Current Status Bill Number:3919 Ratification Number:267 Act Number:151 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19970410 Primary Sponsor:Harrell All Sponsors:Harrell Drafted Document Number:PT1160DW.97 Date Bill Passed both Bodies:19970617 Date of Last Amendment:19970617 Governor's Action:S Date of Governor's Action:19970624 Subject:Income tax credits, infrastructure for project, Businesses, Taxation, economic development projects, revenue bonds
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
------ 19970714 Act No. A151
------ 19970624 Signed by Governor
------ 19970618 Ratified R267
Senate 19970617 Ordered enrolled for ratification
Senate 19970617 Conference Committee Report adopted 88 SCC
House 19970605 Conference Committee Report adopted 98 HCC
Senate 19970605 Conference powers granted, 88 SCC Leventis
appointed Senators to Committee McConnell
of Conference Reese
House 19970605 Conference powers granted, 98 HCC Boan
appointed Reps. to Committee of Law
Conference Young-
Brickell
House 19970605 Insists upon amendment
Senate 19970605 Non-concurrence in House amendment
Senate 19970604 Debate adjourned
House 19970603 Senate amendments amended,
returned to Senate with amendment
Senate 19970529 Amended, read third time,
returned to House with amendment
Senate 19970527 Debate adjourned
Senate 19970522 Read second time, ordered to
third reading with notice of
general amendments
Senate 19970522 Committee amendment amended and
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 19970424 Committee report: Favorable with 30 HWM
amendment
House 19970410 Introduced, read first time, 30 HWM
referred to Committee
View additional legislative information at the LPITS web site.
(A151, R267, H3919)
AN ACT TO AMEND SECTION 4-10-20, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE RATE OF AND EXEMPTIONS FROM THE LOCAL SALES AND USE TAX, SO AS TO EXEMPT FROM THIS TAX ALL ITEMS SUBJECT TO A MAXIMUM STATE SALES AND USE TAX; TO AMEND SECTION 12-36-2110, AS AMENDED, RELATING TO MAXIMUM SALES TAX, SO AS TO DELETE REFERENCES TO INDIVIDUAL ITEMS OF MACHINERY USED FOR RESEARCH AND DEVELOPMENT AND DEFINE "MACHINERY" FOR PURPOSES OF THE MAXIMUM TAX; TO AMEND SECTION 4-12-30, AS AMENDED, RELATING TO THE FEE IN LIEU OF PROPERTY TAXES, SO AS TO PROVIDE FOR THE CALCULATION OF THE CUMULATIVE PROPERTY TAX MILLAGE RATE WHEN AN AREA OF A MUNICIPALITY IS DE-ANNEXED; TO AMEND SECTION 4-29-10, RELATING TO DEFINITIONS FOR INDUSTRIAL REVENUE BOND PURPOSES, SO AS TO EXTEND THE DEFINITION OF "PROJECT" TO INCLUDE RESIDENTIAL AND MIXED USE DEVELOPMENTS OF TWO THOUSAND FIVE HUNDRED ACRES OR MORE; TO AMEND SECTION 4-29-67, AS AMENDED, RELATING TO THE FEE IN LIEU OF TAXES, SO AS TO PROVIDE THAT A CORPORATION AND A CONTROLLED PARTNERSHIP UNDER CERTAIN CIRCUMSTANCES ARE TREATED AS A SINGLE ENTITY AND TO AUTHORIZE AN ASSESSMENT RATIO OF NOT LESS THAN FOUR PERCENT IN A FEE IN LIEU OF TAXES CALCULATION FOR A BUSINESS WITH AN INVESTMENT OF AT LEAST SIX HUNDRED MILLION DOLLARS; TO AMEND SECTION 12-6-3360, AS AMENDED, RELATING TO THE TARGETED JOBS TAX CREDIT, SO AS TO PROVIDE FOR AN INCREASED CREDIT DESIGNATION FOR A COUNTY WITH A POPULATION UNDER TWENTY-FIVE THOUSAND; TO AMEND SECTION 12-10-80, AS AMENDED, RELATING TO THE JOB DEVELOPMENT FEE, SO AS TO CONVERT THE JOB DEVELOPMENT FEE INTO A CREDIT AGAINST STATE WITHHOLDING TAXES AND PROVIDE AN EXCEPTION; TO AMEND SECTION 12-14-60, RELATING TO THE INVESTMENT TAX CREDIT FOR PURPOSES OF THE ECONOMIC IMPACT ZONE COMMUNITY DEVELOPMENT ACT OF 1995, SO AS TO ALLOW A TEN-YEAR CARRYFORWARD OF UNUSED CREDIT; TO AMEND SECTION 12-20-105, RELATING TO CREDITS AGAINST THE CORPORATE LICENSE TAX, SO AS TO EXTEND THE CREDIT FOR CERTAIN AMOUNTS PAID TO PROVIDE INFRASTRUCTURE FOR AN ELIGIBLE PROJECT AND TO DEFINE "ELIGIBLE PROJECT"; TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO REDUCE THE INVESTMENT THRESHOLD FOR THE EXEMPTION ALLOWED MATERIAL HANDLING SYSTEMS AND EQUIPMENT IN THE OPERATION OF A DISTRIBUTION OR MANUFACTURING FACILITY; TO AMEND SECTION 31-13-340, AS AMENDED, RELATING TO THE STATE HOUSING, FINANCE, AND DEVELOPMENT AUTHORITY PROGRAM FUND, SO AS TO ALLOW THE AUTHORITY TO USE THE FUND TO ESTABLISH A CREDIT ENHANCEMENT PROGRAM FOR ECONOMIC DEVELOPMENT PROJECTS SELECTED BY THE DEPARTMENT OF COMMERCE; TO AMEND SECTION 59-20-20, AS AMENDED, RELATING TO DEFINITIONS FOR PURPOSES OF THE EDUCATION FINANCE ACT, SO AS TO PROVIDE FOR THE METHOD OF COMPUTING THE VALUE OF A FEE IN LIEU OF TAXES IN THE INDEX OF TAXPAYING ABILITY; AND TO REPEAL SECTION 12-6-3490, RELATING TO THE INFRASTRUCTURE CORPORATE LICENSE TAX CREDIT.
