S*595 Session 110 (1993-1994)
S*0595(Rat #0162, Act #0123) General Bill, By Drummond, Passailaigue, Russell and
J.V. Smith
Similar(H 3828)
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Section
4-29-69 so as to allow a payment in lieu of property taxes for qualified
property of a qualified manufacturer completing a qualified consolidation
between June 1, 1992, and December 31, 1993, and to provide definitions and
for distribution of the payment; to amend Section 4-1-170, as amended,
relating to joint development projects, so as to provide for the computation
of the bonded debt limit; to amend Section 4-29-67, as amended, relating to
the fee in lieu of taxes allowed certain industrial development projects, so
as to revise the manner in which and conditions under which fees in lieu of
taxes are authorized, including a requirement that the minimum eighty-five
million dollar investment threshold for the fee arrangement may not be reduced
except by a special vote of the General Assembly, defined as an affirmative
vote of two-thirds of the members of each House present and voting but not
less than three-fifths of the total membership of each House, and the
transferability of an interest in a fee in lieu of taxes agreement; to amend
Section 4-29-68, relating to special source revenue bonds, so as to provide
that special purpose districts may issue such bonds and provide that
infrastructure may include improved and unimproved property and provide for an
additional method of the use of bond proceeds and delete a Constitutional
reference; to provide that this Act may not be construed as amending or
repealing any provision of Section 39, Act 361 of 1992, to provide that the
provisions of this Act are severable, and to provide provisions relating to
effective dates.-amended title
03/25/93 Senate Introduced and read first time SJ-6
03/25/93 Senate Referred to Committee on Finance SJ-6
04/15/93 Senate Committee report: Favorable with amendment
Finance SJ-15
04/20/93 Senate Amended SJ-31
04/20/93 Senate Read second time SJ-34
04/20/93 Senate Ordered to third reading with notice of
amendments SJ-34
04/21/93 Senate Amended SJ-11
04/21/93 Senate Read third time and sent to House SJ-12
04/22/93 House Introduced, read first time, placed on calendar
without reference HJ-12
05/06/93 House Amended HJ-51
05/06/93 House Read second time HJ-56
05/11/93 House Read third time and returned to Senate with
amendments HJ-8
05/20/93 Senate Concurred in House amendment and enrolled SJ-32
06/10/93 Ratified R 162
06/14/93 Signed By Governor
06/14/93 Effective date Act No. 123
06/14/93 See act for exception to or explanation of
effective date
07/01/93 Copies available
(A123, R162, S595)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING SECTION 4-29-69 SO AS TO ALLOW
A PAYMENT IN LIEU OF PROPERTY TAXES FOR QUALIFIED
PROPERTY OF A QUALIFIED MANUFACTURER COMPLETING A
QUALIFIED CONSOLIDATION BETWEEN JUNE 1, 1992, AND
DECEMBER 31, 1993, AND TO PROVIDE DEFINITIONS AND FOR
DISTRIBUTION OF THE PAYMENT; TO AMEND SECTION 4-1-170,
AS AMENDED, RELATING TO JOINT DEVELOPMENT PROJECTS,
SO AS TO PROVIDE FOR THE COMPUTATION OF THE BONDED
DEBT LIMIT; TO AMEND SECTION 4-29-67, AS AMENDED,
RELATING TO THE FEE IN LIEU OF TAXES ALLOWED CERTAIN
INDUSTRIAL DEVELOPMENT PROJECTS, SO AS TO REVISE THE
MANNER IN WHICH AND CONDITIONS UNDER WHICH FEES IN
LIEU OF TAXES ARE AUTHORIZED, INCLUDING A
REQUIREMENT THAT THE MINIMUM EIGHTY-FIVE MILLION
DOLLAR INVESTMENT THRESHOLD FOR THE FEE
ARRANGEMENT MAY NOT BE REDUCED EXCEPT BY A SPECIAL
VOTE OF THE GENERAL ASSEMBLY, DEFINED AS AN
AFFIRMATIVE VOTE OF TWO-THIRDS OF THE MEMBERS OF
EACH HOUSE PRESENT AND VOTING BUT NOT LESS THAN
THREE-FIFTHS OF THE TOTAL MEMBERSHIP OF EACH HOUSE,
AND THE TRANSFERABILITY OF AN INTEREST IN A FEE IN LIEU
OF TAXES AGREEMENT; TO AMEND SECTION 4-29-68, RELATING
TO SPECIAL SOURCE REVENUE BONDS, SO AS TO PROVIDE
THAT SPECIAL PURPOSE DISTRICTS MAY ISSUE SUCH BONDS
AND PROVIDE THAT INFRASTRUCTURE MAY INCLUDE
IMPROVED AND UNIMPROVED PROPERTY AND PROVIDE FOR
AN ADDITIONAL METHOD OF THE USE OF BOND PROCEEDS
AND DELETE A CONSTITUTIONAL REFERENCE; TO PROVIDE
THAT THIS ACT MAY NOT BE CONSTRUED AS AMENDING OR
REPEALING ANY PROVISION OF SECTION 39, ACT 361 OF 1992,
TO PROVIDE THAT THE PROVISIONS OF THIS ACT ARE
SEVERABLE, AND TO PROVIDE PROVISIONS RELATING TO
EFFECTIVE DATES.
Be it enacted by the General Assembly of the State of South Carolina:
Payment in lieu of taxes
SECTION 1. A. Chapter 29, Title 4 of the 1976 Code is amended by
adding:
"Section 4-29-69. (A) For purposes of this section:
(1) `Qualified property' means all real and tangible personal property
owned, leased, licensed, or acquired by a qualified manufacturer during the
consolidation period regardless of (a) when the property is placed into
service in this State, and (b) whether the property has been previously
subject to property taxes in this State.
(2) `Qualified manufacturer' means a manufacturing facility in this
State which:
(a) employed at least seven hundred persons at the beginning of the
consolidation period; and
(b) is located in a county which is designated at the beginning of the
consolidation period as a less-developed county by the South Carolina Tax
Commission pursuant to Section 12-7-1220.
