H*3819 Session 112 (1997-1998)
H*3819(Rat #0265, Act #0149 of 1997) General Bill, By Harrell, Allison, Altman,
Barrett, J.M. Baxley, Beck, Boan, H. Brown, Campsen, Cato, Chellis, Cobb-Hunter,
Cooper, Dantzler, Edge, J.G. Felder, Fleming, Gourdine, Harvin, Haskins,
J. Hines, M. Hines, Hinson, J.H. Hodges, Jennings, B.L. Jordan, Keegan, Kelley,
Kennedy, M.H. Kinon, Kirsh, Klauber, Knotts, Lanford, Leach, L.H. Limbaugh,
Limehouse, Littlejohn, Mason, McKay, McMahand, Phillips, Riser, Robinson,
Sandifer, Seithel, Sharpe, Simrill, J. Smith, R. Smith, Stuart, Townsend,
Walker, Whatley, Wilder, Wilkins, Witherspoon, Woodrum, W.J. Young and
Young-Brickell
A BILL TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 44
TO TITLE 12 SO AS TO ENACT THE "FEE IN LIEU OF TAX SIMPLIFICATION ACT OF 1997"
SO AS TO PROVIDE FOR SIMPLIFICATION OF FEE IN LIEU OF PROPERTY TAX
TRANSACTIONS; TO DEFINE CERTAIN TERMS, INCLUDING "ECONOMIC DEVELOPMENT
PROPERTY"; TO PROVIDE FOR APPROVAL BY LOCAL COUNTY COUNCILS OF FEE AGREEMENTS;
TO PROVIDE FOR CALCULATION OF THE REQUIRED FEE PAYMENTS; TO PROVIDE FOR
APPLICATION OF THE FEE TO REPLACEMENT PROPERTY AND A CREDIT AGAINST THE FEE
FOR COSTS OF CERTAIN IMPROVEMENTS; TO PROVIDE FOR DISTRIBUTION OF THE FEE,
PENALTIES FOR FAILING TO COMPLY WITH THE PROVISIONS OF THIS CHAPTER OR THE FEE
AGREEMENTS, CONSEQUENCES OF TRANSFERS OF ECONOMIC DEVELOPMENT PROPERTY AND OF
TERMINATION OF FEE AGREEMENTS, QUALIFICATION AS ECONOMIC DEVELOPMENT PROPERTY
OF PROPERTY PREVIOUSLY SUBJECT TO PROPERTY TAX, AND REQUIREMENTS FOR AFFILIATE
SPONSORS; AND TO AMEND SECTION 12-37-220, AS AMENDED, RELATING TO EXEMPTIONS
OF CERTAIN CLASSES OF PROPERTY FROM AD VALOREM TAXATION, SO AS TO INCLUDE
ECONOMIC DEVELOPMENT PROPERTY AS AN EXEMPTION; TO PROVIDE FOR ELECTION OF THE
NEW FEE IN LIEU ARRANGEMENT AFTER THE EFFECTIVE DATE; TO AMEND SECTION
4-1-175, RELATING TO USE AND PLEDGING OF FEE IN LIEU REVENUES, SO AS TO ALLOW
USE AND PLEDGING WITHOUT ISSUING BONDS OR MEETING CERTAIN REQUIREMENTS UNDER
CERTAIN CONDITIONS; TO AMEND SECTION 4-12-30, RELATING TO FEE IN LIEU FILINGS,
SO AS TO REQUIRE CERTAIN FILINGS OF COPIES; TO AMEND SECTION 4-29-67, AS
AMENDED, RELATING TO INDUSTRIAL DEVELOPMENT PROJECT FILINGS, SO AS TO REQUIRE
CERTAIN FILINGS; TO REQUIRE IMPOSITION OF A PENALTY AS NEEDED TO COVER THE
DEBT OBLIGATION; TO AMEND SECTION 12-43-220, AS AMENDED, RELATING TO
EQUALIZATION AND REASSESSMENT OF AGRICULTURAL PROPERTY, SO AS TO DISALLOW
APPLICATION OF PROPERTY TAX ROLLBACK TO EXEMPT PROPERTY; TO AMEND SECTIONS
4-10-20 AND 12-36-2110, RELATING TO THE LOCAL OPTION SALES AND USE TAX, SO AS
TO DEFINE "MACHINERY" USED FOR RESEARCH AND DEVELOPMENT FOR PURPOSES OF SALES
AND USE TAX AND TO IMPOSE AN EFFECTIVE DATE OF DECEMBER 1, 1992; TO AMEND
SECTION 12-6-3360, AS AMENDED, RELATING TO JOBS TAX CREDIT, SO AS TO INCREASE
THE POPULATION FLOOR TO TWENTY-FIVE THOUSAND FOR RECEIPT OF INCREASED CREDIT
DESIGNATION; AND TO REENACT CHAPTER 41, TITLE 2, RELATING TO THE CREATION OF A
TAX STUDY COMMISSION, SO AS TO RECREATE A TAX STUDY COMMISSION.-AMENDED TITLE
04/03/97 House Introduced and read first time HJ-2
04/03/97 House Referred to Committee on Ways and Means HJ-3
04/17/97 House Committee report: Favorable with amendment Ways
and Means HJ-16
04/29/97 House Amended HJ-42
04/29/97 House Read second time HJ-46
04/29/97 House Roll call Yeas-110 Nays-0 HJ-46
04/30/97 House Read third time and sent to Senate HJ-16
05/01/97 Senate Introduced and read first time SJ-31
05/01/97 Senate Referred to Committee on Finance SJ-31
05/21/97 Senate Committee report: Favorable with amendment
Finance SJ-27
06/03/97 Senate Amended SJ-147
06/03/97 Senate Read second time SJ-147
06/03/97 Senate Unanimous consent for third reading on next
legislative day SJ-147
06/04/97 Senate Read third time and returned to House with
amendments SJ-86
06/04/97 House Non-concurrence in Senate amendment HJ-56
06/04/97 Senate Senate insists upon amendment and conference
committee appointed Sens. Leatherman, Leventis,
Matthews SJ-24
06/04/97 House Conference committee appointed Reps. R. Smith,
Allison & Harrell HJ-140
06/05/97 House Free conference powers granted HJ-215
06/05/97 House Free conference committee appointed Reps.
