Can a South Carolina city, county, or state agency reject a nonprofit's application for tax incentives on a taxable economic-development project just because the nonprofit is tax-exempt?

Plain-English summary

A community development corporation called Word of God CDC was leading a proposed redevelopment of the Dutch Square Mall property in Columbia (the "I.S.E.E. Silicon South" project) as a public-private partnership. The CDC sought tax incentives from the City of Columbia, Richland County, and the State. The question Representative Garvin brought to the AG: can a funding authority deny those incentives just because the CDC is a tax-exempt nonprofit?

The AG's answer was no, and the reasoning was short. Nonprofit status and tax-exempt status are not the same thing, and even a tax-exempt entity is not automatically barred from an incentive program. Whether a particular incentive is available always depends on the specific incentive statute, not on a blanket assumption about the applicant's tax status.

The Office cited an Arkansas Supreme Court case where the state's Economic Development Department had rejected a nonprofit foundation's application on the simple ground that "tax incentives under the Act were not available to non-profit entities." The Arkansas court reversed, holding that nonprofit status alone was not a disqualifier; the funding agency had to actually apply the statutory requirements.

The South Carolina AG used the same framework: "sweeping generalization based solely on nonprofit status is unwarranted and ill-advised." Funding agencies have to do the work of checking the actual eligibility criteria.

The opinion also reminded the requestor of the Office's earlier July 31, 2024 opinion in the same project, which concluded that the federal Free Exercise Clause prevents discrimination against the CDC on the basis of religion. The nonprofit-status point is a second, independent ground.

What this means for you

If you run a nonprofit pursuing an economic development project

The funding agency cannot reject you just because you are a 501(c) organization. They have to read the incentive statute, identify its requirements, and tell you which of those requirements you meet and which you do not. If they refuse on a flat "we don't do incentives for nonprofits" basis, that refusal is not legally supportable under this AG opinion, and the Arkansas precedent the AG cited is persuasive.

That said, the opinion is not a guarantee that you will get the incentive. You still have to meet whatever the statute actually requires, capital investment thresholds, job creation, geographic location, project type, and so on. The AG explicitly emphasized that funding authorities still must exercise their statutory discretion.

If you administer a city, county, or state economic-development incentive program

Build your eligibility analysis around the statute, not around tax-status categories. When a nonprofit applies, ask the same questions you would ask of a for-profit: does the applicant meet the capital investment threshold, the employment standard, the location requirement, whatever the program's actual criteria are? A blanket "nonprofits don't qualify" policy is not consistent with this opinion.

If your enabling ordinance or resolution categorically excludes nonprofits without a statutory basis, consider revising it. The AG's framing is that exclusion based on tax-exempt status alone is "unwarranted and ill-advised."

If you are a faith-based or religiously affiliated nonprofit

Note that the same project (Word of God CDC's Silicon South development) generated a separate July 31, 2024 AG opinion holding that the federal Free Exercise Clause forbids the same funding authorities from discriminating against you based on religion. Together, the two opinions form a pair: neither your religious identity nor your nonprofit status is a basis for excluding you from incentive consideration.

If you are a local government attorney

This opinion is a useful reference when a council member or staffer proposes a categorical exclusion for nonprofits in an incentive program. The AG's reading is that the analysis has to be statute-specific. The Arkansas case (Wm. J. Clinton Presidential Foundation, 216 S.W.3d 119) is the cited persuasive authority, not binding in South Carolina but on point.

Common questions

Q: Does this opinion guarantee that nonprofits will receive tax incentives in South Carolina?
A: No. It says that nonprofits cannot be excluded solely because of their tax-exempt status. Whether a particular nonprofit gets the incentive depends entirely on whether it meets the statutory criteria for that program.

Q: What does "carefully scrutinize" mean for a funding authority?
A: The AG's phrasing is that funding agencies must look at the actual requirements of the governing law and regulations, and determine whether the applicant has met them. Boilerplate "nonprofits not eligible" rejections do not satisfy that duty.

Q: Can a city or county still write its own incentive program that limits eligibility?
A: Yes, as long as the limits are tied to substantive criteria (investment level, job creation, type of project, etc.), not to tax-exempt status as such. The AG's quarrel is with status-based exclusions that bypass the statutory analysis.

Q: What's the connection between tax-exempt status and eligibility for an incentive on a taxable project?
A: A 501(c)(3) organization is exempt from federal income tax on its own qualifying activities. That does not mean every property it owns or every project it leads is tax-exempt at the state and local level. A public-private development can be a taxable project even if the lead nonprofit is itself tax-exempt. So a tax incentive on the taxable project can still be meaningful.

Q: Is the Arkansas case binding in South Carolina?
A: No. South Carolina courts are not bound by Arkansas Supreme Court decisions. But the AG cited it as persuasive authority for the proposition that nonprofit-status-only rejections are inadequate as a matter of law.

Q: Does the AG decide whether the CDC actually gets these incentives?
A: No. The opinion closes by emphasizing that the funding authorities, not the AG, exercise the statutory judgment and discretion. The AG advises on the law; it does not direct local agencies on how to use their discretion.

Background and statutory framework

The opinion is unusual for not citing many South Carolina statutes. That is because the legal question Representative Garvin asked is a procedural one about how funding authorities must analyze eligibility, not a substantive question about which incentives the CDC qualifies for. The AG answered the procedural question and explicitly declined to weigh in on the substantive eligibility, that is for the funding authority to decide using whichever statute it is applying.

