Compliance, Year 15, and South Carolina's owner-elected 30-or-35-year extended-use tail — South Carolina

The real number: an owner election of 15 or 20 years, confirmed directly — not the cross-state default of 55

SC Housing's Compliance Manual defines the Extended Use Period in its Definitions chapter: "After January 1, 1990, in addition to the federal minimum compliance period of fifteen (15) years, developments that received LIHTC allocations also became subject to an extended use period of a minimum of fifteen (15) years, as stipulated by a recorded Agreement As To Restrictive Covenants ('Extended Use Agreement'). Often states extend this requirement to retain affordable housing stock for a longer period of time. SC Housing currently allows the Owner/Developer to elect fifteen (15) or twenty (20) years as the extended use period." That is a direct, verbatim confirmation that South Carolina has not adopted a blanket 55-year (or even a fixed 30- or 35-year) state-wide extended-use term the way some other states have — the actual number for any given development depends on which election that Owner made and recorded, and this research found no QAP scoring incentive tied to choosing the longer 20-year election over the 15-year one.

The same Compliance Manual entry lists three specific relaxations that kick in once a development is in its extended use period rather than its initial 15-year compliance period: unit transfers are no longer restricted provided they occur within the property, a household may be comprised entirely of full-time students (determined under HUD Section 8 criteria), and the Next Available Unit Rule and Vacant Unit Rule are no longer enforced. The same sentence immediately adds, "All other compliance requirements remain intact" — income certification, rent restriction, recordkeeping, annual certifications and inspections are not described as easing up during the extended use period.

Qualified Contracts: a 10-point scored waiver for some deals, and a fully worked process for the rest

Unlike a state that makes the Qualified Contract waiver a mandatory condition of every award, South Carolina's waiver is a competitive scoring item found only in Appendix C1's New Construction Scoring Criteria for 9% applications: "10 points if the application includes a notarized letter signed by the proposed owner of the property affirming a knowing and voluntary waiver of the right to request a qualified contract from the Authority for the duration of the extended use period" (Appendix C1 §III.C.2). Because it lives in the 9% new-construction scoring tables, this specific waiver mechanism does not reach 4%/TEB developments or the separate rehabilitation-application evaluation criteria in Appendix C1 §V — confirm the actual recorded Extended Use Agreement for any given deal rather than assuming a QC waiver exists (or doesn't) based on the credit type alone.

For any development that has not waived the right, SC Housing publishes a complete, live Qualified Contract process (Qualified Contract Request Policy, effective 2/1/2024, revised January 2025) rather than leaving the mechanics to be worked out case by case. An owner cannot even submit an Eligibility Determination Request until "the commencement of the 15th year of the Compliance Period for all buildings," and that initial request — a $5,000 nonrefundable fee plus a defined document list including completed 8609s, a legal opinion on when each building reaches Year 15, and the two most recent Compliance Review close-out letters — does not itself start the one-year marketing clock. A full Qualified Contract Request follows only after eligibility is confirmed, requires a $15,000 payment covering a third-party accountant's price-determination review and a 100%-unit physical inspection, and the Authority — not the owner — controls the price calculation: "The Authority will not consider a price determination submitted by the Owner." The one-year period itself does not start until the owner has received the price calculation, corrected any physical deficiencies the inspector found, submitted all documentation, and paid all fees due; tenants must then be notified at least 14 days before that one-year period begins.

If the Authority is unable to present a qualifying offer, the extended use period terminates by operation of law at the end of the One-Year Period and the property enters a three-year Decontrol Period. During those three years the owner still cannot evict or terminate the tenancy of an existing LIHTC tenant absent good cause, still cannot raise gross rent beyond what Section 42 would have allowed, remains subject to compliance monitoring, and must keep paying the annual compliance monitoring fees — the statutory tenant protections under 26 U.S.C. §42(h)(6)(E)(ii), applied by SC Housing on a per-calendar-year certification basis.

Compliance monitoring: the federal baseline, with no found relaxation after Year 15

SC Housing's inspection cadence tracks the 2019 federal compliance-monitoring rule directly: the Authority must physically inspect all buildings in a low-income housing project by the end of the second calendar year following the year the last building placed in service, and at least once every three years after that, using local codes, HUD's National Standard for the Physical Inspection of Real Estate (NSPIRE), or another habitability standard. The minimum unit/file sample size scales with development size and multi-building elections; major health, safety and building-code violations are reportable to the IRS on Form 8823. This research found no separate SC-specific provision — in the Compliance Manual, the QAP, or Appendix E — that reduces this inspection cadence, drops to a smaller sample, or moves to a "windshield"-only inspection once a property passes Year 15 and enters the extended use period; the manual's own extended-use-period relaxations (unit transfers, full-time-student households, and the Next Available Unit/Vacant Unit Rule) do not mention inspection frequency at all.

Fees that run through the extended use period

SC Housing states it "no longer generates invoices or billing statements" for the annual compliance monitoring fee — only a year-end courtesy reminder letter — which puts the burden squarely on the owner (or its asset manager) to track the February 1 due date independently for as long as the development remains in its compliance or extended use period, including any three-year decontrol tail following a completed Qualified Contract.

Property tax: a real, verified nonprofit exemption — and FILOT is not the mechanism

South Carolina has no LIHTC-specific property-tax exemption. What it has, confirmed by reading the current codified text directly on the South Carolina Legislature's own site, is a general nonprofit-housing exemption at S.C. Code §12-37-220(B)(11)(e): "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." The same subsection extends the exemption to "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" — language written specifically to reach the standard LIHTC structure where a nonprofit-controlled entity serves as GP of a for-profit-invested limited partnership.

As codified and verified directly against scstatehouse.gov as of this research (September 2026), that exemption is not currently limited to the nonprofit's percentage ownership — a qualifying property gets the full exemption, not a pro-rated one. That may not stay true: two 2025-2026 session bills, Senate Bill 125 and House Bill 4475, would each amend §12-37-220 so the exemption applies "only" in proportion to the nonprofit's direct or indirect ownership interest, unless that ownership exceeds 50% or all units serve qualifying low-income residents. As of the legislative status checked for this research, S.125 was referred to the House Ways and Means Committee on March 5, 2025 and H.4475 was referred to the same committee on May 1, 2025 — neither had been reported out, passed by the House, or signed into law. Confirm current status before relying on either the existing full exemption or the proposed proportional one; South Carolina runs two-year legislative sessions, so a bill introduced in 2025 can still move through the remainder of the 2025-2026 session.

Fee-in-lieu-of-tax (FILOT) agreements are real and well documented in South Carolina, but as an economic-development tool, not an affordable-housing one. Under the Fee in Lieu of Tax Simplification Act (S.C. Code Title 12, Chapter 44), a "project" is negotiated between a county and a "sponsor" making a minimum investment of $2.5 million (or $1 million in a county with average unemployment at least twice the state rate), and the statutory "project" definition — land, buildings, machinery, equipment and similar improvements — does not name or exclude residential use. But this research found no documented example of a standard South Carolina LIHTC apartment development using a FILOT agreement, and the program's structure (a negotiated, county-discretionary deal keyed to capital investment and typically jobs) is oriented toward manufacturing, distribution and commercial investment rather than rental housing. A developer looking for SC property-tax relief on a LIHTC deal should look first to the §12-37-220(B)(11)(e) nonprofit exemption — which requires structuring the ownership entity with a nonprofit-controlled GP or managing member and satisfying the Revenue Procedure 96-32 safe harbor — rather than assuming FILOT is available or typical for housing.