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S 960
Session 112 (1997-1998) 

S 0960 General Bill, By Passailaigue, Branton, Grooms, McConnell and Ravenel
 A BILL TO AMEND SECTION 12-6-3360 OF THE CODE OF SOUTH CAROLINA, 1976,
 RELATING TO THE JOBS TAX CREDIT, SO AS TO EXTEND THE BENEFITS APPLICABLE TO A
 LEAST DEVELOPED COUNTY TO AN ECONOMIC IMPACT ZONE AND TO MAKE THE CREDIT
 APPLICABLE TO ADDITIONAL FACILITIES, INCLUDING COMPUTER SOFTWARE DEVELOPMENT,
 MOTION PICTURE PRODUCTION, AND WATER TRANSPORTATION FACILITIES; TO AMEND
 SECTION 12-6-3410, RELATING TO THE INCOME TAX CREDIT FOR CORPORATE
 HEADQUARTERS, SO AS TO ADD FURTHER QUALIFYING CRITERIA; AND TO AMEND SECTION
 12-37-220(B)(32), RELATING TO THE PROPERTY TAX EXEMPTION FOR CORPORATE
 HEADQUARTERS, SO AS TO ADD FURTHER QUALIFYING CRITERIA.

   01/28/98  Senate Introduced and read first time SJ-5
   01/28/98  Senate Referred to Committee on Finance SJ-5



A BILL

TO AMEND SECTION 12-6-3360 OF THE CODE OF SOUTH CAROLINA, 1976, RELATING TO THE JOBS TAX CREDIT, SO AS TO EXTEND THE BENEFITS APPLICABLE TO A LEAST DEVELOPED COUNTY TO AN ECONOMIC IMPACT ZONE AND TO MAKE THE CREDIT APPLICABLE TO ADDITIONAL FACILITIES, INCLUDING COMPUTER SOFTWARE DEVELOPMENT, MOTION PICTURE PRODUCTION, AND WATER TRANSPORTATION FACILITIES; TO AMEND SECTION 12-6-3410, RELATING TO THE INCOME TAX CREDIT FOR CORPORATE HEADQUARTERS, SO AS TO ADD FURTHER QUALIFYING CRITERIA; AND TO AMEND SECTION 12-37-220(B)(32), RELATING TO THE PROPERTY TAX EXEMPTION FOR CORPORATE HEADQUARTERS, SO AS TO ADD FURTHER QUALIFYING CRITERIA.

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

SECTION 1. Section 12-6-3360 of the 1976 Code is amended to read:

"Section 12-6-3360. (A) Taxpayers that operate manufacturing, tourism, processing, warehousing, distribution, research and development, corporate office, and qualifying service-related, computer software development, motion picture production and allied services, and water transportation facilities are allowed an annual job tax credit as provided in this section. In addition, taxpayers that operate retail facilities and service related industries qualify for an annual jobs tax credit in counties designated as least developed or as economic impact zones. Credits under this section may be claimed against income taxes imposed by Section 12-6-510 or 12-6-530, and insurance premium taxes imposed pursuant to Chapter 7 of Title 38, and are limited in use to fifty percent of the taxpayer's South Carolina income tax, insurance premium tax liability. In computing any tax payable by a taxpayer under Section 38-7-90, the credit allowable under this section must be treated as a premium tax paid under Section 38-7-20.

(B) The department shall rank and designate the state's counties by December thirty-first each year using data from the South Carolina Employment Security Commission and the United States Department of Commerce. The counties are ranked using data from the most recent thirty-six month period with equal weight given to unemployment rate and per capita income as follows:

(1) The twelve counties with a combination of the highest unemployment rate and lowest per capita income are designated least developed counties.

(2) The twelve counties with a combination of the next highest unemployment rate and next lowest per capita income are designated under developed counties.

(3) The eleven counties with a combination of the next highest unemployment rate and the next lowest per capita income are designated moderately developed counties.

(4) The eleven counties with a combination of the lowest unemployment rate and the highest per capita income are designated developed counties. The designation by the department is effective for corporate taxable years which begin after the date of designation.

(5)(a) A county, any portion of which is located within twenty-five miles of the boundaries of an applicable military installation or applicable federal facility as defined in Section 12-6-3450(1), shall receive the benefits of the next increased credit designation for five years beginning with the year in which the military installation or federal facility became an applicable military installation or applicable federal facility as defined in Section 12-6-3450(1), with the additional requirement that the military installation must have reduced employment on the installation of at least three thousand employees.