Harrell, R. Smith & Allison HJ-217
06/05/97 House Free conference report received and adopted HJ-217
06/05/97 Senate Free conference powers granted SJ-188
06/05/97 Senate Free conference committee appointed Sens.
Leatherman, Leventis, Matthews SJ-188
06/05/97 Senate Free conference report received and adopted SJ-188
06/17/97 House Ordered enrolled for ratification HJ-13
06/18/97 Ratified R 265
06/24/97 Signed By Governor
06/24/97 Effective date 06/24/97
07/09/97 Copies available
07/09/97 Act No. 149
(A149, R265, H3819)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING CHAPTER 44 TO TITLE 12 SO AS
TO ENACT THE "FEE IN LIEU OF TAX SIMPLIFICATION
ACT OF 1997" SO AS TO PROVIDE FOR SIMPLIFICATION OF
FEE IN LIEU OF PROPERTY TAX TRANSACTIONS; TO DEFINE
CERTAIN TERMS, INCLUDING "ECONOMIC
DEVELOPMENT PROPERTY"; TO PROVIDE FOR APPROVAL
BY LOCAL COUNTY COUNCILS OF FEE AGREEMENTS; TO
PROVIDE FOR CALCULATION OF THE REQUIRED FEE
PAYMENTS; TO PROVIDE FOR APPLICATION OF THE FEE TO
REPLACEMENT PROPERTY AND A CREDIT AGAINST THE FEE
FOR COSTS OF CERTAIN IMPROVEMENTS; TO PROVIDE FOR
DISTRIBUTION OF THE FEE, PENALTIES FOR FAILING TO
COMPLY WITH THE PROVISIONS OF THIS CHAPTER OR THE
FEE AGREEMENTS, CONSEQUENCES OF TRANSFERS OF
ECONOMIC DEVELOPMENT PROPERTY AND OF TERMINATION
OF FEE AGREEMENTS, QUALIFICATION AS ECONOMIC
DEVELOPMENT PROPERTY OF PROPERTY PREVIOUSLY
SUBJECT TO PROPERTY TAX, AND REQUIREMENTS FOR
AFFILIATE SPONSORS; TO AMEND SECTION 12-37-220, AS
AMENDED, RELATING TO EXEMPTIONS OF CERTAIN CLASSES
OF PROPERTY FROM AD VALOREM TAXATION, SO AS TO
INCLUDE ECONOMIC DEVELOPMENT PROPERTY AS AN
EXEMPTION; TO PROVIDE FOR ELECTION OF THE NEW FEE IN
LIEU ARRANGEMENT AFTER THE EFFECTIVE DATE; TO
AMEND SECTION 4-1-175, RELATING TO USE AND PLEDGING
OF FEE IN LIEU REVENUES, SO AS TO ALLOW USE AND
PLEDGING WITHOUT ISSUING BONDS OR MEETING CERTAIN
REQUIREMENTS UNDER CERTAIN CONDITIONS; TO AMEND
SECTION 4-12-30, RELATING TO FEE IN LIEU FILINGS, SO AS TO
REQUIRE CERTAIN FILINGS OF COPIES; TO AMEND SECTION
4-29-67, AS AMENDED, RELATING TO INDUSTRIAL
DEVELOPMENT PROJECT FILINGS, SO AS TO REQUIRE
CERTAIN FILINGS; TO REQUIRE IMPOSITION OF A PENALTY AS
NEEDED TO COVER THE DEBT OBLIGATION; TO AMEND
SECTION 12-43-220, AS AMENDED, RELATING TO
EQUALIZATION AND REASSESSMENT OF AGRICULTURAL
PROPERTY, SO AS TO DISALLOW APPLICATION OF PROPERTY
TAX ROLLBACK TO EXEMPT PROPERTY; TO AMEND SECTIONS
4-10-20 AND 12-36-2110, RELATING TO THE LOCAL OPTION
SALES AND USE TAX, SO AS TO DEFINE
"MACHINERY" USED FOR RESEARCH AND
DEVELOPMENT FOR PURPOSES OF SALES AND USE TAX AND
TO IMPOSE AN EFFECTIVE DATE OF DECEMBER 1, 1992; TO
AMEND SECTION 12-6-3360, AS AMENDED, RELATING TO JOBS
TAX CREDIT, SO AS TO INCREASE THE POPULATION FLOOR TO
TWENTY-FIVE THOUSAND FOR RECEIPT OF INCREASED
CREDIT DESIGNATION; AND TO REENACT CHAPTER 41, TITLE
2, RELATING TO THE CREATION OF A TAX STUDY
COMMISSION, SO AS TO RECREATE A TAX STUDY
COMMISSION.
Be it enacted by the General Assembly of the State of South Carolina:
Provides for simplification of fee in lieu of property tax transactions
SECTION 1. Title 12 of the 1976 Code is amended by adding:
"CHAPTER 44
Fee in Lieu of Tax Simplification Act
Section 12-44-10. This act may be cited as the 'Fee in Lieu of Tax
Simplification Act of 1997'.
Section 12-44-20. The General Assembly finds that:
(1) With the state's economy being centrally connected, as the
wealth-generating capacity of South Carolina's businesses has increased,
the state's per capita income also has increased.
