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H*3775
Session 111 (1995-1996) 

H*3775(Rat #0055, Act #0032 of 1995)  General Bill, By H. Brown, Dantzler, Law, 
D. Williams and S.S. Wofford
 A Bill to amend the Code of Laws of South Carolina, 1976, by adding Section
 12-7-1275 so as to allow credits against the corporate income tax, corporate
 license tax, sales and use tax, local option sales and use tax, and similar
 taxes for a taxpayer constructing or operating a qualified recycling facility
 and to define "qualified recycling facility" and other terms associated with
 this credit; to amend Section 4-29-67, as amended, relating to the fee in lieu
 of taxes, so as to provide special provisions for a fee in lieu agreement for
 a project that is a qualified recycling facility, including, among other
 things, a term of not more than thirty-seven years, an assessment ratio of not
 less than three percent, and a special calculation of net present value; to
 amend Section 12-7-1200, relating to the accounting basis of income tax
 returns, so as to authorize separate accounting for the business activities of
 a taxpayer constructing or operating a qualified recycling facility with the
 approval of the Department of Revenue and Taxation after the certification of
 the Advisory Coordinating Council for Economic Development and to authorize
 this special accounting method for the taxpayer's subsidiaries; and to amend
 Section 12-36-2120, as amended, relating to sales tax exemptions, so as to
 exempt property and fuels used by or for a qualified recycling facility; to
 allow a taxpayer constructing or operating a qualified recycling facility
 income, sales and use, and corporate license tax credits in the amount of job
 development fees collected by the taxpayer; to amend Section 12-37-930, as
 amended, relating to the valuation of property and the annual depreciation
 allowed for manufacturer's machinery and equipment for purposes of the
 property tax, so as to provide an annual depreciation allowance of thirty
 percent for electronic interconnection component assembly devices for
 computers and computer peripherals and to allow original cost of the custom
 molds and dies used to manufacture such devices to be reduced by ninety
 percent and to provide definitions; to amend Section 12-7-1220, as amended,
 relating to the targeted jobs tax credit, so as to provide that two half-time
 jobs are considered one full-time job and to define half-time job for purposes
 of determining eligibility for the credit; and to amend the 1976 Code by
 adding Sections 12-10-40 and 12-10-80 so as to provide the criteria for the
 designation of Enterprise Zones and to allow a qualifying business in an
 Enterprise Zone to collect a job development fee from the wages of the
 employees and to provide the use of these fees.-amended title

   03/09/95  House  Introduced, read first time, placed on calendar
                     without reference HJ-3
   03/15/95  House  Debate adjourned until Thursday, March 16, 1995 HJ-16
   03/16/95  House  Debate adjourned until Tuesday, March 21, 1995 HJ-8
   03/21/95  House  Amended HJ-12
   03/21/95  House  Read second time HJ-14
   03/22/95  House  Read third time and sent to Senate HJ-17
   03/23/95  Senate Introduced, read first time, placed on calendar
                     without reference SJ-6
   03/29/95  Senate Amended SJ-16
   03/29/95  Senate Read second time SJ-21
   03/29/95  Senate Ordered to third reading with notice of
                     amendments SJ-21
   03/30/95  Senate Read third time and returned to House with
                     amendments SJ-161
   04/05/95  House  Concurred in Senate amendment and enrolled HJ-30
   04/05/95         Ratified R 55
   04/06/95         Signed By Governor
   04/06/95         Effective date 04/06/95
   04/24/95         Copies available
   04/24/95         Act No. 32



(A32, R55, H3775)

AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-7-1275 SO AS TO ALLOW CREDITS AGAINST THE CORPORATE INCOME TAX, CORPORATE LICENSE TAX, SALES AND USE TAX, LOCAL OPTION SALES AND USE TAX, AND SIMILAR TAXES FOR A TAXPAYER CONSTRUCTING OR OPERATING A QUALIFIED RECYCLING FACILITY AND TO DEFINE "QUALIFIED RECYCLING FACILITY" AND OTHER TERMS ASSOCIATED WITH THIS CREDIT; TO AMEND SECTION 4-29-67, AS AMENDED, RELATING TO THE FEE IN LIEU OF TAXES, SO AS TO PROVIDE SPECIAL PROVISIONS FOR A FEE IN LIEU AGREEMENT FOR A PROJECT THAT IS A QUALIFIED RECYCLING FACILITY, INCLUDING, AMONG OTHER THINGS, A TERM OF NOT MORE THAN THIRTY-SEVEN YEARS, AN ASSESSMENT RATIO OF NOT LESS THAN THREE PERCENT, AND A SPECIAL CALCULATION OF NET PRESENT VALUE; TO AMEND SECTION 12-7-1200, RELATING TO THE ACCOUNTING BASIS OF INCOME TAX RETURNS, SO AS TO AUTHORIZE SEPARATE ACCOUNTING FOR THE BUSINESS ACTIVITIES OF A TAXPAYER CONSTRUCTING OR OPERATING A QUALIFIED RECYCLING FACILITY WITH THE APPROVAL OF THE DEPARTMENT OF REVENUE AND TAXATION AFTER THE CERTIFICATION OF THE ADVISORY COORDINATING COUNCIL FOR ECONOMIC DEVELOPMENT AND TO AUTHORIZE THIS SPECIAL ACCOUNTING METHOD FOR THE TAXPAYER'S SUBSIDIARIES; TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO EXEMPT PROPERTY AND FUELS USED BY OR FOR A QUALIFIED RECYCLING FACILITY; TO ALLOW A TAXPAYER CONSTRUCTING OR OPERATING A QUALIFIED RECYCLING FACILITY INCOME, SALES AND USE, AND CORPORATE LICENSE TAX CREDITS IN THE AMOUNT OF JOB DEVELOPMENT FEES COLLECTED BY THE TAXPAYER; TO AMEND SECTION 12-37-930, AS AMENDED, RELATING TO THE VALUATION OF PROPERTY AND THE ANNUAL DEPRECIATION ALLOWED FOR MANUFACTURER'S MACHINERY AND EQUIPMENT FOR PURPOSES OF THE PROPERTY TAX, SO AS TO PROVIDE AN ANNUAL DEPRECIATION ALLOWANCE OF THIRTY PERCENT FOR ELECTRONIC INTERCONNECTION COMPONENT ASSEMBLY DEVICES FOR COMPUTERS AND COMPUTER PERIPHERALS AND TO ALLOW ORIGINAL COST OF THE CUSTOM MOLDS AND DIES USED TO MANUFACTURE SUCH DEVICES TO BE REDUCED BY NINETY PERCENT AND TO PROVIDE DEFINITIONS; TO AMEND SECTION 12-7-1220, AS AMENDED, RELATING TO THE TARGETED JOBS TAX CREDIT, SO AS TO PROVIDE THAT TWO HALF-TIME JOBS ARE CONSIDERED ONE FULL-TIME JOB AND TO DEFINE HALF-TIME JOB FOR PURPOSES OF DETERMINING ELIGIBILITY FOR THE CREDIT; AND TO AMEND THE 1976 CODE BY ADDING SECTIONS 12-10-40 AND 12-10-80 SO AS TO PROVIDE THE CRITERIA FOR THE DESIGNATION OF ENTERPRISE ZONES AND TO ALLOW A QUALIFYING BUSINESS IN AN ENTERPRISE ZONE TO COLLECT A JOB DEVELOPMENT FEE FROM THE WAGES OF EMPLOYEES AND TO PROVIDE THE USE OF THESE FEES.

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

Tax credits

SECTION 1. Article 10, Chapter 7, Title 12 of the 1976 Code is amended by adding:

"Section 12-7-1275. (A) As used in this section:

(1) `Investment' means the total cost of acquisition, construction, erection, and installation of all real and personal property, whether owned or leased including, but not limited to, all realty, improvements, leasehold improvements, buildings, machinery, and office equipment, which is at any time incorporated into or associated with a qualified recycling facility.

