H*3534 Session 111 (1995-1996)
H*3534(Rat #0021, Act #0025 of 1995) General Bill, By Wilkins, J.M. Baxley,
H. Brown, B.D. Cain, Cato, Cotty, Easterday, Fleming, Gamble, Harrell, Harrison,
Haskins, R.J. Herdklotz, T.E. Huff, H.G. Hutson, M.F. Jaskwhich, Jennings,
Kelley, Kennedy, Klauber, Knotts, Lanford, Law, Littlejohn, C.V. Marchbanks,
Mason, Meacham, Rice, Riser, Robinson, Sandifer, J.S. Shissias, Simrill, Stuart,
Tripp, D.C. Waldrop, Walker, Whatley, Witherspoon, S.S. Wofford, W.J. Young and
Young-Brickell
A Bill to amend Title 12, Code of Laws of South Carolina, 1976, relating to
taxation, by adding Chapter 10 enacting the Enterprise Zone Act of 1995 so as
to provide for the establishment of enterprise zones in which various tax
incentives may apply for businesses, to provide the criteria for areas to
qualify as enterprise zones, to provide that businesses qualify for enterprise
zone incentives by means of entering into a revitalization agreement with the
Advisory Coordinating Council for Economic Development, to provide incentives,
depending on eligibility, that include the maximum credit allowed under the
targeted jobs tax credit and an additional credit for employees formerly
receiving AFDC, fee in lieu of taxes for property taxes, retaining an amount
of employee wages based on hourly wages but not exceeding five percent for
fifteen years for development expenses and retaining an amount of employee
wages not to exceed five hundred dollars a year and not more than two thousand
dollars over five years for production employee retraining and allowing
withholding tax credits for employers equal to the retained amount, and to
provide the criteria for selecting of qualifying businesses and projects; and
to amend Title 12, relating to taxation, by adding Chapter 14 enacting the
Economic Impact Zone Community Development Act of 1995 so as to provide for
the establishment of economic impact zones on and in the vicinity of closed or
realigned military installations and in other areas determined by the State
Budget and Control Board to be adversely impacted by such closures or
realignments in which various tax incentives may apply including an income tax
deduction for a portion of the cost of economic impact zone stock and an
investment income tax credit equal to five percent of the aggregate bases of
economic impact zone qualified manufacturing and productive equipment
properties and to provide definitions and limitations; and to amend Section
12-7-1200, relating to the use of the accounting methods of taxpayers for the
purpose of determining net income, so as to allow taxpayers to petition the
Department of Revenue and Taxation for an accounting method that more
accurately reflects their business activity in this State and authorize the
Department to enter into agreements for certain taxpayers for not more than
five years establishing a particular method of allocation and apportionment of
the taxpayers' income and to provide the criteria that must be met for such an
agreement.-amended title
02/08/95 House Introduced and read first time HJ-11
02/08/95 House Referred to Committee on Ways and Means HJ-11
02/23/95 House Committee report: Favorable with amendment Ways
and Means HJ-5
02/28/95 House Special order, set for 02/28/95 immediately
following call of the Motion Period (under H
3695) HJ-24
02/28/95 House Amended HJ-37
02/28/95 House Read second time HJ-55