Be it enacted by the General Assembly of the State of South Carolina:
Sales tax
SECTION 1. 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 is 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.
Fee in lieu of tax
SECTION 2. A. Section 4-12-30(G) of the 1976 Code, as added by Act 125 of 1995, is amended by adding at the end a new item to read:
"(3) For purposes of determining the cumulative property tax millage rate under subsection (G)(2), the millage rate assessed by a municipality must not be included in the computation even if the subject property was located in the jurisdiction of the taxing entity as of June 30 preceding the calendar year in which the millage rate agreement is executed, if, pursuant to agreement on the part of the taxing entity at the time of execution of the millage rate agreement, the taxing entity de-annexes the subject property before execution of the initial lease."
B. The amendment to Section 4-12-30(G) of the 1976 Code as contained in subsection A. is effective for millage rate agreements executed after July 1, 1996.
Project
SECTION 3. Section 4-29-10(3) of the 1976 Code is amended to read:
"(3) 'Project' means any land and any buildings and other improvements on the land including, without limiting the generality of the foregoing, water, sewage treatment and disposal facilities, air pollution control facilities, and all other machinery, apparatus, equipment, office facilities, and furnishings which are considered necessary, suitable, or useful by the following or any combination of them: (a) any enterprise for the manufacturing, processing, or assembling of any agricultural or manufactured products; (b) any commercial enterprise engaged in storing, warehousing, distributing, transporting, or selling products of agriculture, mining, or industry, or engaged in providing laundry services to hospitals, to convalescent homes, or to medical treatment facilities of any type, public or private, within or outside of the issuing county or incorporated municipality and within or outside of the State; (c) any enterprise for research in connection with any of the foregoing or for the purpose of developing new products or new processes or improving existing products or processes; (d) any enterprise engaged in commercial business including, but not limited to, wholesale, retail, or other mercantile establishments; residential and mixed use developments of two thousand five hundred acres or more; office buildings; computer centers; tourism, sports, and recreational facilities; convention and trade show facilities; and public lodging and restaurant facilities if the primary purpose is to provide service in connection with another facility qualifying under this subitem; and (e) any enlargement, improvement, or expansion of any existing facility in subitems (a), (b), (c), and (d) of this item. The term 'project' does not include facilities for an enterprise primarily engaged in the sale or distribution to the public of electricity, gas, or telephone services. A project may be located in one or more counties or incorporated municipalities. The term 'project' also includes any structure, building, machinery, system, land, interest in land, water right, or other property necessary or desirable to provide facilities to be owned and operated by any person, firm, or corporation for the purpose of providing drinking water, water, or wastewater treatment services or facilities to any public body, agency, political subdivision, or special purpose district. This definition is for purposes of industrial revenue bonds only."
Fee in lieu of tax
SECTION 4. Section 4-29-67(B)(4)(a) of the 1976 Code, as last amended by Act 462 of 1996, is further amended to read:
"(a) Except as provided in subsections (B)(4)(b) and (D)(4)(a), 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. A corporation and a partnership, which partnership is a 'controlled partnership' of the corporation, as provided under Section 707(b)(1) of the Internal Revenue Code as defined in Chapter 6 of Title 12, as of the date of the execution of the inducement agreement, and both of which will construct their projects on the same site qualifying for the fee, must be treated as a single entity for purposes of this subsection and subsections (B)(3) and (D)(4)."
