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AS PASSED BY THE SENATE
April 4, 2000
H. 3782
Introduced by Reps. Campsen, Barfield, Barrett, Beck, Bowers, Cato, Cotty, Davenport, Delleney, Easterday, Edge, Emory, Gilham, Govan, Hamilton, Harrell, Harris, Harrison, Haskins, Klauber, Koon, Leach, Limehouse, Littlejohn, Loftis, Lourie, Lucas, Maddox, M. McLeod, W. McLeod, Meacham-Richardson, Miller, J.H. Neal, Quinn, Rice, Robinson, Sandifer, Sheheen, Simrill, D. Smith, J. Smith, Stille, Stuart, Taylor, Vaughn, Whatley, Whipper and Woodrum
S. Printed 4/4/00--S. [SEC 4/6/00 11:26 AM]
Read the first time April 28, 1999.
TO ENACT THE "SOUTH CAROLINA CONSERVATION INCENTIVES ACT" AMENDING THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-3515 SO AS TO ALLOW AN INCOME TAX CREDIT EQUAL TO TWENTY-FIVE PERCENT OF THE VALUE OF A FEDERAL INCOME TAX CHARITABLE DEDUCTION FOR A GIFT OF LAND FOR CONSERVATION OR FOR A QUALIFIED CONSERVATION CONTRIBUTION OF A QUALIFIED REAL PROPERTY INTEREST LOCATED IN THIS STATE WHEN DONATED AFTER JUNE 30, 2000, TO PROVIDE A CAP ON THIS CREDIT, TO DEFINE THE LANDS OVER WHICH THESE EASEMENTS APPLY WHICH ARE ELIGIBLE FOR THESE CREDITS, TO PROVIDE A CARRY FORWARD OF UNUSED CREDIT AND MAKE THE UNUSED CREDIT TRANSFERABLE UPON NOTICE TO THE DEPARTMENT OF REVENUE WITH THE CREDIT RETAINING ALL ITS ATTRIBUTES IN THE HANDS OF THE TRANSFEREE, AND TO PROVIDE DEFINITIONS; AND BY ADDING ARTICLE 11 IN CHAPTER 3 OF TITLE 50, RELATING TO THE DEPARTMENT OF NATURAL RESOURCES, SO AS TO ESTABLISH THE CONSERVATION GRANT FUND IN THE STATE TREASURY, TO PROVIDE FOR THE PURPOSE, GOVERNANCE, AND SOURCE OF FUNDS FOR THIS FUND, INCLUDING THE PROMOTION OF DONATIONS OF LANDS AND CONSERVATION EASEMENTS AND AUTHORIZING THE FUND TO MAKE GRANTS IN FURTHERANCE OF THIS PURPOSE, NOT INCLUDING GRANTS TO PURCHASE ANY INTEREST IN REAL PROPERTY; AND TO AMEND SECTION 62-3-715, AS AMENDED, RELATING TO THE TRANSACTIONS AUTHORIZED FOR PERSONAL REPRESENTATIVES UNDER THE SOUTH CAROLINA PROBATE CODE, SO AS TO AUTHORIZE A PERSONAL REPRESENTATIVE OR TRUSTEE, AS APPLICABLE, WITH THE CONSENT OF ALL AFFECTED PARTIES TO MAKE A DONATION OF A QUALIFIED CONSERVATION EASEMENT OR DONATION OF LAND TO OBTAIN A FEDERAL ESTATE TAX AND STATE INCOME TAX CREDIT BENEFIT, AND TO PROVIDE FOR THE METHOD TO OBTAIN THE CONSENT OF PERSONS OTHERWISE UNABLE TO GIVE SUCH CONSENT.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. A. This act may be cited as the "South Carolina Conservation Incentives Act".
B. The General Assembly finds that South Carolina, from the mountains to the sea, is blessed with some of the most beautiful and pristine natural areas in North America. These diverse and ecologically significant areas warrant creative conservation initiatives if they are to be preserved for the enjoyment and benefit of future generations and if traditional uses of undeveloped land, such as wildlife habitat management, farming, hunting, fishing, and forestry, are to be preserved. Absent such initiatives, there is danger that these natural areas and their traditional uses will be lost forever to the pressures of development and urbanization.