03/01/95 House Read third time and sent to Senate HJ-18
03/02/95 Senate Introduced and read first time SJ-18
03/02/95 Senate Referred to Committee on Finance SJ-18
03/07/95 Senate Recalled from Committee on Finance SJ-4
03/09/95 Senate Read second time SJ-19
03/09/95 Senate Ordered to third reading with notice of
amendments SJ-19
03/16/95 Senate Amended SJ-20
03/16/95 Senate Read third time and returned to House with
amendments SJ-48
03/23/95 House Concurred in Senate amendment and enrolled HJ-27
03/30/95 Ratified R 21
04/04/95 Signed By Governor
04/04/95 Effective date 04/04/95
04/24/95 Copies available
04/24/95 Act No. 25
(A25, R21, H3534)
AN ACT TO AMEND TITLE 12, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO TAXATION, BY ADDING
CHAPTER 10 ENACTING THE ENTERPRISE ZONE ACT OF 1995
SO AS TO PROVIDE FOR THE ESTABLISHMENT OF ENTERPRISE
ZONES IN WHICH VARIOUS TAX INCENTIVES MAY APPLY FOR
BUSINESSES, TO PROVIDE THE CRITERIA FOR AREAS TO
QUALIFY AS ENTERPRISE ZONES, TO PROVIDE THAT
BUSINESSES QUALIFY FOR ENTERPRISE ZONE INCENTIVES BY
MEANS OF ENTERING INTO A REVITALIZATION AGREEMENT
WITH THE ADVISORY COORDINATING COUNCIL FOR
ECONOMIC DEVELOPMENT, TO PROVIDE INCENTIVES,
DEPENDING ON ELIGIBILITY, THAT INCLUDE THE MAXIMUM
CREDIT ALLOWED UNDER THE TARGETED JOBS TAX CREDIT
AND AN ADDITIONAL CREDIT FOR EMPLOYEES FORMERLY
RECEIVING AFDC, FEE IN LIEU OF TAXES FOR PROPERTY
TAXES, RETAINING AN AMOUNT OF EMPLOYEE WAGES
BASED ON HOURLY WAGES BUT NOT EXCEEDING FIVE
PERCENT FOR FIFTEEN YEARS FOR DEVELOPMENT EXPENSES
AND RETAINING AN AMOUNT OF EMPLOYEE WAGES NOT TO
EXCEED FIVE HUNDRED DOLLARS A YEAR AND NOT MORE
THAN TWO THOUSAND DOLLARS OVER FIVE YEARS FOR
PRODUCTION EMPLOYEE RETRAINING AND ALLOWING
WITHHOLDING TAX CREDITS FOR EMPLOYERS EQUAL TO THE
RETAINED AMOUNT, AND TO PROVIDE THE CRITERIA FOR
SELECTING OF QUALIFYING BUSINESSES AND PROJECTS; TO
AMEND TITLE 12, RELATING TO TAXATION, BY ADDING
CHAPTER 14 ENACTING THE ECONOMIC IMPACT ZONE
COMMUNITY DEVELOPMENT ACT OF 1995 SO AS TO PROVIDE
FOR THE ESTABLISHMENT OF ECONOMIC IMPACT ZONES ON
AND IN THE VICINITY OF CLOSED OR REALIGNED MILITARY
INSTALLATIONS AND IN OTHER AREAS DETERMINED BY THE
STATE BUDGET AND CONTROL BOARD TO BE ADVERSELY
IMPACTED BY SUCH CLOSURES OR REALIGNMENTS IN WHICH
VARIOUS TAX INCENTIVES MAY APPLY INCLUDING AN
INCOME TAX DEDUCTION FOR A PORTION OF THE COST OF
ECONOMIC IMPACT ZONE STOCK AND AN INVESTMENT
INCOME TAX CREDIT EQUAL TO FIVE PERCENT OF THE
AGGREGATE BASES OF ECONOMIC IMPACT ZONE QUALIFIED
MANUFACTURING AND PRODUCTIVE EQUIPMENT PROPERTIES
AND TO PROVIDE DEFINITIONS AND LIMITATIONS; AND TO
AMEND SECTION 12-7-1200, RELATING TO THE USE OF THE
ACCOUNTING METHODS OF TAXPAYERS FOR THE PURPOSE
OF DETERMINING NET INCOME, SO AS TO ALLOW
TAXPAYERS TO PETITION THE DEPARTMENT OF REVENUE
AND TAXATION FOR AN ACCOUNTING METHOD THAT MORE
ACCURATELY REFLECTS THEIR BUSINESS ACTIVITY IN THIS
STATE AND AUTHORIZE THE DEPARTMENT TO ENTER INTO
AGREEMENTS FOR CERTAIN TAXPAYERS FOR NOT MORE
THAN FIVE YEARS ESTABLISHING A PARTICULAR METHOD OF
ALLOCATION AND APPORTIONMENT OF THE TAXPAYERS'
INCOME AND TO PROVIDE THE CRITERIA THAT MUST BE MET
FOR SUCH AN AGREEMENT.
Be it enacted by the General Assembly of the State of South
Carolina:
Enterprise Zone Act
SECTION 1. Title 12 of the 1976 Code is amended by adding:
"CHAPTER 10
Enterprise Zone Act of 1995
Section 12-10-10. This chapter may be cited as the Enterprise Zone
Act of 1995.