(3) `Qualified consolidation' means:
(a) a restructuring or transfer or series of transfers involving assets
of a manufacturing facility in this State and a manufacturing facility which
is located in a state other than this State, pursuant to which all or a portion
of the assets of the manufacturing facility located in the other state are
transferred to a manufacturing facility in this State;
(b) during the consolidation period, (i) the corporations which own
or lease the manufacturing facility in the other state and the facility in this
State are members of the same controlled group as defined under Internal
Revenue Code Section 1563, or (ii) the same corporation owns or leases the
facility in this State and the facility in the other state;
(c) at least one hundred new jobs are created at the facility in this
State during the consolidation period; and
(d) during the consolidation period, at least ten million dollars of
original cost, without regard to depreciation at the time of the transfer to the
facility, of manufacturing and related property are added to the facility in
this State, either from the manufacturing facility in the other state, or
purchased or leased from a third party.
(4) `Payment in lieu of taxes' means one or more payments made to
the county at the times and in the amounts as the county, and entity or
entities which will initially make the payment in lieu of taxes, may agree,
pursuant to a transfer of title to the property which is subject to such
payments to the county, and a lease of the property by the county to the
entity or entities which will initially make such payments.
(5) `Consolidation period' means the eighteen-month period beginning
on the first date that assets are transferred to the facility in this State from
the manufacturing facility in the other state. The South Carolina Economic
Development Board shall certify in writing to the South Carolina Tax
Commission the specific date that the consolidation period begins.
(B) In the case of a financing agreement in the form of a lease or a
lease purchase, the county and the investor may enter into an inducement
agreement which provides for a payment in lieu of property taxes under this
section for qualified property owned by, or leased or licensed to, one or
more qualified manufacturers which complete a qualified consolidation
between June 1, 1992, and December 31, 1993.
(C) Any interest in the assets which are subject to the payment in lieu of
taxes, or the lease relating to the assets, may be freely transferred without
restriction, except as the county, and the entity or entities which will make
such payment, may otherwise agree. This agreement, and any inducement
agreement, may be freely amended or replaced at any time.
(D) Distribution of the payment in lieu of taxes 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.
(E) The provisions of this section do not apply to any construction of
Section 4-29-67, and to the extent that Sections 4-29-60, 4-29-67, or any
other provision of Title 4 are inconsistent with this section, this section
controls."
B. This section takes effect upon approval by the Governor.
Joint developments
SECTION 2. The last paragraph of Section 4-1-170 of the 1976 Code, as
amended by Act 361 of 1992, is further amended to read:
"For the purpose of bonded indebtedness limitation and for the
purpose of computing the index of taxpaying ability pursuant to Section
59-20-20(3), allocation of the assessed value of property within the park to
the participating counties and to each of the taxing entities within the
participating counties must be identical to the allocation of revenue
received and retained by each of the counties and by each of the taxing
entities within the participating counties. Provided, however, that the
computation of bonded indebtedness limitation is subject to the
requirements of Section 4-29-68(E)."
Fee in lieu of taxes
SECTION 3. Section 4-29-67 of the 1976 Code, as last amended by Act
361 of 1992, is further amended to read:
"Section 4-29-67. (A) Notwithstanding the provisions of Section
4-29-60, in the case of a financing agreement in the form of one or more
lease agreements for a project qualifying under subsection (B), the county
and the investor may enter into an inducement agreement which provides
for payment in lieu of taxes (fee) as provided in this section. All references
in this section to a lease agreement shall be deemed also to refer to a lease
purchase agreement.
(B) In order for property to qualify for the fee as provided in subsection
(D)(2):
(1) Title to the property must be held by the county or in the case of a
project located in an industrial development park as defined in Section
4-1-170, title may be held by more than one county, provided each county
is a member of the industrial development park. Any real property
transferred to the county must include a legal description and plat of the
property.
(2) The investment must be a project which is located in a single
county or an industrial development park as defined in Section 4-1-170. A
project located on a contiguous tract of land in more than one county, but
not in such an industrial development park, may qualify for the fee
provided (a) the counties agree on the terms of the fee and the distribution
of the fee payment; (b) the minimum millage rate cannot be lower than the
millage rate applicable to the county in which the greatest amount of
investment occurs; and (c) all such counties must be parties to all
agreements establishing the terms of the fee.
(3) The minimum level of investment must be at least eighty-five
million dollars and must be invested within the time period provided in
subsection (C).
(4) (a) Except as provided in subsection (B)(4)(b), the investment
must be made by a single entity. For purposes of this section, (i) any
partnership or other association which properly files its South Carolina
income tax returns as a partnership for South Carolina income tax purposes
will be treated as a single entity and as a partnership, and (ii) any
corporation or other association which properly files its South Carolina
income tax returns as a corporation for South Carolina income tax purposes
will be treated as a single entity and as a corporation.
(b)(i) The members of the same controlled group of corporations can
qualify for the fee if the combined investment in the county by the
members meets the minimum investment requirements. The county and the
members who are part of the inducement agreement may agree that any
investments by other members of the controlled group within the time
periods provided in subsections (C)(1) and (C)(2) shall qualify for the
payment regardless of whether the member was part of the inducement
agreement; provided, however, in order to qualify for the fee, such other
members of the controlled group must be specifically approved by the
county and must agree to be bound by agreements with the county relating
to the fee; provided, however, such controlled group members need not be
bound by agreements, or portions of agreements, to the extent such
agreements do not affect the county; provided, further, that with the
consent of the county, such members will not be bound by agreements or
portions of agreements which do affect the county. Except as otherwise
provided in subsection (B)(2), the investments under this subsection
(B)(4)(b) must be within the same county or industrial park. Any
controlled group member which is claiming the fee must invest at least ten
million dollars in the county or industrial park.
