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Current Status Bill Number:View additional legislative information at the LPITS web site.3126 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19990112 Primary Sponsor:Cobb-Hunter All Sponsors:Cobb-Hunter, Moody-Lawrence Drafted Document Number:l:\council\bills\dka\3072mm99.doc Residing Body:House Current Committee:Ways and Means Committee 30 HWM Subject:Community Development Corporations and Financial Institutions Commission, Banks, Businesses, Taxation History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ House 19990112 Introduced, read first time, 30 HWM referred to Committee House 19981216 Prefiled, referred to Committee 30 HWM Versions of This Bill
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO BANKING, FINANCIAL INSTITUTIONS, AND MONEY, BY ADDING CHAPTER 43 SO AS TO CREATE THE SOUTH CAROLINA COMMUNITY DEVELOPMENT CORPORATIONS AND FINANCIAL INSTITUTIONS COMMISSION FOR THE PURPOSE OF CERTIFYING ENTITIES AS COMMUNITY DEVELOPMENT CORPORATIONS AND FINANCIAL INSTITUTIONS, TO PROVIDE FOR THE APPOINTMENT OF COMMISSION MEMBERS AND THE OPERATION OF THE COMMISSION, AND TO DEFINE "COMMUNITY DEVELOPMENT CORPORATION" AND "COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION"; AND TO AMEND ARTICLE 25, CHAPTER 6, TITLE 12 OF THE 1976 CODE, RELATING TO INCOME TAX CREDITS, BY ADDING SECTION 12-6-3520 SO AS TO PROVIDE A TAX CREDIT EQUAL TO FIFTY PERCENT OF A TAXPAYER'S INVESTMENT IN A COMMUNITY DEVELOPMENT CORPORATION OR FINANCIAL INSTITUTION, UP TO A MAXIMUM OF TEN MILLION DOLLARS FOR ALL TAXPAYERS FOR ALL TAXABLE YEARS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The General Assembly finds that:
(1) Many of South Carolina's urban and rural communities face critical social and economic problems arising in part from people living in proverty and the lack of economic growth and employment and other opportunities.
(2) The restoration and maintenance of these communities requires increased access to credit and capital for development activities, including investment in businesses, housing, human development, and other activities that promote the long-term economic and social viability of the community.
(3) Access to credit and capital is essential to unleash the untapped entrepreneurial energy of South Carolina's poorest communities and to empower individuals and communities to become self-sufficient.
(4) Community development corporations have a proven ability to identify and respond to community needs and manage community assets for the purpose of community and economic development on a local level.
(5) Community development financial institutions have a proven ability to identify and respond to community needs for capital, credit, and development services in the absence of, or as a complement to, services provided by other lenders.
(6) For the above reasons, it has determined to enact the provisions of this act as being consistent with public policy objectives of our State including economic growth, higher employment, and community development.
SECTION 2. Title 34 of the 1976 Code is amended by adding:
Section 34-43-10. (A) There is created a South Carolina Community Development Corporations and Financial Institutions Commission for the purpose of certifying entities as community development corporations, as defined in Section 34-43-40, and as community development financial institutions, as defined in Section 34-43-50. The commission also may make grants and loans to community development corporations and community development financial institutions from grant funds made available to it by the General Assembly or from other available funds. The General Assembly may appropriate funds to the commission to be used for grants and loans to community development corporations and community development financial institutions as authorized in this chapter. The General Assembly also may provide funds in the annual general appropriations act to pay salaries, employee benefits, and administrative expenses of the commission. All actions of the commission are subject to approval by the Department of Commerce in the manner determined by the department.
(B) In addition to other powers provided in this chapter, the commission may:
(1) promulgate regulations necessary to carry out its functions;
(2) contract for and accept, for use in carrying out the provisions of this chapter, a grant or contribution of funds from a political subdivision of the State or from another source and comply, subject to the provisions of this chapter, with the terms and conditions of the contract; and
(3) do what is necessary or convenient to carry out its powers and functions.
(C) The commission may receive funds from, among other sources, state appropriations and private contributions.