Section 12-10-20. The General Assembly finds:
(1) that the economic well-being of the citizens of the State will be
enhanced by the increased development and growth of industry within the
State, and that it is in the best interest of the State to induce the location
or expansion of manufacturing, processing, services, distribution,
warehousing, research and development, corporate offices, and certain
tourism facilities within the State in order to promote the public purpose
of creating new jobs within the State;
(2) that the inducement provided in this chapter will encourage the
creation of jobs which would not otherwise exist and will create sources
of tax revenues for the State and its political subdivisions;
(3) the powers to be granted to the Advisory Coordinating Council
for Economic Development by this chapter and the purposes to be
accomplished are proper governmental and public purposes and that the
inducement of the location or expansion of manufacturing, processing,
services, distribution, warehousing, research and development, corporate
offices, and certain tourism facilities within the State is of paramount
importance.
Section 12-10-30. As used in this chapter:
(1) `Council' means the Advisory Coordinating Council for Economic
Development.
(2) `Department' means the South Carolina Department of Revenue
and Taxation.
(3) `Employee' means an employee of the qualifying business who
works full time within the enterprise zone.
(4) `Manufacturing' means engagement primarily in an activity or
activities listed under the Standard Industrial Classification (SIC) Codes
20 through 39 as published in the Office of Management and Budget's
Standard Industrial Classification Manual.
(5) `Qualifying business' means an employer that meets the
requirements of Section 12-10-50 and other applicable requirements of
this chapter and, where required under Section 12-10-50, enters into a
revitalization agreement with the council to undertake a project under the
provisions of this chapter.
(6) `Project' means an investment for one or more purposes in
Section 12-10-80(B) needed for a qualifying business to locate, remain,
or expand in an enterprise zone and otherwise fulfill the requirements of
this chapter.
(7) `Services' means engagement primarily in an activity or activities
listed under the Standard Industrial Classification (SIC) Code 80
according to the Federal Office of Management and Budget Standard
Industrial Classification Manual 1987 edition.
(8) `Withholding' means employee withholding under Chapter 9 of
this title.
Section 12-10-40. Annually, by December thirty-first, using the most
current data available, the State Budget and Control Board shall designate
the enterprise zones within this State as provided in this section. Each
enterprise zone must be located in this State and meet one of the
following criteria:
(1) consist of a census tract in which either the median household
income is eighty percent or less of the state average, or at least twenty
percent of households are below the poverty level according to the most
recent United States census;
(2) consist of a county classified as less developed pursuant to Section
12-7-1220;
(3) be located in a federal military base or installation which was
closed, or designated to be closed, or in a federal facility in which the
permanent employment was reduced by three thousand or more jobs after
December 31, 1990;
(4) consist of a census tract with at least one hundred manufacturing
jobs, at least fifty percent of which are textile and apparel jobs;
(5) consist of a census tract where a manufacturing facility has closed
or experienced permanent layoffs and notified the Employment Security
Commission under the federal Worker Adjustment and Retaining
Notification (WARN) Act of 1988. The enterprise zone designation
applies only for five years after the date of closure or layoff, and the
number of jobs permanently lost must equal twenty-five percent or more
of the total manufacturing workforce in the tract at the time the layoff
occurred. The job loss shall have occurred no more than five years prior
to the effective date of this chapter, except in any census tract where a
catastrophic loss of one thousand or more jobs from a single employer
has occurred since 1980 and fewer than half the job losses have been
replaced. Any such tract will remain an enterprise zone until at least half
the catastrophic job losses have been replaced. Where a municipality in
which the catastrophic job loss occurred is split by census tracts, each
tract containing any part of the municipality meets the catastrophic job
loss criteria; or
(6) consist of a census tract, any part of which is within twenty miles
of a federal facility that has reduced its permanent civilian employment
by three thousand or more jobs after December 31, 1990, for ten years
after the effective date of this chapter.
