S*1140 Session 109 (1991-1992)
S*1140(Rat #0305, Act #0285 of 1992) General Bill, By J.M. Waddell, F. Gilbert,
Leatherman and McGill
A Bill to amend Section 12-7-1245, Code of Laws of South Carolina, 1976,
relating to the corporate income tax credit for corporate headquarters located
in this State, so as to revise the categories of jobs which must be created to
qualify for the credit, to add additional requirements for personal property
to qualify for the credit, to expand the personal property for which the
credit may be claimed, to provide the taxable years to which the credit
applies, to require recapture of the credit if staffing levels are not timely
met, to prohibit the credit for a year when staffing levels are not met and
delete that year from the carry forward period, to allow the credit when a fee
in lieu of taxes arrangement exists, to require a reduction in the income tax
basis only of property for which the credit was claimed, to revise and add
additional definitions, and to allow taxpayers relying on rulings from the
South Carolina Tax Commission in the application of the former provisions of
the Code Section to continue to rely on the rulings and allow the taxpayer to
benefit from the provisions of the Section.-amended title
01/14/92 Senate Introduced, read first time, placed on calendar
without reference SJ-41
01/15/92 Senate Read second time SJ-179
01/15/92 Senate Ordered to third reading with notice of
amendments SJ-179
02/18/92 Senate Amended SJ-12
02/18/92 Senate Read third time and sent to House SJ-13
02/19/92 House Introduced, read first time, placed on calendar
without reference HJ-14
02/27/92 House Amended HJ-23
02/27/92 House Read second time HJ-23
02/27/92 House Unanimous consent for third reading on next
legislative day HJ-23
02/28/92 House Read third time and returned to Senate with
amendments HJ-2
03/03/92 Senate Concurred in House amendment and enrolled SJ-11
03/11/92 Ratified R 305
03/13/92 Signed By Governor
03/13/92 Act No. 285
03/13/92 See act for exception to or explanation of
effective date
04/14/92 Copies available
(A285, R305, S1140)
AN ACT TO AMEND SECTION 12-7-1245, CODE OF
LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE
CORPORATE INCOME TAX CREDIT FOR CORPORATE
HEADQUARTERS LOCATED IN THIS STATE, SO AS TO
REVISE THE CATEGORIES OF JOBS WHICH MUST BE
CREATED TO QUALIFY FOR THE CREDIT, TO ADD
ADDITIONAL REQUIREMENTS FOR PERSONAL
PROPERTY TO QUALIFY FOR THE CREDIT, TO EXPAND
THE PERSONAL PROPERTY FOR WHICH THE CREDIT
MAY BE CLAIMED, TO PROVIDE THE TAXABLE YEARS
TO WHICH THE CREDIT APPLIES, TO REQUIRE
RECAPTURE OF THE CREDIT IF STAFFING LEVELS ARE
NOT TIMELY MET, TO PROHIBIT THE CREDIT FOR A
YEAR WHEN STAFFING LEVELS ARE NOT MET AND
DELETE THAT YEAR FROM THE CARRY FORWARD
PERIOD, TO ALLOW THE CREDIT WHEN A FEE IN LIEU
OF TAXES ARRANGEMENT EXISTS, TO REQUIRE A
REDUCTION IN THE INCOME TAX BASIS ONLY OF
PROPERTY FOR WHICH THE CREDIT WAS CLAIMED, TO
REVISE AND ADD ADDITIONAL DEFINITIONS, AND TO
ALLOW TAXPAYERS RELYING ON RULINGS FROM THE
SOUTH CAROLINA TAX COMMISSION IN THE
APPLICATION OF THE FORMER PROVISIONS OF THE
CODE SECTION TO CONTINUE TO RELY ON THE
RULINGS AND ALLOW THE TAXPAYER TO BENEFIT
FROM THE PROVISIONS OF THE SECTION.
Be it enacted by the General Assembly of the State of South
Carolina:
Headquarters Credit
SECTION 1. Section 12-7-1245 of the 1976 Code is amended to
read:
"Section 12-7-1245. (A) A corporation establishing a
corporate headquarters in this State, or expanding or adding to an
existing corporate headquarters, is allowed a credit against any tax
due pursuant to Section 12-7-230 or Section 12-19-70 as set forth
in this section.