(b) For a county in which is located an applicable military installation or applicable federal facility meeting the requirements for the increased credit provided in subitem (a) of this item, the credit allowed is two tiers higher than the credit for which the county would otherwise qualify for five years beginning with the year the installation or facility meets the requirements.

(c) Notwithstanding the designations in Section 12-6-3360, Laurens, Cherokee, and Union Counties shall qualify for the next increased credit designation.

(d) In a county where less than five percent of the work force is in manufacturing, the credit allowed is one tier higher than the credit for which the county would otherwise qualify.

(C) Subject to the conditions provided in subsection (N) of this section, a job tax credit is allowed for five years beginning in year two after the creation of the job for each new full-time job created if the minimum level of new jobs is maintained. The credit is only available to taxpayers that increase employment by ten or more full-time jobs, and no credit is allowed for the year or any subsequent year in which the net employment increase falls below the minimum level of ten. The amount of the initial job credit is as follows:

(1) Four thousand five hundred dollars for each new full-time job created in least developed counties and in economic impact zones.

(2) Three thousand five hundred dollars for each new full-time job created in under developed counties.

(3) Two thousand five hundred dollars for each new full-time job created in moderately developed counties.

(4) One thousand five hundred dollars for each new full-time job created in developed counties.

(D) If the taxpayer qualifying for the new jobs credit under subsection (C) creates additional new full-time jobs in years two through six, the taxpayer may obtain a credit for those new jobs for five years following the year in which the job is created. The amount of the credit for each new full-time job is the same as provided in subsection (C).

(E) Taxpayers which qualify for the job tax credit provided in subsection (C) and which are located in a business or industrial park jointly established and developed by a group of counties pursuant to Section 13 of Article VIII of the Constitution of this State are allowed an additional one thousand dollar credit for each new full-time job created. This additional credit is permitted for five years beginning in the taxable year following the creation of the job.

(F)(1) The number of new and additional new full-time jobs is determined by comparing the monthly average number of full-time employees subject to South Carolina income tax withholding in the applicable county for the taxable year with the monthly average in the prior taxable year. For purposes of calculating the monthly average number of full-time employees in the first year of operation in this State, a taxpayer may use the actual months in operation or a full twelve-month period. If a taxpayer's business is in operation for less than twelve months a year, the number of new and additional new full-time jobs is determined using the monthly average for the months the business is in operation.

(2)(a) A taxpayer who makes a capital investment of at least fifty million dollars at a single site within a three-year period may elect to have the number of new and additional new full-time jobs determined by comparing the monthly average number of full-time jobs subject to South Carolina income tax withholding at the site for the taxable year with the monthly average for the prior taxable year.

(b) For purposes of this item, 'single site' means a stand-alone building whether or not several stand-alone buildings are located in one geographical location.

(c) The calculation of new and additional jobs provided for in this item is allowed for only a five-year period commencing in the year in which the fifty million dollars of capital investment is completed.

(d) For purposes of this subsection a 'new job' does not include a job transferred from one site to another site by the taxpayer or a related person. A related person includes any entity or person that bears a relationship to the taxpayer as set forth in Section 267 of the Internal Revenue Code. However, this exclusion of a new job created by a job transferred from one site to another site does not extend to a job created at a new or expanded facility located in a county in which is located an 'applicable federal facility' as defined in Section 12-6-3450(A)(1)(b).

(G) Except for credits carried forward under subsection (H), the credits available under this section are only allowed for the job level that is maintained in the taxable year that the credit is claimed. If the job level for which a credit was claimed decreases, the five-year period for eligibility for the credit continues to run.

(H) A credit claimed under this section but not used in a taxable year may be carried forward for fifteen years from the taxable year in which the credit is earned by the taxpayer. Credits which are carried forward must be used in the order earned and before jobs credits claimed in the current year.

(I) The merger, consolidation, or reorganization of a taxpayer where tax attributes survive does not create new eligibility in a succeeding taxpayer, but unused job tax credits may be transferred and continued by the succeeding taxpayer subject to the limitations of Section 12-6-3320. In addition, a taxpayer may assign its rights to its jobs tax credit to another taxpayer if it transfers all, or substantially all, of the assets of the taxpayer or all, or substantially all, of the assets of a trade or business or operating division of a taxpayer related to the generation of the jobs tax credits to that taxpayer if the required number of new jobs is maintained for that amount of credit. No taxpayer is allowed a jobs tax credit if the net employment increase for that taxpayer falls below ten. The appropriate agency shall determine whether or not qualifying net increases or decreases have occurred and may require reports, promulgate rules or regulations, and hold hearings needed for substantiation and qualification.