(2) `Recycling property' means all real and personal property, whether owned or leased including, but not limited to, all realty, improvements, leasehold improvements, buildings, machinery, and office equipment, incorporated into or associated with a qualified recycling facility.

(3) `Qualified recycling facility' means a facility certified as a qualified recycling facility by a duly authorized representative of the department which includes all real and personal property incorporated into or associated with the facility located or to be located within this State that will be used by the taxpayer to manufacture products for sale composed of at least fifty percent postconsumer waste material by weight or by volume. The minimum level of investment for a qualified recycling facility must be at least three hundred million dollars incurred by the end of the fifth calendar year after the year in which the taxpayer begins construction or operation of the facility.

(4) `Postconsumer waste material' means any product generated by a business or consumer which has served its intended end use and which has been separated from the solid waste stream for the purpose of recycling and includes, but is not limited to, scrap metal and iron, and used plastics, paper, glass, and rubber.

(B) A taxpayer who is constructing or operating a qualified recycling facility is allowed a credit in the amount of thirty percent of the taxpayer's investment in recycling property during the taxable year. This credit may be used to reduce any corporate income tax imposed by Section 12-7-230, sales or use tax imposed by the State or any political subdivision of the State, or corporate license fees imposed by Section 12-19-70 or any tax similar to these taxes. Any unused credit for a taxable year may be carried forward to subsequent taxable years until the credit is exhausted. If the recycling facility fails to meet the minimum investment within the time required by subsection (A)(3) of this section, the taxpayer shall increase its tax liability for the current taxable year by an amount equal to the amount of credit which was used to reduce any tax liability in earlier years."

Fee in lieu of taxes

SECTION 2. Section 4-29-67 of the 1976 Code, as last amended by Act 497 of 1994, is further amended by adding at the end:

"(AA) (1) Notwithstanding any other provision of this section, in the case of a qualified recycling facility the annual fee is available for no more than thirty years, and for those projects constructed or placed in service during more than one year, the annual fee is available for a maximum of thirty-seven years.

(2) Notwithstanding any other provision of this section, for a qualified recycling facility, the assessment ratio may not be less than three percent.

(3) Any machinery and equipment foundations, port facilities, or railroad track systems used, or to be used, for a qualified recycling facility is considered tangible personal property.

(4) Notwithstanding subsections (F) and (I) of this section, the total costs of all investments made for a qualified recycling facility are eligible for fee payments as provided in this section.

(5) For purposes of any fees that may be due on undeveloped property for which title has been transferred to the county by or for the owner or operator of a qualified recycling facility, the assessment ratio is three percent.

(6) Notwithstanding subsection (D)(2)(b) of this section, in the case of a qualified recycling facility, net present value calculations performed under the 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 on any day selected by the investor during the year in which assets are placed into service or in which the inducement agreement is executed.

(7) As used in this subsection, `qualified recycling facility' and `investment' have the meaning provided in Section 12-7-1275(A)."

Accounting method

SECTION 3. Section 12-7-1200 of the 1976 Code is amended by adding at the end:

"Notwithstanding the provisions of this section, a taxpayer who is constructing or operating a qualified recycling facility as defined in Section 12-7-1275(A) may petition the department for the use of separate accounting with respect to all or any part of the taxpayer's or taxpayer's subsidiaries' business activities or for the use of any other method to determine the taxpayer's or taxpayer's subsidiaries' taxable income. The department shall forward the petition with its comments concerning the economic impact of the suggested method to the Advisory Coordinating Council for Economic Development. The department may approve the petition upon certification of the Advisory Coordinating Council for Economic Development that the benefits to the public exceed the costs to the public."

