Current Status Bill Number:3819 Ratification Number:265 Act Number:149 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19970403 Primary Sponsor:Harrell All Sponsors:Harrell, Beck, J. Hines, Walker, Altman, Leach, Mason, Jennings, Simrill, Kinon, Limbaugh, Dantzler, Sandifer, R. Smith, Allison, Campsen, Knotts, Barrett, Seithel, Cobb-Hunter, Cooper, Young, Townsend, Felder, Kennedy, Woodrum, Hinson, Haskins, M. Hines, Harvin, Klauber, Fleming, Kelley, Limehouse, Young-Brickell, Whatley, Wilkins, Boan, McMahand, Littlejohn, Cato, H. Brown, Stuart, Robinson, Phillips, Riser, McKay, Lanford, Keegan, Edge, Jordan, Witherspoon, Gourdine, Hodges, Wilder, J. Smith, Chellis, Baxley, Kirsh and Sharpe Drafted Document Number:dka\4171mm.97 Date Bill Passed both Bodies:19970617 Date of Last Amendment:19970605 Governor's Action:S Date of Governor's Action:19970624 Subject:Fee in Lieu of Tax Simplification Act, economic development property; Taxation, Property, sales and use, agricultural
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
------ 19970714 Act No. A149
------ 19970624 Signed by Governor
------ 19970618 Ratified R265
House 19970617 Ordered enrolled for ratification
Senate 19970605 Free Conference Committee Report 89 SFCC
adopted
Senate 19970605 Free Conference Powers granted, 89 SFCC Leatherman
appointed Senators to Committee Leventis
of Free Conference Matthews
House 19970605 Free Conference Committee Report 99 HFCC
adopted
House 19970605 Free Conference Powers granted, 99 HFCC Harrell
appointed Reps. to Committee of Allison
Free Conference R. Smith
House 19970604 Conference powers granted, 98 HCC R. Smith
appointed Reps. to Committee of Allison
Conference Harrell
Senate 19970604 Conference powers granted, 88 SCC Leatherman
appointed Senators to Committee Leventis
of Conference Matthews
Senate 19970604 Insists upon amendment
House 19970604 Non-concurrence in Senate amendment
Senate 19970604 Read third time, returned to House
with amendment
Senate 19970603 Amended, read second time,
unanimous consent for third reading
on Wednesday, 19970604
Senate 19970603 Committee amendment adopted
Senate 19970521 Committee report: Favorable with 06 SF
amendment
Senate 19970501 Introduced, read first time, 06 SF
referred to Committee
House 19970430 Read third time, sent to Senate
House 19970429 Amended, read second time
House 19970417 Committee report: Favorable with 30 HWM
amendment
House 19970403 Introduced, read first time, 30 HWM
referred to Committee
View additional legislative information at the LPITS web site.
(A149, R265, H3819)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 44 TO TITLE 12 SO AS TO ENACT THE "FEE IN LIEU OF TAX SIMPLIFICATION ACT OF 1997" SO AS TO PROVIDE FOR SIMPLIFICATION OF FEE IN LIEU OF PROPERTY TAX TRANSACTIONS; TO DEFINE CERTAIN TERMS, INCLUDING "ECONOMIC DEVELOPMENT PROPERTY"; TO PROVIDE FOR APPROVAL BY LOCAL COUNTY COUNCILS OF FEE AGREEMENTS; TO PROVIDE FOR CALCULATION OF THE REQUIRED FEE PAYMENTS; TO PROVIDE FOR APPLICATION OF THE FEE TO REPLACEMENT PROPERTY AND A CREDIT AGAINST THE FEE FOR COSTS OF CERTAIN IMPROVEMENTS; TO PROVIDE FOR DISTRIBUTION OF THE FEE, PENALTIES FOR FAILING TO COMPLY WITH THE PROVISIONS OF THIS CHAPTER OR THE FEE AGREEMENTS, CONSEQUENCES OF TRANSFERS OF ECONOMIC DEVELOPMENT PROPERTY AND OF TERMINATION OF FEE AGREEMENTS, QUALIFICATION AS ECONOMIC DEVELOPMENT PROPERTY OF PROPERTY PREVIOUSLY SUBJECT TO PROPERTY TAX, AND REQUIREMENTS FOR AFFILIATE SPONSORS; TO AMEND SECTION 12-37-220, AS AMENDED, RELATING TO EXEMPTIONS OF CERTAIN CLASSES OF PROPERTY FROM AD VALOREM TAXATION, SO AS TO INCLUDE ECONOMIC DEVELOPMENT PROPERTY AS AN EXEMPTION; TO PROVIDE FOR ELECTION OF THE NEW FEE IN LIEU ARRANGEMENT AFTER THE EFFECTIVE DATE; TO AMEND SECTION 4-1-175, RELATING TO USE AND PLEDGING OF FEE IN LIEU REVENUES, SO AS TO ALLOW USE AND PLEDGING WITHOUT ISSUING BONDS OR MEETING CERTAIN REQUIREMENTS UNDER CERTAIN CONDITIONS; TO AMEND SECTION 4-12-30, RELATING TO FEE IN LIEU FILINGS, SO AS TO REQUIRE CERTAIN FILINGS OF COPIES; TO AMEND SECTION 4-29-67, AS AMENDED, RELATING TO INDUSTRIAL DEVELOPMENT PROJECT FILINGS, SO AS TO REQUIRE CERTAIN FILINGS; TO REQUIRE IMPOSITION OF A PENALTY AS NEEDED TO COVER THE DEBT OBLIGATION; TO AMEND SECTION 12-43-220, AS AMENDED, RELATING TO EQUALIZATION AND REASSESSMENT OF AGRICULTURAL PROPERTY, SO AS TO DISALLOW APPLICATION OF PROPERTY TAX ROLLBACK TO EXEMPT PROPERTY; TO AMEND SECTIONS 4-10-20 AND 12-36-2110, RELATING TO THE LOCAL OPTION SALES AND USE TAX, SO AS TO DEFINE "MACHINERY" USED FOR RESEARCH AND DEVELOPMENT FOR PURPOSES OF SALES AND USE TAX AND TO IMPOSE AN EFFECTIVE DATE OF DECEMBER 1, 1992; TO AMEND SECTION 12-6-3360, AS AMENDED, RELATING TO JOBS TAX CREDIT, SO AS TO INCREASE THE POPULATION FLOOR TO TWENTY-FIVE THOUSAND FOR RECEIPT OF INCREASED CREDIT DESIGNATION; AND TO REENACT CHAPTER 41, TITLE 2, RELATING TO THE CREATION OF A TAX STUDY COMMISSION, SO AS TO RECREATE A TAX STUDY COMMISSION.