(2) Since South Carolina's property tax rates as applied to
manufacturing and certain commercial properties are disproportionately
higher than those applied to other property in South Carolina, this
disparity and the resulting property tax burdens historically have impeded
new and expanded business in South Carolina.
(3) Previous General Assemblies have enacted legislation which
reduces this disparity and the resulting property tax burden through a
complex fee in lieu of tax arrangement that requires a company to transfer
title to its property to the county and then lease the property back by
paying rent and fees instead of property taxes on the property. The
arrangement often includes the issuance of industrial revenue bonds by
the county.
(4) The transfer of title and issuance of bonds are expensive, complex,
time-consuming, and difficult undertakings for the county, public, and
companies to understand and implement. The current rules also make
financings more difficult and more expensive. All of these factors act to
discourage new investments in South Carolina.
(5) The 'Fee in Lieu of Tax Simplification Act' simplifies the method
for obtaining the fee in lieu of tax benefits while maintaining the essential
county council approval process.
(6) The 'Fee in Lieu of Tax Simplification Act' makes the fee in lieu
of tax incentive more attractive by eliminating the requirement for the
issuance of industrial revenue bonds or the transfer of title of property to
a county. This simplification facilitates the benefit for the county and the
company making the investments.
Section 12-44-30. As used in this chapter:
(1) 'Alternative payment method' means fee payments as provided in
Section 12-44-50(A)(3).
(2) 'Commencement date' means the last day of the property tax year
during which economic development property is placed in service, except
that this date must not be later than the last day of the property tax year
which is three years from the year in which the county and the sponsor
enter into a fee agreement.
(3) 'Controlled group' or 'controlled group of corporations' means the
definition provided under Section 1563(a) of the Internal Revenue Code,
as defined in Chapter 6, Title 12, as of the date of the execution of the fee
agreement, without regard to amendments or replacements, and without
regard to subsections (a)(4) and (b) of Section 1563.
(4) 'County' means the county or counties in which the project is
proposed to be located. A project may be located in more than one
county, subject to the provisions of Section 12-44-40(G).
(5) 'County council' means the governing body of the county in which
the economic development property is located, except as specifically
provided by Section 12-44-40(G).
(6) 'Department' means the South Carolina Department of Revenue.
(7) 'Economic development property' means each item of real and
tangible personal property comprising a project which satisfies the
provisions of Section 12-44-40(C) and other requirements of this chapter
and becomes subject to a fee agreement. That property, other than
replacement property qualifying under Section 12-44-60, must be placed
in service by the end of the investment period.
(8) 'Enhanced investment' means a project which results in a total
investment by a sponsor of:
(a) at least two hundred million dollars, which when added to the
previous investments, 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 the project;
(b) at least four hundred million dollars of property qualifying for
the fee and which is creating at least two hundred new full-time jobs at the
project. The new full-time jobs requirement of this item does not apply to
a taxpayer which paid more than fifty percent of all property taxes
actually collected in the county for more than the twenty-five years
ending on the date of the agreement;
(c) at least four hundred million dollars in a county classified as
either least developed or underdeveloped, by a limited liability company
and/or one or more of the members or equity holders where a member or
equity holder is creating, at a site qualifying for the fee, at least one
hundred new full-time jobs with an average annual salary of at least forty
thousand dollars within four years of the date of execution of the fee
agreement.
(9) 'Exemption period' means the period beginning on the later of the
commencement date or the last day of the property tax year in which the
fee agreement is entered into and ending on the termination date. For
projects which are completed and placed in service during more than one
year, the exemption period applies to each year's investment made by a
sponsor during the investment period.
(10) 'Fee agreement' means an agreement between the sponsor and the
county obligating the sponsor to pay fees instead of property taxes during
the exemption period for each item of economic development property as
more particularly described in Section 12-44-40.
(11) 'Inducement resolution' means a resolution of the county setting
forth the commitment of the county to enter into a fee agreement.
(12) 'Infrastructure improvement credit' means a credit against the fee
as provided by Section 12-44-70.
(13) 'Investment period' means the period beginning sixty days before
the county takes action or identifies the project under Section
12-44-40(C), and ending five years after the commencement date; except
that for a project with an enhanced investment as described above, the
period ends eight years after the commencement date. The minimum
investment must be completed within five years of the commencement
date. For an enhanced investment, the enhanced investment must be
completed within eight years of the commencement date. If the sponsor
does not anticipate completing the project within this period, the sponsor
may apply to the county before the end of the period for an extension of
time to complete the project. If the county agrees to an extension, it must
do so in writing and furnish a copy of the extension to the Department of
Revenue within thirty days of the date the extension was granted. The
extension may not exceed two years in which to complete the project. An
extension is not allowed for the time period in which the sponsor must
meet the minimum investment requirement.
(14) 'Minimum investment' means a project which results in a total
investment by a sponsor of not less than five million dollars within the
investment period.
(15) 'Multicounty park' means an industrial or business park developed
by two or more counties as defined in Section 4-1-170.
(16) 'Project' means land and buildings and other improvements on the
land including water, sewage treatment and disposal facilities, air
pollution control facilities, and all other machinery, apparatus, equipment,
office facilities, and furnishings which are necessary, suitable, or useful.
(17) 'Replacement property' means property placed under the fee
agreement to replace economic development property previously subject
to the fee agreement, as provided in Section 12-44-60.
(18) 'Sponsor' means a single entity as defined in Section
12-6-3360(m)(1) which signs the fee agreement with the county, subject
to the provisions of Section 12-44-40.
(19) 'Sponsor affiliate' means an entity that joins with or is an affiliate,
as defined in Section 12-44-130, of a sponsor and that participates in the
investment in, or financing of, a project.