(ii) The Tax Commission must be notified in writing of all
members which have investments subject to the fee before or within thirty
days after the execution of the lease agreement covering the investment by
the member. The Tax Commission may extend the thirty-day period upon
written request. Failure to meet this notice requirement will not adversely
affect the fee, but a penalty may be assessed by the Tax Commission for
late notification for 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 must provide the information
considered necessary by the Tax Commission to ensure that the investors
are part of a controlled group.
(iii) If at any time the controlled group or any former member (who
has left the controlled group) no longer has the minimum eighty-five
million dollars of investment (without regard to depreciation), that group or
former member no longer holding the minimum amount of investment as
provided in subsection (B)(3) (without regard to depreciation) will no
longer qualify for the fee.
(iv) For purposes of this section, `controlled group' or `controlled
group of corporations' shall have the meaning provided under Section
1563(a) of the Internal Revenue Code as defined in Chapter 7 of Title 12 as
of the date of the execution of the inducement agreement (without regard to
amendments or replacements thereof), without regard to subsection (b) of
such Section 1563.
(C) (1) From the end of the property tax year in which the investor
and the county execute an inducement agreement, the investor has seven
years in which to enter into an initial lease agreement with the county.
(2) From the end of the property tax year in which the investor and
the county execute the initial lease agreement, the investor has five years in
which to complete its investment for purposes of qualifying for this section.
If the investor does not anticipate completing the project within five years,
the investor may apply to the county before the end of the five-year period
for an extension of time to complete the project. If the county agrees to
grant the extension, the county must do so in writing and a copy must be
delivered to the Tax Commission within thirty days of the date the
extension was granted. The extension may not exceed two years in which
to complete the project.
There is no extension allowed for the five-year period in which to meet
the minimum level of investment. If the minimum level of investment is
not met within five years, all property under the lease agreement or
agreements reverts retroactively to the payments required by Section
4-29-60. The difference between the fee actually paid by the investor and
the payment which is due under Section 4-29-60 is subject to interest as
provided in Section 12-43-305.
Unless property qualifies as replacement property under a contract
provision enacted pursuant to subsection (F)(2), any property placed in
service after the five-year period, or seven years in the case of a project
which has received an extension, is not part of the fee agreement under
subsection (D)(2) and is subject to the payments required by Section
4-29-60 if the county has title to the property, or to property taxes as
provided in Chapter 37 of Title 12 if the investor has title to the
property.
(3) The annual fee provided by subsection (D)(2) is available for no
more than twenty years. For projects which are completed and placed in
service during more than one year, each year's investment may be subject to
the fee in subsection (D)(2) for twenty years to a maximum total of
twenty-seven years for the fee for a single project which has been granted
an extension.
(D) The inducement agreement must provide for fee payments, to the
extent applicable, as follows:
(1) (a) Any property, title to which is transferred to the county, will
be subject, before being placed in service, to an annual fee payment as
provided in Section 4-29-60.
(b) Any undeveloped land, title to which is transferred to the
county, will be subject, before being developed and placed in service, to an
annual fee payment as provided in Section 4-29-60. The time during which
fee payments are made under Section 4-29-60 will not be considered part of
the maximum periods provided in subsections (C)(2) and (C)(3), and no
lease shall be considered an `initial lease agreement' for purposes of this
section unless and until the first day of the calendar year for which a fee
payment is due under subsection (D)(2) in connection with such lease.
(2) After property qualifying under subsection (B) is placed in service,
an annual fee payment determined in accordance with one of the following
is due:
(a) an annual payment in an amount not less than the property taxes
that would be due on the project if it were taxable, but using an assessment
ratio of not less than six percent, and a fixed millage rate as provided in
subsection (G), and a fair market value estimate determined by the South
Carolina Tax Commission as follows:
(i) for real property using the original income tax basis for South
Carolina income tax purposes without regard to depreciation (provided,
however, if real property is constructed for the fee or is purchased in an
arm's length transaction, fair market value will be deemed to equal the
original income tax basis, otherwise the Tax Commission will determine
fair market value by appraisal); and
(ii) for personal property using the original income tax basis for
South Carolina income tax purposes less depreciation allowable for
property tax purposes, except that the investor is not entitled to any
extraordinary obsolescence.
(b) an annual payment based on any alternative arrangement yielding
a net present value of the sum of the fees for the life of the agreement not
less than the net present value of the fee schedule as calculated under
subsection (D)(2)(a). Net present value calculations performed under this
subsection 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 inducement agreement is executed. If no
yield is available for the month in which the inducement agreement is
executed, the last published yield for the appropriate maturity must be used.
If there are no bonds of appropriate maturity available, bonds of different
maturities may be averaged to obtain the appropriate maturity.
(c) an annual payment using a formula that results in a fee not less
than the amount required pursuant to subsection (D)(2)(a), except that
every fifth year the applicable millage rate is allowed to increase or
decrease in step with the average actual millage rate applicable in the
district where the project is located based on the preceding five-year
period.
(3) At the conclusion of the payments determined pursuant to items
(1) and (2) of this subsection, an annual payment equal to the taxes due on
the project as if it were taxable. When the property is no longer subject to
the fee under subsection (D)(2), the fee or property taxes must be
assessed:
(a) with respect to real property, based on the fair market value as of
the latest reassessment date for similar taxable property; and
(b) with respect to personal property, based on the then depreciated
value applicable to such property under the fee, and thereafter continuing
with the South Carolina property tax depreciation schedule.
(E) Calculations pursuant to subsection (D)(2) must be made on the
basis 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 12-37-220B (32) and (34).
(F) With regard to calculation of the fee provided in subsection
(D)(2), the inducement agreement may provide for the disposal of property
and the replacement of property subject to the fee as follows:
(1) (a) If an investor disposes of property subject to the fee, the fee
must be reduced by the amount of the fee applicable to that property.
(b) Property is disposed of only when it is scrapped or sold in
accordance with the lease agreement.