Be it enacted by the General Assembly of the State of South Carolina:
Provides for simplification of fee in lieu of property tax transactions
SECTION 1. Title 12 of the 1976 Code is amended by adding:
Section 12-44-10. This act may be cited as the 'Fee in Lieu of Tax Simplification Act of 1997'.
Section 12-44-20. The General Assembly finds that:
(1) With the state's economy being centrally connected, as the wealth-generating capacity of South Carolina's businesses has increased, the state's per capita income also has increased.
(2) Since South Carolina's property tax rates as applied to manufacturing and certain commercial properties are disproportionately higher than those applied to other property in South Carolina, this disparity and the resulting property tax burdens historically have impeded new and expanded business in South Carolina.
(3) Previous General Assemblies have enacted legislation which reduces this disparity and the resulting property tax burden through a complex fee in lieu of tax arrangement that requires a company to transfer title to its property to the county and then lease the property back by paying rent and fees instead of property taxes on the property. The arrangement often includes the issuance of industrial revenue bonds by the county.
(4) The transfer of title and issuance of bonds are expensive, complex, time-consuming, and difficult undertakings for the county, public, and companies to understand and implement. The current rules also make financings more difficult and more expensive. All of these factors act to discourage new investments in South Carolina.
(5) The 'Fee in Lieu of Tax Simplification Act' simplifies the method for obtaining the fee in lieu of tax benefits while maintaining the essential county council approval process.
(6) The 'Fee in Lieu of Tax Simplification Act' makes the fee in lieu of tax incentive more attractive by eliminating the requirement for the issuance of industrial revenue bonds or the transfer of title of property to a county. This simplification facilitates the benefit for the county and the company making the investments.
Section 12-44-30. As used in this chapter:
(1) 'Alternative payment method' means fee payments as provided in Section 12-44-50(A)(3).
(2) 'Commencement date' means the last day of the property tax year during which economic development property is placed in service, except that this date must not be later than the last day of the property tax year which is three years from the year in which the county and the sponsor enter into a fee agreement.
(3) 'Controlled group' or 'controlled group of corporations' means the definition provided under Section 1563(a) of the Internal Revenue Code, as defined in Chapter 6, Title 12, as of the date of the execution of the fee agreement, without regard to amendments or replacements, and without regard to subsections (a)(4) and (b) of Section 1563.
(4) 'County' means the county or counties in which the project is proposed to be located. A project may be located in more than one county, subject to the provisions of Section 12-44-40(G).
(5) 'County council' means the governing body of the county in which the economic development property is located, except as specifically provided by Section 12-44-40(G).
(6) 'Department' means the South Carolina Department of Revenue.
(7) 'Economic development property' means each item of real and tangible personal property comprising a project which satisfies the provisions of Section 12-44-40(C) and other requirements of this chapter and becomes subject to a fee agreement. That property, other than replacement property qualifying under Section 12-44-60, must be placed in service by the end of the investment period.
(8) 'Enhanced investment' means a project which results in a total investment by a sponsor of:
(a) at least two hundred million dollars, which when added to the previous investments, 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 the project;
(b) at least four hundred million dollars of property qualifying for the fee and which is creating at least two hundred new full-time jobs at the project. The new full-time jobs requirement of this item does not apply to a taxpayer which paid more than fifty percent of all property taxes actually collected in the county for more than the twenty-five years ending on the date of the agreement;
(c) at least four hundred million dollars in a county classified as either least developed or underdeveloped, by a limited liability company and/or one or more of the members or equity holders where a member or equity holder is creating, at a site qualifying for the fee, at least one hundred new full-time jobs with an average annual salary of at least forty thousand dollars within four years of the date of execution of the fee agreement.