Section 12-10-50. To qualify for the benefits provided in this chapter,
a business must be located within an enterprise zone and satisfy the
following criteria:
(1) it must be primarily engaged in a business of the type identified in
Section 12-7-1220, or in the alternative it must be primarily engaged in a
business providing services as defined in Section 12-10-30;
(2) the business in the enterprise zone shall provide a benefits
package to full-time employees which includes health care;
(3) the qualifying business shall enter into a revitalization agreement
which is approved by the council, except that no revitalization agreement
is required for a qualifying business with respect to Sections 12-10-70(2),
12-10-70(3), and 12-10-80(D); and
(4) the council shall determine that the available incentives are
appropriate for the project, and the council shall certify to the department
that the total benefits of the project exceed the costs to the public, and
that the qualifying business otherwise fulfills the requirements of this
chapter. No provision of this chapter must be construed to allow the
council to negotiate a fee-in-lieu of property taxes agreement or approve
job training or retraining.
Section 12-10-60. The council may enter into a revitalization
agreement with each qualifying business with respect to the project. The
terms and provisions of each revitalization agreement must be determined
by negotiations between the council and the qualifying business. The
revitalization agreement must set a date by which the qualifying business
shall have completed the project. Within three months of the completion
date, the qualifying business shall document the actual costs of the
project in a manner acceptable to the council.
Section 12-10-70. Qualifying businesses are entitled to the following
benefits in addition to all others provided by law:
(1) If at least fifty-one percent of the full-time employees hired for
the project either reside in an enterprise zone at the time of employment,
have a household income that is eighty percent or less of the median
household income for the county prior to employment, or have been a
recipient of Aid to Families with Dependent Children (AFDC) payments
within the past twelve months, the qualifying business is entitled to the
jobs tax credit for the period and in the amount provided in Section
12-7-1220(B); in addition, a qualifying business is entitled to an
additional five hundred dollars a year tax credit in the third, fourth, and
fifth year of any AFDC recipient's continued employment with the
qualifying business, based on the status of the employee at the time of
beginning employment. A new job is not considered a new job for the
purpose of this credit if it replaces the same job that was part of a
reduction in force in the preceding twelve months.
(2) The qualifying business is eligible for the benefits provided in
Section 4-29-67 if it meets one-half of the quantitative requirements of
that section.
(3) The business is eligible to use the special source revenue bonds
authorized under Sections 4-29-68 and 4-1-175.
(4) If the qualifying business is of a type that does not qualify for the
jobs tax credit as provided in Section 12-7-1220 because it only provides
services as defined in Section 12-10-30, notwithstanding any other
provision of law, it shall be entitled to receive the jobs tax credit for new
jobs created under Section 12-7-1220 if it locates or expands in an
enterprise zone and otherwise meets the requirements of Section
12-7-1220.
Section 12-10-80. (A) Upon certification by the council to the
department of the council's determination that a business is a qualifying
business, a qualifying business may collect a job development fee by
retaining an amount of employee withholding permitted by subsection
(C) or (D), but not both, for the purposes permitted by subsection (B) or
(D), respectively. The amount withheld must be maintained in an escrow
account with a bank which is insured by the Federal Deposit Insurance
Corporation. To the extent the money is not used as permitted by
subsection (B) or (D), it must be treated as misappropriated employee
withholding. Employee withholding may not be retained before the entry
of the qualifying business into a revitalization agreement. If a qualifying
business retains employee withholding under this section, it shall make its
payroll books and records available for inspection by the council and the
department at the times the council and the department request. Each
qualifying business retaining employee withholding under this section
shall file with the council and the department the information and
documentation respecting the retention and use of the employee
withholding according to the revitalization agreement. Each qualifying
business which retains in excess of ten thousand dollars in any calendar
year shall furnish an audited report prepared by an independent certified
public accountant which itemizes the sources and uses of the funds. The
audited report must be filed with the council and the department no later
than April fifteenth following the calendar year of the retention. Each
qualifying business retaining employee withholding under this section is
allowed a credit against the withholding tax liability provided in Chapter
9 of this title otherwise owed to the State, the credit not to exceed the
lesser of the amount of such tax or the aggregate amount of employee
withholding retained. No employer may withhold an amount that results
in any employee ever receiving a smaller amount of wages on either a
weekly or on an annual basis than the employee would otherwise receive
in the absence of this chapter.
