South Carolina Moves First on the Nonprofit Housing Tax Exemption

By Wesley Fricks

What the May 2026 SC moratorium does, how it compares to NC HB 1042, and what multifamily owners should be watching

Update:  On May 19, Governor McMaster signed this legislation into law.

North Carolina has spent the spring debating HB 1042, the bipartisan bill that would narrow the property tax exemption claimed by for-profit operators who partner with nonprofit housing corporations. The bill cleared House Finance on May 11 but is not yet law. While Raleigh was debating, state legislators in Columbia acted.

On May 13, the SC House amended S 853, the Abandoned Buildings Tax Credit bill, to add a temporary moratorium on new applications for the parallel SC exemption under S.C. Code §12-37-220(B)(11)(e), then passed it 112-0. The Senate concurred in the House amendment on May 14, enrolling the bill and sending it to the Governor. The moratorium runs through June 30, 2027. It stops new for-profit/nonprofit hybrid structures from getting approved while the legislature works on permanent reform. Same structures NC is going after with HB 1042.

Worth flagging: S 853 is publicly tracked as an abandoned buildings bill. The nonprofit-housing language was added by House amendment late in session and the Senate concurred the next day. While there was a lot of focus on North Carolina, South Carolina ended up moving first on this.

What the South Carolina Moratorium Actually Does 

• No new approvals through June 30, 2027. The SC Department of Revenue cannot grant final approval of any (B)(11)(e) exemption application filed on or after June 30, 2026. Applications get parked in abeyance and are evaluated under whatever statute is in effect when the moratorium expires.
• Pure nonprofits keep moving. Applications for property owned entirely by a nonprofit housing corporation (directly or through a wholly-owned instrumentality) meeting Rev. Proc. 96-32 are unaffected, DOR processes those normally.
• No vested rights. Filing an application, spending money in reliance on the exemption, or getting a preliminary DOR determination creates no vested right. The legislature put this in to head off lawsuits from developers who structured deals around the old rules.
• Sunsets June 30, 2027. Gives the legislature a 12-month window to pass permanent reform, possibly a proportional-ownership rule similar to what NC is contemplating.

South Carolina vs. North Carolina — Side by Side 

Why This Matters for Affordable Multifamily Markets 

For SC owners and developers: If you have a deal that needs the (B)(11)(e) exemption to pencil and you haven’t filed yet, get it in before June 30 or you’re waiting until July 2027 to find out what rules apply. Existing approved projects and pure nonprofit affordable housing developers are unchanged.

For NC owners and buyers: The political momentum now covers the Carolinas. If you’re underwriting an NC acquisition where the seller has the exemption, don’t assume that exempt tax bill is what the next owner pays. Underwrite the post-reform number. LIHTC and government-financed deals stay protected under HB 1042.

Bottom Line

The for-profit / nonprofit hybrid structure that has taken billions in multifamily value off Carolinas’ tax rolls over the past five years has garnered much attention and seems to be on the way out, on both sides of the state line.

SC took the easier route: pause new applications, deal with the policy fix later, while NC is going at it head-on, at least for now. NC’s HB 1042 rewrites the exemption itself, and every exempt property will have to reapply by December 2026 under the proposed standard. SC’s new standard will be figured out during this pause.

If you’ve been counting on that structure to make a deal pencil, the math is changing.