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(C)(1) Except as provided in subsection (2) of this subsection, upon the occurrence of an event described in subsection (A) of this section requiring recognition of deferred gain, the deferred gain is added to federal taxable income for the tax year in which the event occurs. Except for adjustments required for purposes of Chapter 6 of this title other than in this chapter, no other adjustment to federal taxable income may be made as a result of an event requiring recognition of deferred gain described in subsection (A) of this section.

(2) A taxpayer who does not own a controlling interest in a business with respect to which an event occurs requiring recognition of gain as described in subsection (A)(1), (2), and (3) of this section may continue to defer gain by timely filing a declaration of intent to reinvest as described in Section 12-12-40.

(3) If a qualified investment fund fails to divest itself of the fund's interest in a disqualified business activity within the twelve-month period described in subsection (B) of this section, the deferred gain that is required to be recognized by subsection (B) of this section must be added to federal taxable income for the tax year in which expires the twelve-month period for divestment.

Section 12-12-70. (A) If a taxpayer sells or otherwise disposes of a qualified business interest or qualified business asset, the statutory period prescribed in Section 12-54-85 for assessing a deficiency attributable to any part of the gain deferred under this chapter does not expire prior to the expiration of three years after the latest of the following dates:

(1) the date of receipt by the department of the statement described in Section 12-12-40(B);

(2) the date of receipt by the department of a statement from the taxpayer declaring an intent not to reinvest;

(3) the date that is six months after the date of sale or disposition resulting in possible deferred gain.

(C) A taxpayer who files a declaration of intent to reinvest but fails to reinvest as required by Section 12-12-20 is liable for unpaid taxes on the deferred amount and for interest at the rate established under Section 12-54-25(D) for deficiencies from the date that the tax on the deferred gain would have been due had the declaration not been filed to the date of payment.

Section 12-12-80. (A) If, on account of death or disability of the taxpayer, a related party succeeds to a qualified business interest, interest in a qualified investment fund, or qualified business asset upon the acquisition of which gain was deferred under this chapter, then at the election of the related party, the death or disability of the taxpayer does not result in the addition to federal taxable income of the deferred gain.

(B) The related party who succeeds to the qualified business interest, interest in a qualified investment fund, or qualified business asset may dispose of the interest or asset without addition of the deferred gain to federal taxable income if the requirements of reinvestment and other requirements of this chapter are met.

(C) If a taxpayer dies, and the death does not result in the addition of the deferred gain to federal taxable income because of an election under this section, at the time the deferred gain is added to federal taxable income, the amount of gain is determined using the basis that the deceased taxpayer had in the qualified business interest, qualified investment fund, or qualified business asset.

Section 12-12-90. The department may promulgate regulations under this chapter including regulations that define what constitutes an interim holding of investment property by a qualified investment fund and an incidental holding of investment property by a qualified business activity or a qualified investment fund.

Section 12-12-100. This chapter applies to gain incurred from the sale or other disposition of a capital asset in taxable years beginning after 1995, and to investments in qualified business interests, qualified investment funds, or qualified business assets that occur before 2001."

B. The Advisory Coordinating Council for Economic Development shall prepare a report regarding the economic impact of Chapter 12, Title 12 of the 1976 Code and shall present the report to the House Ways and

The confidentiality requirements applicable to returns and the information contained therein is not applicable to the Advisory Coordinating Council for Economic Development for purposes of preparing the report described in this subsection."

SECTION 7. Chapter 27, Title 58 of the 1976 Code is amended by adding:

"Section 58-27-240. No provision of the South Carolina Rural Development Act of 1996 may be construed to alter, modify, amend, or repeal, directly or by implication, any provision of Chapter 27 of Title 58, Chapter 31 of Title 58, Chapter 33 of Title 58, Chapter 23 of Title 6, Chapter 7 of Title 5, and Chapter 31 of Title 5, governing, among other things, the retail and wholesale distribution and sale of electric energy in this State."

SECTION 8. A. Section 4-12-30(B) (4)(b)(iv) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(iv) for purposes of this section, `controlled group' or `controlled group of corporations' has the meaning provided under Section 1563(a) of the Internal Revenue Code as defined in Chapter 7 6 of Title 12 as of the date of the execution of the inducement agreement without regard to amendments or replacements thereof, and without regard to subsection subsections (a)(4) and (b) of Section 1563."

B. Section 4-12-30(B)(5)(b) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(b) The Board of Economic Advisors shall determine that the purposes to be accomplished by the project are proper governmental and public purposes and that the inducement of the location or expansion of projects within the State is of paramount importance and that the benefits of the project are greater than the costs. In addition to the findings required in subsection (B)(5)(a) above, the county council or county councils, with such assistance and advice from the Department or the Board of Economic Advisors as the county council or county councils desire, shall determine that the purposes to be accomplished by the project are proper governmental and public purposes and that the inducement of the location or expansion of the projects within the State is of paramount importance and that the benefits of the project are greater than the cost."

C. Section 4-12-30(B)(6) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

D. Section 4-12-30(C) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(C)(1) From the end of the property tax year in which the investor and the county execute an inducement agreement, the investor has five years in which to enter into an initial lease agreement with the county.