(20) 'Termination date' means the date which is the last day of a
property tax year which is the nineteenth year following the first property
tax year in which economic development property is placed in service.
With respect to a fee agreement involving an enhanced investment, the
termination date is the last day of a property tax year which is the
twenty-ninth year following the first property tax year in which an
economic development property is placed in service. If the fee agreement
is terminated in accordance with Section 12-44-140, the termination date
is the date the agreement is terminated.
Section 12-44-40. (A) To obtain the benefits provided by this chapter,
the sponsor and the county must enter into a fee agreement requiring the
payment of the fee described in Section 12-44-50. The county may not
enter into a fee agreement unless the county council adopts an ordinance
approving the agreement with the sponsor.
(B) If the county and the sponsor enter into a fee agreement, all
economic development property is exempt from all ad valorem taxation
imposed by Chapter 37 of Title 12 for the entire exemption period. Upon
termination of the exemption period, the property is subject to property
taxation in the manner provided by law, unless the property is otherwise
exempt.
(C) Subject to the provisions of subsection (D) and the provisions of
Section 12-44-110, real or tangible personal property of a sponsor or
sponsor affiliate for which expenditures have been incurred by the
sponsor or sponsor affiliate in connection with a project or a portion of it
qualifies as economic development property, if the expenditures are
incurred after, or within sixty days before, the county takes action
reflecting or identifying the project or proposed project including, but not
limited to, the adoption of an inducement or similar resolution by county
council and before the end of the investment period.
(D) A county has two years from the date it takes action reflecting or
identifying the project, or proposed project, to adopt an inducement
resolution if the inducement resolution was not the original county action
reflecting or identifying the project or proposed project. Otherwise,
expenditures incurred before adoption of the inducement resolution do not
qualify as economic development property.
(E) If a fee agreement is not executed within five years after the
inducement resolution is adopted by the county council, the real property
or tangible personal property of a sponsor and sponsor affiliate for which
expenditures have been incurred by the sponsor and sponsor affiliate with
respect to the project do not qualify as economic development property.
(F) To be eligible to enter into a fee agreement, the sponsor shall
commit to a project which meets the minimum investment level and, with
respect to applicable enhanced investments, the total investment and the
minimum job creation levels required for an enhanced investment.
(G) The project which is the subject of the fee agreement must be
located in a single county or in a multicounty park or on contiguous tracts
of land in more than one county. When a tract crosses a county boundary,
all counties in which the tract is located must be parties to the fee
agreement, which must provide the manner in which the fee payments
must be distributed among the counties and the fee agreement must set a
minimum millage rate not lower than the millage rate applicable to the site
in the county in which the greatest amount of investment occurs.
(H) The county council shall evaluate projects for classification as
economic development property, based on criteria that include, but are not
limited to:
(1) the purposes to be accomplished by the project are proper
governmental and public purposes;
(2) the anticipated dollar amount and nature of the investment to be
made; and
(3) the anticipated costs and benefits to the county.
(I) Before entering into a fee agreement, the county council shall find
that:
(1) the project is anticipated to benefit the general public welfare of
the locality by providing services, employment, recreation, or other public
benefits not otherwise adequately provided locally;
(2) the project gives rise to no pecuniary liability of the county or
incorporated municipality or to no charge against its general credit or
taxing power;
(3) the purposes to be accomplished by the project are proper
governmental and public purposes; and
(4) the benefits of the project to the public are greater than the costs
to the public.
(J) In making the findings of subsections (H) and (I), the county
council may seek the advice and assistance of the department or the Board
of Economic Advisors.
(K) If 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, a new enactment does not bind the original
parties to the agreement unless the change is ratified by the governing
body of the county.
(L)(1) Upon agreement of the parties, and except as provided in item
(2), a fee agreement may be amended or terminated and replaced with
regard to all matters, including the addition or removal of controlled
group members.
(2) An amendment or replacement of a fee agreement may not be
used to change the millage rate, discount rate, assessment ratio, or length
of the agreement.
Section 12-44-50. (A) A fee agreement must contain the requirement
that a fee in lieu of property tax be paid as follows:
(1) During the exemption period, the sponsor shall pay, or be
responsible for payment, to the county the annual fee payment in
connection with the economic development property which has been
placed in service, in an amount not less than the property taxes that would
be due on the economic development property if it were taxable but using:
(a) an assessment ratio of not less than six percent, or if the
project involves an enhanced investment, an assessment ratio of not less
than four percent;
(b) a millage rate as established, either:
(i) by the county, which must not be lower than the
cumulative property tax millage rate legally levied by or on behalf of all
millage levying entities within which the project is to be located, which
is the cumulative rate applicable on the thirtieth day of June preceding the
calendar year in which the fee agreement is executed; or
(ii) as provided under subsubitem (i), except that every fifth
year the millage rate is allowed to increase or decrease in step with the
average cumulative actual millage rate applicable to the project based
upon the preceding five-year period; and
(c) a fair market value for the economic development property.
The fair market value of real property is determined by 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 equals the
original income tax basis. Otherwise, the department shall determine fair
market value by appraisal. Fair market value for personal property is
determined by 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 extraordinary obsolescence.
(2) The fee calculation must be made so that the property, if
taxable, is allowed all applicable property tax exemptions except the
exemption allowed under Section 3(g) of Article X of the Constitution of
this State and the exemption allowed pursuant to Section
12-37-220(B)(32) and (34).
