On February 10, 2025, the South Carolina Department of Revenue (SC DOR) released SC Revenue Ruling 25-1, providing updated guidance on legislative changes to the abandoned textile mills rehabilitation tax credit. This Revenue Ruling replaces the prior ruling, SC Rev Rul 2015-8 and any other guidance previously issued. Since 2015, when the credit was first established, state law has broadened the scope of properties eligible for this incentive. The credit and revised SC DOR guidance encourage the revitalization of areas surrounding former textile mills by expanding the types of properties and expenses that can qualify for the credit. This alert outlines the major updates to guidance in SC Rev Rul 2025-1 including eligibility criteria and implications for taxpayers.
Expanded Property Eligibility
The updated ruling significantly broadens the range of properties that can qualify for the Textiles Rehabilitation Credit, including:
- A building within a 1,000-foot radius of a textile mill may qualify, even if it is completely unrelated to textile manufacturing. This includes structures such as office buildings that have no direct connection to the textile industry.
- Sites where textile mills have been demolished can qualify, provided the taxpayer can demonstrate that a textile mill once existed on the site.
Changes To Square Footage and Rehabilitation Expenses
Under the new guidelines, buildings located on contiguous parcels within the 1,000-foot radius may now expand their square footage up to three times the size of the existing building. Taxpayers can claim all qualifying rehabilitation expenses for the credit, subject to a limitation based on the building's size when the textile mill was abandoned. This adjustment, previously known as the "200% rule," offers greater flexibility for redevelopment projects.
Additional Eligible Expenses and Transfers
The Questions and Answers section of SC Rev Rul 25-1 covers several new categories of expenses and ownership transfers that may occur before the rehabilitation work is complete, and definitions to assist with qualification as and abandoned textile mill site.
- Buyers of in-progress rehabilitation sites may claim some of the seller's expenses when calculating the tax credit
- Certain solar-panel-related expenses may qualify, aligning with broader efforts to incorporate sustainable practices in redevelopment
- Explanations of when a textile mill is “closed to business” or “nonoperational as a textile mill” to identify income-generating properties that may qualify for the credit
Amendment Opportunities for Taxpayers
Taxpayers who are favorably affected by these changes and have not yet placed their sites into service have the opportunity to amend their previously filed Notice of Intent (NOI) with the SC DOR.
To take advantage of the new rules, amendments must be submitted by June 10, 2025.
Conclusion
SC Rev Rul 25-1 updates to guidance for the Textiles Rehabilitation Credit provide new opportunities for redeveloping former textile mill areas in South Carolina. Taxpayers interested in leveraging these changes should review SC Revenue Ruling #25-1 (Revised) for detailed information and consult with their Cherry Bekaert tax professional to understand the specific impact on their projects.