The General Assembly further finds that paying deference to property rights while conserving these natural areas is a laudable goal and that traditional land use planning and regulatory techniques have limited effectiveness in preserving large tracts of undeveloped land. By enacting the "South Carolina Conservation Incentives Act", it is the intent of the General Assembly to provide an income tax credit incentive for landowners to voluntarily convey lands or conservation easements to qualified conservation organizations. Such an incentive for the voluntary conveyance of lands or conservation easements will protect and preserve natural areas and their traditional uses while paying appropriate deference to property rights, expending no state funds, and keeping property in the private sector and on property tax rolls.
C. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3515. (A) Effective for donations made after June 30, 2000, a taxpayer who has qualified for and claimed on the taxpayer's federal income tax return a charitable deduction for a gift of land for conservation or for a qualified conservation contribution of a qualified real property interest located in this State is allowed a credit against a tax imposed by this chapter for the applicable tax year in an amount equal to twenty-five percent of the total amount of the deduction attributable to the gift of land for conservation or to the qualified real property interest located in this State; provided, however, that the credit is subject to the caps provided in subsection (C). If the amount of the credit exceeds the taxpayer's tax liability under this chapter for the taxable year or if it exceeds the maximum credit that may be used in any particular taxable year as provided in subsection (C)(2), the excess credit may be carried forward to succeeding taxable years until all the credit is claimed. In addition to the carry forward of unused credit, unused credit may be transferred, devised, or distributed, with or without consideration, by an individual, partnership, limited liability company, corporation, trust, or estate. To be effectual, such a transfer, devise, or distribution requires written notification to and approval by the department with the unused credit maintaining all its original attributes in the hands of the recipient. With regard to the sale or exchange of a credit allowed under this section, general income tax principles apply for purposes of the state income tax. In the hands of the original donor of a qualified conservation contribution of a qualified real property interest or of a gift of land for conservation, and of any subsequent transferee, devisee, or distributee, the credit allowed by this section that may be used to offset state income tax liability in any one taxable year is limited to an amount that, when combined with all other state income tax credits of the taxpayer, does not exceed the taxpayer's total state income tax liability for the taxable year. The fair market value of qualified donations made pursuant to this section must be substantiated by a 'qualified appraisal' prepared by a 'qualified appraiser' as those terms are defined under applicable federal law and regulations applicable to charitable contributions.
(B)(1) For purposes of this section:
(a) 'Qualified conservation contribution' and a 'qualified real property interest' are defined as provided in Internal Revenue Code Section 170(h);
(b) 'Gift of land for conservation' means a charitable contribution of fee simple title to real property conveyed for conservation purposes as defined in Internal Revenue Code Section 170(h)(4)(A) to a qualified conservation organization as described in Internal Revenue Code Section 170(h)(3).
(2) Notwithstanding the provisions of Internal Revenue Code Section 170(h) and applicable regulations pertaining to forestry and silvaculture practices, a taxpayer is not disqualified for the tax credit allowed in this section because of silvacultural and forestry practices permitted by or undertaken pursuant to a conservation contribution of a real property interest if:
(a) the forestry and silvacultural practices permitted by or undertaken pursuant to the conservation contribution conform to Best Management Practices established by the South Carolina Forestry Commission existing either at the time the conservation contribution is made, or at the time a particular forestry or silvacultural practice is undertaken;
(b) the conservation contribution of a real property interest in all other respects conforms to the requirements of Internal Revenue Code Section 170(h) and applicable regulations for a 'qualified conservation contribution' of a 'qualified real property interest'; and
(c) the taxpayer provides the Department of Revenue with the information the department considers necessary to determine that the taxpayer would otherwise be eligible for the deduction allowed under Section 170(h).
The amount of the credit allowable under this item is equal to twenty-five percent of the deduction that would otherwise be allowable under Section 170(h) but for the silvacultural and forestry activities performed on the real property interest, subject to the same conditions and limitations as the credit allowed by this section.
(C)(1) The credit provided for in this section may not exceed two hundred fifty dollars per acre of property to which the qualified conservation contribution or gift of land for conservation applies. For the purpose of calculating the per acre tax credit cap of this subsection, all upland and wetland acreage subject to a qualified conservation contribution must be taken into account, except for property lying within the intertidal zone. All other wetland acreage subject to a qualified conservation contribution including, but not limited to, ponds, wetland impoundments, hardwood bottomlands, and Carolina Bays must be taken into account when calculating the two hundred fifty dollar an acre tax credit cap.
(2) Regardless of the amount of the credit allowed by this section, the total credit a taxpayer may use under this section for any particular taxable year may not exceed fifty-two thousand five hundred dollars.
(3) For purposes of applying the per acre limitation and per taxpayer limitation on the credit allowed by this section, the attribution rules of Section 267 of the Internal Revenue Code apply.