(2) From the end of the property tax year in which the investor and the county execute the initial lease agreement, the investor has five years in which to complete its investment for purposes of qualifying for this section. If the investor does not anticipate completing the project within five years, the investor may apply to the county before the end of the five-year period for an extension of time to complete the project. If the county agrees to grant the extension, the county must do so in writing and a copy must be delivered to the department within thirty days of the date the extension was granted. The extension may not exceed two years in which to complete the project. There is no extension allowed for the five-year period in which to meet the minimum level of investment. If the minimum level of investment is not met within five years, all property under the lease agreement or agreements, reverts retroactively to the payments required by Section 4-12-20. The difference between the fee actually paid by the investor and the payment which is due under Section 4-12-20 is subject to interest as provided in Section 12-43-305 12-54-25(D). Any property placed in service after the five-year period, or seven years in the case of a project which has received an extension, is not part of the fee agreement under subsection (D)(2) and is subject to the payments required by Section 4-12-20 if the county has title to the property, or to property taxes as provided in Chapter 37 of Title 12 if the investor has title to the property.
For purposes of those businesses qualifying under subsection (D)(4), the five-year period referred to in this subsection is eight years and the seven year period is ten years.

(3) The annual fee provided by subsection (D)(2) is available for no more than twenty years. For projects which are completed and placed in service during more than one year, each year's investment may be subject to the fee in subsection (D)(2) for twenty years to a maximum total of twenty-seven years for the fee for a single project which has been granted

(4) Annually, during the time period allowed to meet the minimum investment level, the investor shall provide the total amount invested to the appropriate county official."

E. Section 4-12-30(D) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(D) The inducement agreement must provide for fee payments, to the extent applicable, as follows:

(1)(a) Any property, title to which is transferred to the county before being placed in service, is subject to an annual fee payment as provided in Section 4-12-20.

(b) Any undeveloped land, title to which is transferred to the county, before being developed and placed in service, is subject to an annual fee payment as provided in Section 4-12-20. The time during which fee payments are made under Section 4-12-20 is not considered part of the maximum periods provided in subsections (C)(2) and (C)(3), and no lease is considered an `initial lease agreement' for purposes of this section until the first day of the calendar year for which a fee payment is due under subsection (D)(2) in connection with the lease.

(2) After property qualifying under subsection (B) is placed in service, an annual fee payment determined in accordance with one of the following is due:

(a) an annual payment in an amount not less than the property taxes that would be due on the project if it were taxable, but using an assessment ratio of not less than six percent, except as provided in item (4) of this subsection, and a fixed millage rate as provided in subsection (G), and a fair market value estimate determined by the department as follows:

(i) for real property, using the original income tax basis for South Carolina income tax purposes without regard to depreciation, but if real property is constructed for the fee or is purchased in an arm's length transaction, fair market value is deemed to equal the original income tax basis; otherwise, the department shall determine fair market value by appraisal; and

(ii) for personal property, using the original tax basis for South Carolina income tax purposes less depreciation allowable for property tax purposes, except that the investor is not entitled to any extraordinary obsolescence.

(3) At the conclusion of the payments determined pursuant to items (1) and (2) of this subsection, an annual payment equal to the taxes due on the project as if it were taxable. When the property is no longer subject to the fee under subsection (D)(2), the fee or property taxes must be assessed:

(a) with respect to real property, based on the fair market value as of the latest reassessment date for similar taxable property; and

(b) with respect to personal property, based on the then depreciated value applicable to such property under the fee, and thereafter continuing with the South Carolina property tax depreciation schedule.

(4) (a) The assessment ratio may not be lower than three percent:

(i) in the case of a business which is investing at least two hundred million dollars which results in a total investment of at least four hundred million dollars and which is creating at least two hundred new full-time jobs at a site qualifying for the fee;

(ii) in the case of a business which is investing at least four hundred million dollars and which is creating at least two hundred new full-time jobs at a site qualifying for the fee; or

(iii) in the case of a joint venture which is investing at least six hundred million dollars in a county classified as either least developed or under developed, and creating at least one hundred jobs in the same county.

(b) The new full-time jobs requirement of this item does not apply in the case of a taxpayer which for more than the twenty-five years ending on the date of the agreement paid more than fifty percent of all property taxes actually collected in the county.

(c) In an instance in which the governing body of a county has by contractual agreement provided for a change in fee-in-lieu of taxes arrangements conditioned on a future legislative enactment, any new enactment shall not bind the original parties to the agreement unless the change is ratified by the governing body of the county."

F. Section 4-12-30(F) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(F) (1) If an investor disposes of property subject to the fee, the fee must be reduced by the amount of the fee applicable to that property.

(d) If there is no provision in the inducement agreement dealing with replacement property, any property placed in service after the time period allowed for investments as provided by subsection (C)(2), is subject to the payments required by Section 4-12-20 if the county has title to the

G. Items (1) and (2) of Section 4-12-30(H) of the 1976 Code, as added by Act 125 of 1995, are further amended to read:

"(1) Upon agreement of the parties, and except as provided in subsection (H) item (2) of this subsection, an inducement agreement, a millage rate agreement, or both, may be amended or terminated and replaced with regard to all matters including, but not limited to, the addition or removal of controlled group members; but no such amendment or termination and replacement may take place after the initial lease agreement date.