(9) 'Exemption period' means the period beginning on the later of the commencement date or the last day of the property tax year in which the fee agreement is entered into and ending on the termination date. For projects which are completed and placed in service during more than one year, the exemption period applies to each year's investment made by a sponsor during the investment period.
(10) 'Fee agreement' means an agreement between the sponsor and the county obligating the sponsor to pay fees instead of property taxes during the exemption period for each item of economic development property as more particularly described in Section 12-44-40.
(11) 'Inducement resolution' means a resolution of the county setting forth the commitment of the county to enter into a fee agreement.
(12) 'Infrastructure improvement credit' means a credit against the fee as provided by Section 12-44-70.
(13) 'Investment period' means the period beginning sixty days before the county takes action or identifies the project under Section 12-44-40(C), and ending five years after the commencement date; except that for a project with an enhanced investment as described above, the period ends eight years after the commencement date. The minimum investment must be completed within five years of the commencement date. For an enhanced investment, the enhanced investment must be completed within eight years of the commencement date. If the sponsor does not anticipate completing the project within this period, the sponsor may apply to the county before the end of the period for an extension of time to complete the project. If the county agrees to an extension, it must do so in writing and furnish a copy of the extension to the Department of Revenue within thirty days of the date the extension was granted. The extension may not exceed two years in which to complete the project. An extension is not allowed for the time period in which the sponsor must meet the minimum investment requirement.
(14) 'Minimum investment' means a project which results in a total investment by a sponsor of not less than five million dollars within the investment period.
(15) 'Multicounty park' means an industrial or business park developed by two or more counties as defined in Section 4-1-170.
(16) 'Project' means land and buildings and other improvements on the land including water, sewage treatment and disposal facilities, air pollution control facilities, and all other machinery, apparatus, equipment, office facilities, and furnishings which are necessary, suitable, or useful.
(17) 'Replacement property' means property placed under the fee agreement to replace economic development property previously subject to the fee agreement, as provided in Section 12-44-60.
(18) 'Sponsor' means a single entity as defined in Section 12-6-3360(m)(1) which signs the fee agreement with the county, subject to the provisions of Section 12-44-40.
(19) 'Sponsor affiliate' means an entity that joins with or is an affiliate, as defined in Section 12-44-130, of a sponsor and that participates in the investment in, or financing of, a project.
(20) 'Termination date' means the date which is the last day of a property tax year which is the nineteenth year following the first property tax year in which economic development property is placed in service. With respect to a fee agreement involving an enhanced investment, the termination date is the last day of a property tax year which is the twenty-ninth year following the first property tax year in which an economic development property is placed in service. If the fee agreement is terminated in accordance with Section 12-44-140, the termination date is the date the agreement is terminated.
Section 12-44-40. (A) To obtain the benefits provided by this chapter, the sponsor and the county must enter into a fee agreement requiring the payment of the fee described in Section 12-44-50. The county may not enter into a fee agreement unless the county council adopts an ordinance approving the agreement with the sponsor.
(B) If the county and the sponsor enter into a fee agreement, all economic development property is exempt from all ad valorem taxation imposed by Chapter 37 of Title 12 for the entire exemption period. Upon termination of the exemption period, the property is subject to property taxation in the manner provided by law, unless the property is otherwise exempt.
(C) Subject to the provisions of subsection (D) and the provisions of Section 12-44-110, real or tangible personal property of a sponsor or sponsor affiliate for which expenditures have been incurred by the sponsor or sponsor affiliate in connection with a project or a portion of it qualifies as economic development property, if the expenditures are incurred after, or within sixty days before, the county takes action reflecting or identifying the project or proposed project including, but not limited to, the adoption of an inducement or similar resolution by county council and before the end of the investment period.
(D) A county has two years from the date it takes action reflecting or identifying the project, or proposed project, to adopt an inducement resolution if the inducement resolution was not the original county action reflecting or identifying the project or proposed project. Otherwise, expenditures incurred before adoption of the inducement resolution do not qualify as economic development property.
(E) If a fee agreement is not executed within five years after the inducement resolution is adopted by the county council, the real property or tangible personal property of a sponsor and sponsor affiliate for which expenditures have been incurred by the sponsor and sponsor affiliate with respect to the project do not qualify as economic development property.
(F) To be eligible to enter into a fee agreement, the sponsor shall commit to a project which meets the minimum investment level and, with respect to applicable enhanced investments, the total investment and the minimum job creation levels required for an enhanced investment.
(G) The project which is the subject of the fee agreement must be located in a single county or in a multicounty park or on contiguous tracts of land in more than one county. When a tract crosses a county boundary, all counties in which the tract is located must be parties to the fee agreement, which must provide the manner in which the fee payments must be distributed among the counties and the fee agreement must set a minimum millage rate not lower than the millage rate applicable to the site in the county in which the greatest amount of investment occurs.