(B) A qualifying business may collect a job development fee under
the revitalization agreement for a period not to exceed fifteen years. A
qualifying business must create at least ten new, full-time jobs at the
South Carolina facility described in the revitalization agreement. Capital
expenditures from the escrow account must be expended at the
above-described facility or for utility or transportation improvements that
serve this facility. The qualifying business may expend funds from the
escrow account if (a) the expenditures are incurred during the term of the
revitalization agreement, (b) the expenditures from the escrow account
are authorized by the revitalization agreement, (c) the expenditures are
approved in writing by the council and the department prior to
expenditure, and (d) the expenditures are for any of the following
purposes:
(1) training costs and facilities;
(2) acquiring and improving real estate whether acquired by lease,
purchase, installment payment, or otherwise, the escrow account can be
spent only for capital improvements made after entering a revitalization
agreement;
(3) improvements to both public and private utility systems
including water, sewer, electricity, natural gas, and
telecommunications;
(4) fixed transportation facilities including highway, rail, water, and
air; and
(5) construction or improvements of any real property and fixtures
constructed or improved primarily for the purpose of complying with
local, state, or federal environmental laws or regulations.
(C) The total amount retained from employee withholding by the
qualifying business may not exceed the sum of the following
amounts:
(1) two percent of the gross wages of each new employee who earns
six dollars or more an hour but less than eight dollars an hour;
(2) three percent of the gross wages of each new employee who
earns eight dollars or more an hour but less than ten dollars an hour;
(3) four percent of the gross wages of each new employee who
earns ten dollars or more an hour but less than fifteen dollars an hour;
and
(4) five percent of the gross wages of each new employee who earns
fifteen dollars or more an hour.
The hourly gross wage figures set forth in this section must be
adjusted annually by an inflation factor determined by the State Budget
and Control Board.
(D) Subject to the conditions in this section, any qualifying business
in an enterprise zone may negotiate with the council to retain from
employee withholding an amount equal to five hundred dollars a year for
each production employee being retrained, where this retraining is
necessary for the qualifying business to remain competitive or to
introduce new technologies. This retraining must be approved by and
performed by the technical college under the jurisdiction of the State
Board for Technical and Comprehensive Education serving the designated
enterprise zone. In addition to the yearly limits, the amount retained
from employee withholding may not exceed two thousand dollars over
five years for each production employee being retrained. Additionally,
the qualifying business must match on a dollar-for-dollar basis the
amount retained from employee withholding. The total amount retained
from withholding and all of the qualifying business matching funds must
be paid to the technical college that provides the training to defray the
cost of the training program. Any training cost in excess of the job
development fees and matching funds is the responsibility of the
qualifying business based on negotiations with the technical college.
(E) Each qualified business which has retained employee withholding
under this section, shall report each employees state withholding to the
United States, this State, and the employee as if the retained withholding
had been paid over to the State pursuant to Chapter 9 of this title.
(F) Any job development fee of a qualifying business permanently
lapses upon expiration or termination of the revitalization agreement. In
the event of termination, the qualifying business shall immediately cease
to retain employee withholding and immediately cease spending funds
from the escrow account. Within thirty days of the expiration or
termination of the revitalization agreement, the qualifying business shall
pay over all the funds remaining in the escrow account to the department
as withholding taxes.
Section 12-10-90. If a qualifying business fails to achieve the level of
capital investment or employment set forth in the revitalization
agreement, the department may terminate the revitalization agreement and
reduce or suspend all or any part of the incentives until the time the
anticipated capital investment and employment levels are met. However,
these incentives must not be suspended retroactively. The council shall
provide in the revitalization agreement entered into in connection with a
project for the levels of capital investment and employment which must
be achieved and for the time period in which the levels must be
achieved.
Section 12-10-100. (A) The council shall establish criteria for the
determination and selection of qualifying businesses and the approval of
revitalization agreements. These criteria must give greatest weight to the
creditworthiness of the business, the number, type, and quality of new
jobs to be provided by the project to residents of this State, and the
economic viability of the business. The council may include in its
criteria requirements relating to the capital costs of, and projected
employment to be produced by, projects eligible for benefits under this
chapter and requirements relating to the employment of previously
unemployed or underemployed persons.
With respect to each business and project, the council shall request the
materials and make the inquiries necessary to determine whether the
business and its proposed project satisfy the council's announced criteria
and to conduct an adequate cost/benefit analysis with respect to the
proposed project and the incentives proposed to be granted by the council
with respect to the project. After a review of the relevant materials and
completion of its inquiries and analysis, the council may by resolution of
its members designate an applicant business as a qualifying business and
authorize the undertaking of its project according to the revitalization
agreement.