Section 34-43-20. (A) The governing body of the commission consists of the following seven members, who shall represent the diverse ethnic population of the State:
(1) a chairman, representing a federally-chartered or state-chartered financial institution doing business in this State, who must be appointed by the Governor;
(2) a designee of the Secretary of Commerce;
(3) three members representing the community economic development industry, as described by the National Congress for Community Economic Development, appointed by the Governor;
(4) two members representing federally-chartered or state-chartered financial institutions or other business entities doing business in this State, other than the institution represented by the chairman, who must be appointed by the Governor.
(B) Commission members serve terms of four years and until their successors are appointed and qualify.
(C) A member appointed to fill a vacancy on the commission serves only for the remainder of the unexpired term and until a successor is appointed and qualifies.
(D) The commission ceases to exist on July 1, 2004, unless further authorized by the General Assembly.
Section 34-43-30. (A) Four appointed members of the commission are a quorum. However, the commission may not act on a matter unless at least four members in attendance concur.
(B) The commission determines the times and places of its meetings.
(C) Members of the commission, while serving on business of the commission, shall receive, to the extent funding is available, per diem, mileage, and subsistence as provided by law for members of state boards, committees, and commissions.
(D) The commission, to the extent funding is available, may employ or contract for staff and consultants necessary to assist in carrying out its duties and responsibilities pursuant to this chapter.
(E) In its internal functions, the commission shall keep proper records of its accounts and follow the procedures of this State governing the purchase of office space, supplies, facilities, materials, equipment, and professional services. The commission must be audited by the State Auditor as provided in Chapter 7 of Title 11.
(F) The commission shall make an annual report on its condition and operations to the General Assembly and the Governor, including the information required to be reported by Section 34-43-80.
Section 34-43-40. (A) The commission may certify an entity as a community development corporation if it meets the definition provided in subsection (B).
(B) For purposes of this section:
(1) 'Community development corporation' means a nonprofit corporation which:
(a) is chartered pursuant to Chapter 31, Title 33;
(b) is tax exempt pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986;
(c) has a primary mission of developing and improving low-income communities and neighborhoods through economic and related development;
(d) has activities and decisions initiated, managed, and controlled by the constituents of those local communities;
(e) has a primary function of developing projects and activities designed to enhance the economic opportunities of the people in the community served, including efforts to enable them to become owners and managers of small businesses and producers of affordable housing and jobs in the community served;
(f) does not provide credit, capital, or other assistance from public funds in an amount greater than twenty-five thousand dollars at one time or in one transaction. The commission shall adjust that dollar amount in the manner provided in Section 37-1-109; and
(g) is not a nonprofit organization with the sole purpose of providing housing to neighborhoods or technical assistance to other nonprofit organizations.
(2) The term 'invest' includes an advance of funds to a community development corporation whether by charitable contributions or purchase of stock or other equity interest.
(3) The term 'low income' means an income level which falls within the eightieth percentile of the mean income for a family of four within this State.
(C) The commission shall establish and implement criteria for grants made to community development corporations pursuant to Section 34-43-10. The criteria must require that the applicant demonstrate a capacity to engage in community development projects and sufficient organizational structure to ensure proper management. However, if the applicant is created after the effective date of this section, the applicant must present a strategic plan for community development projects and show evidence of developing an organizational structure which ensures proper management.
(D) The commission shall contract with an appropriate entity or the South Carolina Association of Community Development Corporations to provide technical support to assist community development corporations served pursuant to this section in developing their organizational capacity and implementing their projects successfully.
(E) The commission shall make an annual report to the General Assembly regarding grants made pursuant to this section. The report required by this subsection may be included with the report required by Section 34-43-30.
Section 34-43-50. (A) The commission may certify an entity as a community development financial institution if it meets the definition provided in subsection (B).
(B) For purposes of this section:
(1) 'Community development financial institution' means an organization that:
(a) has a primary mission of promoting community development by providing credit, capital, or development services to small businesses or home mortgage assistance to individuals, including, but not limited to, capital access programs, microlending, franchise financing, and guaranty performance bonds;
(b) provides service delivery throughout the State;
(c) maintains, through representation on its governing board, accountability to persons in need of the institution's services;
(d) is not an agent or instrumentality of the United States, or of a state or political subdivision of a state nor maintains an affiliate relationship with any of them;
(e) maintains a goal of providing a majority of its services to low-income individuals, minorities, females, or rural areas;
(f) provides capital and technical assistance to small and micro businesses, or mortgage assistance to individuals;
(g) does not provide credit, capital, or other assistance in an amount greater than two hundred fifty thousand dollars at one time or in one transaction. That dollar amount must be adjusted in the manner provided in Section 37-1-109; and
(h) has been certified or recertified as a community development financial institution as provided in this chapter.
