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(e) Any transfer must be for fair market value or result in a carryover basis for income tax purposes. If for income tax purposes, the property begins a new depreciable life for the asset, the property also begins a new depreciable life for purposes of computing the fee. In no event is the time period for receiving the fee extended."

L. Section 4-12-40 of the 1976 Code, as added by Act 125 of 1995, is amended to read:

"Section 4-12-40. Projects with respect to which a lease agreement has been entered into before the effective date of this chapter are required to use the provisions of Section 4-29-67. Projects with respect to which a lease agreement is entered into after December 31, 1995, the effective date of this chapter are required to use the provisions contained in this chapter.

The minimum investment levels or job creation levels or both required in order to qualify for a fee-in-lieu of property tax as provided in Section 4-29-67 and as reduced in Section 12-10-70(2) may be used for lease agreements executed before December 31, 1995, and for any project which has received any of the required readings before county council to enact the agreement before December 31, 1995."

M. The provisions of this section are effective for lease agreements entered into after 1995.

SECTION 9. A. Subsections (A) through (U) of Section 4-29-67 of the 1976 Code, as last amended by Act 32 of 1995, are amended to read:

"(A) Notwithstanding the provisions of Section 4-29-60, in the case of a financing agreement in the form of one or more lease agreements for a project qualifying under subsection (B), the county and the investor may enter into an inducement agreement which provides for payment in lieu of taxes (fee) as provided in this section. All references in this section to a lease agreement shall be deemed also to refer to a lease purchase agreement.

(B) In order for property to qualify for the fee as provided in subsection (D)(2):

(1) Title to the property must be held by the county or in the case of a project located in an industrial development park as defined in Section 4-1-170, title may be held by more than one county, provided each county is a member of the industrial development park. Any real property transferred to the county must include a legal description and plat of the property.

(2) The investment must be a project which is located in a single county or an industrial park as defined in Section 4-1-170. A project located on a contiguous tract of land in more than one county, but not in such an industrial development park, may qualify for the fee provided (a) the counties agree on the terms of the fee and the distribution of the fee payment; (b) the minimum millage rate cannot be lower than the millage rate applicable to the county in which the greatest amount of investment occurs; and (c) all such counties must be parties to all agreements establishing the terms of the fee.

(4)(a) Except as provided in subsection (B)(4)(b), the investment must be made by a single entity. For purposes of this section, (i) any partnership or other association which properly files its South Carolina income tax returns as a partnership for South Carolina income tax purposes will be treated as a single entity and as a partnership, and (ii) any corporation or other association which properly files its South Carolina income tax returns as a corporation for South Carolina income tax purposes will be treated as a single entity and as a corporation.

(b)(i) The members of the same controlled group of corporations can qualify for the fee if the combined investment in the county by the members meets the minimum investment requirements. The county and the members who are part of the inducement agreement may agree that any investments by other members of the controlled group within the time periods provided in subsections (C)(1) and (C)(2) shall qualify for the payment regardless of whether the member was part of the inducement agreement; provided, however, in order to qualify for the fee, such other members of the controlled group must be specifically approved by the county and must agree to be bound by agreements with the county relating to the fee; provided, however, such controlled group members need not be bound by agreements, or portions of agreements, to the extent such agreements do not affect the county; provided, further, that with the consent of the county, such members will not be bound by agreements or portions of agreements which do affect the county. Except as otherwise provided in subsection (B)(2), the investments under this subsection (B)(4)(b) must be within the same county or industrial park. Any controlled group member which is claiming the fee must invest at least ten million dollars in the county or industrial park.

(ii) The Department of Revenue and Taxation must be notified in writing of all members which have investments subject to the fee before or within thirty days after the execution of the lease agreement covering the investment by the member. The Department of Revenue and Taxation may extend the thirty-day period upon written request. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the Department of Revenue and Taxation for late notification for up to ten thousand dollars a month or portion of a month with the total penalty not to exceed one hundred twenty thousand dollars. Members of the controlled group must provide the information considered

(iii) If at any time the controlled group or any former member (who has left the controlled group) no longer has the minimum eighty-five forty-five million dollars of investment (without regard to depreciation), that group or former member no longer holding the minimum amount of investment as provided in subsection (B)(3) (without regard to depreciation) will no longer qualify for the fee.