(B) The council shall establish an application fee schedule, not to
exceed two thousand dollars for each qualifying business, for undertaking
the provisions of this chapter. The State Treasurer shall establish an
account for these fees which must be expended by the council only for
meeting administrative, data collection, credit analysis, cost/benefits
analysis, reporting, and any other obligations pursuant to this chapter.
This account may retain funds for expenditure in the next fiscal year only
for purposes enumerated in this section.
(C) By March first of each year, the council shall prepare a public
document that itemizes each revitalization agreement concluded during
the prior calendar year. The report shall list each revitalization
agreement, the results of each cost/benefits analysis, and receipts and
expenditures of application fees. This document must be forwarded to
the State Budget and Control Board, Senate Finance Committee, and
House Ways and Means Committee. This document may not contain any
proprietary or confidential information that is otherwise exempt under
Chapter 4 of Title 30, the Freedom of Information Act, and nothing in
this section must be construed to require the release of such exempt
information.
(E) Notwithstanding any other provision of law, the council may
promulgate regulations to implement the provisions of this chapter
immediately upon the effective date of this chapter. These regulations
remain in effect until the convening of the General Assembly for the
1996 session, at which time the council shall comply with the
requirements of Chapter 23 of Title 1. The regulations initially
promulgated by the council remain in effect until compliance with
Chapter 23 of Title 1 during the 1996 session of the General
Assembly.
Section 12-10-110. This chapter must be liberally construed in
conformity with the findings provided in Section 12-10-20."
Economic Impact Zone Community Development Act of
1995
SECTION 2. Title 12 of the 1976 Code is amended by adding:
"CHAPTER 14
Economic Impact Zone Community
Development Act of 1995
Section 12-14-10. This chapter may be cited as the Economic Impact
Zone Community Development Act of 1995.
Section 12-14-20. It is the purpose of this chapter to establish a
program of providing tax incentives for the creation of economic impact
zones in order:
(1) to revitalize economically and physically distressed areas impacted
as a result of the closing or realignment of a federal military installation
area, primarily by encouraging the formation of new businesses and the
retention and expansion of existing businesses;
(2) to promote meaningful employment for economic impact zone
residents; and
(3) to encourage individuals to reside in the economic impact zones in
which they are employed.
Section 12-14-30. For purposes of this chapter:
(1) `economic impact zone' means a county or municipality, any
portion of which is located within fifty miles of the boundaries of an
applicable federal military installation, and any area not otherwise
included as part of the economic impact zone if the State Budget and
Control Board determines the area to be adversely impacted by the
closing or realignment of an applicable federal military installation. An
applicable federal military installation is one which is closed or realigned
under:
(a) the Defense Base Closure and Realignment Act of 1990;
(b) Title II of the Defense Authorization Amendments and Base
Closure and Realignment Act; or
(c) Section 2687 of Title 10, United States Code.
(2) `Internal Revenue Code' has the meaning provided in Section
12-7-20(11).
Section 12-14-40. (A) The designation of an area as an economic
impact zone must be made by the State Budget and Control Board. It
remains in effect during the period beginning on the date the board
designates the area an economic impact zone and ending on the earlier
of:
(1) December thirty-first of the fifteenth calendar year following the
calendar year in which the designation occurs, or
(2) a termination date designated by legislative enactment of the
General Assembly.
(B) A designation may be revoked by the General Assembly only
after a hearing on the record in which officials of the county or
municipality involved may participate.
Section 12-14-50. (A) In the case of an individual, there is allowed as
a deduction against South Carolina taxable income an amount equal to
twenty percent of the aggregate amount paid in cash by the taxpayer
during the taxable year for the purchase of economic impact zone
stock.
(B)(1) The maximum amount allowed as a deduction under subsection
(A) to a taxpayer for the taxable year may not exceed the lesser of:
(a) ten thousand dollars; or
(b) the excess of one hundred thousand dollars over the amount
allowed as a deduction under this section to the taxpayer for all prior
taxable years.
(2) If the amount otherwise deductible by the person under
subsection (A) exceeds the limitation under subsection (B)(1)(a):
(a) the amount of such excess is treated as an amount paid to
which subsection (A) applies during the next taxable year; and
(b) the deduction allowed for any taxable year must be allocated
proportionately among the economic impact zone stock purchased by the
person on the basis of the respective purchase prices a share.