(D) The South Carolina Department of Revenue shall report to the Governor, the House Ways and Means Committee, and Senate Finance Committee the activity generated on taxable year 2000 and 2001 state income tax returns by the credit allowed by this item."
D. Chapter 3, Title 50 of the 1976 Code is amended by adding:
Section 50-3-1110. There is created in the state treasury a fund separate and distinct from the general fund of the State and all other funds styled the 'Conservation Grant Fund'. The income and principal of the fund must be used only to stimulate the use of conservation easements and fee simple gifts of land for conservation to qualified conservation organizations to improve the capacity of private nonprofit land trusts successfully to accomplish conservation projects and to provide an opportunity to leverage private and public monies for conservation easements.
Section 50-3-1120. The Board of the Department of Natural Resources serves ex officio as the Conservation Grant Fund Board with full authority over the administration of the fund.
Section 50-3-1130. The Conservation Grant Fund shall consist of any monies appropriated to it by the General Assembly and other monies received from public or private sources.
Section 50-3-1140. In order for real property to be the subject of a grant under this article, the land must qualify for the tax credit allowed pursuant to Section 12-6-3515.
Section 50-3-1150. (A) Revenues in the Conservation Grant Fund may be used by the department only to:
(1) defray the administrative costs of the department in administering the grant purposes provided for by this article;
(2) provide education on conservation easements and fee simple gifts of land for conservation, including information material intended for landowners and education for staff and volunteers; and
(3) make conservation grants.
(B) A grant from the Conservation Grant Fund may be used only to pay for one or more of the following costs:
(1) reimbursement for total or partial transaction costs for donations from individuals or corporations that otherwise would not be made because of insufficient financial revenues;
(2) management support, including initial baseline inventory and planning;
(3) monitoring compliance with conservation easements;
(4) education on conservation easements and fee simple gifts of land for conservation, including information materials intended for landowners, and education for staff and volunteers.
(C) Fund proceeds may not be used to pay the purchase price of any interest in real property.
Section 50-3-1160. The board shall establish the procedures and criteria for awarding grants under this article. The criteria shall focus grants on those areas, approaches, and techniques that are likely to provide the optimum positive effect on conservation. The board shall make recommendations to the General Assembly on the award of grants. Upon approval by the General Assembly by concurrent resolution, the board shall award the grants and provide public notice of the award."
E. Section 62-3-715 of the 1976 Code, as last amended by Act 521 of 1990, is further amended by adding an item appropriately numbered at the end to read:
"( ) donate a qualified conservation easement or fee simple gift of land for conservation on any real property of the decedent in order to obtain the benefit of the estate tax exclusion allowed under Internal Revenue Code Section 2031(c), as defined in Section 12-6-40(A), and the state income tax credit allowed under Section 12-6-3515, if the personal representative has the written consent of all of the heirs, beneficiaries, and devisees whose interests are affected by the donation. Upon petition of the personal representative, the circuit court may consent on behalf of any unborn, unascertained, or incapacitated heirs, beneficiaries, or devisees whose interests are affected by the donation after determining that the donation of the qualified real property interest shall not adversely affect them or would most likely be agreed to by them if they were before the court and capable of consenting. A guardian ad litem must be appointed to represent the interest of any unborn, unascertained, or incapacitated persons. Similarly, and for the same purposes and under the same conditions, mutatis mutandis, a trustee may make such a donation for the settlor."
F. Except where otherwise stated, this section takes effect upon approval by the Governor and applies for taxable years begining after 1999.
SECTION 2. A. Section 12-36-130 of the 1976 Code, as added by Act 612 of 1990, is amended by adding a paragraph at the end to read:
"For purposes of the sale of an 'audiovisual master' as defined in Section 12-36-2120(55), sales price is the total amount for which the audiovisual master is sold, including charges for any services that go into its fabrication, manufacture, or delivery that are a part of the sale valued in money whether paid in money, or otherwise, and includes any amount for which credit is given to the purchaser by the seller without any deduction from it on account of the cost of the property sold, the cost of materials used, labor or service costs, interest charged, losses or any other expenses whatsoever."
B. Section 12-36-2120 of the 1976 Code, as last amended by Act 419 of 1998, is further amended by adding at the end:
"(55) audiovisual masters made or used by a production company in making visual and audio images for first generation reproduction. For purposes of this item:
(a) 'Audiovisual master' means an audio or video film, tape, or disk, or another audio or video storage device from which all other copies are made.