(c) If the investor used any method to compute the fee other than
that provided in subsection (D)(2)(a), the fee on the property which was
disposed of must be recomputed in accordance with subsection (D)(2)(a)
and to the extent that the amount which would have been paid under
subsection (D)(2)(a) exceeds the fee actually paid by the investor, the
investor must pay the difference with the next fee payment due after the
property is disposed of. If the investor used the method provided in
subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must
be used to calculate the amount which would have been paid under
subsection (D)(2)(a).
(d) If there is no provision in the agreement dealing with the
disposal of property in accordance with this subsection, the fee remains
fixed and no adjustment to the fee is allowed for disposed property.
(2) Any property which is placed in service as a replacement for
property which is subject to the fee payment may become part of the fee
payment as provided in this item:
(a) Replacement property does not have to serve the same function
as the property it is replacing. Replacement property qualifies for fee
treatment provided in subsection (D)(2) only up to the original income tax
basis of fee 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. To the extent that the income tax basis of the replacement
property exceeds the original income tax basis of the property which it is
replacing, the excess amount is subject to payments as provided in Section
4-29-60. Replacement property is entitled to the fee payment for the period
of time remaining on the twenty-year fee period for the property which it is
replacing; provided, however, that where a single piece of property replaces
two or more pieces of property, such fee period shall be measured from the
earliest of the dates on which the replaced pieces of property were placed in
service.
(b) The new replacement property which qualifies for the fee
provided in subsection (D)(2) is recorded using its income tax basis and the
fee is calculated using the millage rate and assessment ratio provided on the
original fee property. The fee payment for replacement property must be
based on subsection (D)(2)(a) or (D)(2)(c), if the investor originally used
this method, without regard to present value.
(c) In order to qualify as replacement property title to the
replacement property must be held by the county.
(d) If there is no provision in the inducement agreement dealing with
replacement property, any property placed in service after the five-year
period, or seven years in the case of a project which has received an
extension, is subject to the payments required by Section 4-29-60 if the
county has title to the property, or to property taxes as provided in Chapter
37 of Title 12 if the investor has title to the property.
(G) (1) The county and the investor may enter into an agreement to
establish the millage rate (millage rate agreement) for purposes of
calculating payments under subsection (D)(2)(a) and the first five years
under subsection (D)(2)(c). This millage rate agreement must be executed
on the date of the inducement agreement or anytime thereafter up to and
including the date of the initial lease agreement. This millage rate
agreement may be a separate agreement or may be made a part of either the
inducement agreement or the initial lease agreement.
(2) The millage rate cannot be lower than the cumulative property tax
millage rate legally levied by or on behalf of all taxing entities within
which the subject property is to be located which is the cumulative rate
applicable on the thirtieth day of June preceding the calendar year in which
the millage rate agreement is executed. If no millage rate agreement is
executed before the date of the initial lease agreement, the millage rate is
deemed to be the cumulative property tax millage rate applicable on the
thirtieth day of June preceding the calendar year in which the initial lease
agreement is executed by the parties.
(H) (1) Upon agreement of the parties, and except as provided in
subsection (H)(2), an inducement agreement, a millage rate agreement or
both may be amended or terminated and replaced with regard to all matters
including, but not limited to, the addition or removal of controlled group
members; provided, however, that no such amendment or termination and
replacement may take place after the initial lease agreement date.
(2) No amendment or replacement of an inducement agreement or
millage rate agreement may be used to change the millage rate or discount
rate under any such agreement.
(I) Any and all investment expenditures made or incurred by any
investor in connection with a project (or relevant phase thereof in
connection with a project completed and placed in service in more than one
year) shall qualify as expenditures subject to the fee in subsection (D)(2),
so long as such expenditures are made:
(1) after the county takes action reflecting or identifying the project or
proposed project or investment including, but not limited to, the adoption
of an inducement or similar resolution by county council; and
(2) before the end of the applicable five or seven-year period
referenced in subsection (C)(2) and (C)(3).
An inducement agreement must be executed within two years after the date
on which the county takes action reflecting or identifying the project or
proposed project or investment including, but not limited to, the adoption
of an inducement or similar resolution by county council; otherwise, only
investment expenditures made or incurred by any investor after the date of
such inducement agreement in connection with a project shall qualify as
expenditures subject to the fee in subsection (D)(2).
(J) (1) Subject to subsection (K), project investment expenditures
which are incurred within the applicable time period provided in subsection
(I) by an entity whose investments are not being computed in the level of
investment for purposes of subsections (B) or (C) shall qualify as
investment expenditures subject to the fee in subsection (D)(2) where:
(a) such expenditures are part of the original cost of the property
which is transferred, within the applicable time period provided in
subsection (I), to one or more other entities which are members of the same
controlled group as the transferor entity and whose investments are being
computed in the level of investment for purposes of subsections (B) or (C);
and
(b) such property would have qualified for the fee in subsection
(D)(2) if it had been initially acquired by the transferee entity rather than
the transferor entity.
(2) The income tax basis of such property immediately before such
transfer must equal the income tax basis of such property immediately after
such transfer; provided, however, that to the extent income tax basis of
such property immediately after such transfer unintentionally exceeds the
income tax basis of such property immediately before such transfer, such
excess shall be subject to payments under Section 4-29-60.
(3) The county must agree to any inclusion in the fee of the property
described in subsection (J)(1).
(K) (1) Property which has been previously subject to property taxes in
South Carolina will not qualify for the fee except as provided in this
subsection:
(a) Land, excluding improvements thereon, on which a new
project will be located may qualify for the fee even if it has previously been
subject to South Carolina property taxes;
(b) Property which has been subject to South Carolina property
taxes, but which has never been placed in service in South Carolina, may
qualify for the fee; and
(c) Property which has been placed in service in South Carolina
and subject to South Carolina property taxes 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 7 of Title
12 as of the time of the transfer, may qualify for the fee provided the
fee-paying entity invests at least an additional eighty-five million dollars in
the project.
(2) Repairs, alterations, or modifications to real or personal property
which are not subject to a fee will not be eligible for a fee, even if they are
capitalized expenditures, except for modifications to existing real property
improvements which constitute an expansion of such improvements.