(iv) For purposes of this section, `controlled group' or `controlled group of corporations' shall have the meaning provided under Section 1563(a) of the Internal Revenue Code as defined in Chapter 7 6 of Title 12 as of the date of the execution of the inducement agreement (without regard to amendments or replacements thereof), without regard to subsection subsections (a)(4) and (b) of such Section 1563.

(C)(1) From the end of the property tax year in which the investor and the county execute an inducement agreement, the investor has seven years in which to enter into an initial lease agreement with the county.

(2) From the end of the property tax year in which the investor and the county execute the initial lease agreement, the investor has five years in which to complete its investment for purposes of qualifying for this section. If the investor does not anticipate completing the project within five years, the investor may apply to the county before the end of the five-year period for an extension of time to complete the project. If the county agrees to grant the extension, the county must do so in writing, and a copy must be delivered to the Department of Revenue and Taxation within thirty days of the date the extension was granted. The extension may not exceed two years in which to complete the project.

There is no extension allowed for the five-year period in which to meet the minimum level of investment. If the minimum level of investment is not met within five years, all property under the lease agreement or agreements reverts retroactively to the payments required by Section 4-29-60. The difference between the fee actually paid by the investor and the payment which is due under Section 4-29-60 is subject to interest as provided in Section 12-43-305 12-54-25(D).

Unless property qualifies as replacement property under a contract provision enacted pursuant to subsection (F)(2), any property placed in service after the five-year period, or seven years in the case of a project which has received an extension, is not part of the fee agreement under subsection (D)(2) and is subject to the payments required by Section 4-29-60 if the county has title to the property, or to property taxes as provided in Chapter 37 of Title 12 if the investor has title to the property.

(3) The annual fee provided by subsection (D)(2) is available for no more than twenty years. For projects which are completed and placed in service during more than one year, each year's investment may be subject to the fee in subsection (D)(2) for twenty years to a maximum total of twenty-seven years for the fee for a single project which has been granted an extension. For those businesses qualifying under subsection (D)(4), the annual fee is available for no more than thirty years and for those projects placed in service in more than one year the annual fee is available for a maximum of thirty-seven years.
(4) Annually, during the time period allowed to meet the minimum investment level, the investor must provide the total amount invested to the appropriate county official.

(D) The inducement agreement must provide for fee payments, to the extent applicable, as follows:

(1)(a) Any property, title to which is transferred to the county, will be subject, before being placed in service, to an annual fee payment as provided in Section 4-29-60.

(b) Any undeveloped land, title to which is transferred to the county, will be subject, before being developed and placed in service, to an annual fee payment as provided in Section 4-29-60. The time during which fee payments are made under Section 4-29-60 will not be considered part of the maximum periods provided in subsections (C)(2) and (C)(3), and no lease shall be considered an `initial lease agreement' for purposes of this section unless and until the first day of the calendar year for which a fee payment is due under subsection (D)(2) in connection with such lease.

(2) After property qualifying under subsection (B) is placed in service, an annual fee payment determined in accordance with one of the following is due:

(a) an annual payment in an amount not less than the property taxes that would be due on the project if it were taxable, but using an assessment ratio of not less than six percent, except as provided in subsection (D)(4), and a fixed millage rate as provided in subsection (G), and a fair market value estimate determined by the South Carolina Department of Revenue and Taxation as follows:

(i) for real property using the original income tax basis for South Carolina income tax purposes without regard to depreciation. (provided, However, if real property is constructed for the fee or is

(ii) for personal property using the original income tax basis for South Carolina income tax purposes less depreciation allowable for property tax purposes, except that the investor is not entitled to any extraordinary obsolescence.