Assessment ratio
SECTION 5. Section 4-29-67(D)(4)(a) of the 1976 Code, as last amended by Act 462 of 1996, is further amended by adding at the end:
"(iv) in the case of a business which is investing at least six hundred million dollars in this State."
Targeted jobs tax credit
SECTION 6. 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."
Job development credit
SECTION 7. A. Section 12-10-80 of the 1976 Code, as last amended by Act 462 of 1996, is further amended to read:
"Section 12-10-80. (A) A business that qualifies under Section 12-10-50 and which has met the minimum job requirement and minimum capital investment provided for in the final revitalization agreement may claim a job development credit as determined by this section. A business may claim its job development credit against its withholding on its quarterly state withholding tax return for the amount of job development credit allowable under this section. The credit must be claimed on a quarterly basis. In order to claim a job development credit, the business must be current with respect to its withholding tax as well as any other tax due and owing the State, and must have maintained its minimum employment requirement for the entire quarter. A qualifying business may receive its initial job development credit only after the council has certified to the department that the qualifying business has met the required minimum employment and capital investment levels. To be eligible to apply to the council to claim a job development credit, a qualifying business shall create at least ten new, full-time jobs at the South Carolina facility described in the revitalization agreement. A qualifying business is eligible to claim a job development credit under the revitalization agreement for not more than fifteen years. To the extent any return of an overpayment of withholding that results from claiming job development credits is not used as permitted by subsection (C) or (D), it must be treated as misappropriated employee withholding. Job development credits may not be claimed for purposes of (B) and (C) with regard to any employee whose job was created in this State before the taxable year of the qualifying business in which it enters into a revitalization agreement. If a qualifying business claims job development credits 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 claiming job development credits under this section shall file with the council and the department the information and documentation respecting employee withholding, the job development credit, and the use of any overpayment of withholding resulting from the claiming of a job development credit according to the revitalization agreement that the council or department requests. Each qualifying business which claims 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 June thirtieth following the calendar year in which the job development credits are claimed. No employer may claim 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) The maximum job development credit a qualifying business may claim for new employees is determined by the sum of the following amounts:
(1) two percent of the gross wages of each new employee who earns 6.34 dollars or more an hour but less than 8.45 dollars an hour;
(2) three percent of the gross wages of each new employee who earns 8.45 dollars or more an hour but less than 10.57 dollars an hour;
(3) four percent of the gross wages of each new employee who earns 10.57 dollars or more an hour but less than 15.85 dollars an hour; and
(4) five percent of the gross wages of each new employee who earns 15.85 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. The amount which may be claimed by a qualifying business is limited by subsection (C)(6) and the revitalization agreement. The council may approve a waiver of ninety-five percent of the limits under subsection (C)(6) for qualifying businesses making a significant capital investment as defined in Section 4-12-30(D)(4) or Section 4-29-67(D)(4). The maximum job development credit that can be claimed is limited to the lesser of withholding paid to the State on a quarterly basis or the amount allowed by this subsection.
(C) In order to claim a job development credit, the qualifying business must incur expenditures at the above-described facility or for utility or transportation improvements that serve this facility. To be qualified expenditures (a) the expenditures are incurred during the term of the revitalization agreement or within sixty days before the execution of a revitalization agreement, including a preliminary revitalization agreement, (b) the expenditures must be by the revitalization agreement, and (c) the expenditures are for any of the following purposes:
(1) training costs and facilities;
(2) acquiring and improving real estate whether constructed or acquired by purchase, or in cases approved by the council, acquired by lease or otherwise;
(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;
(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;
(6) the amount of job development credits a qualifying business may claim for its use for qualifying expenditures is limited according to the designation of the county as defined in Section 12-6-3360 as follows:
(a) one hundred percent of the maximum job development credits may be claimed by businesses located in counties designated as 'least developed';
(b) eighty-five percent of the maximum job development credits may be claimed by businesses located in counties designated as 'under developed';
(c) seventy percent of the maximum job development credits may be claimed by businesses located in counties designated as 'moderately developed'; or
(d) fifty-five percent of the maximum job development credits may be claimed by businesses located in counties designated as 'developed'.
The council shall certify to the department the maximum job development credit for each qualifying business. After receiving certification, the department shall remit an amount equal to the difference between the maximum job development credit and the job development credit actually claimed to the State Rural Infrastructure Fund as defined and provided in Section 12-10-85.
(D) Subject to the conditions in this section, any qualifying business in this State may negotiate with the council to claim a job development credit for retraining according to the procedure in subsection (A) in 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. The technical college may provide the retraining program delivery directly or contract with other training entities to accomplish the required training outcomes. In addition to the yearly limits, the amount claimed as a job development credit for retraining 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 claimed as a job development credit for retraining. The total amount claimed as job development credits for retraining 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 credits for retraining and matching funds is the responsibility of the qualifying business based on negotiations with the technical college.
