H 4187 Session 109 (1991-1992)
H 4187 General Bill, By Boan
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 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.
01/16/92 House Introduced and read first time HJ-8
01/16/92 House Referred to Committee on Ways and Means HJ-8
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 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:
SECTION 1. Section 12-7-1245 of the 1976 Code is amended to
read:
"Section 12-7-1245. A corporation establishing a corporate
headquarters in this State, 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 of the 1976 Code in an amount equal to
twenty percent of the (1) costs incurred in the design, preparation, and
development of either establishing or expanding a corporate
headquarters, and (2) direct construction or the direct lease costs during
the first five years of operations for the corporate headquarters. This
credit applies to all qualifying costs incurred to establish or expand a
corporate headquarters which add at least seventy-five new jobs which
are full-time in South Carolina with at least forty of the new jobs
classified as staff employees, and the cost of the new construction or
additions is fifty thousand dollars or more. This credit only applies to
facilities established for the direct use of the headquarters staff
employees. This credit is nonrefundable but an unused credit may be
carried forward for ten taxable years for all qualifying corporate
headquarters costs or fifteen years for all qualifying corporate
headquarters costs in connection with which at least one hundred fifty
new full-time jobs are created which (1) have an average cash
compensation level more than one and one-half times the per capita
income of the State at the time the jobs are filled, and (2) result in a total
employee cash compensation per South Carolina employee of more than
twice the per capita income of the State at the time the newly created
jobs are filled. In addition to the credits set forth above, qualifying
headquarters meeting these per capita income criteria are further entitled
to the credit in this section for personal property used for corporate
headquarters related functions and services or research and development
related functions and services.
For purposes of this section, the terms "corporate
headquarters", "new jobs", and "full-time"
are defined as provided in Section 12-37-220(B).
The amount of any credit allowed under this section must be reduced
by the amount of any past-due debt owed to the State of South Carolina
by the taxpayer.
(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 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.
(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 headquarter's related functions on
a national basis. A national headquarters is considered 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 headquarter's
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."
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.
SECTION 3. Upon approval by the Governor, this act is effective for
taxable years beginning after 1991.
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