(H) The county council shall evaluate projects for classification as economic development property, based on criteria that include, but are not limited to:
(1) the purposes to be accomplished by the project are proper governmental and public purposes;
(2) the anticipated dollar amount and nature of the investment to be made; and
(3) the anticipated costs and benefits to the county.
(I) Before entering into a fee agreement, the county council shall find that:
(1) the project is anticipated to benefit the general public welfare of the locality by providing services, employment, recreation, or other public benefits not otherwise adequately provided locally;
(2) the project gives rise to no pecuniary liability of the county or incorporated municipality or to no charge against its general credit or taxing power;
(3) the purposes to be accomplished by the project are proper governmental and public purposes; and
(4) the benefits of the project to the public are greater than the costs to the public.
(J) In making the findings of subsections (H) and (I), the county council may seek the advice and assistance of the department or the Board of Economic Advisors.
(K) If 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, a new enactment does not bind the original parties to the agreement unless the change is ratified by the governing body of the county.
(L)(1) Upon agreement of the parties, and except as provided in item (2), a fee agreement may be amended or terminated and replaced with regard to all matters, including the addition or removal of controlled group members.
(2) An amendment or replacement of a fee agreement may not be used to change the millage rate, discount rate, assessment ratio, or length of the agreement.
Section 12-44-50. (A) A fee agreement must contain the requirement that a fee in lieu of property tax be paid as follows:
(1) During the exemption period, the sponsor shall pay, or be responsible for payment, to the county the annual fee payment in connection with the economic development property which has been placed in service, in an amount not less than the property taxes that would be due on the economic development property if it were taxable but using:
(a) an assessment ratio of not less than six percent, or if the project involves an enhanced investment, an assessment ratio of not less than four percent;
(b) a millage rate as established, either:
(i) by the county, which must not be lower than the cumulative property tax millage rate legally levied by or on behalf of all millage levying entities within which the project is to be located, which is the cumulative rate applicable on the thirtieth day of June preceding the calendar year in which the fee agreement is executed; or
(ii) as provided under subsubitem (i), except that every fifth year the millage rate is allowed to increase or decrease in step with the average cumulative actual millage rate applicable to the project based upon the preceding five-year period; and
(c) a fair market value for the economic development property. The fair market value of real property is determined by using the original income tax basis for South Carolina income tax purposes without regard to depreciation, but if real property is constructed for the fee or is purchased in an arm's length transaction, fair market value equals the original income tax basis. Otherwise, the department shall determine fair market value by appraisal. Fair market value for personal property is determined by using the original tax basis for South Carolina income tax purposes less depreciation allowable for property tax purposes, except that the investor is not entitled to extraordinary obsolescence.
(2) The fee calculation must be made so 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 12-37-220(B)(32) and (34).
(3) If the project subject to the fee agreement involves an investment of forty-five million dollars or more, or any higher minimum established by the county, the county and the sponsor may agree to pay the fees established in subsection (A)(1) based on an alternative payment method yielding a net present value of the fee schedule as calculated in subsection (A)(1) provided the sponsor agrees to a millage rate as established in subsection (A)(1)(b)(i). Net present value calculations 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 fee agreement is executed. If no yield is available for the month in which the fee agreement is executed, the last published yield for the appropriate maturity available must be used. If there are no bonds of appropriate maturity available, bonds of different maturities may be averaged to obtain the appropriate maturity.
(B) If a sponsor or sponsor affiliate disposes of an item of economic development property, the fee must be reduced by the amount of the fee applicable to that item of economic development property. Economic development property is disposed of only when it is scrapped or sold. Transactions with respect to items of property described in Section 12-44-120 are not a disposition of property under this subsection. If the sponsor used an alternative payment method as provided in subsection (A)(3), the fee applicable to the item of property which was disposed of must be recomputed in accordance with subsection (A)(1) and, to the extent that the amount which would have been paid with respect to this item under subsection (A)(1) exceeds the fee actually paid by the sponsor, the sponsor shall pay the difference with the next annual fee payment due after the item of property is disposed of.
Section 12-44-60. (A) The fee agreement may provide that property which is placed in service as a replacement for economic development property may become economic development property. This replacement property is not required to serve the same function as the economic development property it is replacing. Replacement property qualifies as economic development property only to the extent of the original income tax basis of the economic development 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.
(B) To the extent that the income tax basis of the replacement property exceeds the original income tax basis of the economic development property which it is replacing, the excess amount is subject to annual payments calculated as if the exemption for economic development property were not allowed. Replacement property is entitled to the fee payment for the period of time remaining during the exemption period for the economic development property which it is replacing. Where a single piece of property replaces two or more pieces of economic development property, the time period remaining must be measured from the earliest of the dates on which the replaced pieces of economic development property were placed in service.