The conceptual framework comes from two ideas:

First, nonprofit status and tax-exempt status are not coextensive. A nonprofit corporation organized under the South Carolina Nonprofit Corporation Act may or may not be tax-exempt at the federal level under § 501 of the Internal Revenue Code, and may or may not be exempt from state and local taxes. The AG cited Op. S.C. Att'y Gen., 2005 WL 1609285 (June 1, 2005) for the proposition that nonprofit status does not automatically carry tax exemption; exemption depends on the relevant tax statutes.

Second, eligibility for incentives depends on the specific statute creating the incentive, not on a general tax-status rule. The AG cited Arkansas Department of Economic Development v. Wm. J. Clinton Presidential Foundation, 216 S.W.3d 119 (Ark. 2005), where the Arkansas Supreme Court reversed a state agency's blanket rejection of a nonprofit's Enterprise Zone Act application. The Arkansas court required the agency to actually apply the Enterprise Zone Act's substantive requirements, and concluded that the foundation met them.

The opinion is also the second AG opinion in this same matter. An earlier opinion (Op. S.C. Att'y Gen., 2024 WL 3696599 (July 31, 2024)) addressed the religion question, holding that the federal Free Exercise Clause forbids excluding the CDC from project participation on the basis of religion. The May 2, 2025 opinion adds the parallel point on nonprofit status.

Citations

• Ark. Dept. of Econ. Devel. v. Wm. J. Clinton Presidential Foundation, 216 S.W.3d 119 (Ark. 2005)
• Op. S.C. Att'y Gen., 2005 WL 1609285 (June 1, 2005) (nonprofit status vs. tax-exempt status)
• Op. S.C. Att'y Gen., 2024 WL 3696599 (July 31, 2024) (Free Exercise Clause, same project)
• U.S. Const. amend. I (Free Exercise Clause, referenced via the 2024 opinion)

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-on-whether-a-nonprofit-organization-spearheading-a-taxable-public-private-development-can-be-denied-consideration-for-tax-incentives-based-solely-upon-the-nonprofit-s-tax-exempt-status/
• Original PDF: https://www.scag.gov/media/uh3hbmp4/garvink-os-11016-final-opinion-5-2-2025.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ALAN WILSON
ATTORNEY GENERAL

May 2, 2025

The Honorable Kambrell H. Garvin, Member
South Carolina House of Representatives
335-D Blatt Building
Columbia, SC 29201

Dear Representative Garvin:

You seek our opinion regarding the following situation:

[t]he Word of God CDC proposed a multimillion-dollar economic development project, I.S.E.E. Silicon South, which sought to provide workforce development and tourism opportunities along the Broad River Road Corridor by redeveloping the Dutch Square Mall property. The development was proposed to be a public-private partnership, and the CDC sought funding from governmental entities such as the City of Columbia, Richland County, and the State of South Carolina to bring the project to fruition.

In hopes of providing clarity for Word of God CDC, as an elected official, I write to formally request an Attorney General opinion explaining whether a nonprofit organization, spearheading a taxable public-private development, can be denied consideration for tax incentives based solely upon the nonprofit's tax-exempt status.

The short answer to your question is "no."

Law/Analysis

We have already answered a different question regarding this proposed project. See Op. S.C. Att'y Gen., 2024 WL 3696599 (July 31, 2024). There, we concluded that ". . . the Free Exercise Clause of the United States Constitution precludes . . . discrimination [from participation in the project] on the basis of religion."

Likewise, the mere fact that Word of God CDC is a nonprofit corporation is not a ground for exclusion from consideration from tax incentives or tax exemptions. As we recognized in Op. S.C. Att'y Gen., 2005 WL 1609285 (June 1, 2005), nonprofit corporation status does not necessarily carry with it exemption from tax, but exemption "can be determined only by reference to the relevant tax statutes and regulations." Thus, any sweeping generalization based solely on nonprofit status is unwarranted and ill-advised. Instead, careful scrutiny must be given to determine whether a nonprofit is entitled to a tax exemption or a tax incentive under existing law.

A good example of the requirement that careful scrutiny must be given pursuant to the relevant statutes and regulations is Ark. Dept. of Econ. Devel. v. Wm. J. Clinton Presidential Foundation, 216 S.W.3d 119 (2005). There, a nonprofit corporation brought a declaratory judgment action against the Arkansas Department of Economic Development and its Director to challenge denial of an application for tax incentives under the Enterprise Zone Act. The application was denied on the basis that tax incentives under the Act were "not available to non-profit entities." 216 S.W.3d at 122.

The nonprofit brought suit and the Arkansas Supreme Court concluded that it was entitled to the tax incentives irrespective of its nonprofit status. The Court scrutinized the requirements of the Arkansas Economic Development Act and concluded that the nonprofit met those requirements.

In short, it is up to the funding authorities to carefully scrutinize the requirements of the governing laws and regulations to determine whether such requirements have been met. Such a determination is within the sound judgment and discretion of the funding authorities. This Office may only advise as to the applicable law. We cannot direct any such funding authority with respect to how to exercise its judgment or discretion.

Sincerely,

Robert D. Cook
Solicitor General