(3) If the project subject to the fee agreement involves an
investment of forty-five million dollars or more, or any higher minimum
established by the county, the county and the sponsor may agree to pay
the fees established in subsection (A)(1) based on an alternative payment
method yielding a net present value of the fee schedule as calculated in
subsection (A)(1) provided the sponsor agrees to a millage rate as
established in subsection (A)(1)(b)(i). Net present value calculations must
use a discount rate equivalent to the yield in effect for new or existing
United States Treasury bonds of similar maturity as published during the
month in which the fee agreement is executed. If no yield is available for
the month in which the fee agreement is executed, the last published yield
for the appropriate maturity available must be used. If there are no bonds
of appropriate maturity available, bonds of different maturities may be
averaged to obtain the appropriate maturity.
(B) If a sponsor or sponsor affiliate disposes of an item of economic
development property, the fee must be reduced by the amount of the fee
applicable to that item of economic development property. Economic
development property is disposed of only when it is scrapped or sold.
Transactions with respect to items of property described in Section
12-44-120 are not a disposition of property under this subsection. If the
sponsor used an alternative payment method as provided in subsection
(A)(3), the fee applicable to the item of property which was disposed of
must be recomputed in accordance with subsection (A)(1) and, to the
extent that the amount which would have been paid with respect to this
item under subsection (A)(1) exceeds the fee actually paid by the sponsor,
the sponsor shall pay the difference with the next annual fee payment due
after the item of property is disposed of.
Section 12-44-60. (A) The fee agreement may provide that property
which is placed in service as a replacement for economic development
property may become economic development property. This replacement
property is not required to serve the same function as the economic
development property it is replacing. Replacement property qualifies as
economic development property only to the extent of the original income
tax basis of the economic development property which is being disposed
of in the same property tax year. More than one piece of property can
replace a single piece of property.
(B) To the extent that the income tax basis of the replacement property
exceeds the original income tax basis of the economic development
property which it is replacing, the excess amount is subject to annual
payments calculated as if the exemption for economic development
property were not allowed. Replacement property is entitled to the fee
payment for the period of time remaining during the exemption period for
the economic development property which it is replacing. Where a single
piece of property replaces two or more pieces of economic development
property, the time period remaining must be measured from the earliest
of the dates on which the replaced pieces of economic development
property were placed in service.
(C) The new replacement property which qualifies for the fee provided
in Section 12-44-50 is recorded using its income tax basis, and the fee is
calculated using the millage rate and assessment ratio provided on the
original economic development property. The fee payment for
replacement property must be based on Section 12-44-50(A)(3) if the
sponsor originally used an alternative payment method.
Section 12-44-70. (A) If allowed by the fee agreement and subject to
any limitations and conditions contained in the fee agreement, a sponsor
may take a credit against the fee established in Section 12-44-50(A)(1)
and (3) over the term specified in the fee agreement to offset improvement
costs:
(1) for a project not located in a multicounty park, to the extent that
the cumulative credit taken does not exceed the lesser of:
(a) the improvement costs of the project; or
(b) the county's share of fees distributed from the project under
Section 12-44-80(A).
A municipality or special purpose district that would otherwise receive
a distribution of fee in lieu of taxes under Section 12-44-80(A), may agree
to allow to a sponsor a credit against the fee established in Section
12-44-50(A)(1) or (A)(3) in an amount not exceeding the share of the fee
in lieu of taxes that would have been distributed to the municipality or
special purpose district with respect to the sponsor's project; or
(2) for a project located within a multicounty park, to the extent that
the cumulative credit taken does not exceed the lesser of:
(a) the improvement costs of the project; or
(b) the county's share of fees.
(B) For purposes of this section, improvement costs include the cost
of designing, acquiring, constructing, improving, or expanding:
(1) the infrastructure serving the issuer; and
(2) improved and unimproved real property, buildings, and
structural components of buildings used in the operation of a
manufacturing or commercial enterprise in order to enhance economic
development.
Section 12-44-80. (A) For a project not located in a multicounty park,
distribution of the fee payments 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.
(B) For a project located in a multicounty park, distribution of the fee
payments on the project must be made in the same manner provided for
by the agreement between or among counties establishing the multicounty
park.
Section 12-44-90. (A) The investor shall file returns, contracts, and
other information which may be required by the department.
(B) Fee payments, and returns calculating fee payments, are due at the
same time as property tax payments and property tax returns are due.
(C) Failure to make a timely fee payment and file required returns
results in penalties being assessed as if the payment or return were a
property tax payment or return.
(D) The department may issue rulings and promulgate regulations as
necessary to carry out the purpose of this section.
(E) The provisions of Chapters 4 and 54 of Title 12, applicable to
property taxes, apply to this section, and for purposes of the application,
the fee is considered a property tax. Section 12-54-155 does not apply to
this section.
(F) The provisions of Chapters 49, 51, and 53 of Title 12 apply to a
fee agreement and a fee due under the agreement. For purposes of those
chapters, the fee is considered a property tax.
(G) Within thirty days of the date of execution of a fee agreement, a
copy of the fee agreement must be filed with the Department of Revenue,
the county assessor, and the county auditor for the county in which the
project is located. If the project is located in a multicounty park the fee
agreement must be filed with the auditors and assessors for all counties
participating in the multicounty park.
Section 12-44-100. (A) A fee agreement may provide that a sponsor
who has committed to an enhanced investment or an investment above
that required for a minimum investment may continue to receive the
benefits of this chapter, even if the sponsor fails to make the required
investment or fails to create the jobs required by the fee agreement, if the
sponsor meets the minimum investment. If the sponsor fails to make the
required investment or create the required number of jobs, the fee
agreement may not provide for an assessment ratio and an exemption
period more favorable than those allowed for the minimum investment.
(B) Notwithstanding the use of the term 'assessment ratio', a sponsor
and a county may negotiate a fee agreement using differing assessment
ratios for different assessment years covered by the fee agreement, but the
assessment ratio for an assessment year may not be lower than six percent
or, if the project involves an enhanced investment, four percent.