(C) The new replacement property which qualifies for the fee provided in Section 12-44-50 is recorded using its income tax basis, and the fee is calculated using the millage rate and assessment ratio provided on the original economic development property. The fee payment for replacement property must be based on Section 12-44-50(A)(3) if the sponsor originally used an alternative payment method.
Section 12-44-70. (A) If allowed by the fee agreement and subject to any limitations and conditions contained in the fee agreement, a sponsor may take a credit against the fee established in Section 12-44-50(A)(1) and (3) over the term specified in the fee agreement to offset improvement costs:
(1) for a project not located in a multicounty park, to the extent that the cumulative credit taken does not exceed the lesser of:
(a) the improvement costs of the project; or
(b) the county's share of fees distributed from the project under Section 12-44-80(A).
A municipality or special purpose district that would otherwise receive a distribution of fee in lieu of taxes under Section 12-44-80(A), may agree to allow to a sponsor a credit against the fee established in Section 12-44-50(A)(1) or (A)(3) in an amount not exceeding the share of the fee in lieu of taxes that would have been distributed to the municipality or special purpose district with respect to the sponsor's project; or
(2) for a project located within a multicounty park, to the extent that the cumulative credit taken does not exceed the lesser of:
(a) the improvement costs of the project; or
(b) the county's share of fees.
(B) For purposes of this section, improvement costs include the cost of designing, acquiring, constructing, improving, or expanding:
(1) the infrastructure serving the issuer; and
(2) improved and unimproved real property, buildings, and structural components of buildings used in the operation of a manufacturing or commercial enterprise in order to enhance economic development.
Section 12-44-80. (A) For a project not located in a multicounty park, distribution of the fee payments on the project must be made in the same manner and proportion that the millage levied for school and other purposes would be distributed if the property were taxable.
(B) For a project located in a multicounty park, distribution of the fee payments on the project must be made in the same manner provided for by the agreement between or among counties establishing the multicounty park.
Section 12-44-90. (A) The investor shall file returns, contracts, and other information which may be required by the department.
(B) Fee payments, and returns calculating fee payments, are due at the same time as property tax payments and property tax returns are due.
(C) Failure to make a timely fee payment and file required returns results in penalties being assessed as if the payment or return were a property tax payment or return.
(D) The department may issue rulings and promulgate regulations as necessary to carry out the purpose of this section.
(E) The provisions of Chapters 4 and 54 of Title 12, applicable to property taxes, apply to this section, and for purposes of the application, the fee is considered a property tax. Section 12-54-155 does not apply to this section.
(F) The provisions of Chapters 49, 51, and 53 of Title 12 apply to a fee agreement and a fee due under the agreement. For purposes of those chapters, the fee is considered a property tax.
(G) Within thirty days of the date of execution of a fee agreement, a copy of the fee agreement must be filed with the Department of Revenue, the county assessor, and the county auditor for the county in which the project is located. If the project is located in a multicounty park the fee agreement must be filed with the auditors and assessors for all counties participating in the multicounty park.
Section 12-44-100. (A) A fee agreement may provide that a sponsor who has committed to an enhanced investment or an investment above that required for a minimum investment may continue to receive the benefits of this chapter, even if the sponsor fails to make the required investment or fails to create the jobs required by the fee agreement, if the sponsor meets the minimum investment. If the sponsor fails to make the required investment or create the required number of jobs, the fee agreement may not provide for an assessment ratio and an exemption period more favorable than those allowed for the minimum investment.
(B) Notwithstanding the use of the term 'assessment ratio', a sponsor and a county may negotiate a fee agreement using differing assessment ratios for different assessment years covered by the fee agreement, but the assessment ratio for an assessment year may not be lower than six percent or, if the project involves an enhanced investment, four percent.
(C) The fee agreement may provide that replacement property is not subject to Section 12-44-60 if the sponsor fails to make the level of investment specified in the fee agreement.
Section 12-44-110. Property which previously has been subject to property taxes in South Carolina does not qualify as economic development property, except that:
(1) land, excluding existing improvements on the land, on which a new project is to be located may qualify as economic development property even if it previously has been subject to property taxes in this State;
(2) property which has been subject to property taxes in this State, but which has never been placed in service in this State, may qualify as economic development property;
(3) property which previously has been placed in service in this State and previously has been subject to property taxes in this State 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 6 of Title 12 as of the time of the transfer, may qualify as economic development property if the sponsor invests at least an additional forty-five million dollars at the project;
(4) repairs, alterations, or modifications to real or personal property, which is not economic development property, are not eligible to be economic development property, even if they are capitalized expenditures, except for modifications which constitute an expansion to existing real property improvements.
Section 12-44-120. (A) An interest in a fee agreement and the economic development property to which the fee agreement relates may be transferred to another entity at any time. Notwithstanding another provision of this chapter, equity or other interest in an entity with an interest in a fee agreement or the economic development property, or both, to which a fee agreement relates may be transferred to another entity or person at any time.
