Current Status Bill Number:3534 Ratification Number:21 Act Number:25 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19950208 Primary Sponsor:Wilkins All Sponsors:Wilkins, Tripp, Knotts, Whatley, Harrell, Wofford, A. Young, Hutson, Sandifer, Walker, Littlejohn, Herdklotz, Jaskwhich, Meacham, Fleming, Cain, Kelley, Simrill, Law, Mason, Jennings, Kennedy, Cato, Rice, Klauber, Stuart, Gamble, J. Young, Cotty, Shissias, Haskins, Harrison, Riser, Huff, Robinson, Marchbanks, H. Brown, Witherspoon, Baxley, Lanford, Waldrop and Easterday Drafted Document Number:BBM\9862HTC.95 Date Bill Passed both Bodies:19950323 Date of Last Amendment:19950316 Governor's Action:S Date of Governor's Action:19950404 Subject:Enterprise Zone Act of 1995
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
------ 19950404 Act No. A25
------ 19950404 Signed by Governor
------ 19950330 Ratified R21
House 19950323 Concurred in Senate amendment,
enrolled for ratification
Senate 19950316 Amended, read third time,
returned to House with amendments
Senate 19950309 Read second time, notice of
general amendments
Senate 19950307 Recalled from Committee, 06 SF
placed on the Calendar
Senate 19950302 Introduced, read first time, 06 SF
referred to Committee
House 19950301 Read third time, sent to Senate
House 19950228 Amended, read second time
House 19950228 Made Special Order under H.3695
House 19950223 Committee report: Favorable with 30 HWM
amendment
House 19950208 Introduced, read first time, 30 HWM
referred to Committee
View additional legislative information at the LPITS web site.
(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:
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:
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.