(L) (1) For a project not located in an industrial development park
as defined in Section 4-1-170, distribution of the fee in lieu of taxes 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. For this purpose, the relative proportions must be calculated
based on the following procedure: holding constant the millage rate set in
subsection (G) and using all tax abatements automatically granted for
taxable property, a full schedule of the property taxes that would otherwise
have been distributed to each millage-levying entity in the county must be
prepared for the life of the agreement, up to twenty years maximum. These
separate schedules must then be reduced to present value using the discount
rate provided under subsection (D)(2)(b). The resulting values for each
millage-levying entity as a percentage of the present value total for all such
entities determines each entity's relative shares of each year's fee payment
for all subsequent years of the agreement.
(2) For a project located in an industrial development park as defined
in Section 4-1-170, distribution of the fee in lieu of taxes on the project
must be made in the manner provided for by the agreement establishing the
industrial development park.
(M) As a directly foreseeable result of negotiating the fee, gross
revenue of a school district in which a project is located in any year a fee
negotiated pursuant to this section is paid, may not be less than gross
revenues of the district in the year before the first year for which a fee in
lieu of taxes is paid. In negotiating the fee, the parties shall assume that the
formulas for the distribution of state aid at the time of the execution of the
inducement agreement must remain unchanged for the duration of the lease
agreement.
(N) Projects on which a fee in lieu of taxes is paid 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). Provided, however, that the computation of bonded
indebtedness limitation is subject to the requirements of Section
4-29-68(E).
(O) (1) (a) Any corresponding interest in each of an inducement
agreement, millage rate agreement, and lease agreement (collectively
referred to as a `fee interest'), representing an investment of at least
eighty-five million dollars (based on income tax basis without regard to
depreciation, and regardless of whether such investment comprises all or
part of a project), may be transferred by any entity to any entity, whether or
not such transferee entity is a member of the same controlled group of
which the transferor entity is a member, and (b) any or all equity interests
in any partnership, corporation, or other association which properly files its
South Carolina income tax returns as a partnership or corporation and
which has an interest in an inducement agreement, millage rate agreement,
and lease agreement (such equity interests collectively and individually
referred to as an `entity interest') may be transferred by any entity to any
entity, whether or not such transferee entity is a member of the same
controlled group of which the entity in which one or more interests is being
transferred is a member, provided that the entity or entities whose entity
interest is or are being transferred hold at least an eighty-five million dollar
investment (based on income tax basis without regard to depreciation) in
the project as of the time of the transfer.
(2) Except for transfers pursuant to subsections (P) or (Q), no transfer
of a fee interest or entity interest may be undertaken:
(a) until twenty-four months after the project has been placed in
service, or relevant portion thereof in the case of a project placed in service
in more than one year; or
(b) within twenty-four months after a prior transfer of the fee interest
or entity interest to be transferred.
Provided, however, the running of such applicable twenty-four month
period shall be suspended for any period during which a transferor's (under
subsection (O)(2)(a)) or transferee's (under subsection (O)(2)(b)) risk of
loss with respect to the fee interest or entity interest to be transferred is in
fact substantially diminished by:
(i) the holding by any entity of a contractual right to require any
transfer of such interest by an entity which is not a member of the
transferor's (under subsection (O)(2)(a)) or transferee's (under subsection
(O)(2)(b)) controlled group;
(ii) the holding by any entity which is not a member of the
transferor's (under subsection (O)(2)(a)) or transferee's (under subsection
(O)(2)(b)) controlled group of a right to acquire the interest; or
(iii) a short sale or any similar transaction with respect to the interest
which is undertaken by the transferor (under subsection (O)(2)(a)) or
transferee (under subsection (O)(2)(b)) which is not a member of any such
transferee's or transferor's controlled group.
(3) All transfers of fee interests or entity interests authorized under
subsection (O)(1) must meet the following requirements:
(a) The county must approve such transfer within six months prior to
the transfer.
(b) The Tax Commission must receive notification in writing of the
identity of each transferee and other information required by the Tax
Commission within thirty days after the transfer becomes effective. The
Tax Commission may extend the thirty-day period upon written request.
Failure to meet this notice requirement will not adversely affect the fee, but
a penalty may be assessed by the Tax Commission for late notification for
up to ten thousand dollars a month or portion of a month, with the total
penalty not to exceed one hundred twenty thousand dollars.
(c) No election under Internal Revenue Code of 1986, as amended,
Sections 338 or 754 may be made with respect to the transfer.
(4) All transfers of fee interests authorized under subsection (O)(1)
must meet the following additional requirements:
(a) The transferor must pay the county any present value fee
differential (as defined under subsection (O)(5)) within ninety days after
the transfer. Failure to make this payment will result in interest and
penalties computed in the same manner and amounts applicable to property
tax.
(b) Each transferee must agree to be bound by the applicable
agreements constituting the fee arrangement as to that portion of the project
to which the transfer relates.
(c) The income tax basis of property interests which are subject to
the fee in the hands of the transferee immediately after such transfer (i)
cannot exceed the original income tax basis of such property (without
regard to depreciation) in the hands of the transferor and (ii) cannot be less
than the income tax basis of such property (taking depreciation into
account) in the hands of the transferor immediately before transfer. The fee
to be paid under subsection (D) with respect to such transferred property
interests for the remaining term of the fee shall be recomputed using the
transferee's income tax basis immediately after the transfer; the same
millage rate and discount rate used by the transferor; and the fee payment
method provided under subsection (D)(2)(a); provided, however, that if the
pre-transfer fee payments were made under subsection (D)(2)(c), then
post-transfer fee payments must be made under subsection (D)(2)(c), but
without any present value method applicable to such payments.
(5) The present value fee differential shall mean the amount by which
the fee that would have been paid under subsection (D)(2)(a) with respect
to the transferred fee interest until the time of the transfer exceeds the
amount which was paid under subsection (D)(2)(b) or (D)(2)(c) until such
time with respect to such fee interest. If the investor used the method
provided in subsection (D)(2)(c), the millage rate provided in subsection
(D)(2)(c) must be used to calculate the amount which would have been paid
under subsection (D)(2)(a). If subsection (D)(2)(b) is not applicable to
such fee interest, or if no present value fee computation was used under
subsection (D)(2)(c), no present value fee differential shall be required to
be paid on a transfer thereof.
