H 3306 General Bill, By Chellis, Young, Altman, Barfield, Cato, Harrell, 
Harrison, Limehouse, Scarborough, J.E. Smith, Townsend and Bailey
 A BILL TO AMEND SECTION 12-20-50, CODE OF LAWS OF SOUTH CAROLINA, 1976,
 RELATING TO THE CORPORATE LICENSE TAX, SO AS TO ALLOW A HOLDING COMPANY TO
 REDUCE ITS PAID-IN CAPITAL SURPLUS BY THE PORTION OF CONTRIBUTIONS TO ITS
 CAPITAL RECEIVED FROM ITS PARENT CORPORATION THAT IS DIRECTLY OR INDIRECTLY
 USED TO FINANCE A SUBSIDIARY'S EXPANSION COSTING IN EXCESS OF ONE HUNDRED
 MILLION DOLLARS, WHICH ON THE DATE CONSTRUCTION BEGAN IS LOCATED IN AN
 ECONOMIC IMPACT ZONE.

   01/14/03  House  Introduced and read first time HJ-119
   01/14/03  House  Referred to Committee on Ways and Means HJ-119
   01/28/03  House  Member(s) request name added as sponsor: Bailey
   03/19/03  House  Committee report: Favorable with amendment Ways
                     and Means HJ-6
   03/20/03         Scrivener's error corrected
   03/25/03  House  Amended HJ-30
   03/25/03  House  Read second time HJ-31
   03/26/03  House  Read third time and sent to Senate HJ-12
   03/26/03  Senate Introduced and read first time SJ-21
   03/26/03  Senate Referred to Committee on Finance SJ-21

AMENDED

March 25, 2003

H. 3306

Introduced by Reps. Chellis, Young, Altman, Barfield, Cato, Harrell, Harrison, Limehouse, Scarborough, J.E. Smith, Townsend and Bailey

S. Printed 3/25/03--H.

Read the first time January 14, 2003.

REVENUE IMPACT 1/

This bill is expected to reduce general fund corporate income tax revenue by an estimated $200,000 in FY 2003-04.

Explanation

This bill would allow a holding company to reduce its paid-in capital surplus by the amount of capital investment received from its parent company. This investment must exceed $100 million and be used directly or indirectly to finance the holding company's expansion in an Economic Impact Zone. Based on data provided by the Department of Revenue (DOR), approximately 5 companies currently claiming the Economic Impact Zone investment tax credit are reporting paid-in capital surplus in excess of $100 million. The DOR is unaware if these 5 companies paid-in capital surplus was provided by contributions from its parent corporation. Each company that would qualify for the proposed reduction in paid-in capital surplus for the $100 million investment will reduce general fund corporate license fees by $100,000. The company would derive this $100,000 benefit from the $100 million reduction in paid-in capital surplus times the corporate license fee rate of $1 for each $1,000 of paid-in capital surplus reported. This fiscal impact anticipates that one of the companies currently claiming the Economic Impact Zone investment tax credit is eligible for the proposed reduction in paid-in capital surplus and one additional company will become eligible due to the availability of the reduction. Therefore, this bill is expected to reduce general fund corporate income tax revenue by an estimated $200,000 in FY 2003-04.

Approved By:

William C. Gillespie

Board of Economic Advisors

1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by BEA, or Section 2-7-76 for a local revenue impact, or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.

TO AMEND SECTION 12-20-50, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CORPORATE LICENSE TAX, SO AS TO ALLOW A HOLDING COMPANY TO REDUCE ITS PAID-IN CAPITAL SURPLUS BY THE PORTION OF CONTRIBUTIONS TO ITS CAPITAL RECEIVED FROM ITS PARENT CORPORATION THAT IS DIRECTLY OR INDIRECTLY USED TO FINANCE A SUBSIDIARY'S EXPANSION COSTING IN EXCESS OF ONE HUNDRED MILLION DOLLARS, WHICH ON THE DATE CONSTRUCTION BEGAN IS LOCATED IN AN ECONOMIC IMPACT ZONE.

Amend Title To Conform

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

SECTION    1.    Section 12-20-50 of the 1976 Code is amended by adding a new subsection at the end to read:

"(C)    In addition to the provisions of subsection (B) of this section, a holding company may reduce its paid-in capital surplus by the portion of contributions to capital received from its parent corporation that is directly or indirectly used to finance a subsidiary's expansion costing in excess of one hundred million dollars, which on the date construction started is located in an Economic Impact Zone as defined in Section 12-14-30. A reduction is only allowed pursuant to this subsection for the paid-in capital surplus of the holding company attributable to this contribution to capital for expansion. Additionally, no reduction is allowed unless the expansion is completed within three years of the first contribution to capital received by the holding company, but this three-year limitation may be extended by the Department of Revenue upon written application and good cause shown. Amounts previously excluded in paid-in capital surplus pursuant to this subsection must be included in the first license tax year beginning after the period allowed for the expansion if the expansion is not timely completed."

SECTION    2.    This act takes effect upon approval by the Governor and applies for contributions to capital for expansion made after August 2002.