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Indicates Matter Stricken
Indicates New Matter
May 3, 2000
S. Printed 5/3/00--S. [SEC 5/4/00 1:12 PM]
Read the first time May 4, 1999.
Collectively, this bill is expected to reduce state general fund tax revenue $337,500 in FY1999-00. This bill is expected to reduce individual income tax revenue by an estimated $125,000 in FY1999-00; to reduce corporate income tax revenue by an estimated $187,500 in FY1999-00; to reduce sales and use tax by an estimated $25,000 in FY1999-00. Of the sales tax amount, general fund sales and use tax revenue would be reduced by $20,000 and EIA funds would be reduced by $5,000 in FY1999-00.
Sections 1 and 2
Currently, reinstated jobs at facilities that have been rebuilt due to "destruction by accidental fire, natural disaster, or act of God" are considered "new jobs" for purposes of claiming a job tax credit. This bill would broaden the definition of a "new job" as described in Section 12-6-3360(M)(3) to include jobs that have been reinstated at a facility that has been rebuilt due to the "involuntary conversion as result of condemnation or exercise of eminent domain by the State or any of its political subdivisions or by the federal government." The State did displace a facility during recent construction of the Greenville Connector project. According to the Department of Commerce's Industrial Directory, the displaced company employed 125 persons. This bill would allow the displaced jobs to be considered "new jobs" and allow the company to claim job tax credits and withhold job development fees for each "new job". In a "developed" county such as Greenville, each of the 125 new jobs would be eligible for a $1,500 job tax credit totaling $187,500. Multiplying 125 jobs by an average job development fee of four percent and an average salary of $25,000 yields job development fees to be withheld by the company of a loss of individual income tax withholdings of $125,000.
This section would permit a moratorium on corporation income taxes for companies that invest and create at least one hundred new full-time jobs in counties where the county unemployment rate exceeds twice the state average. According to data from the South Carolina Employment Security Commission, six counties would be covered under this bill: Chester, Georgetown, Lee, Marion, Marlboro, and Williamsburg. The revenue projection would not have included jobs and investment gained as a result of a facility being constructed, so the BEA would not need to adjust its estimate as a result of this provision.
Allows a qualifying company under Section 12-20-105(B)(2) to claim a credit against its license tax liability for cash contributions in providing infrastructure for an eligible project. Because the State does not now have plants that produce semiconductors nor has any reasonable prospect of attracting such a plant, the revenue projection would not have included license tax revenue lost as a result of a facility being constructed, so the BEA would not need to adjust its estimate as a result of this provision.
The amendment would create a sales and use tax exemption on the "clothing and other attire required for working in a clean room environment". Clean rooms are used to isolate workstations from contaminants during the manufacturing stage of a variety of products in industries such as pharmaceuticals, electronics, semiconductors, food processing, medical devices, and consumer products. There are presently clean room environments located in the State. According to industry representatives, the average price of nondisposable clean room attire, including such items as gown, shoes, gloves, mask, hood, shield, etc... is $200 per employee. Disposable clean room attire is considerably less expensive. Multiplying an estimated 100 jobs in the State that depend on clean room attire in performing their trades by the appropriate charge per outfit and applying a five percent sales tax rate yields an estimated reduction of $25,000 in sales and use tax collections in FY1999-00.
Sections 6 and 7
These sections accelerate the State's depreciation schedule to include semiconductors, flat panel displays, and liquid crystal displays at a depreciation rate of thirty percent, and clean rooms, environmental and water purification systems at ten percent. This accelerated depreciation would lower corporate taxable income for companies that use these components in the manufacturing process. The revenue projection does not include revenue from these plants. Because the State does not now have plants that produce semiconductors nor has any reasonable prospect of attracting such a plant, the BEA would not need to adjust its estimate as a result of this provision.