(b) 'Production company' means a person or entity engaged in the business of making motion picture, television, or radio images for theatrical, commercial, advertising, or education purposes."
C. Notwithstanding the general effective date of this act, this section takes effect on the first day of the first month following the month in which this act is approved by the Governor. Notwithstanding any other provision of law, taxes, penalties, and interest otherwise due on underpayments of sales and use tax arising from the sale or use of audiovisual masters, as defined in Section 12-36-2120(55) as added by this section, before the effective date of this section are waived. No refund is due any taxpayer of sales and use tax on account of the sales and use tax exemption established by this section.
SECTION 3. A. The General Assembly finds that notwithstanding previous attempts by the General Assembly to simplify fee-in-lieu, one of South Carolina's most important tax incentives, the current system is cumbersome, complex, and continues to inhibit use of popular financing techniques by South Carolina taxpayers which are widely used in other states. The General Assembly further finds that the purpose of this legislation is to simplify the fee program by making it more like traditional ad valorem taxation, which imposes no limitation on financing techniques, and to make explicit the General Assembly's intent that businesses be afforded broad flexibility in their choice of financing techniques. This legislation also allows two businesses which are not part of a controlled group, which are involved in a simple project, for example, one owns the real estate and the other the machinery and equipment, to execute a single fee-in-lieu where the aggregate investment equals or exceeds the statutory minimum. This legislation is not intended to, and does not, expand the incentive itself, for example by decreasing the assessment ratio.
B. Section 4-12-10 of the 1976 Code, as added by Act 125 of 1995, is amended to read:
"Section 4-12-10. As used in this chapter:
(1) 'Department' means the South Carolina Department of Revenue.
(2) '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 a sponsor.
(3) 'Sponsor' means one or more entities which sign the fee agreement with the county and also includes a sponsor affiliate unless the context clearly indicates otherwise.
(4) 'Sponsor affiliate' means an entity that joins with or is an affiliate of a sponsor and that participates in the investment in, or financing of, a project.
(5) 'Title to the property' as provided in Section 4-12-30 includes either record title or a leasehold or other interest including, without limitation, a sponsor or sponsor affiliate's interest in a nordic, synthetic, defeased tax benefit, or transfer lease."
C. Section 4-12-30 of the 1976 Code, as last amended by Act 114 of 1999, is further amended to read:
"Section 4-12-30. (A) Notwithstanding the provisions of Section 4-12-20, in the case of an agreement in the form of one or more lease agreements for a project qualifying under subsection (B), the county and the investor sponsor may enter into an inducement agreement which provides for a payment in lieu of taxes, as provided in this section. All references in this section to a lease agreement also are considered 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, if 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 development 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 if:
(a) the counties agree on the terms of the fee and the distribution of the fee payment;
(b) the minimum millage rate is not lower than the millage rate applicable to the county in which the greatest amount of investment occurs; and
(c) all the counties are parties to all agreements establishing the terms of the fee.
(3) The minimum level of investment must be at least five million dollars and must be invested within the time period provided in subsection (C)(2). If a county has an average annual unemployment rate of at least twice the state average during each of the last two calendar years, the minimum level of investment is one million dollars.
(4)(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 must be treated as a single entity and as a partnership,
(ii) any corporation or other association which properly files its South Carolina income tax returns as a corporation for South Carolina tax purposes must be treated as a single entity and as a corporation, and
(iii) any limited liability companies must be treated as a single entity.
(b)(i) The members of the same controlled group of corporations A sponsor and a sponsor affiliate can qualify for the fee if the combined investment in the county by the members project meets the minimum investment requirements. The county and the members sponsors who are part of the inducement agreement may agree that any investments by other members of the controlled group sponsor affiliates within the time periods provided in subsections (C)(1) and (C)(2) qualify for the payment whether or not the member affiliate was part of the inducement agreement. However, in order to qualify for the fee, the other members of the controlled group sponsor affiliates must be specifically approved by the county and must agree to be bound by agreements with the county relating to the fee, but the controlled group members affiliates need not be bound by agreements, or portions of agreements, to the extent the agreements do not 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 shall invest at least five million dollars in the county or industrial park.
(ii)(b) The department must be notified in writing of all members affiliates which have investments subject to the fee before or within ninety days after the end of the calendar year during which the project or phase of the project was first placed in service. The department may extend this period upon written request. Failure to meet this notice requirement does not adversely affect the fee, but a penalty may be assessed by the department for late notification in the amount of ten thousand dollars a month or portion of a month but not to exceed fifty 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.