(3) The taxpayer and members of the taxpayer's family are treated
as one person for purposes of subitem (1), and the limitations contained
in such subitem must be allocated among the taxpayer and such members
in accordance with their respective purchases of economic impact zone
stock. For purposes of this section, an individual's family includes only
such individual's spouse and minor children.
(C) For purposes of this section:
(1) the term `economic impact zone stock' means stock of a
corporation if:
(a) such stock is acquired on original issue from the corporation;
and
(b) such corporation is, at the time of issue, a qualified enterprise
zone issuer.
(2) (a) `Economic impact zone stock' includes such stock only to
the extent that the proceeds of the stock issue are used by the issuer
during the twelve-month period beginning on the date of issuance to
purchase qualified economic impact zone property.
(b) For purposes of this section, the term `qualified economic
impact zone property' means property to which Section 168 of the
Internal Revenue Code applies:
(i) the original use of which in an economic impact zone
commences with the issuer; and
(ii) substantially all of the use of which is in an economic
impact zone.
(3) The term `economic impact zone stock' does not include any
stock acquired from a corporation which made a substantial stock
redemption or distribution (without a bona fide business purpose therefor)
in an attempt to avoid the purposes of this section.
(D) For purposes of this section, the term `qualified economic impact
zone issuer' means any `C' corporation if:
(1) the corporation is an economic impact zone business or, in the
case of a new corporation, the corporation is being organized for
purposes of being an economic impact zone business;
(2) the sum of:
(a) the money;
(b) the aggregate adjusted bases of property owned by the
corporation; and
(c) the fair market value of property leased to the corporation (as
determined by the Department of Revenue and Taxation for property tax
purposes), does not exceed five million dollars; and
(3) more than twenty percent of the total voting power and twenty
percent of the total value of the stock of the corporation is owned
directly by individuals or estates or indirectly by individuals through
partnerships or trusts. The determination under subsection (3) must be
made as of the time of issuance of the stock in question but shall include
amounts received for the stock.
(E) The basis of any economic impact zone stock must be reduced by
the amount of the deduction allowed under this section with respect to
the stock.
(F)(1) In the case of a partnership or an `S' corporation, the
limitations under subsection (B) apply at the partner and shareholder
level and do not apply at the partnership or corporation level.
(2) Estates and trusts are not treated as individuals for purposes of
this section.
Section 12-14-60. (A) There is allowed as a credit against the tax
imposed pursuant to Chapter 7 of this title an economic impact zone
investment tax credit for any taxable year in an amount equal to five
percent of the aggregate bases of economic impact zone qualified
manufacturing and productive equipment properties placed in service
during such taxable year in the economic impact zone.
(B) For purposes of this section:
(1) `economic impact zone qualified manufacturing and productive
equipment property' means any property:
(a) which is used as an integral part of manufacturing, production,
or extraction of or furnishing transportation, communications, electrical
energy, gas, water, or sewage disposal services in the economic impact
zone;
(b) which is tangible property to which Section 168 of the Internal
Revenue Code applies;
(c) which is Section 1245 property (as defined in Section
1245(a)(3)of the Internal Revenue Code); and
(d)(i) the construction, reconstruction, or erection of which is
completed by the taxpayer in the economic impact zone; or
(ii) which is acquired by the taxpayer if the original use of such
property commences with the taxpayer inside the economic impact
zone.
(2) In the case of any computer software which is used to control or
monitor a manufacturing or production process inside the economic
impact zone and with respect to which depreciation (or amortization in
lieu of depreciation) is allowable, the software must be treated as
qualified manufacturing and productive equipment property.
(C) This section does not apply to any property to which the other tax
credits would apply unless the taxpayer elects to waive the application of
the other credits to the property.