(2) 'Low income' means an income level which falls within the eightieth percentile of the mean income for a family of four within this State.
(3) The term 'invest' includes an advance of funds to a community development financial institution whether by purchase of stock or other equity interest or by charitable contribution.
(C) Banks and financial institutions chartered by the State of South Carolina may invest in community development financial institutions incorporated pursuant to the laws of this State, up to a maximum of ten percent of a chartered bank or financial institution's total capital and surplus.
(D) A federally-chartered or state-chartered financial institution holding company may qualify as a community development financial institution only if the holding company and the subsidiaries and affiliates of the holding company collectively satisfy the requirements of subsection (B).
(E) A community development financial institution is not subject to taxes based upon or measured by income which are levied by the State now or later.
Section 34-43-60. (A) Application for certification must be in writing under oath and in the form prescribed by the commission. It must contain the information the commission requires, including names and addresses of the partners, officers, directors or trustees, and those principal owners or members who provide the basis for investigations and findings contemplated by subsection (B). At the time of making the application, the applicant must pay to the commission a fee for investigating the application, as prescribed by the commission, in an amount sufficient to defray the commission's costs of investigating the applicant.
(B) Upon the filing of the application and payment of the fees, the commission shall investigate the facts concerning the application and the requirements of either Section 34-43-40 or Section 34-43-50.
Section 34-43-70. (A) Certification of a community development corporation or a community development financial institution expires two years from the date of certification.
(B) Certification of a community development corporation or a community development financial institution may be renewed for additional two-year periods upon application by the corporation or institution and approval by the commission.
(C) The commission may not renew certification of a corporation or an institution unless it continues to comply with the regulations of the commission and provisions of Section 34-43-40 or Section 34-43-50.
(D) The commission may revoke the certification of a corporation or an institution upon a finding that the corporation or institution does not comply with the provisions of Section 34-43-40 or Section 34-43-50.
(E) The commission shall serve a notice of intent not to grant certification, intent not to renew certification, or intent to revoke certification upon the corporation or institution with a brief statement of the reasons alleged. The corporation or institution may request a hearing within thirty days of receiving notice by filing a request for a hearing with the commission. The hearing must be held in accordance with Article 3, Chapter 23, Title 1, the Administrative Procedures Act.
(F) A taxpayer may not claim the tax credit provided for in Section 12-6-3520 unless the corporation or institution in which the investment is made is certified by the commission at the time the investment is made. A taxpayer who invested in good faith in a certified corporation or institution may claim the credit provided in Section 12-6-3520 notwithstanding the fact that the certification is later revoked or not renewed by the commission.
Section 34-43-80. A community development financial institution shall file with the commission, on or before the anniversary date of its certification, an annual report for the preceding calendar year. The report must give information about the financial condition of the institution, and must include balance sheets for the beginning and end of the accounting period, a statement of income and expenses for the period, a reconciliation of surplus with the balance sheets, a schedule of assets used and useful by the institution to conduct its business, an analysis of charges, size and type of loans and other activities described in Section 34-43-40(B)(1)(a), and other relevant information in form and detail as the commission prescribes. The report must be made under oath and in the form prescribed by the commission, which shall make and publish annually an analysis and recapitulation of the reports for inclusion in its annual report to the Governor and General Assembly as provided in Section 34-43-30(F)."
SECTION 3. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3520. (A) A taxpayer may claim as a credit against his state income tax, bank tax, or premium tax liability fifty percent of all amounts invested in a community development corporation, as defined in Section 34-43-40 or in a community development financial institution, as defined in Section 34-43-50.
To qualify for this credit the taxpayer must obtain a certificate from the South Carolina Community Development Corporations and Financial Institutions Commission certifying that the entity into which the funds are invested is a community development corporation within the meaning of Section 34-43-40 or a community development financial institution within the meaning of Section 34-43-50 and certifying that the credit taken or available to that taxpayer will not exceed the aggregate ten million dollar limitation of all those credits as provided in subsection (B) when added to the credits previously taken or available to other taxpayers making similar investments.