(iii) If at any time the controlled group, or any former member which has left the controlled group no longer has the minimum 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, no longer qualifies for the fee.
(iv) for purposes of this section, "controlled group" or "controlled group of corporations" has the meaning provided under Section 1563(a) of the Internal Revenue Code as defined in Chapter 6 of Title 12 as of the date of the execution of the inducement agreement without regard to amendments or replacements thereof, and without regard to subsections (a)(4) and (b) of Section 1563.
(5)(a) Before undertaking a project, the county council or county councils shall find:
(i) that the project is anticipated to benefit the general public welfare of the locality by providing services, employment, recreation, or other public benefits not otherwise provided locally;
(ii) that the project gives rise to no pecuniary liability of the county or incorporated municipality or a charge against its general credit or taxing power; and
(iii) unless the terms of an agreement with respect to a project provides provide that the industry shall maintain the project and carry all proper insurance with respect thereto,; the estimated cost of maintaining the project in good repair and keeping it properly insured must be included in the lease payment.
The determinations and findings of the county council or county councils required to be made above must be set forth in the proceedings under which the ordinance is enacted.
(b) In addition to the findings required in subsection (B)(5)(a) above, the county council or county councils, with assistance and advice, from the department or the Board of Economic Advisors shall determine that the purposes to be accomplished by the project are proper governmental and public purposes and that the inducement of the location or expansion of the projects within the State is of paramount importance and that the benefits of the project are greater than the cost.
(6) Every financing agreement with respect to a project shall contain an agreement obligating the industry to effect the completion of the project, and obligating the industry to pay an amount under the terms of a lease agreement, which must be sufficient to build up and maintain any reserve considered by the county council or county councils to be advisable in connection with the agreement.
(C)(1) From the end of the property tax year in which the investor sponsor and the county execute an inducement agreement, the investor sponsor has five 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 sponsor and the county execute the initial lease agreement, the investor sponsor has five years in which to complete its investment for purposes of qualifying for this section. If the investor sponsor does not anticipate completing the project within five years, the investor sponsor 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 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 4-12-20. The difference between the fee actually paid by the investor sponsor and the payment which is due under Section 4-12-20 is subject to interest, as provided in Section 12-54-25(D). 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 4-12-20 if the county has title to the property, or to property taxes, as provided in Chapter 37 of Title 12 if the investor sponsor has title to the property.
For purposes of those businesses qualifying under subsection (D)(4), the five-year period referred to in this subsection is eight years and the seven-year period is ten years.
(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 sponsor shall 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 before being placed in service, is subject to an annual fee payment, as provided in Section 4-12-20.
(b) Any undeveloped land, title to which is transferred to the county, before being developed and placed in service, is subject to an annual fee payment as provided in Section 4-12-20. The time during which fee payments are made under Section 4-12-20 is not considered part of the maximum periods provided in subsections (C)(2) and (C)(3), and no lease is considered an 'initial lease agreement' for purposes of this section until the first day of the calendar year for which a fee payment is due under subsection (D)(2) in connection with the 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 item (4) of this subsection, and a fixed millage rate as provided in subsection (G), and a fair market value estimate determined by the department as follows:
(i) for real property, 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 is deemed to equal the original income tax basis; otherwise, the department shall determine fair market value by appraisal; and
(ii) for personal property, using the original tax basis for South Carolina income tax purposes less depreciation allowable for property tax purposes, except that the investor sponsor is not entitled to any extraordinary obsolescence.
(b) an annual payment as provided in 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 four percent:
(i) in the case of a business which is investing 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 site qualifying for the fee;
(ii) in the case of a business which is investing 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; or
(iii) in the case of investments totaling 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 millage rate agreement.
(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.
(5) Notwithstanding the use of the term 'assessment ratio', a business qualifying under items (2) or (4) of this subsection may negotiate an inducement agreement with a county using differing assessment ratios for different assessment years covered by the agreement. However, the lowest assessment ratio allowed is the lowest ratio for which the business may qualify under this section.
(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 12-37-220(B)(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 a sponsor 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 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.
(2) Any property which is placed in service as a replacement for property which is subject to the fee payment may become part of the fee payment, as provided in this item:
(a) Replacement property does not have to serve the same function as the property it is replacing. Replacement property is deemed to replace the oldest property subject to the fee, whether real or personal, which is disposed of in the same property tax year as the replacement property is placed in service. Replacement property qualifies for fee treatment provided in subsection (D)(2) only up to the original income tax basis of fee property it is replacing. More than one piece of replacement property can replace a single piece of fee 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 4-12-20. Replacement property is entitled to the fee payment for the period of time remaining on the fee period for the property which it is replacing.