(b) an annual payment based on any alternative arrangement yielding a net present value of the sum of the fees for the life of the agreement not less than the net present value of the fee schedule as calculated under subsection (D)(2)(a). Net present value calculations performed under this 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 during the month in which the inducement agreement is executed. If no yield is available for the month in which the inducement agreement is executed, the last published yield for the appropriate maturity must be used. If there are no bonds of appropriate maturity available, bonds of different maturities may be averaged to obtain the appropriate maturity.

(c) an annual payment using a formula that results in a fee not less than the amount required pursuant to subsection (D)(2)(a), except that every fifth year the applicable millage rate is allowed to increase or decrease in step with the average actual millage rate applicable in the district where the project is located based on the preceding five-year period.

(3) At the conclusion of the payments determined pursuant to items (1) and (2) of this subsection, an annual payment equal to the taxes due on the project as if it were taxable. When the property is no longer subject to the fee under subsection (D)(2), the fee or property taxes must be assessed:

(a) with respect to real property, based on the fair market value as of the latest reassessment date for similar taxable property; and

(b) with respect to personal property, based on the then depreciated value applicable to such property under the fee, and thereafter continuing with the South Carolina property tax depreciation schedule.

(4)(a) The assessment ratio may not be lower than three percent:

(i) in the case of a business which is investing at least two hundred million dollars which results in a total investment of at least four hundred million dollars and which is creating at least two hundred new full-time jobs at a site qualifying for the fee;

(iii) in the case of a joint venture which is investing at least six hundred million dollars in a county classified as either least developed or under developed, and creating at least one hundred jobs in the same county.

(b) The new full-time jobs requirement of this item does not apply in the case of a taxpayer which for more than the twenty-five years ending on the date of the agreement paid more than fifty percent of all property taxes actually collected in the county.

(c) In an instance in which the governing body of a county has by contractual agreement provided for a change in fee-in-lieu of taxes arrangements conditioned on a future legislative enactment, any new enactment shall not bind the original parties to the agreement unless the change is ratified by the governing body of the county.

(E) Calculations pursuant to subsection (D)(2) must be made on the basis that the property, if taxable, is allowed all applicable property tax exemptions except the exemption allowed under Section 3(g) of Article X of the Constitution of this State and the exemption allowed pursuant to Section 12-37-220B(32) and (34).

(F) With regard to calculation of the fee provided in subsection (D)(2), the inducement agreement may provide for the disposal of property and the replacement of property subject to the fee as follows:

(1)(a) If an investor disposes of property subject to the fee, the fee must be reduced by the amount of the fee applicable to that property.

(b) Property is disposed of only when it is scrapped or sold in accordance with the lease agreement.

(c) If the investor used any method to compute the fee other than that provided in subsection (D)(2)(a), the fee on the property which was disposed of must be recomputed in accordance with subsection (D)(2)(a) and to the extent that the amount which would have been paid under subsection (D)(2)(a) exceeds the fee actually paid by the investor, the investor must pay the difference with the next fee payment due after the property is disposed of. If the investor used the method provided in subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must be used to calculate the amount which would have been paid under subsection (D)(2)(a).

(d) If there is no provision in the agreement dealing with the disposal of property in accordance with this subsection, the fee remains fixed and no adjustment to the fee is allowed for disposed property.

(a) Replacement property does not have to serve the same function as the property it is replacing. Replacement property qualifies for fee treatment provided in subsection (D)(2) only up to the original income tax basis of fee property which is being disposed of in the same property tax year. More than one piece of property can replace a single piece of property. To the extent that the income tax basis of the replacement property exceeds the original income tax basis of the property which it is replacing, the excess amount is subject to payments as provided in Section 4-29-60. Replacement property is entitled to the fee payment for the period of time remaining on the twenty-year fee period for the property which it is replacing; provided, however, that where a single piece of property replaces two or more pieces of property, such fee period shall be measured from the earliest of the dates on which the replaced pieces of property were placed in service.

(b) The new replacement property which qualifies for the fee provided in subsection (D)(2) is recorded using its income tax basis, and the fee is calculated using the millage rate and assessment ratio provided on the original fee property. The fee payment for replacement property must be based on subsection (D)(2)(a) or (D)(2)(c), if the investor originally used this method, without regard to present value.