(P) (1) Any interests in an inducement agreement, millage rate
agreement, or lease agreement (collectively and individually referred to as a
`group fee interest') may be transferred by any entity to:
(a) any corporation which is a member of the same controlled group
as the transferring corporation;
(b) any corporation which is a member of the same controlled group
as all of the partners comprising the transferring partnership;
(c) any partnership all of the partners of which are members of the
same controlled group of which the transferring corporation is a member;
and
(d) any partnership all of the partners of which are members of the
same controlled group as all of the partners comprising the transferring
partnership.
(2) Transfers of group fee interests authorized under subsection (P)(1)
must meet the requirements set forth in subsection (O)(3) and (O)(4);
provided, however, in connection with subsection (O)(4)(c), to the extent a
present value fee payment computation was used by the transferor, the
transferee may, if the county agrees, use a fee payment method based on
any present value fee payment method provided under subsection (D)(2).
In addition, such transfers must involve at least a ten million dollar portion
of the project investment or proposed investment (based on income tax
basis without regard to depreciation).
(3) Any transfer of an interest in an inducement agreement must
include a transfer of a corresponding interest in a millage rate agreement, if
any, and lease agreement, if any; any transfer of an interest in a millage rate
agreement must include a transfer of a corresponding interest in an
inducement agreement, and lease agreement, if any; and any transfer of an
interest in a lease agreement must include a transfer of a corresponding
interest in an inducement agreement and millage rate agreement.
(4) One or more members of a controlled group, or a partnership all of
the partners of which are members of the same controlled group, having an
interest in a fee may enter into a sublease, concerning some or all of the
project, with any other member of such controlled group, or with any
partnership all the partners of which are members of such controlled group,
without adversely affecting the fee and without regard to the other
provisions of this subsection (P); provided, however, that such sublease
may not transfer income tax ownership (as defined under subsection (S)) to
the portion of the project which is the subject of the sublease, unless the
applicable provisions of subsection (P) have been met.
(Q) (1) Any or all equity interests in any partnership, corporation, or
other association which properly files its South Carolina income tax returns
as a partnership or corporation and which has an interest in an inducement
agreement, millage rate agreement, lease agreement, or any or all of the
foregoing (such equity interests collectively and individually referred to as
a `group entity interest') may be transferred to:
(a) any corporation which is a member of the same controlled group
as the corporation in which an interest is being transferred;
(b) any corporation which is a member of the same controlled group
as all of the partners comprising the partnership in which an interest is
being transferred;
(c) any partnership in which all of the partners are members of the
same controlled group as the corporation in which an interest is being
transferred; and
(d) any partnership in which all of the partners are members of the
same controlled group as all of the partners comprising the partnership in
which an interest is being transferred.
(2) Transfers of group entity interests authorized under subsection
(Q)(1) must meet the requirements set forth in subsection (O)(3).
(R) For purposes of subsections (O)(1)(a) and (P), and subject to
subsection (U), each transferee shall, with respect to a project which is the
subject of a transfer, be considered to have made amounts of qualified
investments represented by the property interest which is subject to the fee
and which is transferred, without regard to depreciation.
(S) (1) Notwithstanding anything in subsections (O), (P), and (Q), a
single entity, or two or more entities which are members of a controlled
group, may enter into any lending, financing, security or similar
arrangement, or succession of such arrangements, with any financing entity,
concerning all or part of a project, provided that the income tax ownership
of the property which is subject to the fee payment under subsection (D)(2)
is held, by the time the fee payments relating to such property begin under
subsection (D)(2), by:
(a) the entity, or one or more members of the controlled group,
which entered into the inducement agreement with the county;
(b) one or more transferees permitted under subsection (O)(1)(a) or
(P); or
(c) one or more of the entities referenced in items (a) and (b).
Without limiting the foregoing, pursuant to any such arrangement or
arrangements, the inducement agreement may permit one or more financing
entities: (i) to make investments on behalf of such income tax owner or
owners which will qualify for the fee once the property acquired by such
investment is transferred to the county and leased or subleased pursuant to
the requirements of this section; (ii) to transfer title to property to the
county; and (iii) to enter into a lease agreement with the county for the
project or portion of the project, provided the property which is subject to
the fee is leased or subleased, by the time the fee payments relating to such
property begin under subsection (D)(2), to the entity or entities which will
be treated as the income tax owners of the project. After the transfer of title
to the county and before subsection (D)(2) fee payments begin, subsection
(D)(1) fee payments must be made.
(2) Notwithstanding anything in subsections (B), (O), (P), (Q), (S)(1),
and (U), a single entity, or two or more entities which are members of a
controlled group (the `original transferor'), may enter into any
sale-leaseback arrangement (including, without limitation, an assignment, a
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 the property which is
subject to the fee payment under subsection (D)(2), provided that such
sale-leaseback is executed prior to or contemporaneously with the time that
fee payments under subsection (D)(2) begin with respect to property which
is the subject of a sale-leaseback. 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, will affect the amount of the fee due. Nothing in
this subsection (S)(2) shall prohibit a sale-leaseback where income tax
ownership of the property which is subject to the fee payment under
subsection (D)(2) is held only by the entities identified in subsection
(S)(1).
(3) All transfers undertaken with respect to the project to effect a
financing authorized under subsection (S)(2) must meet the following
requirements:
(a) The county must approve such transfer in advance.
(b) The Tax Commission must receive notification in writing of the
identity of each transferee and other information required by the Tax
Commission within thirty days after the transfer becomes effective. The
Tax Commission may extend such thirty-day period upon written request.
Failure to meet this notice requirement will not adversely affect the fee, but
a penalty may be assessed by the Tax Commission for late notification for
up to ten thousand dollars a month or portion of a month up to a maximum
penalty of one hundred twenty thousand dollars.