(B) A single entity, or two or more entities which are members of a controlled group, may enter into lending, financing, security, or similar arrangements, or succession of such arrangements, with a financing entity concerning all or part of a project and may enter into a sale-leaseback arrangement including, without limitation, an assignment, sublease, or similar arrangement, or succession of such arrangements, with one or more financing entities concerning all or part of a project, regardless of the identity of the income tax owner of economic development property. Even though income tax basis is changed for income tax purposes, neither the original transfer to the financing entity nor the later transfer from the financing entity back to the original transferor or members of its controlled group, pursuant to terms in the sale-leaseback agreement, affects the amount of the payments due under Section 12-44-50.
(C) All transfers undertaken with respect to other projects to effect a financing authorized under this subsection must meet the following requirements:
(1) The department and the county must receive notification, in writing within sixty days after the transfer, of the identity of each transferee and other information required by the department with the appropriate returns. Failure to meet this notice requirement does not adversely affect the exemption, but a penalty may be assessed by the department for late notification for up to ten thousand dollars a year or portion of a year, up to a maximum penalty of fifty thousand dollars.
(2) If the financing entity is the income tax owner of property, either the financing entity is primarily liable for the payments due under Section 12-44-50 as to that portion of the project to which the transfer relates, with the sponsor remaining secondarily liable for the payment, or the sponsor must agree to continue to be primarily liable for the annual payments as to that portion of the project to which the transfer relates.
(D) Before a sponsor may transfer a fee agreement, or substantially all the economic development property to which the fee agreement relates, it must obtain the approval of the county with which it entered into the fee agreement. That approval is not required in connection with financing-related transfers.
Section 12-44-130. (A) To be eligible for the fee, a sponsor affiliate must invest five million dollars. The county and the members who are part of the fee agreement may agree that investments by other members of the controlled group within the investment period qualify for the payment regardless of whether the member was part of the fee agreement, except that the new sponsor affiliate must invest at least five million dollars in the project. To qualify for the exemption, the other members of the controlled group must be approved specifically by the county and must agree to be bound by agreements with the county relating to the exemption. These controlled group members need not be bound by agreements, or portions of agreements, which do not affect the county.
(B) The department and the county must be notified in writing of all members of the controlled group which have investments subject to the fee exemption before or within thirty days after the execution of the fee agreement covering the investment by the member. The department may extend the thirty-day period upon written request. Failure to meet this notice requirement does not affect adversely the exemption, but a penalty may be assessed by the department for late notification of 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 shall provide the information considered necessary by the department to ensure that the investors are part of a controlled group.
Section 12-44-140. (A) The county and the sponsor may agree to terminate the fee agreement at any time. From the date of termination, all economic development property is subject to ad valorem taxation as imposed by law. If the sponsor used an alternative payment method, the sponsor shall pay to the county at the time of termination an additional fee payment equal to the difference between the total amount of the fee payments that would have been made with respect to the economic development property by the sponsor if the standard fee calculation under Section 12-44-50(A)(1) had been used and the total amount of fee payments actually made by the sponsor.
(B) A fee agreement is automatically terminated if the sponsor fails to satisfy the minimum investment level provided in Section 12-44-30(14) within the investment period or otherwise fails to meet the minimum investment or job creation requirements of a fee agreement to qualify for the benefits of this chapter. If the fee agreement is terminated under this subsection, all economic development property is subject, as of the commencement date, to ad valorem taxation as imposed by law. At the time of termination, the sponsor shall pay to the county an additional fee equal to the difference between the total amount of property taxes that would have been paid by the sponsor had the project been taxable, taking into account exemptions from property taxes that would have been available to the sponsor, and the total amount of fee payments actually made by the sponsor.
Section 12-44-150. Projects to which a fee agreement applies pursuant to this section are considered taxable property at the level of the negotiated payments for purposes of bonded indebtedness pursuant to Sections 14 and 15 of Article X of the Constitution of this State, and for purposes of computing the index of taxpaying ability pursuant to Section 59-20-20(3). However, for a project located in an industrial development park as defined in Section 4-1-170, projects are considered taxable property in the manner provided in Section 4-1-170 for purposes of bonded indebtedness pursuant to Sections 14 and 15 of Article X of the Constitution of this State, and for purposes of computing the index of taxpaying ability pursuant to Section 59-20-20(3). However, the computation of bonded indebtedness limitation is subject to the requirements of Section 4-29-68(E).
Section 12-44-160. This chapter must be construed liberally in accordance with the findings in Section 12-44-20 with due regard to the paramount importance of the county council approvals required throughout this chapter. If the General Assembly adopts enabling legislation, property that would be exempt under this chapter but is held not to be exempt because of the unconstitutionality or illegality of this chapter, or any portion of it, is exempt from property tax under Section 4-29-67 or Chapter 12 of this title if the project and county approval would have met the requirements for exemption under them, except that fees in lieu of taxes must have been, and must continue to be, made in the amounts required by Section 4-29-67 or Chapter 12 of this title."
Exempts economic development property from ad valorem taxes
SECTION 2. Section 12-37-220(B) of the 1976 Code, as last amended by Act 462 of 1996, is further amended by adding an appropriately numbered item at the end to read:
"( ) Economic development property during the exemption period as provided in Chapter 44 of Title 12."