(B) In order to qualify for this credit, each of the following
criteria must be satisfied:
(1) The qualifying real property costs of the corporate
headquarters establishment, expansion, or addition must be at
least fifty thousand dollars. Qualifying real property costs
are:
(a) costs incurred in the design, preparation, and
development of establishing, expanding, or adding to a corporate
headquarters, and
(b) (i) direct construction costs, or
(ii) with respect to leased facilities, direct lease
costs during the first five years of operations for the corporate
headquarters.
(2) The headquarters establishment, expansion, or
addition must result in the creation of:
(a) at least seventy-five new jobs performing
headquarters related functions and services or research and
development related functions and services. These jobs must be
permanent, full-time positions located in this State, and
(b) at least forty of the above-referenced new jobs must
be classified as headquarters staff employees.
(C) The amount of the credit is equal to twenty percent of the
qualifying real property costs listed in subsection (B)(1).
(D) A headquarters establishment, expansion, or addition
which meets the criteria of subsection (B) of this section is
entitled to an additional credit equal to twenty percent of cost for
tangible personal property if the following conditions are met:
(1) the personal property is:
(a) capitalized as personal property for income tax
purposes under the Internal Revenue Code; and
(b) purchased for the establishment, expansion, or
addition of a corporate headquarters, or for the establishment,
expansion, or addition of a research and development facility
which is part of the same corporate project as the headquarters
establishment, addition, or expansion; and
(c) used for corporate headquarters related functions and
services or research and development related functions and
services in South Carolina.
(2) The establishment, expansion, or addition of a
corporate headquarters or research and development facility must
result in:
(a) the creation of at least one hundred fifty new full-time
jobs performing headquarters related functions and services or
research and development related functions and services which
have an average cash compensation level of more than one and
one-half times the per capita income of this State at the time the
jobs are filled; and
(b) an average South Carolina employee cash
compensation level for all employees in this State of more than
twice the per capita income in this State at the time the newly
created jobs are filled.
(E) (1) (a) For facilities which are constructed, the credit
can only be claimed for the taxable year when the headquarters
establishment, expansion, or addition, and the research and
development facility establishment, expansion, or addition in the
case of corporations qualifying under subsection (D), is placed in
service for federal income tax purposes. For construction projects
completed in phases and placed in service for federal income tax
purposes in more than one taxable year, the corporation can claim
the credit on the South Carolina income tax return for the taxable
year in which property, which qualifies for the credit, is placed in
service. Credits cannot be obtained for costs incurred more than
three taxable years after the taxable year in which the first
property for which the credit is claimed is placed in service.
Notwithstanding any other provisions of this subsection, if the
entire project is not completed by the end of the three taxable
years, the corporation may claim the credit for all property placed
in service within the time limitation set forth in the preceding
sentence. The credit may not be claimed for personal property
which is replacing personal property for which the credit can be
claimed. The commission may for good cause extend the time for
incurring additional costs and for claiming the credit if the project
is not completed within the time period allowed by this
subsection. For purposes of this subsection the term `property'
includes qualifying real property and, where the conditions of
subsection (D) are met, personal property.
(b) For leased real property the credit must be claimed in
the taxable year in which the first direct lease costs are
incurred.
(2) The corporation must meet the staffing requirements
of subsections (B)(2) and, if applicable, (D)(2), by the end of the
second taxable year following the last taxable year for which the
credit is claimed. The corporation must have documented plans to
meet the initial staffing requirements at the time the credit is
claimed. If the corporation fails to meet the staffing requirements
within the time required by this subsection, the corporation must
increase its tax liability for the current taxable year by an amount
equal to the amount of credit, or any portion of the credit for
which the corporation would not qualify, which was used to
reduce tax in the earlier years.
(F) The credit provided in this section is nonrefundable, but an
unused credit may be carried forward for ten years. An unused
credit may be carried forward fifteen years if the criteria set forth
in subsection (D)(2) are met. No credit may be claimed for a
taxable year during which the corporation fails to meet the
qualifying employment requirements provided in this section and
the carry forward period is not extended for any year in which the
credit may not be claimed for failure to meet the employment
requirements. The credit may be claimed for a taxable year in the
unextended carry forward period if the corporation requalifies for
the credit by meeting the employment requirements during that
taxable year.
(G) If a fee-in-lieu arrangement under Section 4-29-67 is
entered into with respect to all or part of property involving a
corporate headquarters, and the corporation claiming the credit
provided under this section is treated as the owner of the property
for federal income tax purposes, then the corporation must be
treated as the owner of the property for purposes of the credit
provided by this section.