(C) The fee agreement may provide that replacement property is not
subject to Section 12-44-60 if the sponsor fails to make the level of
investment specified in the fee agreement.
Section 12-44-110. Property which previously has been subject to
property taxes in South Carolina does not qualify as economic
development property, except that:
(1) land, excluding existing improvements on the land, on which a
new project is to be located may qualify as economic development
property even if it previously has been subject to property taxes in this
State;
(2) property which has been subject to property taxes in this State, but
which has never been placed in service in this State, may qualify as
economic development property;
(3) property which previously has been placed in service in this State
and previously has been subject to property taxes in this State which is
purchased in a transaction other than between any of the entities specified
in Section 267(b) of the Internal Revenue Code, as defined under Chapter
6 of Title 12 as of the time of the transfer, may qualify as economic
development property if the sponsor invests at least an additional
forty-five million dollars at the project;
(4) repairs, alterations, or modifications to real or personal property,
which is not economic development property, are not eligible to be
economic development property, even if they are capitalized expenditures,
except for modifications which constitute an expansion to existing real
property improvements.
Section 12-44-120. (A) An interest in a fee agreement and the
economic development property to which the fee agreement relates may
be transferred to another entity at any time. Notwithstanding another
provision of this chapter, equity or other interest in an entity with an
interest in a fee agreement or the economic development property, or
both, to which a fee agreement relates may be transferred to another entity
or person at any time.
(B) A single entity, or two or more entities which are members of a
controlled group, may enter into lending, financing, security, or similar
arrangements, or succession of such arrangements, with a financing entity
concerning all or part of a project and may enter into a sale-leaseback
arrangement including, without limitation, an assignment, 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 economic development property.
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,
affects the amount of the payments due under Section 12-44-50.
(C) All transfers undertaken with respect to other projects to effect a
financing authorized under this subsection must meet the following
requirements:
(1) The department and the county 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 does not
adversely affect the exemption, 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.
(2) If the financing entity is the income tax owner of property,
either the financing entity is primarily liable for the payments due under
Section 12-44-50 as to that portion of the project to which the transfer
relates, with the sponsor remaining secondarily liable for the payment, or
the sponsor must agree to continue to be primarily liable for the annual
payments as to that portion of the project to which the transfer relates.
(D) Before a sponsor may transfer a fee agreement, or substantially all
the economic development property to which the fee agreement relates,
it must obtain the approval of the county with which it entered into the fee
agreement. That approval is not required in connection with
financing-related transfers.
Section 12-44-130. (A) To be eligible for the fee, a sponsor affiliate
must invest five million dollars. The county and the members who are
part of the fee agreement may agree that investments by other members
of the controlled group within the investment period qualify for the
payment regardless of whether the member was part of the fee agreement,
except that the new sponsor affiliate must invest at least five million
dollars in the project. To qualify for the exemption, the other members of
the controlled group must be approved specifically by the county and
must agree to be bound by agreements with the county relating to the
exemption. These controlled group members need not be bound by
agreements, or portions of agreements, which do not affect the county.
(B) The department and the county must be notified in writing of all
members of the controlled group which have investments subject to the
fee exemption before or within thirty days after the execution of the fee
agreement covering the investment by the member. The department may
extend the thirty-day period upon written request. Failure to meet this
notice requirement does not affect adversely the exemption, but a penalty
may be assessed by the department for late notification of up to ten
thousand dollars a month or portion of a month, with the total penalty not
to exceed one hundred twenty thousand dollars. Members of the
controlled group shall provide the information considered necessary by
the department to ensure that the investors are part of a controlled group.
Section 12-44-140. (A) The county and the sponsor may agree to
terminate the fee agreement at any time. From the date of termination, all
economic development property is subject to ad valorem taxation as
imposed by law. If the sponsor used an alternative payment method, the
sponsor shall pay to the county at the time of termination an additional fee
payment equal to the difference between the total amount of the fee
payments that would have been made with respect to the economic
development property by the sponsor if the standard fee calculation under
Section 12-44-50(A)(1) had been used and the total amount of fee
payments actually made by the sponsor.
(B) A fee agreement is automatically terminated if the sponsor fails to
satisfy the minimum investment level provided in Section 12-44-30(14)
within the investment period or otherwise fails to meet the minimum
investment or job creation requirements of a fee agreement to qualify for
the benefits of this chapter. If the fee agreement is terminated under this
subsection, all economic development property is subject, as of the
commencement date, to ad valorem taxation as imposed by law. At the
time of termination, the sponsor shall pay to the county an additional fee
equal to the difference between the total amount of property taxes that
would have been paid by the sponsor had the project been taxable, taking
into account exemptions from property taxes that would have been
available to the sponsor, and the total amount of fee payments actually
made by the sponsor.
Section 12-44-150. Projects to which a fee agreement applies
pursuant to this section are considered taxable property at the level of the
negotiated payments for purposes of bonded indebtedness pursuant to
Sections 14 and 15 of Article X of the Constitution of this State, and for
purposes of computing the index of taxpaying ability pursuant to Section
59-20-20(3). However, for a project located in an industrial development
park as defined in Section 4-1-170, projects are considered taxable
property in the manner provided in Section 4-1-170 for purposes of
bonded indebtedness pursuant to Sections 14 and 15 of Article X of the
Constitution of this State, and for purposes of computing the index of
taxpaying ability pursuant to Section 59-20-20(3). However, the
computation of bonded indebtedness limitation is subject to the
requirements of Section 4-29-68(E).