Allows election of new fee arrangement
SECTION 3. (A) Economic development property as defined in Section 12-44-30(7) may include property placed in service for property tax purposes after the effective date of this act.
(B) An entity with property subject to an existing fee in lieu of property taxes arrangement under Article 1, Chapter 12, Title 4 of the 1976 Code or Section 4-29-67 of the 1976 Code, or which has acquired or will acquire property pursuant to an inducement resolution, may elect, with the consent of the applicable county, to transfer property from the prior arrangement to the fee arrangements provided by the act and that property must be considered automatically economic development property as defined in Section 12-44-30(7) subject to:
(1) a continuation of the same fee payments required under the existing lease agreement;
(2) a continuation of the same fee in lieu of tax payments only for the time required for payments under the existing lease agreement;
(3) a carryover of minimum investment or employment requirements of the existing arrangements to the new fee arrangement; and
(4) appropriate agreements and amendments between the sponsor and the county entered into continuing the provisions and limitations of the prior agreement.
The entity and the governing body of the county may enter into a new fee agreement reflecting the appropriate handling of the transition with due regard to appropriate cancellation or amendment of existing financing arrangements.
Allows use of funds without issuing bonds or meeting certain requirements
SECTION 4. Section 4-1-175 of the 1976 Code, as added by Act 361 of 1992, is amended to read:
"Section 4-1-175. A county or municipality receiving revenues from a payment in lieu of taxes pursuant to Section 13 of Article VIII of the Constitution of this State may issue special source revenue bonds secured by and payable from all or a part of that portion of the revenues which the county is entitled to retain pursuant to the agreement required by Section 4-1-170 in the manner and for the purposes set forth in Section 4-29-68. The county or municipality may pledge the revenues for the additional securing of other indebtedness in the manner and for the purposes set forth in Section 4-29-68.
A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes pursuant to Section 13 of Article VIII of the Constitution of this State may use a portion of this revenue for the purposes outlined in Section 4-29-68 without the requirement of issuing the special source revenue bonds or meeting the requirements of Section 4-29-68(A)(4).
A political subdivision of this State subject to the limitation of either Section 14(7)(a) or Section 15(6) of Article X of the Constitution of this State pledging pursuant to this section all or a portion of the revenues received and retained by that subdivision from a payment in lieu of taxes to the repayment of any bonds shall not include in the assessed value of taxable property located in the political subdivision for the purposes of calculating the limit imposed by those sections of the Constitution any amount representing the value of the property that is the basis of the pledged portion of revenues. If the political subdivision, before pledging revenues pursuant to this section, has included an amount representing the value of a parcel or item of property that is the subject of a payment in lieu of taxes in the assessed value of taxable property located in the political subdivision and has issued general obligation debt within the debt limit calculated on the basis of such assessed value, then it may not pledge pursuant to this section revenues based on the item or parcel of property, to the extent that the amount representing its value is necessary to permit the outstanding general obligation debt within the debt limit of the political subdivision."
Requires filings of copies of fee in lieu agreements
SECTION 5. Section 4-12-30(Q) of the 1976 Code, as added by Act 125 of 1995, is amended by adding:
"(7) Within thirty days of the date of execution of an inducement or lease agreement, a copy of the agreement must be filed with the Department of Revenue and the county auditors and the county assessors
for the county or counties in which the project is located. If the project is located in a multicounty park, the agreements must be filed with the auditors and assessors for all counties participating in the multicounty park."
Requires filings of copies of fee in lieu agreements
SECTION 6. Section 4-29-67(W) of the 1976 Code, as last amended by Act 181 of 1993, is further amended by adding:
"(6) Within thirty days of the date of execution of an inducement or lease agreement, a copy of the agreement must be filed with the Department of Revenue and the county auditors and the county assessors for the county or counties in which the project is located. If the project is located in a multicounty park, the agreements must be filed with the auditors and assessors for all counties participating in the multicounty park."
Imposes penalty if needed to meet debt obligation
SECTION 7. If the stream of payments from a fee in lieu of tax agreement becomes insufficient to completely service the payments of interest and principal due pursuant to a debt obligation issued pursuant to Section 4-29-68, a penalty must be imposed, in addition to any amount of fee in lieu of tax payment otherwise due or payable, in the amount necessary to pay all amounts of interest and principal which are not otherwise paid by the pledged fee revenue. This penalty does not apply if the entity obligated to make the fee payments or a member of the control group associated with the entity owns the entire bond issue one year before any such default of payment.
Disallows rollback application to exempt property
SECTION 8. Section 12-43-220(d) of the 1976 Code, as last amended by Act 431 of 1996, is further amended by adding at the end:
"(5) Any property which becomes exempt from property taxes under Section 12-37-220(A)(1) or any economic development property which becomes exempt under Section 12-37-220(B) is not subject to rollback taxes."