(c) If the financing entity is the income tax owner of property, the
financing entity will be primarily liable for the fee as to that portion of the
project to which the transfer relates. The original transferor must also agree
to continue to be secondarily liable for the payment of the fee as to that
portion of the project to which the transfer relates.
(d) Subsections (O) and (U) will apply to the extent:
(i) the financing entity transfers a fee interest to anyone other
than the original transferor or one or more members of its controlled group,
or
(ii) the lease to the original transferor is terminated and the fee
interest is not transferred back to the original transferor or one or more
members of its controlled group.
In addition, within ninety days of the occurrence of items (i) and (ii) in
the immediate preceding sentence, the original transferor must pay the
county any present value differential as defined in subsection (O)(5).
(4) For purposes of this subsection (S):
(a) The income tax owner of property shall mean the entity or
entities which are entitled to depreciation deductions for such property for
South Carolina income tax purposes.
(b) Financing entity shall include any entity or entities.
(c) Fee interest shall include any fee interest as defined in subsection
(O) and any group fee interest as defined in subsection (P).
(5) The manner in which an arrangement is reported under generally
accepted accounting principles shall not adversely affect the authorization
of such an arrangement under this section.
(T) No inducement agreement, millage rate agreement, or lease
agreement, nor the rights of any entity pursuant to any such agreement,
including without limitation the availability of the subsection (D)(2) fee,
shall be adversely affected if the bonds issued pursuant to any such
agreement are purchased by one or more of the entities which are or
become parties to any such agreement.
(U) Notwithstanding any other provision of this section to the contrary,
if at any time following the period provided in subsection (C)(2), the
investment based on income tax basis without regard to depreciation falls
below the eighty-five million dollar minimum investment to which the fee
relates and is held by an entity or controlled group of entities, the fee
provided in subsection (D)(2) is no longer available and the investor is
required to make the payments which are due under Section 4-29-60 for the
remainder of the lease period.
(V) The minimum amount of the initial investment provided in
subsection (B)(2) of this section may not be reduced except by a special
vote which, for purposes of this section, means an affirmative vote in each
branch of the General Assembly by two-thirds of the members present and
voting, but not less than three-fifths of the total membership in each
branch.
(W) (1) The investor shall file the returns, contracts, and other
information which may be required by the Tax Commission.
(2) Fee payments, and returns calculating fee payments, are due at the
same time as property tax payments and property tax returns would be due
if the property were owned by the party obligated to make such fee
payments and file such returns.
(3) Failure to make a timely fee payment and file required returns
shall result in penalties being assessed as if the payment or return was a
property tax payment or return.
(4) The Tax Commission may issue the rulings and promulgate
regulations it determines necessary or appropriate to carry out the purpose
of this section.
(5) The provisions of Chapters 4 and 54 of Title 12 applicable to
property taxes shall apply to this section; and for purposes of such
application, the fee shall be considered a property tax. Sections 12-54-20,
12-54-80, and 12-54-155 do not apply to this section.
(X) Except as otherwise expressly provided in subsection (C)(2), any
loss of fee benefits under this section shall be prospective only from the
date of noncompliance and, subject to subsection (U), only with respect to
that portion of the project to which such noncompliance relates; provided,
however, that such loss of fee benefits cannot result in the recovery from
the fee-paying entity of fee payments for more than:
(1) three years from the date a return concerning the fee is filed for the
time period during which the noncompliance occurs, absent a showing of
bad faith noncompliance, in which case such three-year period shall instead
be a ten-year period; or
(2) ten years if no such return is filed for the time period during which
the noncompliance occurs.
(Y) Section 4-29-65 shall be inapplicable with respect to this section.
All references in this section to taxes shall be considered to mean South
Carolina taxes unless otherwise expressly stated."
Special source revenue bonds
SECTION 4. Section 4-29-68 of the 1976 Code, as added by Act 361 of
1992, is amended to read:
"Section 4-29-68. (A) A county or municipality or special
purpose district that receives and retains revenues from a payment in lieu of
taxes pursuant to Section 4-29-60 or Section 4-29-67 may issue special
source revenue bonds secured by and payable from all or a part of such
revenues, subject to the following terms and conditions:
(1) The issuance of bonds is authorized by a duly adopted ordinance of
the governing body of the issuer or, if the issuer is a special purpose
district, an ordinance of the county council or councils in the county or
counties in which the special purpose district is located, and a resolution of
the governing body of the issuer, after a public hearing is held at least
fifteen days after notice of the hearing is published in a newspaper of
general circulation in the county or municipality or special purpose
district.
(2) The bonds are issued solely for the purpose of paying the cost of
designing, acquiring, constructing, improving, or expanding the
infrastructure serving the issuer in order to enhance the economic
development of the issuer and costs of issuance of the bonds. For purposes
of this section, infrastructure includes improved and unimproved real
property. Bonds issued pursuant to this section to finance the acquisition of
real or personal property may be additionally secured by a mortgage of that
real or personal property.
(3) The bonds may include amounts for capitalized interest for a period
not to extend beyond the later of (a) the date that is three years from the
date of issuance of the bonds and (b) the first date on which any ad valorem
taxes (including, but not limited to, county or school district taxes) would
have been payable on the property (other than unimproved real property)
which is the subject of the payment in lieu of taxes.
(4) The issuer may use proceeds of the bonds (including by
establishment of a reserve fund to be used) (a) directly for infrastructure
owned or controlled by the issuer or (b) to make loans or grants to, or to
participate in joint undertakings with, other agencies or political
subdivisions of the State that own or control the infrastructure referred to in
item (2) of this subsection.
(5) The bonds are, and must state on their face that they are, (a) payable
solely from all or a specifically described part of the payments in lieu of
taxes received and retained by the issuer under Section 4-29-60, Section
4-29-67, or Section 13 of Article VIII of the Constitution of this State, (b)
not secured by, or in any way entitled to, a pledge of the full faith, credit, or
taxing power of the issuer, (c) not an indebtedness of the issuer within the
meaning of any state constitutional provision or statutory limitation but are
payable solely from a special source that does not include revenues from
any tax or license, and (d) not a pecuniary liability of the issuer or a charge
against the issuer's general credit or taxing power.