(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 for the original fee property. The fee payment for replacement property must be based on subsection (D)(2)(a) or (D)(2)(b), if the investor sponsor originally used this method.
(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 time period allowed for investments, as provided by subsection (C)(2), is subject to the payments required by Section 4-12-20 if the county has title to the property, or to property taxes, as provided in Chapter 37 of Title 12, if the investor sponsor has title to the property.
(G)(1) The county and the investor sponsor may enter into an agreement to establish the millage rate, a millage rate agreement, for purposes of calculating payments under subsection (D)(2)(a), and the first five years under subsection (D)(2)(b). This millage rate agreement must be executed on the date of the inducement agreement or any time 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.
(2) The millage rate cannot be lower than the cumulative property tax millage rate legally levied by or on behalf of all taxing entities within which the subject property is to be located which is the cumulative rate applicable on the thirtieth day of June preceding the calendar year in which the millage rate agreement is executed. If no millage rate agreement is executed before the date of the initial lease agreement, the millage rate is deemed to be the cumulative property tax millage rate applicable on the thirtieth day of June preceding the calendar year in which the initial lease agreement is executed by the parties.
(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.
(H)(1) Upon agreement of the parties, and except as provided in item (2) of this subsection, 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 sponsors or sponsor affiliates.
(2) No amendment or replacement of an inducement agreement or millage rate agreement may be used to change the millage 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) Investment expenditures incurred by any investor sponsor in connection with a project, or relevant phase of a project in connection with a project completed and placed in service in more than one year, qualify as expenditures subject to the fee in subsection (D)(2), so long as those expenditures are incurred:
(1) after, or within sixty days before, 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-year or seven-year period referenced in subsection (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 sponsor after the date of the inducement agreement in connection with a project qualifies as expenditures subject to the fee in subsection (D)(2).
(J)(1) Property which has been previously subject to property taxes in South Carolina does not qualify for the fee except as provided in this subsection:
(a) land, excluding improvements on the land, on which a new project is to 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.
(2) Repairs, alterations, or modifications to real or personal property which are not subject to a fee are not eligible for a fee, even if they are capitalized expenditures, except for modifications to existing real property improvements which constitute an expansion of the improvements.
(3) Project investment expenditures which are incurred within the applicable time period provided in subsection (I) by an entity whose investments are not being computed in the level of investment for purposes of subsection (B) or (C) qualify as investment expenditures subject to the fee in subsection (D)(2) where:
(a) the 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 sponsors or sponsor affiliates and whose investments are being computed in the level of investment for purposes of subsection (B) or (C); and
(b) the 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.
(4) The income tax basis of the property immediately before the transfer must equal the income tax basis of the property immediately after the transfer. However, to the extent income tax basis of the property immediately after the transfer unintentionally exceeds the income tax basis of the property immediately before the transfer, the excess shall be subject to payments under Section 4-12-20.
(5) The county shall agree to any inclusion in the fee of the property described in subsection (J)(1).
(K)(1) For a project not located in an industrial development park, as defined in Section 4-1-170, distribution of the fee-in-lieu of taxes 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. For this purpose, the relative proportions must be calculated based on the following procedure: holding constant the millage rate set in subsection (G) and using all tax abatements automatically granted for taxable property, a full schedule of the property taxes that would otherwise have been distributed to each millage levying entity in the county must be prepared for the life of the agreement, up to twenty years maximum. The property taxes which would have been paid on the property if it was were owned by the investor sponsor to each millage levying entity as a percentage of the total of such property taxes for all such entities determines each entity's relative shares of each year's fee payment for all subsequent years of the agreement.
(2) For a project located in an industrial development park, as defined in Section 4-1-170, distribution of the fee-in-lieu of taxes on the project must be made in the manner provided for by the agreement establishing the industrial development park.
(3) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes may use a portion of this revenue for the purposes outlined in Section 4-29-68 without the requirement of issuing special source revenue bonds or the requirements of Section 4-29-68(A)(4).
(L) Projects on which a fee-in-lieu of taxes is paid 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).
(M)(1) Any interest in an inducement agreement, millage rate agreement, lease agreement, and property to which the agreement relates may be transferred to any other entity at any time. Notwithstanding any other provision of this chapter, any equity interest in any entity with an interest in any inducement agreement, millage rate agreement, or lease agreement may be transferred to any other entity or person at any time.