Defines "machinery" used for research and development for purposes of sales and use tax and imposes special effective date
SECTION 9. A. Section 4-10-20 of the 1976 Code, as added by Act 317 of 1990, is amended to read:
"Section 4-10-20. A county, upon referendum approval, may levy a sales and use tax of one percent on the gross proceeds of sales within the county area which are subject to tax under Chapter 36 of Title 12 and the enforcement provisions of Chapter 54 of Title 12. The sale of items with a maximum tax levied in accordance with Section 12-36-2110 and Article 17 of Chapter 36 of Title 12 are exempt from the local sales and use tax. The adopted rate also applies to tangible personal property subject to the use tax in Section 12-36-1310. Taxpayers required to remit taxes under Section 12-36-1310 shall identify the county or municipality in the county area in which tangible personal property purchased at retail is stored, used, or consumed in this State. Utilities are required to report sales in the county or municipality in which consumption of the tangible personal property occurs. A taxpayer subject to the tax imposed by Section 12-36-920, who owns or manages rental units in more than one county or municipality, shall report separately in his sales tax return the total gross proceeds from business done in each county or municipality."
B. Section 12-36-2110(D) of the 1976 Code, as added by Act 110 of 1991, is amended to read:
"(D) The maximum tax levied pursuant to this chapter on the sale or use of machinery for research and development is three hundred dollars. As used in this subsection, 'machinery for research and development' means machinery used directly and exclusively in research and development in the experimental or laboratory sense for new products, new uses for existing products, or for improving existing products. 'Machinery' includes machines and the parts of machines, attachments, and replacements used or manufactured for use on or in the operation of the machines and which are necessary to the operation of the machines and are customarily so used. To be eligible for the limitation imposed by this subsection, the machinery must be located in a separate facility devoted exclusively to research and development as defined in this subsection. The limitation does not extend to machinery used in connection with efficiency surveys, management studies, consumer surveys, economic surveys, advertising, promotion, or research in connection with literary, historical, or similar projects."
C. Notwithstanding any other effective date provided in this act, this section is effective for sales or use made on or after December 1, 1992.
Increases population floor for receipt of increased credit designation
SECTION 10. Section 12-6-3360(L) of the 1976 Code, as last amended by Act 462 of 1996, is further amended to read:
"(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."
Reenacts tax study commission
SECTION 11. A. Chapter 41, Title 2 of the 1976 Code is reenacted to read:
Section 2-41-5. There is established the Tax Study Commission composed of nine members, three appointed by the President pro tempore of the Senate from the membership of the Senate, who shall serve ex officio with full voting powers, three appointed by the Speaker of the House of Representatives from the membership of the House, who shall serve ex officio with full voting powers, and three nonlegislative members appointed by the Governor. The terms of members of the commission appointed by the Governor are coterminous with the term of the appointing Governor.
Section 2-41-15. The commission shall:
(1) make a detailed and careful study of the revenue laws of the State, together with all other laws of the State which have a bearing upon the study of the revenue laws, and to make recommendations to the General Assembly;
(2) provide for the revision of revenue laws so as to provide a more easily understandable and workable system of revenue laws for the State;
(3) recommend changes in the basic tax structure of the State and in the rates of taxation, together with predicted revenue effects of the charges together with proposed alternate sources of revenue, to the end that our revenue system may be stable and equitable, and yet so fair when compared with the tax structures of other states, that business enterprises and persons would be encouraged by the economic impact of the South Carolina revenue laws to move themselves and their business enterprises into the State;
(4) recommend study of alternate sources of revenue found in the tax structures of other states, and particularly in the other southeastern states, and to make a report of the economic impact of the South Carolina tax structure upon the business enterprises of various types of industry, as compared with those of other southeastern states; and
(5) make recommendations for long range revenue planning, and for future amendments of the revenue laws of South Carolina.
Section 2-41-25. The commission may:
(1) hold public hearings;
(2) receive testimony of any employees of the State or any other witnesses who may assist the commission in its duties; and
(3) call for assistance in the performance of its duties from any employees or agencies of the State or any of its political subdivisions.
Section 2-41-35. The commission may adopt by majority vote rules not inconsistent with this chapter it considers proper with respect to matters relating to the discharge of its duties under this chapter.
Section 2-41-45. Professional and clerical services for the commission must be made available from the staffs of the General Assembly, the office of the Governor, the Department of Revenue, and other state agencies and institutions.
Section 2-41-55. The commission shall make reports and recommendations to the General Assembly and the Governor. These findings and recommendations must be published and made available to the public.
Section 2-41-65. The members of the commission shall receive the per diem, mileage, and subsistence as is allowed by law for members of boards, committees, and commissions when engaged in the exercise of their duties as members of the commission. These expenses for legislative members must be paid from approved accounts of their respective houses and these expenses of gubernatorial appointees must be paid from funds appropriated for the operation of the office of the Governor. All other costs and expenses of the commission must be paid in equal proportion by the Office of the Governor, the Senate, and the House of Representatives."
B. Unless extended by affirmative act of the General Assembly, the existence of the commission established by this section terminates after June 30, 1999.
Time effective
SECTION 12. This act takes effect upon approval by the Governor.
Approved the 24th day of June, 1997.