(6) The ordinance authorizing the issuance of the bonds shall
specifically describe the portion of the payments in lieu of taxes received
and retained by the issuer from which the bonds are payable and by which
the bonds are secured.
(7) The bonds may be executed and delivered at any time as a single
issue or from time to time as several issues, be in the form and
denominations, be of the tenor, be payable in the installments and at the
time or times not to exceed the time over which payments in lieu of taxes
are scheduled to be received, be subject to the terms of redemption, be
payable at the place or places, bear interest at the rate or rates which is
payable at the place or places, and contain provisions not inconsistent with
this section, all of which must be provided in the ordinance authorizing the
bonds.
(8) The bonds may be sold at public or private sale at the prices and in
the manner and from time to time as may be determined by the governing
board to be most advantageous, and the governing board may pay, as a part
of the costs described in item (2) of this subsection, and out of the bond
proceeds, all expenses, premiums, commissions, and expenses which the
governing board considers necessary or advantageous in connection with
the authorization, sale, and issuance of the bonds.
(9) The ordinance may provide for the issuance, in the future, of further
bonds on a parity with those initially issued, but the proceedings may
preclude the issuance of bonds or any obligations of any sort secured by a
lien prior to the lien of the bond or bonds afterward issued on a parity with
the bonds.
(10) Pending the issuance of bonds, bond anticipation notes may be
issued, and to the end that a vehicle be provided therefor, the provisions of
Section 11-17-10 to Section 11-17-110, as now or hereafter amended, are
applicable to the bond anticipatory borrowing.
(11) The ordinance authorizing the issuance of the bonds may contain
agreements and provisions customarily contained in the instruments
securing revenue or special source bonds as the governing board considers
advisable, but the issuer does not have the power to obligate itself to
impose or maintain any particular level of tax rates.
(B) A county or municipality or special purpose district that receives
and retains revenues from a payment in lieu of taxes pursuant to Section
4-29-60 or Section 4-29-67 may pledge the revenues as additional security
for general obligation debt or revenue debt of the issuer if the general
obligation debt or revenue debt is issued in accordance with items (1) and
(2) of this subsection.
(C) A county or municipality or special purpose district that receives and
retains revenues from a payment in lieu of taxes pursuant to Section
4-29-60 or Section 4-29-67 may pledge the revenues as additional security
for general obligation debt or revenue debt of other agencies or political
subdivisions of the State referred to in item (4)(b) of this subsection if the
pledge is authorized by a duly-adopted ordinance of the governing body of
the county or municipality or special purpose district after a public hearing
is held at least fifteen days after notice of the hearing is published in a
newspaper of general circulation in the county or municipality or special
purpose district, and if the general obligation debt or revenue debt to which
the revenues received from a payment in lieu of taxes are pledged is issued
solely for the purpose of paying the cost of designing, acquiring,
constructing, improving, or expanding the infrastructure serving the county
or municipality or special purpose district in order to enhance the economic
development of the county or municipality or special purpose district and
costs of issuance of the bonds.
(D) Revenues received by a county or municipality or special purpose
district which may be pledged or from which bonds may be payable and
secured pursuant to this Section 4-29-68 or Section 4-1-175 may be used
jointly to pay or secure a single series of bonds.
(E) A political subdivision of this State subject to the limitation of
Section 14(7)(a) 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 that section 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."
Not to be construed
SECTION 5. Nothing in this act may be construed as amending or
repealing any provision of Section 39, Act 361 of 1992.
Severability
SECTION 6. If any provision of this act or its application to any
circumstance is held by a court of competent jurisdiction to be invalid for
any reason, this holding does not affect other provisions or applications of
this act which can be given effect without the invalid provision or
application, and to this end, the provisions of this act are severable.
Time effective
SECTION 7. This act takes effect upon approval by the Governor and
applies prospectively to any project for which an inducement agreement
was not entered into before the effective date of this act; provided,
however, that projects with respect to which an inducement agreement,
millage rate agreement, or both, have been entered into before the effective
date of this act are entitled but not required to use the provisions of Section
4-29-67 of the 1976 Code, as amended by this act, and also one or more of
the provisions of the following subsections of Section 4-29-67 of the 1976
Code as in existence before the amendments contained in this act: (B);
(F)(1)(c); (F)(2); (G); and (I); and provided further that investors having a
lease agreement which was entered into before the effective date of this act
meeting the eighty-five million dollar minimum level of investment
required under Section 4-29-67(C) within five years from the date the lease
agreement was signed shall have seven years from the date the lease
agreement was signed to complete the investment, unless a longer period is
otherwise stipulated in the lease agreement. The last sentence of Section
4-29-67(I) of the 1976 Code, as amended by this act, is not applicable to
any project with respect to which an inducement agreement was entered
into or an inducement or similar resolution was adopted by the governing
body of the county before the effective date of this act; provided, however,
that if an inducement agreement has not been entered into before the
effective date of this act, such an agreement must be entered into with
respect to any such project within one year of the effective date of this act
in order for pre-inducement agreement project expenditures to qualify for
the fee provided in subsection (D)(2). Any lease which was entered into
with a county prior to the effective date of this act, in order to preserve the
eligibility of certain property for subsequent inclusion in a fee in lieu of
taxes arrangement, and which lease provides for lease payments within two
dollars of what the property taxes on the leased property would otherwise
have been, shall not be considered a lease agreement of any kind for
purposes of beginning the running of any time period provided under
Section 4-29-67 of the 1976 Code, including, but not limited to, the five,
seven, and twenty-year periods provided therein. For purposes of this
SECTION 7, references to inducement or millage rate agreements shall be
considered to exclude any amendments or replacements of such
agreements.
Approved the 14th day of June, 1993. |