(J) For a taxpayer which plans a significant expansion in its labor forces at a location in this State, the appropriate agency shall prescribe certification procedures to ensure that the taxpayer can claim credits in future years even if a particular county is removed from the list of least developed, under developed, or moderately developed counties, or if a particular county is removed from the list of economic impact zones.

(K)(1) In addition to those credits allowed under subsection (C) of this section a corporation, partnership, or limited liability company that qualifies for a credit under this section as an S corporation, partnership, or limited liability company, entitles each shareholder of the S corporation, partner of the partnership, or member of the limited liability company to a nonrefundable credit against taxes imposed pursuant to Section 12-6-510.

(2) The amount of the credit allowed a shareholder, partner, or owner of a limited liability company by this subsection is equal to the shareholder's percentage of stock ownership, partner's interest in the partnership, or member's interest in the limited liability company for the taxable year multiplied by the amount of the credit the taxpayer would have been entitled to if it were taxed as a corporation.

(3) A credit claimed under this subsection but not used in a taxable year may be carried forward for fifteen years from the close of the tax year in which the credit is earned by the S corporation, partnership, or limited liability company. However, the credit established by this section taken in one tax year may not exceed fifty percent of the taxpayer's tax liability under Section 12-6-510.

(L) Notwithstanding any other provision of this section, a county with a population under twenty-five thousand as determined by the most recent United States Census shall receive the next increased credit designation for purposes of the credit allowed by this section.

(M) As used in this section:

(1) 'Taxpayer' means a sole proprietor, partnership, corporation of any classification, limited liability company, or association taxable as a business entity which is subject to South Carolina taxes as contained in Sections 12-6-510 and 12-6-530 and Chapter 7 of Title 38.

(2) 'Appropriate agency' means the Department of Revenue for corporations subject to tax under Section 12-6-530 and the Department of Insurance for corporations subject to the premium tax under Chapter 7 of Title 38.

(3) 'New job' means a job created in this State at the time a new facility or an expansion is initially staffed. The term does not include a job created when an employee is shifted from an existing location in this State to a new or expanded facility whether the transferred job is from, or to, a facility of the taxpayer or a related person. A related person shall include any entity or person that bears a relationship to the taxpayer as set forth in Section 267 of the Internal Revenue Code. However, this exclusion of a new job created by employee shifting does not extend to a job created at a new or expanded facility located in a county in which is located an 'applicable federal facility' as defined in Section 12-6-3450(A)(1)(b). The term 'new job' also includes existing jobs at a facility of an employer which are reinstated after the employer has rebuilt the facility due to its destruction by accidental fire, natural disaster, or act of God. Destruction for purposes of this provision means that more than fifty percent of the facility was destroyed. The year of reinstatement is considered to be the year of creation of the job. All such jobs so reinstated qualify for the credit under this section, and no comparison is required to be made between the number of full-time jobs of the employer in the taxable year and the number of full-time jobs of the employer with the corresponding period of the prior taxable year.

(4) '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.

(5) 'Manufacturing facility' means an establishment where tangible personal property is produced or assembled.

(6) 'Processing facility' means an establishment engaged in services such as manufacturing-related, computer-related, communication-related, energy-related, or transportation-related services, but the term 'processing facility' does not include an establishment where retail sales of tangible personal property or services are made to retail customers. The term also includes a business entity engaged in processing agricultural, aquacultural, or maricultural products.

(7) 'Warehousing facility' means an establishment where tangible personal property is stored but does not include any establishment where retail sales of tangible personal property are made to retail customers.

(8) 'Distribution facility' means an establishment where shipments of tangible personal property are processed for delivery to customers. The term does not include an establishment where retail sales of tangible personal property are made to retail customers on more than twelve days a year except for a facility which processes customer sales orders by mail, telephone, or electronic means, if the facility also processes shipments of tangible personal property to customers and if at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers outside of South Carolina.

(9) 'Research and development facility' means an establishment engaged in laboratory, scientific, or experimental testing and development related to new products, new uses for existing products, or improving existing products. The term does not include an establishment engaged in efficiency surveys, management studies, consumer surveys, economic surveys, advertising, promotion, or research in connection with literary, historical, or similar projects.