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND SECTION 12-6-3360, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEFINITION OF "NEW JOB" FOR PURPOSES OF CLAIMING THE JOB TAX CREDIT, SO AS TO INCLUDE A JOB REINSTATED AFTER THE EMPLOYER HAS REBUILT A FACILITY DUE TO INVOLUNTARY CONVERSION, BY EMINENT DOMAIN OR CONDEMNATION, OF A PRIOR EXISTING FACILITY; AND TO AMEND SECTIONS 12-10-30, AS AMENDED, AND 12-10-35, BOTH RELATING TO QUALIFICATION OF A BUSINESS PURSUANT TO THE ENTERPRISE ZONE ACT OF 1995, SO AS TO CONFORM CRITERIA TO INCLUDE THE DEFINITION OF "NEW JOB" AS A JOB CREATED OR REINSTATED PURSUANT TO SECTION 12-6-3360.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-6-3360(M)(3) of the 1976 Code, as last amended by Act 143 of 1997, is further amended to read:
"(3) 'New job' means a job created in this State at the time a new facility or an expansion is initially staffed. The term does not include a job created when an employee is shifted from an existing location in this State to a new or expanded facility whether the transferred job is from, or to, a facility of the taxpayer or a related person. A related person
shall include includes any entity or person that bears a relationship to the taxpayer as set forth described in Section 267 of the Internal Revenue Code. However, this exclusion of a new job created by employee shifting does not extend to a job created at a new or expanded facility located in a county in which is located an 'applicable federal facility' as defined in Section 12-6-3450(A)(1)(b). The term 'new job' also includes an existing jobs job at a facility of an employer which are is reinstated after the employer has rebuilt the facility due to:
(a) its destruction by accidental fire, natural disaster, or act of God;
(b) involuntary conversion as a result of condemnation or exercise of eminent domain by the State or any of its political subdivisions or by the federal government.
Destruction for purposes of this provision means that more than fifty percent of the facility was destroyed. For purposes of this section, involuntary conversion as a result of condemnation or exercise of eminent domain includes a legally binding agreement for the purchase of a facility of an employer entered into between an employer and the State of South Carolina or a political subdivision of the State under threat of exercise of eminent domain by the State or its political subdivision.
The year of reinstatement is
considered to be the year of creation of the job. All such reinstated jobs so reinstated qualify for the credit under pursuant to this section, and no a comparison is not required to be made between the number of full-time jobs of the employer in the taxable year and the number of full-time jobs of the employer with the corresponding period of the prior taxable year."
SECTION 2. Section 12-10-30 of the 1976 Code, as last amended by Act 462 of 1996, is further amended to read:
"Section 12-10-30. As used in this chapter:
(1) 'Council' means the Advisory Coordinating Council for Economic Development.
(2) 'Department' means the South Carolina Department of Revenue.
(3) 'Employee' means an employee of the qualifying business who works full time within the enterprise zone.
(4) 'Manufacturing' means engagement primarily in an activity or activities listed under the Standard Industrial Classification (SIC) Codes 20 through 39 as published in the Office of Management and Budget's Standard Industrial Classification Manual.
(5) 'New Job' means a job created or reinstated as defined in Section 12-6-3360(M)(3).
(6) 'Qualifying business' means an employer that meets the requirements of Section 12-10-50 and other applicable requirements of this chapter and, where required under Section 12-10-50, enters into a revitalization agreement with the council to undertake a project under the provisions of this chapter.
(6)(7) 'Project' means an investment for one or more purposes in Section 12-10-80(B) needed for a qualifying business to locate, remain, or expand in an enterprise zone and otherwise fulfill the requirements of this chapter.
(8)(9) 'Withholding' means employee withholding under Chapter 9 of this title."
SECTION 3. A. Section 12-10-35(A) of the 1976 Code, as added by Act 419 of 1998, is amended to read:
"(A) If a qualifying business creates at least one hundred new full-time jobs, as defined and determined in Section 12-6-3360
(F), in a county with an average annual unemployment rate of at least twice the state average during each of the last two completed calendar years and at least ninety percent of the investment of the qualifying businesses' investment business in this State is in such a that county, then the company is allowed a moratorium on state corporate income taxes imposed pursuant to Section 12-6-530 for the company's first ten taxable years beginning with the taxable year after it first qualifies. The moratorium applies to that portion of the company's corporate income tax that represents the ratio that the company's new investment is of its total investment in this State."