Section 12-44-160. This chapter must be construed liberally in
accordance with the findings in Section 12-44-20 with due regard to the
paramount importance of the county council approvals required
throughout this chapter. If the General Assembly adopts enabling
legislation, property that would be exempt under this chapter but is held
not to be exempt because of the unconstitutionality or illegality of this
chapter, or any portion of it, is exempt from property tax under Section
4-29-67 or Chapter 12 of this title if the project and county approval
would have met the requirements for exemption under them, except that
fees in lieu of taxes must have been, and must continue to be, made in the
amounts required by Section 4-29-67 or Chapter 12 of this title."
Exempts economic development property from ad valorem taxes
SECTION 2. Section 12-37-220(B) of the 1976 Code, as last amended
by Act 462 of 1996, is further amended by adding an appropriately
numbered item at the end to read:
"( ) Economic development property during the exemption
period as provided in Chapter 44 of Title 12."
Allows election of new fee arrangement
SECTION 3. (A) Economic development property as defined in Section
12-44-30(7) may include property placed in service for property tax
purposes after the effective date of this act.
(B) An entity with property subject to an existing fee in lieu of
property taxes arrangement under Article 1, Chapter 12, Title 4 of the
1976 Code or Section 4-29-67 of the 1976 Code, or which has acquired
or will acquire property pursuant to an inducement resolution, may elect,
with the consent of the applicable county, to transfer property from the
prior arrangement to the fee arrangements provided by the act and that
property must be considered automatically economic development
property as defined in Section 12-44-30(7) subject to:
(1) a continuation of the same fee payments required under the
existing lease agreement;
(2) a continuation of the same fee in lieu of tax payments only for
the time required for payments under the existing lease agreement;
(3) a carryover of minimum investment or employment
requirements of the existing arrangements to the new fee arrangement;
and
(4) appropriate agreements and amendments between the sponsor
and the county entered into continuing the provisions and limitations of
the prior agreement.
The entity and the governing body of the county may enter into a new
fee agreement reflecting the appropriate handling of the transition with
due regard to appropriate cancellation or amendment of existing financing
arrangements.
Allows use of funds without issuing bonds or meeting certain
requirements
SECTION 4. Section 4-1-175 of the 1976 Code, as added by Act 361
of 1992, is amended to read:
"Section 4-1-175. A county or municipality receiving revenues
from a payment in lieu of taxes pursuant to Section 13 of Article VIII of
the Constitution of this State may issue special source revenue bonds
secured by and payable from all or a part of that portion of the revenues
which the county is entitled to retain pursuant to the agreement required
by Section 4-1-170 in the manner and for the purposes set forth in Section
4-29-68. The county or municipality may pledge the revenues for the
additional securing of other indebtedness in the manner and for the
purposes set forth in Section 4-29-68.
A county or municipality or special purpose district that receives and
retains revenues from a payment in lieu of taxes pursuant to Section 13 of
Article VIII of the Constitution of this State may use a portion of this
revenue for the purposes outlined in Section 4-29-68 without the
requirement of issuing the special source revenue bonds or meeting the
requirements of Section 4-29-68(A)(4).
A political subdivision of this State subject to the limitation of either
Section 14(7)(a) or Section 15(6) of Article X of the Constitution of this
State pledging pursuant to this section all or a portion of the revenues
received and retained by that subdivision from a payment in lieu of taxes
to the repayment of any bonds shall not include in the assessed value of
taxable property located in the political subdivision for the purposes of
calculating the limit imposed by those sections of the Constitution any
amount representing the value of the property that is the basis of the
pledged portion of revenues. If the political subdivision, before pledging
revenues pursuant to this section, has included an amount representing the
value of a parcel or item of property that is the subject of a payment in
lieu of taxes in the assessed value of taxable property located in the
political subdivision and has issued general obligation debt within the
debt limit calculated on the basis of such assessed value, then it may not
pledge pursuant to this section revenues based on the item or parcel of
property, to the extent that the amount representing its value is necessary
to permit the outstanding general obligation debt within the debt limit of
the political subdivision."
Requires filings of copies of fee in lieu agreements
SECTION 5. Section 4-12-30(Q) of the 1976 Code, as added by Act
125 of 1995, is amended by adding:
"(7) Within thirty days of the date of execution of an
inducement or lease agreement, a copy of the agreement must be filed
with the Department of Revenue and the county auditors and the county
assessors
for the county or counties in which the project is located. If the project
is located in a multicounty park, the agreements must be filed with the
auditors and assessors for all counties participating in the multicounty
park."
Requires filings of copies of fee in lieu agreements
SECTION 6. Section 4-29-67(W) of the 1976 Code, as last amended
by Act 181 of 1993, is further amended by adding:
"(6) Within thirty days of the date of execution of an
inducement or lease agreement, a copy of the agreement must be filed
with the Department of Revenue and the county auditors and the county
assessors for the county or counties in which the project is located. If the
project is located in a multicounty park, the agreements must be filed with
the auditors and assessors for all counties participating in the multicounty
park."
Imposes penalty if needed to meet debt obligation
SECTION 7. If the stream of payments from a fee in lieu of tax
agreement becomes insufficient to completely service the payments of
interest and principal due pursuant to a debt obligation issued pursuant to
Section 4-29-68, a penalty must be imposed, in addition to any amount of
fee in lieu of tax payment otherwise due or payable, in the amount
necessary to pay all amounts of interest and principal which are not
otherwise paid by the pledged fee revenue. This penalty does not apply
if the entity obligated to make the fee payments or a member of the
control group associated with the entity owns the entire bond issue one
year before any such default of payment.
Disallows rollback application to exempt property
SECTION 8. Section 12-43-220(d) of the 1976 Code, as last amended
by Act 431 of 1996, is further amended by adding at the end:
"(5) Any property which becomes exempt from property taxes
under Section 12-37-220(A)(1) or any economic development property
which becomes exempt under Section 12-37-220(B) is not subject to
rollback taxes."