(2) No amendment or replacement of an inducement agreement or millage rate agreement may be used to change the millage rate, assessment ratio, or length of the agreement under any such agreement. However, existing inducement agreements which have not yet been implemented by the execution and delivery of a millage rate agreement or a lease purchase agreement, may be amended up to the date of execution and delivery of a millage rate agreement or a lease purchase agreement in the discretion of the governing body."

H. Section 4-12-30(J) of the 1976 Code, as added by Act 125 of 1995, is amended by adding at the end:

"(3) Project investment expenditures which are incurred within the applicable time period provided in subsection (I) by an entity whose investments are not being computed in the level of investment for purposes of subsection (B) or (C) qualify as investment expenditures subject to the fee in subsection (D)(2) where:

(a) the expenditures are part of the original cost of the property which is transferred, within the applicable time period provided in subsection (I), to one or more other entities which are members of the same controlled group as the transferor entity and whose investments are being computed in the level of investment for purposes of subsections (B) or (C); and

(b) the property would have qualified for the fee in subsection (D)(2) if it had been initially acquired by the transferee entity rather than the transferor entity.

(4) The income tax basis of the property immediately before the transfer must equal the income tax basis of the property immediately after the transfer. However, to the extent income tax basis of the property immediately after the transfer unintentionally exceeds the income tax basis of the property immediately before the transfer, the excess shall be subject to payments under Section 4-12-20.

I. Section 4-12-30(K) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(K)(1) For a project not located in an industrial development park as defined in Section 4-1-170, distribution of the fee-in-lieu of taxes on the project must be made in the same manner and proportion that the millage levied for school and other purposes would be distributed if the property were taxable. For this purpose, the relative proportions must be calculated based on the following procedure: holding constant the millage rate set in subsection (G) and using all tax abatements automatically granted for taxable property, a full schedule of the property taxes that would otherwise have been distributed to each millage levying entity in the county must be prepared for the life of the agreement, up to twenty years maximum. The total property taxes which would have been paid on the property if it was owned by the investor to for each millage levying entity as a percentage of the total of such property taxes for all such entities determines each entity's relative shares of each year's fee payment for all subsequent years of the agreement.

(2) For a project located in an industrial development park as defined in Section 4-1-170, distribution of the fee-in-lieu of taxes on the project must be made in the manner provided for by the agreement establishing the industrial development park.

(3) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes may use a portion of this revenue for the purposes outlined in Section 4-29-68 without the requirement of issuing special source revenue bonds."

J. Section 4-12-30(M) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"(M) An entity subject to the fee may enter into any lending, financing, security or similar arrangement, with any financing entity, concerning all or part of a project, provided that the income tax ownership of the property which is subject to the fee payment under subsection (D)(2) is held, by the time the fee payments relating to such property begin under subsection (D)(2), by the entity subject to the fee.

(1) Any interest in an inducement agreement, millage rate agreement, lease agreement, and property to which the agreement relates may be transferred to any other entity at any time. Notwithstanding any other provision of this chapter, any equity or other interest in any entity with an interest in any inducement agreement, millage rate agreement, or

(2) A single entity, or two or more entities which are members of a controlled group, may enter into any lending, financing, security, or similar arrangement, or succession of such arrangements, with any financing entity, concerning all or part of a project and may enter into any sale-leaseback arrangement including, without limitation, an assignment, a sublease, or similar arrangement, or succession of such arrangements, with one or more financing entities, concerning all or part of a project, regardless of the identity of the income tax owner of the property which is subject to the fee payment under subsection (D)(2). Even though income tax basis is changed for income tax purposes, neither the original transfer to the financing entity nor the later transfer from the financing entity back to the original transferor or members of its controlled group, pursuant to terms in the sale-leaseback agreement, shall affect the amount of the fee due.

(3) All transfers undertaken with respect to other projects to effect a financing authorized under subsection (M) must meet the following requirements:

(a) The Department of Revenue and Taxation must receive notification in writing within sixty days after the transfer of the identity of each transferee and other information required by the department with the appropriate returns. Failure to meet this notice requirement shall not adversely affect the fee, but a penalty may be assessed by the department for late notification for up to ten thousand dollars a year or portion of a year up to a maximum penalty of fifty thousand dollars.

(b) If the financing entity is the income tax owner of property, either the financing entity is primarily liable for the fee as to that portion of the project to which the transfer relates with the original transferor remaining secondarily liable for the payment of the fee or the original transferor must agree to continue to be primarily liable for the payment of the fee as to that portion of the project to which the transfer relates.

(4) Before an investor may transfer an inducement agreement, millage rate agreement, lease agreement, or the assets subject to the lease agreement, it shall obtain the approval of the county with whom it entered into the original inducement agreement, millage rate agreement, or lease agreement. However, no such approval is required in connection with financing-related transfers."

K. Section 4-12-30(N) of the 1976 Code, as added by Act 125 of 1995, is amended to read:

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