54 units reserved for households at 60–80% of AMI over a 15-year affordability period, phasing from a 92% abatement in the first three years down over time. Greenville County has separately combined FILOT with a multi-county industrial park and special-source revenue credits on at least one affordable project (The McClaren). [UNCONFIRMED] No primary source found in this research confirms that a FILOT/multi-county-park housing abatement has been formally combined with a Section 42 LIHTC award on the same property, and the confirmed examples target a materially higher income band (60–80% AMI) than LIHTC's own set-asides. A developer should treat FILOT as a rare, county-by-county negotiated tool to raise with a specific jurisdiction's economic development office — not a standing statewide program available to any LIHTC application the way the state Housing Tax Credit or SC HTF are.