South Carolina General Assembly
121st Session, 2015-2016

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Bill 3568

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COMMITTEE REPORT

May 20, 2015

H. 3568

Introduced by Reps. G.R. Smith, Duckworth, Burns, Goldfinch, Clemmons, Yow, Kirby, Spires, Norrell, Cobb-Hunter, Daning, Parks, Mitchell, Robinson-Simpson, Bamberg, Limehouse, Sottile, Cole, Corley, Felder, Finlay, Funderburk, Gagnon, Hamilton, Hardee, Hardwick, Henderson, McCoy, McKnight, Nanney, Sandifer, Tallon, Wells, Willis, Dillard and Stavrinakis

S. Printed 5/20/15--S.

Read the first time May 4, 2015.

            

THE COMMITTEE ON FINANCE

To whom was referred a Bill (H. 3568) to amend Section 12-36-2120, Code of Laws of South Carolina, 1976, relating to exemptions from the state sales tax, so as to exempt construction materials, etc., respectfully

REPORT:

That they have duly and carefully considered the same and recommend that the same do pass with amendment:

Amend the bill, as and if amended, page 1, by striking SECTION 1 in its entirety and inserting:

/        SECTION    1.    Section 12-36-2120 of the 1976 Code is amended by adding an appropriately numbered item at the end to read:

"( )    construction materials used by an entity organized under Section 501(c)(3) of the Internal Revenue Code as a nonprofit corporation to build, rehabilitate, or repair a home for the benefit of an individual or family in need. For purposes of this item, 'an individual or family in need' means an individual or family, as applicable, whose income is less than or equal to eighty percent of the county median income."        /

Renumber sections to conform.

Amend title to conform.

HUGH K. LEATHERMAN, SR. for Committee.

            

STATEMENT OF ESTIMATED FISCAL IMPACT

Fiscal Impact Summary

This bill, as amended, would reduce sales and use tax revenue by an estimated $511,860 in FY2015-16. Of this total, general fund revenue would be reduced by $341,240, the E.I.A. fund would be reduced by $85,310, and the Homestead Exemption Fund would be reduced by $85,310 in FY2015-16. In FY2016-17, and each fiscal year thereafter, sales and use tax revenue would be reduced by an estimated $1,023,720 annually. Of this total, general fund revenue would be reduced by $682,480, the E.I.A. would be reduced by $170,620, and the Homestead Exemption Fund would be reduced by $170,620 annually.

Explanation of Fiscal Impact

Explanation of Amendment (April 29, 2015) - By the House of Representatives

State Expenditure

Since this legislation makes no substantive changes to existing programs or resources, the Department of Revenue can administer the legislative changes with existing resources.

State Revenue

This amendment would include an amendment to Section 12-36-2120(52) to strike "owned by or leased to the federal government or commercial air carriers" for those types of air carriers that would be eligible for a sales and use tax exemption on parts and supplies used by businesses that repair of recondition aircraft. This change would allow a sales and use tax exemption on all parts and supplies used to repair or recondition aircraft for all types of aircraft. This amendment would now include private general aviation aircraft previously excluded from the exemption.

Based on information from the General Aviation Manufacturer's Association and the Federal Aviation Association, Washington, D.C., there are 2,855 general aviation aircraft registered and/or hangered in South Carolina. Multiplying 2,855 general aviation aircraft by an estimated $4,400 annual maintenance expenditures and applying a six percent sales and use tax rate yields a reduction of sales and use tax revenue of an estimated $753,720 annually.

Since the effective date of this bill is January 1, 2016, sales and use tax revenue would be reduced by one-half of a full fiscal year, or an estimated $376,860 in FY2015-16. Of this total, general fund revenue would be reduced by $251,240, the E.I.A. would be reduced by $62,810, and the Homestead Exemption Fund would be reduced by $62,810 in FY2015-16. In FY2016-17, sales and use tax revenue would be reduced by an estimated $753,720 annually. Of this total, general fund revenue would be reduced by $502,480, the E.I.A. would be reduced by $125,620, and the Homestead Exemption Fund would be reduced by $125,620 in FY2016-17, and each fiscal year thereafter.

Explanation of Bill filed February 11, 2015

State Expenditure

Since this legislation makes no substantive changes to existing programs or resources, the Department of Revenue can administer the legislative changes with existing resources.

State Revenue

This bill would amend Section 12-36-2120 allow a sales and use tax exemption for building materials purchased by a nonprofit tax exempt entity to build, rehabilitate, or repair a home for the benefit of an individual or family in need. This would include organizations such as Habitat for Humanity. This organization is organized and operated to build and sell single family houses to selected buyers to promote home ownership and build a sense of community. This is done through the assistance of thirty-four affiliates located throughout the state. The Board of Economic Advisors has been advised by Habitat for Humanity that their goal for 2016 is to complete 150 new single family homes statewide. At an estimated cost of materials of $30,000 per home and applying a six percent sales tax rate, sales and use tax revenue would be reduced by an estimated $270,000 annually.

Since the effective date of this bill is January 1, 2016, sales and use tax revenue would be reduced by one-half of a full fiscal year, or an estimated $135,000 in FY2015-16. Of this total, general fund revenue would be reduced by $90,000, the E.I.A. would be reduced by $22,500, and the Homestead Exemption Fund would be reduced by $22,500 in FY2015-16. In FY2016-17, sales and use tax revenue would be reduced by an estimated $270,000 annually. Of this total, general fund revenue would be reduced by $180,000, the E.I.A. would be reduced by $45,000, and the Homestead Exemption Fund would be reduced by $45,000 in FY2016-17, and each fiscal year thereafter.

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

A BILL

TO AMEND SECTION 12-36-2120, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EXEMPTIONS FROM THE STATE SALES TAX, SO AS TO EXEMPT CONSTRUCTION MATERIALS USED BY AN ENTITY ORGANIZED UNDER SECTION 501(C)(3) OF THE INTERNAL REVENUE CODE AS A NONPROFIT ORGANIZATION TO BUILD, REHABILITATE, OR REPAIR A HOME FOR THE BENEFIT OF AN INDIVIDUAL OR FAMILY IN NEED.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Section 12-36-2120 of the 1976 Code is amended by adding an appropriately numbered item at the end to read:

"( )    construction materials used by an entity organized under Section 501(c)(3) of the Internal Revenue Code as a nonprofit corporation to build, rehabilitate, or repair a home for the benefit of an individual or family in need. For purposes of this item, 'an individual or family in need' means an individual or family, as applicable, whose income is less than or equal to eighty percent of the Area Median Income."

SECTION    2.    Section 12-36-2120(52) of the 1976 Code is amended to read:

"(52)    parts and supplies used by persons engaged in the business of repairing or reconditioning aircraft owned by or leased to the federal government or commercial air carriers. This exemption does not extend to tools and other equipment not attached to or that do not become a part of the aircraft;"

SECTION    3.    This act takes effect January 1, 2016.

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