(c) In order to qualify as replacement property, title to the replacement property must be held by the county.

(d) If there is no provision in the inducement agreement dealing with replacement property, any property placed in service after the five-year period, or seven years in the case of a project which has received an extension time period allowed for investments as provided by subsection (C)(2), is subject to the payments required by Section 4-29-60 if the county has title to the property, or to property taxes as provided in Chapter 37 of Title 12 if the investor has title to the property.

(G)(1) The county and the investor may enter into an agreement to establish the millage rate (millage rate agreement) for purposes of calculating payments under subsection (D)(2)(a) and the first five years under subsection (D)(2)(c). This millage rate agreement must be executed on the date of the inducement agreement or anytime thereafter up to and including the date of the initial lease agreement. This millage rate agreement may be a separate agreement or may be made a part of either the inducement agreement or the initial lease agreement.

(H)(1) Upon agreement of the parties, and except as provided in subsection (H)(2), an inducement agreement, a millage rate agreement, or both, may be amended or terminated and replaced with regard to all matters including, but not limited to, the addition or removal of controlled group members; provided, however, that no such amendment or termination and replacement may take place after the initial lease agreement date.

(2) No amendment or replacement of an inducement agreement or millage rate agreement may be used to change the millage rate, or discount rate, assessment ratio, or length of the agreement under any such agreement. However, existing inducement agreements which have not yet been implemented by the execution and delivery of a millage rate agreement or a lease purchase agreement, may be amended up to the date of execution and delivery of a millage rate agreement or a lease purchase agreement in the discretion of the governing body.

(I) Any and all investment expenditures made or incurred by any investor in connection with a project (or relevant phase thereof in connection with a project completed and placed in service in more than one year) shall qualify as expenditures subject to the fee in subsection (D)(2), so long as such expenditures are made:

(1) after the county takes action reflecting or identifying the project or proposed project or investment including, but not limited to, the adoption of an inducement or similar resolution by county council; and

(2) before the end of the applicable five or seven-year period time period for investments referenced in subsections (C)(2) and (C)(3).

An inducement agreement must be executed within two years after the date on which the county takes action reflecting or identifying the project or proposed project or investment including, but not limited to, the adoption of an inducement or similar resolution by county council; otherwise, only investment expenditures made or incurred by any investor after the date of such inducement agreement in connection with a project shall qualify as expenditures subject to the fee in subsection (D)(2).

(a) such expenditures are part of the original cost of the property which is transferred, within the applicable time period provided in subsection (I), to one or more other entities which are members of the same controlled group as the transferor entity and whose investments are being computed in the level of investment for purposes of subsections (B) or (C); and

(b) such property would have qualified for the fee in subsection (D)(2) if it had been initially acquired by the transferee entity rather than the transferor entity.

(2) The income tax basis of such property immediately before such transfer must equal the income tax basis of such property immediately after such transfer; provided, however, that to the extent income tax basis of such property immediately after such transfer unintentionally exceeds the income tax basis of such property immediately before such transfer, such excess shall be subject to payments under Section 4-29-60.

(3) The county must agree to any inclusion in the fee of the property described in subsection (J)(1).

(K)(1) Property which has been previously subject to property taxes in South Carolina will not qualify for the fee except as provided in this subsection:

(a) Land, excluding improvements thereon, on which a new project will be located may qualify for the fee even if it has previously been subject to South Carolina property taxes;

(b) Property which has been subject to South Carolina property taxes, but which has never been placed in service in South Carolina, may qualify for the fee; and

(c) Property which has been placed in service in South Carolina and subject to South Carolina property taxes which is purchased in a transaction other than between any of the entities specified in Section 267(b) of the Internal Revenue Code, as defined under Chapter 7 6 of Title 12 as of the time of the transfer, may qualify for the fee provided the fee-paying entity invests at least an additional eighty-five forty-five million dollars in the project.

(2) Repairs, alterations, or modifications to real or personal property which are not subject to a fee will not be eligible for a fee, even if they are capitalized expenditures, except for modifications to existing real

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