(10) 'Corporate office facility' means the location where corporate managerial, professional, technical, and administrative personnel are domiciled and employed, and where corporate financial, personnel, legal, technical, support services, and other business functions are handled. Support services include, but are not limited to, claims processing, data entry, word processing, sales order processing, and telemarketing. The term does not include an establishment where retail sales of tangible personal property or retail services are made to retail customers except for a facility which processes customer sales orders by mail, telephone, or electronic means, if the facility also processes shipments of tangible personal property to customers and if at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers outside of this State.

(11) The terms 'retail sales' and 'tangible personal property' for purposes of this section are defined in Chapter 36 of this title.

(12) 'Tourism facility' means an establishment used for a theme park; amusement park; historical, educational, or trade museum; botanical garden; cultural center; theater; motion picture production studio; convention center; arena; auditorium; or a spectator or participatory sports facility; and similar establishments where entertainment, education, or recreation is provided to the general public. Tourism facility also includes new hotel and motel construction, except that to qualify for the credits allowed by this section and regardless of the county in which the facility is located, the number of new jobs that must be created by the new hotel or motel is twenty or more. It does not include that portion of an establishment where retail merchandise or retail services are sold directly to retail customers.

(13) 'Qualifying service-related facility' means (a) an establishment engaged 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; or, (b) a business for which over fifty percent of the gross receipts are from providing services, as opposed to manufacturing or selling or dealing in tangible personal property and which creates at least two hundred fifty jobs at a single location.

(14) 'Computer software development facility' includes establishments primarily engaged in the design, development, and production of prepackaged computer software. Important products of this industry include operating, utility, and applications programs. 'Computer software development facility' also includes establishments providing services such as preparation of software documentation for the user, installation of software for the user, and training the user in the use of the software.

(15) 'Motion picture and video tape production facility' includes establishments primarily engaged in the production of theatrical and nontheatrical motion pictures and video tapes for exhibition or sale, including education, industrial, and religious films. 'Motion picture and video tape production facility' also includes establishments engaged in both production and distribution.

(16) 'Water transportation' includes establishments engaged in freight and passenger transportation on the open seas or inland waters, and establishments furnishing such incidental services as lighterage, towing, and canal operation. 'Water transportation facility' also includes excursion boats, sightseeing boats, and water taxis. 'Water transportation facility' also includes the following:

(a) 'deep sea foreign transportation of freight', which includes establishments engaged primarily in operating vessels for the transportation of freight on the deep seas between the United States and foreign ports. 'Deep sea transportation of freight' also includes establishments operating vessels for the transportation of freight which travel to foreign ports and also to noncontiguous territories;

(b) 'deep sea domestic transportation of freight', which includes establishments primarily engaged in operating vessels for the transportation of freight on the deep seas between ports of the United States, the Panama Canal Zone, Puerto Rico, and United States island possessions or protectorates. Also included are operations limited to the coasts of Alaska, Hawaii, or Puerto Rico;

(c) 'water transportation of freight, not elsewhere classified', which includes establishments primarily engaged in the transportation of freight on all inland waterways, including the intracoastal waterways on the Atlantic and Gulf Coasts;

(d) 'deep sea transportation of passengers, except by ferry', which includes establishments primarily engaged in operating vessels for the transportation of passengers on the deep sea;

(e) 'ferries', which includes establishments primarily engaged in operating ferries for the transportation of passengers or vehicles;

(f) 'water transportation of passengers, not elsewhere classified', which includes establishments primarily engaged in furnishing water transportation of passengers, not elsewhere classified;

(g) 'marine cargo handling', which includes establishments primarily engaged in activities directly related to marine cargo handling from the time cargo, for or from a vessel, arrives at shipside, dock, pier, terminal, staging area, or in-transit area until cargo loading or unloading operations are completed. Included in this industry are establishments primarily engaged in the transits of cargo between ships and barges, trucks, trains, pipelines, and wharfs. Cargo handling operations carried on by transportation companies and separately reported are also included here. 'Marine cargo handling' also includes the operation and maintenance of piers, docks, and associated buildings and facilities;

(h) 'towing and tugboat services', which includes establishments primarily engaged in furnishing marine towing and tugboat services in the performance of auxiliary or terminal services in harbor areas. The vessels used in performing these services do not carry cargo or passengers;

(i) 'marinas', which includes establishments primarily engaged in operating marinas. These establishments rent boat slips and store boats, and generally perform a range of other services including cleaning and incidental boat repair. They frequently sell food, fuel, and fishing supplies, and may sell boats; and

(j) 'water transportation services, not elsewhere classified', which includes establishments primarily engaged in furnishing miscellaneous services incidental to water transportation, not elsewhere classified, such as lighterage, boat hiring, except for pleasure; chartering of vessels; canal operations; ship cleaning, except hold cleaning; and steamship leasing.