Defines "machinery" used for research and development
for purposes of sales and use tax and imposes special effective date
SECTION 9. A. Section 4-10-20 of the 1976 Code, as added by Act
317 of 1990, is amended to read:
"Section 4-10-20. A county, upon referendum approval, may levy
a sales and use tax of one percent on the gross proceeds of sales within the
county area which are subject to tax under Chapter 36 of Title 12 and the
enforcement provisions of Chapter 54 of Title 12. The sale of items with
a maximum tax levied in accordance with Section 12-36-2110 and Article
17 of Chapter 36 of Title 12 are exempt from the local sales and use tax.
The adopted rate also applies to tangible personal property subject to the
use tax in Section 12-36-1310. Taxpayers required to remit taxes under
Section 12-36-1310 shall identify the county or municipality in the county
area in which tangible personal property purchased at retail is stored,
used, or consumed in this State. Utilities are required to report sales in the
county or municipality in which consumption of the tangible personal
property occurs. A taxpayer subject to the tax imposed by Section
12-36-920, who owns or manages rental units in more than one county or
municipality, shall report separately in his sales tax return the total gross
proceeds from business done in each county or municipality."
B. Section 12-36-2110(D) of the 1976 Code, as added by Act 110 of
1991, is amended to read:
"(D) The maximum tax levied pursuant to this chapter on the
sale or use of machinery for research and development is three hundred
dollars. As used in this subsection, 'machinery for research and
development' means machinery used directly and exclusively in research
and development in the experimental or laboratory sense for new
products, new uses for existing products, or for improving existing
products. 'Machinery' includes machines and the parts of machines,
attachments, and replacements used or manufactured for use on or in the
operation of the machines and which are necessary to the operation of the
machines and are customarily so used. To be eligible for the limitation
imposed by this subsection, the machinery must be located in a separate
facility devoted exclusively to research and development as defined in this
subsection. The limitation does not extend to machinery used in
connection with efficiency surveys, management studies, consumer
surveys, economic surveys, advertising, promotion, or research in
connection with literary, historical, or similar projects."
C. Notwithstanding any other effective date provided in this act, this
section is effective for sales or use made on or after December 1, 1992.
Increases population floor for receipt of increased credit designation
SECTION 10. Section 12-6-3360(L) of the 1976 Code, as last amended
by Act 462 of 1996, is further amended to read:
"(L) Notwithstanding any other provision of this section, a
county with a population under twenty-five thousand as determined by the
most recent United States Census shall receive the next increased credit
designation for purposes of the credit allowed by this section."
Reenacts tax study commission
SECTION 11. A. Chapter 41, Title 2 of the 1976 Code is reenacted
to read:
"CHAPTER 41
Tax Study Commission
Section 2-41-5. There is established the Tax Study Commission
composed of nine members, three appointed by the President pro tempore
of the Senate from the membership of the Senate, who shall serve ex
officio with full voting powers, three appointed by the Speaker of the
House of Representatives from the membership of the House, who shall
serve ex officio with full voting powers, and three nonlegislative members
appointed by the Governor. The terms of members of the commission
appointed by the Governor are coterminous with the term of the
appointing Governor.
Section 2-41-15. The commission shall:
(1) make a detailed and careful study of the revenue laws of the State,
together with all other laws of the State which have a bearing upon the
study of the revenue laws, and to make recommendations to the General
Assembly;
(2) provide for the revision of revenue laws so as to provide a more
easily understandable and workable system of revenue laws for the State;
(3) recommend changes in the basic tax structure of the State and in
the rates of taxation, together with predicted revenue effects of the
charges together with proposed alternate sources of revenue, to the end
that our revenue system may be stable and equitable, and yet so fair when
compared with the tax structures of other states, that business enterprises
and persons would be encouraged by the economic impact of the South
Carolina revenue laws to move themselves and their business enterprises
into the State;
(4) recommend study of alternate sources of revenue found in the tax
structures of other states, and particularly in the other southeastern states,
and to make a report of the economic impact of the South Carolina tax
structure upon the business enterprises of various types of industry, as
compared with those of other southeastern states; and
(5) make recommendations for long range revenue planning, and for
future amendments of the revenue laws of South Carolina.
Section 2-41-25. The commission may:
(1) hold public hearings;
(2) receive testimony of any employees of the State or any other
witnesses who may assist the commission in its duties; and
(3) call for assistance in the performance of its duties from any
employees or agencies of the State or any of its political subdivisions.
Section 2-41-35. The commission may adopt by majority vote rules
not inconsistent with this chapter it considers proper with respect to
matters relating to the discharge of its duties under this chapter.
Section 2-41-45. Professional and clerical services for the
commission must be made available from the staffs of the General
Assembly, the office of the Governor, the Department of Revenue, and
other state agencies and institutions.
Section 2-41-55. The commission shall make reports and
recommendations to the General Assembly and the Governor. These
findings and recommendations must be published and made available to
the public.
Section 2-41-65. The members of the commission shall receive the
per diem, mileage, and subsistence as is allowed by law for members of
boards, committees, and commissions when engaged in the exercise of
their duties as members of the commission. These expenses for legislative
members must be paid from approved accounts of their respective houses
and these expenses of gubernatorial appointees must be paid from funds
appropriated for the operation of the office of the Governor. All other
costs and expenses of the commission must be paid in equal proportion by
the Office of the Governor, the Senate, and the House of
Representatives."
B. Unless extended by affirmative act of the General Assembly, the
existence of the commission established by this section terminates after
June 30, 1999.
Time effective
SECTION 12. This act takes effect upon approval by the Governor.
Approved the 24th day of June, 1997. |