(2) A single entity, or two or more entities which are members of a controlled group, sponsor may enter into any lending, financing, security, lease, or similar arrangement, or succession of such arrangements, with any financing entity, concerning all or part of a project and may enter into including, without limitation, any sale-leaseback arrangement including, without limitation, equipment lease, build-to-suit lease, synthetic lease, nordic lease, defeased tax benefit, or transfer lease, an assignment, a 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 the property which is subject to the fee payment under subsection (D)(2). 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, shall affect the amount of the fee due.
(3) All transfers undertaken with respect to other projects to effect a financing authorized under subsection (M) must meet the following requirements:
(a) The Department of Revenue 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 shall not adversely affect the fee, 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.
(b) If the sponsor affiliate or other financing entity is the income tax owner of property, either the financing entity is primarily liable for the fee as to that portion of the project to which the transfer relates with the original transferor remaining secondarily liable for the payment of the fee or the original transferor must agree to continue to be primarily liable for the payment of the fee as to that portion of the project to which the transfer relates.
(4) Before an investor a sponsor may transfer an inducement agreement, millage rate agreement, lease agreement, or the assets subject to the lease agreement, it shall obtain the approval of the county with whom it entered into the original inducement agreement, millage rate agreement, or lease agreement. However, no such approval is required in connection with transfers to sponsor affiliates or other financing-related transfers.
(N) Reserved.
(O) Notwithstanding any other provision of this section, if at any time following the period provided in subsection (C)(2), the investment based on income tax basis without regard to depreciation falls below the five-million-dollar-minimum investment to which the fee relates, the fee provided in subsection (D)(2) is no longer available and the investor sponsor is required to make the payments which are due under Section 4-12-20 for the remainder of the lease period.
(P) The minimum amount of investment provided in subsection (B)(3) of this section may not be reduced except by a special vote which, for purposes of this section, means an affirmative vote in each branch of the General Assembly by two-thirds of the members present and voting, but not less than three-fifths of the total membership in each branch.
(Q)(1) The investor sponsor shall file the returns, contracts, and other information which may be required by the department.
(2) Fee payments and returns showing investments are due at the same time as property tax payments and property tax returns would be due if the property were owned by the party obligated to make the fee payments and file the returns.
(3) Failure to make a timely fee payment and file required returns shall result in penalties being assessed as if the payment or return were a property tax payment or return.
(4) The department may issue the rulings and promulgate regulations it determines necessary or appropriate to carry out the purpose of this section.
(5) The provisions of Chapters 4 and 54 of Title 12 applicable to property taxes shall apply to this section; and, for purposes of such application, the fee is considered a property tax. Sections 12-54-80 and 12-54-155 do not apply to this section.
(6) If the entity subject to the fee fails to make the fee lease payments as provided by the agreements between the entity and the county, upon ninety days' notice, the county may terminate the fee and lease agreement and sell the property to which the county has title free from any claim by the entity.
(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.
(R) All references in this section to taxes must be considered to mean South Carolina taxes unless otherwise expressly stated."
D. Items (3), (16), and (18) of Section 12-44-30 of the 1976 Code, as added by Act 149 of 1997, are amended to read:
"(3) Reserved '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.
(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 by a sponsor.
(18) 'Sponsor' means a single entity one or more entities as defined in Section 12-6-3360(m)(1) which signs sign the fee agreement with the county, subject to the provisions of Section 12-44-40."
E. Section 12-44-40(L)(1) of the 1976 Code, as added by Act 149 of 1997, is amended to read:
"(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 sponsors or sponsor affiliates."
F. Section 12-44-120 of the 1976 Code, as added by Act 149 of 1997, is amended to read:
"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, sponsor may enter into lending, financing, security, leasing, or similar arrangements, or succession of such arrangements, with a sponsor affiliate or other financing entity concerning all or part of a project and may enter into including, without limitation, a sale-leaseback arrangement, equipment lease, build-to-suit lease, synthetic lease, nordic lease, defeased tax benefit, or transfer lease 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 sponsor affiliate or other 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 transfers to sponsor affiliates or other financing-related transfers."
G. Section 12-44-130 of the 1976 Code, as added by Act 149 of 1997, is amended to read:
"Section 12-44-130. (A) To be eligible for the fee, a sponsor affiliate and the sponsor affiliates must invest five million dollars in the project. The county and the members sponsors who are part of the fee agreement may agree that investments by other members of the controlled group sponsors or sponsor affiliates within the investment period qualify for the payment regardless of whether the member sponsor or sponsor affiliate 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 sponsors or sponsor affiliates 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 sponsors 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 sponsors or sponsor affiliates which have investments subject to the fee exemption before or within thirty sixty days after the execution of the fee agreement covering the investment by the member sponsor or sponsor affiliate. The department may extend the thirty-day sixty-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."