Sales tax exemption

SECTION 4. Section 12-36-2120 of the 1976 Code is amended by adding an appropriately numbered item at the end to read:

"( ) (a) recycling property;

(b) electricity, natural gas, propane, or fuels of any type, oxygen, hydrogen, nitrogen, or gasses of any type, and fluids and lubricants used by a qualified recycling facility;

(c) tangible personal property which becomes, or will become, an ingredient or component part of products manufactured for sale by a qualified recycling facility;

(d) tangible personal property of or for a qualified recycling facility which is or will be used (1) for the handling or transfer of postconsumer waste material, (2) in or for the manufacturing process, or (3) in or for the handling or transfer of manufactured products;

(e) machinery and equipment foundations used or to be used by a qualified recycling facility;

(f) as used in this item, `recycling property', `qualified recycling facility', and `postconsumer waste material' have the meanings provided in Section 12-7-1275(A);"

Tax credits

SECTION 5. A taxpayer who is constructing or operating a qualified recycling facility as defined in Section 12-7-1275 shall be entitled to credits in the amount of all funds collected as permitted in Section 12-10-80, which credits can be used to reduce the taxpayer's corporate income tax imposed by Section 12-7-230, sales or use tax imposed by the State or any political subdivision of the State, corporate license fees imposed by Section 12-19-70 or any tax similar to these taxes. Any unused credits may be carried forward to subsequent taxable years until such credits are exhausted.

Depreciation allowed

SECTION 6. A. Item 6 of the schedule contained in the first paragraph of Section 12-37-930 of the 1976 Code is amended by adding at the end:

"(c) Electronic Interconnection Component Assembly Devices for Computers and Computer Peripherals........30%

Includes the manufacture of interconnection component assemblies and devices which are incorporated in computers or computer peripherals. Computer peripherals include tape drives, compact disk read-only memory systems, hard disks, drivers, tape streamers, monitors, printers, and power supplies."

B. The penultimate paragraph of Section 12-37-930 of the 1976 Code, as last amended by Act 516 of 1994, is further amended to read:

"In no event may the original cost be reduced more than eighty percent, except this limit is ninety percent for custom molds and dies used in the conduct of manufacturing electronic interconnection component assembly devices for computers and computer peripherals. In the year of acquisition, depreciation is allowed as if the property were owned for the full year. The term `original cost' means gross capitalized cost, including property on which the taxpayer made the election allowed pursuant to Section 179 of the Internal Revenue Code of 1986, as shown by the taxpayer's records for income tax purposes. For purposes of this paragraph, custom molds and dies used in the conduct of manufacturing electronic interconnection component assembly devices for computers and computer peripherals are molds and dies designed, produced, and conditioned to the special order of a manufacturer."

Tax credits

SECTION 7. Section 12-7-1220(H)(2) of the 1976 Code, as last amended by Section 48, Part II, Act 171 of 1991, is further amended to read:

"(2) `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 company 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 hired initially for or transferred to the South Carolina facility. For the purposes of this section, two half-time jobs are considered one full-time job. A `half-time job' is a job requiring a minimum of twenty hours of an employee's time a week for the entire normal year of the company's operations or a job requiring a minimum of twenty hours of an employee's time a week for a year in which the employee was hired initially for or transferred to the South Carolina facility."

Job development fee

SECTION 8. A. The 1976 Code is amended by adding:

"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 from an employee whose job was created in this State 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 employee@s 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.

(G) For purposes of the job development fee allowed by this section, an employee is a person whose job was created in this State."

B. The provisions of Section 12-10-80 of the 1976 Code as added by this section supersede the provisions of Section 12-10-80 of the 1976 Code as added by the enactment of H. 3534 of 1995.

Enterprise zone

SECTION 9. A. The 1976 Code is amended by adding:

"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;

(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; or

(7) consist of a census tract in which a penal institution operated by the South Carolina Department of Corrections has closed."

B. The provisions of Section 12-10-40 of the 1976 Code as added by this act are intended to supersede the provisions of Section 12-10-40 of the 1976 Code as added by the enactment of H. 3534 of 1995.

Time effective

SECTION 10. This act takes effect upon approval by the Governor.

Approved the 6th day of April, 1995.




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