(E) Any job development credit of a qualifying business permanently lapses upon expiration or termination of the revitalization agreement. If an employee is terminated, the qualifying business immediately shall cease to claim job development credits.
(F) For purposes of the job development credit allowed by this section, an employee is a person whose job was created in this State.
(G) Job development credits may not be claimed by a governmental employer who employs persons at a closed or realigned military installation as defined in Section 12-10-85(E)."
B. A qualifying business that is a qualified recycling facility as defined in Section 12-6-3460 of the 1976 Code may elect to receive the benefits of Section 12-10-80 of the 1976 Code as that section existed immediately before the effective date of the amendment to it contained in this section.
Carryforward
SECTION 8. Section 12-14-60 of the 1976 Code, as added by Act 25 of 1995, is amended by adding a new subsection at the end to read:
"(D) Unused credit allowed pursuant to this section may be carried forward for ten years from the close of the tax year in which the credit was earned."
Infrastructure credit
SECTION 9. Section 12-20-105 of the 1976 Code, as added by Act 231 of 1996, is amended to read:
"Section 12-20-105. (A) Any company subject to a license tax under Section 12-20-100 may claim a credit against its license tax liability for amounts paid in cash to provide infrastructure for an eligible project.
(B)(1) In order to be considered an eligible project for purposes of this section, the project must qualify for income tax credits under Chapter 6 of Title 12, withholding tax credit under Chapter 10 of Title 12, income tax credits under Chapter 14 of Title 12, or fees in lieu of property taxes under Chapter 12 of Title 4.
(2) If a project consists of an office, business, commercial, or industrial park which is constructed by a county or political subdivision of this State, the project does not have to meet the qualifications of item (1) in order to be considered an eligible project.
(C) For the purpose of this section 'infrastructure' means improvements for water, sewer, gas, steam, electric energy, and communication services made to a building or land which are considered necessary, suitable, or useful to an eligible project. These improvements include, but are not limited to:
(1) improvements to both public or private water and sewer systems;
(2) improvements to both public or private electric, natural gas, and telecommunication systems including, but not limited to, ones owned or leased by an electric cooperative, electric utility, or electric supplier, as defined in Chapter 27, Title 58;
(3) fixed transportation facilities including highway, road, rail, water, and air.
(D) A company is not allowed the credit provided by this section for actual expenses it incurs in the construction and operation of any building or infrastructure it owns, leases, manages, or operates.
(E) The maximum aggregate credit that may be claimed in any tax year by a single company is three hundred thousand dollars.
(F) The credits allowed by this section may not reduce the license tax liability of the company below zero. If the applicable credit originally earned during a taxable year exceeds the liability and is otherwise allowable under subsection (D), the amount of the excess may be carried forward to the next taxable year.
(G) For South Carolina income tax and license purposes, a company that claims the credit allowed by this section is ineligible to claim the credit allowed by Section 12-6-3420."
Sales tax
SECTION 10. A. Section 12-36-2120(51) of the 1976 Code, as last amended by an act of 1997 bearing ratification number 162, is further amended to read:
"(51) Material handling systems and material handling equipment including, but not limited to, racks, whether or not the racks are used to support a facility structure or part thereof, used in the operation of a distribution facility or a manufacturing facility. In order to qualify for this exemption, the taxpayer shall notify the department before the first month it uses the exemption and shall invest at least thirty-five million dollars in any real or personal property in this State over the five-year period beginning on the date provided by the taxpayer to the department in its notices."
B. Notwithstanding any other effective date provided in this act, this section takes effect upon approval by the Governor.
Credit enhancement
SECTION 11. Section 31-13-340 of the 1976 Code is amended by adding at the end:
"The authority is authorized to establish and fund through the State Housing, Finance, and Development Authority Program Fund a program to provide credit enhancements for designated economic development projects selected by the Department of Commerce."
Index of taxpaying ability
SECTION 12. Section 59-20-20 of the 1976 Code, as last amended by Act 497 of 1994, is further amended by adding at the end of item (3):
"For purposes of disbursing EFA funding and for purposes of the index of taxpaying ability, the value of a fee in lieu of taxes shall be computed by the Department of Revenue by basing the computation on the net fee received and retained by the school district. The value thus computed shall not be inflated by any portion of the fee shared with or used by any other local taxing authority. Provided, however, any revenue received by a taxing entity as a result of this section must be considered taxable property 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 item (3) of this section."
Repeal
SECTION 13. Section 12-6-3490 of the 1976 Code is repealed.
Time effective
SECTION 14. Upon approval by the Governor, this act is effective for tax years beginning after 1996.
Approved the 24th day of June, 1997.