Section 12-14-70. (A) For purposes of this chapter, `economic impact
zone business' means, with respect to any taxable year, any corporation if
for such year:
(1)(a) every trade or business of such corporation is the active
conduct of a qualified business within an economic impact zone; and
(b) at least eighty percent of the total gross income of the
corporation is derived from the active conduct of the business;
(2) substantially all of the use of the tangible property of the
corporation (whether owned or leased) is within an economic impact
zone;
(3) substantially all of the intangible property of the corporation is
used in, and exclusively related to, the active conduct of any such
business;
(4) substantially all of the services performed for the corporation by
its employees are performed within an economic impact zone;
(5) at least one-third of its employees are residents of an economic
impact zone;
(6) less than five percent of the average of the aggregate unadjusted
bases of the property of such corporation is attributable to collectibles (as
defined in Section 408(m)(2) of the Internal Revenue Code) other than
collectibles that are held primarily for sale to customers in the ordinary
course of such business; and
(7) less than five percent of the average of the aggregate unadjusted
bases of the property of such corporation is attributable to nonqualified
financial property.
(B) For purposes of this chapter:
(1) Except as otherwise provided in this subsection, the term
`qualified business' means any trade or business.
(2) The rental to others of real property located in an economic
impact zone may be treated as a qualified business only if:
(a) in the case of real property which is not residential rental
property (as defined in Section 168(e)(2) of the Internal Revenue Code),
the lessee is an economic impact zone business; or
(b) in the case of residential rental property:
(i) the property was originally placed in service after the date the
economic impact zone was designated; or
(ii) the property is rehabilitated after such date in a rehabilitation
which meets requirements based on the principles of Section 42(e)(3) of
the Internal Revenue Code.
(3) The rental to others of tangible personal property must be treated
as a qualified business only if substantially all of the rental of the
property is by economic impact zone businesses or by residents of an
economic impact zone.
(4) `Qualified business' does not include any trade or business
consisting predominantly of the development or holding of intangibles for
sale or license.
(5) The term `qualified business' does not include:
(a) any trade or business consisting of the operation of any facility
described in Section 144(c)(6)(B) of the Internal Revenue Code; and
(b) any trade or business the principal activity of which is farming
(within the meaning of subsections (A) or (B) of Section 2032A(e)(5) of
the Internal Revenue Code), but only if, as of the close of the preceding
taxable year, the sum of:
(i) the aggregate unadjusted bases (or, if greater, the fair market
value) of the assets owned by the taxpayer which are used in such trade
or business; and
(ii) the aggregate value of assets leased by the taxpayer which are
used in such a trade or business, exceeds five hundred thousand
dollars.
For purposes of subitem (b), rules similar to the rules of Section
1395(b) of the Internal Revenue Code apply.
(6) For purposes of this chapter, the term `nonqualified financial
property' means debt, stock, partnership interests, options, futures
contracts, forward contracts, warrants, notional principal contracts,
annuities, and other similar property specified in regulations, except that
the term does not include:
(a) reasonable amounts of working capital held in cash, cash
equivalents, or debt instruments with a term of eighteen months or less;
or
(b) debt instruments described in Section 1221(4) of the Internal
Revenue Code."
Accounting method for tax returns
SECTION 3. Section 12-7-1200 of the 1976 Code is amended to
read:
"Section 12-7-1200. (A) If the allocation and apportionment
provisions of this chapter do not fairly represent the extent of the
taxpayer's business activity in this State, the taxpayer may petition for, or
the department may require, in respect to all or any part of the taxpayer's
business activity, if reasonable:
(1) separate accounting;
(2) the exclusion of one or more of the factors;
(3) the inclusion of one or more additional factors which will fairly
represent the taxpayer's business activity in the State; or
(4) the employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
(B) For the purposes of this chapter, the department may enter into an
agreement with the taxpayer establishing the allocation and
apportionment of the taxpayer's income for a period not to exceed five
years, if the following conditions are met:
(1) the taxpayer is planning a new facility in this State or an
expansion of an existing facility;
(2) the taxpayer asks the department to enter into a contract under
this subsection reciting an allocation and apportionment method; and
(3) after reviewing the taxpayer's proposal and planned new facility
or expansion, the Advisory Coordinating Council for Economic
Development certifies that the new facility or expansion will have a
significant beneficial economic effect on the region for which it is
planned and that its benefits to the public exceed its costs to the public.
It is within the Advisory Coordinating Council for Economic
Development's sole discretion to determine whether a new facility or
expansion has a significant economic effect on the region for which it is
planned."
Time effective
SECTION 4. This act takes effect upon approval by the Governor.
Approved the 4th day of April, 1995. |