(B) The total amount of credits allowed pursuant to this section may not exceed, in the aggregate, ten million dollars for all taxpayers and all taxable years. The total amount of credits allowed for investments in community development corporations may not exceed, in the aggregate, one million dollars for all taxpayers and all taxable years. The total amount of credits allowed for investments in community development financial institutions may not exceed, in the aggregate, nine million dollars for all taxpayers and all taxable years. The credit must be allowed to taxpayers in the order of the time of the making of the qualified investments in community development corporations and community development financial institutions.
The commission shall monitor the investments made by taxpayers in community development corporations and community development financial institutions as permitted by this section and shall perform the functions as provided in subsection (A) above.
(C) If the amount of the credit determined pursuant to subsection (A) exceeds the taxpayer's state tax liability for the applicable taxable year, the taxpayer may carry over the excess to the immediately succeeding taxable years. However, the credit carry-over may not be used for a taxable year that begins on or after ten years from the date of the qualified investment. The amount of the credit carry-over from a taxable year must be reduced to the extent that the carry-over is used by the taxpayer to obtain a credit under this chapter for a later taxable year.
(D) Notwithstanding the provisions of subsections (A), (B), and (C) above, if on April 1, 2000, or as soon after that as the commission is able to determine, the total amount of tax credits which may be claimed by all taxpayers exceeds the total amount of tax credits authorized by this section, the credits must be determined on a pro rata basis. For purposes of this subsection, a community development corporation or community development financial institution for which an investment may be claimed as a tax credit pursuant to this section must report all investments made before April 1, 2000, to the commission by April 1, 2000, which shall inform, as soon as reasonably possible, all community development corporations and community development financial institutions of the total of all investments in all institutions and corporations as of April 1, 2000.
(E) If a qualified investment which is the basis for a credit under this section is redeemed by a taxpayer within five years of the date it is purchased, the credit provided by this section for the qualified investment is disallowed, and credit previously claimed and allowed with respect to the redeemed qualified investment must be paid to the Department of Revenue with the appropriate return of the taxpayer covering the period in which the redemption occurred. When payments are made to the Department of Revenue pursuant to this section, the amount collected must be handled as if no credit had been allowed.
(F) To receive the credit provided by this section, a taxpayer shall:
(1) claim the credit on his annual state income or premium tax return as prescribed by the Department of Revenue; and
(2) file with the Department of Revenue and with his annual state income or premium tax return a copy of the form issued by the commission as to the qualified investment by the taxpayer, including an undertaking by the taxpayer to report to the Department of Revenue a redemption of the qualified investment.
(G) The commission shall complete forms prescribed by the Department of Revenue which must show as to each qualified investment in a community development corporation or a community development financial institution:
(1) the name, address, and identification number of the taxpayer who purchased a qualified investment; and
(2) the nature of the qualified investment purchased by the taxpayer and the amount paid for it.
These forms must be filed with the Department of Revenue on or before the fifteenth day of the third month following the month in which the qualified investment is purchased. Copies of the forms to be provided to the Department of Revenue must be mailed to the taxpayer on or before the fifteenth day of the second month following the month in which the qualified investment is purchased.
(H) A taxpayer may not claim the tax credit provided in this section unless the community development corporation or community development financial institution in which the investment is made has been certified at the time the investment is made. A taxpayer who invested in good faith in a certified corporation or institution may claim the credit provided in this section, notwithstanding the fact that the certification is later revoked or not renewed by the commission.
(I) If the community development financial institution in which the investment is made is a tax-exempt nonprofit corporation, the tax credit provided in this section is not allowed if the taxpayer claims the investment as a deduction pursuant to Section 170 of the Internal Revenue Code.
(J) The total amount of credits allowed by the Department of Revenue may not exceed five hundred thousand dollars in a community development corporation for fiscal year 2000-2001 and each fiscal year after that until the total aggregate amount of one million dollars is reached. The total amount of credits allowed by the Department of Revenue may not exceed one million five hundred thousand dollars in a community development financial institution for fiscal year 2000-2001 and each fiscal year after that until the total aggregate amount of nine million dollars is reached. A credit which is disallowed because of this subsection may be carried forward as provided in this section."
SECTION 4. This act takes effect upon approval of the Governor, except that Section 3 applies to tax years beginning after 1999.
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