(H) To the extent that this credit applies to the cost of certain
property, the basis of the property for South Carolina income tax
purposes must be reduced by the amount of the credit claimed
with respect to the property. This basis reduction does not reduce
the basis or limit or disallow any depreciation allowable under the
law of this State for other than income tax purposes, even if the
depreciation is based upon or otherwise relates to income tax
depreciation, including, without limitation, basis or depreciation
which is allowable under this title for property tax purposes. If
the corporation fails to meet the staffing requirements of
subsection (E)(2), the corporation may increase the basis of the
property by the amount of the original basis reduction with regard
to that property in the year in which the credit is recaptured.
(I) The amount of a credit allowed under this section must be
reduced by the amount of any past-due debt owed this State by the
taxpayer.
(J) As used in this section:
(1) `corporate headquarters' means the facility or portion
of a facility where corporate staff employees are physically
employed, and where the majority of the company's financial,
personnel, legal, planning, or other headquarters related functions
are handled either on a regional or national basis. A corporate
headquarters must be a regional corporate headquarters or a
national corporate headquarters as defined below:
(a) National corporate headquarters must be the sole
corporate headquarters in the nation and handle headquarters
related functions on a national basis. A national headquarters
shall be deemed to handle headquarters related functions on a
national basis from this State if the corporation has a facility in
this State from which the corporation engages in interstate
commerce by providing goods or services for customers outside of
this State in return for compensation.
(b) Regional corporate headquarters must be the sole
corporate headquarters within the region and must handle
headquarters related functions on a regional basis. For purposes
of this section, `region' or `regional' means a geographic area
comprised of either:
(i) at least five states, including this State, or
(ii) two or more states, including this State, if the entire
business operations of the corporation are performed within fewer
than five states.
(2) `New job' means a job created by an employer in this
State at the time a new facility, expansion, or addition is initially
staffed, but does not include a job created when an employee is
shifted from an existing location in this State to work in a new or
expanded facility. An employee may be employed at a temporary
location in this State pending completion of the new facility,
expansion, or addition.
(3) `Full-time' means a job requiring a minimum of
thirty-five hours of an employee's time a week for the entire
normal year of corporate operations or a job requiring a minimum
of thirty-five hours of an employee's time for a week for a year in
which the employee was initially hired for or transferred to the
corporate headquarters or research and development facility in
this State.
(4) `Headquarters related functions and services' are those
functions involving financial, personnel, administrative, legal,
planning, or similar business functions.
(5) `Headquarters staff employees' means executive,
administrative, or professional workers performing headquarters
related functions and services.
(a) An executive employee is a full-time employee in
which at least eighty percent of his business functions involve the
management of the enterprise and directing the work of at least
two employees. An executive employee has the authority to hire
and fire or has the authority to make recommendations related to
hiring, firing, advancement, and promotion decisions, and an
executive employee must customarily exercise discretionary
powers.
(b) An administrative employee is a full-time employee
who is not involved in manual work and whose work is directly
related to management policies or general headquarters
operations. An administrative employee must customarily
exercise discretion and independent judgment.
(c) A professional employee is an employee whose
primary duty is work requiring knowledge of an advanced type in
a field of science or learning. This knowledge is characterized by
a prolonged course of specialized study. The work must be
original and creative in nature, and the work cannot be
standardized over a specific period of time. The work must
require consistent exercise of discretion and the employee must
spend at least eighty percent of the time performing headquarters
related functions and services.
(6) `Research and development' means laboratory,
scientific, or experimental testing and development related to new
products, new uses for existing products, or improving existing
products, but `research and development' does not include
efficiency surveys, management studies, consumer surveys,
economic surveys, advertising, promotion, or research in
connection with literary, historical, or similar projects.
(7) `Research and development facility' means the
building or buildings or portion of a building where research and
development functions and services are physically located.
(8) `Direct lease costs' are cash lease payments. The term
does not include any accrued, but unpaid, costs."
Reliance and ruling
SECTION 2. A corporation which obtained a ruling from the
South Carolina Tax Commission based on the provisions of
Section 12-7-1245 of the 1976 Code in effect on December 31,
1991, is entitled to continue to rely on that ruling, and is entitled
to the applicable tax benefits of the provisions of that section in
effect on that date.
Time effective
SECTION 3. Upon approval by the Governor, this act is
effective for taxable years beginning after 1991.
Approved the 13th day of March, 1992. |