B. The repeal of Section 12-10-35 effective July 1, 2003, pursuant to Section 37B, Part II, Act 419 of 1998, applies to this section.
SECTION 4. Section 12-20-105 of the 1976 Code, as last amended by Act 151 of 1997, is further amended to read:
"Section 12-20-105. (A) Any company subject to a license tax under Section 12-20-100 may claim a credit against its license tax liability for amounts paid in cash to provide infrastructure for an eligible project.
(B)(1) In order to be considered an eligible project for purposes of this section, the project must qualify for income tax credits under Chapter 6 of Title 12, withholding tax credit under Chapter 10 of Title 12, income tax credits under Chapter 14 of Title 12, or fees in lieu of property taxes under Chapter 12 of Title 4.
(2) If a project consists of an office, business, commercial, or industrial park which is constructed by a county or political subdivision of this State, the project does not have to meet the qualifications of item (1) in order to be considered an eligible project.
(C) For the purpose of this section 'infrastructure' means improvements for water, sewer, gas, steam, electric energy, and communication services made to a building or land which are considered necessary, suitable, or useful to an eligible project. These improvements include, but are not limited to:
(1) improvements to both public or private water and sewer systems;
(2) improvements to both public or private electric, natural gas, and telecommunication systems including, but not limited to, ones owned or leased by an electric cooperative, electric utility, or electric supplier, as defined in Chapter 27, Title 58;
(3) fixed transportation facilities including highway, road, rail, water, and air;
(4) for a qualifying project under subsection (B)(2), infrastructure improvements include industrial shell buildings and the purchase of land for an office, business, commercial, or industrial park which is constructed by a county or political subdivision of this State.
(D) A company is not allowed the credit provided by this section for actual expenses it incurs in the construction and operation of any building or infrastructure it owns, leases, manages, or operates.
(E) The maximum aggregate credit that may be claimed in any tax year by a single company is three hundred thousand dollars.
(F) The credits allowed by this section may not reduce the license tax liability of the company below zero. If the applicable credit originally earned during a taxable year exceeds the liability and is otherwise allowable under subsection (D), the amount of the excess may be carried forward to the next taxable year.
(G) For South Carolina income tax and license purposes, a company that claims the credit allowed by this section is ineligible to claim the credit allowed by Section 12-6-3420."
SECTION 5. Section 12-36-2120 of the 1976 Code, as last amended by Act 419 of 1998, is further amended by adding an appropriately numbered item at the end to read:
"(___) clothing and other attire required for working in a clean room environment."
SECTION 6. Section 12-37-930(6)(c) of the 1976 Code, as added by Act 32 of 1995, is amended to read:
"(c) Electronic Interconnection Component Assembly Devices for Computers and Computer Peripherals; semiconductors and semiconductor devices; flat panel displays; and liquid crystal displays ............................................30%
Includes the manufacture of interconnection component assemblies and devices, semiconductors and semiconductor devices, flat panel displays, and liquid crystal displays which are incorporated in computers or computer peripherals, or other electronic control applications, and telecommunications devices. Computer peripherals include tape drives, compact disk read-only memory systems, hard disks, drivers, tape streamers, monitors, printers, routers, servers, and power supplies."
SECTION 7. Section 12-37-930 of the 1976 Code, as last amended by Act 458 of 1996, is further amended by adding an appropriately numbered item at the end to read:
"( ) Clean Room Modules and Associated Mechanical Systems, Process Piping, Wiring, Environmental Systems, and Water Purification Systems..........................10%
Includes waffle flooring, wall and ceiling panels; foundation improvements that isolate the clean room to control vibrations; clean air handling and filtration systems; piping systems for fluids and gases used in the manufacturing process and that touch the product during the fabrication of semiconductors, flat panel displays, and liquid crystal displays; process equipment energy control systems; ultra pure water processing and waste water recycling systems; and safety alarm and monitoring systems."
SECTION 8. Upon approval by the Governor, this act is effective for taxable years after 1998.
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