(N) The maximum aggregate credit that may be claimed in any tax year for a single employee under this section and Section 12-6-3470(A)(1) is five thousand five hundred dollars."

SECTION 2. Section 12-6-3410 of the 1976 Code is amended to read:

"Section 12-6-3410(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 12-6-530 or Section 12-20-50 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)(i) at least forty 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)(ii) at least twenty of the above referenced new jobs must be classified as headquarters staff employees.; or

(b)(i) at least fifteen 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;

(ii) at least eight of the above referenced new jobs must be classified as headquarters staff employees; and

(iii) annual gross income earned outside of South Carolina of at least five million dollars for the year in which the credit is claimed.

(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 seventy-five 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 the 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 department 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."

SECTION 3. Section 12-37-220(B)(32) of the 1976 Code is amended to read:

"Section 12-37-220(B)(32). All new corporate headquarters, corporate office facilities, distribution facilities, and all additions to existing corporate headquarters, corporate office facilities, or distribution facilities located in South Carolina, established or constructed, or placed in service, after June 27, 1988, are exempt from nonschool county ad valorem taxes for a period of five years from the time of establishment, construction, or being placed in service if the cost of the new construction or additions is fifty thousand dollars or more and either:

(i) seventy-five or more new jobs which are full-time or one hundred fifty or more substantially equivalent jobs are created in South Carolina.; or

(ii) fifteen or more new jobs which are full-time or thirty or more substantially equivalent jobs are created in South Carolina and the corporation has gross income earned outside of South Carolina of at least five million dollars for each year in which the credit is claimed.

For the purpose of this exemption, the term:

(1) 'new job' means any job created by an employer in South Carolina at the time a new facility or an expansion is initially staffed, but does not include a job created when an employee is shifted from an existing South Carolina location to work in a new or expanded facility;

(2)(a) '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 initially hired for or transferred to the South Carolina corporate headquarters, corporate office facility, or distribution facility and worked at a rented facility pending construction of a corporate headquarters, corporate office facility, or distribution facility;

(b) 'substantially equivalent' means a job requiring a minimum of twenty hours of an employee's time a week for the entire normal year of company's operations or a job requiring a minimum of twenty hours of an employee's time for a week for a year in which the employee was initially hired for or transferred to the South Carolina corporate headquarters, corporate office facility, or distribution facility and worked at a rented facility pending construction of a corporate headquarters, corporate office facility, or distribution facility;

(3) 'corporate headquarters' means the location where corporate staff members or employees are domiciled and employed, and where the majority of the company's financial, personnel, legal, planning, or other business functions are handled either on a regional or national basis and must be the sole such corporate headquarters within the region or nation;

(4) 'staff employee' or 'staff member' means executive, administrative, or professional worker. At least eighty percent of an executive employee's business functions must 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. An administrative employee is an employee who is not involved in manual work and whose work is directly related to management policies or general business operations. An administrative employee must customarily exercise discretion and independent judgment. 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;

(5) 'region' or 'regional' means a geographic area comprised of either:

(a) at least five states, including South Carolina, or

(b) two or more states, including South Carolina, if the entire business operations of the corporation are performed within fewer than five states;

(6) 'corporate office facility' means the location where corporate managerial, professional, technical, and administrative personnel are domiciled and employed, and where corporate financial, personnel, legal, technical, support services, and other business functions are handled. Support services include, but are not limited to, claims processing, data entry, word processing, sales order processing, and telemarketing;

(7) 'distribution facility' means an establishment where shipments of tangible personal property are processed for delivery to customers, but the term 'distribution facility' does not include an establishment which operates as a location where retail sales of tangible personal property are made to customers. A distribution facility includes establishments which process customer sales orders by mail, telephone, or electronic means, if the establishment also processes shipments of tangible personal property to customers. The terms 'retail sale', and 'tangible personal property', for purposes of this definition, have those meanings as contained in Chapter 36 of Title 12.

Certification of the required investment and the number of new jobs which are full-time or substantially equivalent and which are created must be provided by the South Carolina Department of Revenue to the appropriate local tax officials."

SECTION 4. This act takes effect upon approval by the Governor.

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Legislative Services Agency
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