H. Notwithstanding the general effective date of this act, this section takes effect upon approval by the Governor.
SECTION 4. A. Chapter 37, Title 12 of the 1976 Code is amended by adding:
"Section 12-37-223A. (A) As authorized by Section 3, Article X of the South Carolina Constitution, the General Assembly hereby authorizes the governing body of a county by ordinance to exempt an amount of fair market value of real property located in the county sufficient to limit to fifteen percent any valuation increase attributable to a countywide appraisal and equalization program conducted pursuant to Section 12-43-217. An exemption allowed by this section does not apply to:
(1) real property valued for property tax purposes by the unit valuation method;
(2) value attributable to property or improvements not previously taxed, such as new construction, and for renovation of existing structures;
(3) property transferred after the most recent countywide equalization program implemented pursuant to Section 12-43-217; provided, however, at the option of the governing body of a county which is in the process of first implementing a countywide equalization program under Section 12-43-217, property transferred after the implementation of the most recent countywide equalization program.
(B) Under either option chosen by a county pursuant to subitem (A)(3), the fifteen percent limitation authorized in the subsection (A) shall apply to property transfers that are not subject to income tax pursuant to Sections 102 (Gifts and Inheritances), 351 (Transfer to a Corporation Controlled by Transferor), 355 (Distribution by a Controlled Corporation), 368 (Corporate Reorganizations), 721 (Nonrecognition of Gain or Loss on a Contribution to a Partnership), 1031 (Like-Kind Exchanges), 1033 (Conversions - Fire and Insurance Proceeds to Rebuild), or 1041 (Transfers of Property Between Spouses or Incident to Divorce) of the Internal Revenue Code, as defined in Section 12-6-40. The fifteen percent limitation shall also apply to property transfers between immediate family members which means spouse, parents, children, sisters, brothers, grandparents, and grandchildren.
(C) Assessed value exempted from ad valorem taxation by an ordinance enacted pursuant to this section is nevertheless considered taxable property for purposes of computing the bonded indebtedness limit for a political subdivision or school district.
(D) Once the taxable value of a property is reduced because of the exemption provided for in subsection (A), that reduced value shall continue and remain in effect, except as otherwise provided in subitem (A)(3), until the implementation of the next equalization and reassessment program, provided the ordinance authorizing such exemption remains in effect. The effect of this exemption is, that upon the implementation of each subsequent equalization and reassessment program, the value of the property as determined under Section 12-37-930, reduced by the amount of any exemption granted under this section, may increase no more than fifteen percent.
When a property is transferred such that the property is no longer eligible for the exemption provided for in subsection (A), the property is subject to being taxed in the tax year following the transfer at its value, as determined under Section 12-37-930, as if no exemption had ever existed under subsection (A).
Property transferred after the year of implementation of an appraisal and equalization program conducted pursuant to Section 12-43-217 but prior to the effective date of the ordinance implementing the exemption authorized in subsection (A) shall be eligible for the exemption; such exemption shall remain in effect until a subsequent disqualifying transfer.
(E) For counties adopting an ordinance as authorized in subsection (A), the closing attorney involved in a real estate transfer occurring subsequent to such enactment shall provide the following notice to the buyer(s):
REAL PROPERTY TRANSFERRED AS A RESULT OF THIS TRANSACTION MAY BE SUBJECT TO PROPERTY TAXATION DURING THE NEXT TAX YEAR AT A VALUE THAT REFLECTS ITS FAIR MARKET VALUE AS DETERMINED UNDER SECTION 12-37-930 AS IF AN EXEMPTION UNDER SECTION 12-37-223 HAD NOT OCCURRED.
(F) To qualify for the exemption authorized under subsection (A), the owner of the property for which the exemption is sought or the owner's agent must apply to the county assessor where the property is located and establish eligibility for the exemption.
The time period for making application for the exemption provided for in subsection (A), or for seeking a refund of taxes paid as a result of a subsequent determination of eligibility for the exemption, shall be the same as provided for in Section 12-43-220(c) for administering the special legal residence assessment ratio, mutatis mutandis.
Under penalty of perjury, the applicant taxpayer must certify that the property meets the qualifications established in subsection (A) for eligibility for the exemption and provide such other proof as may be required by the county assessor. The burden is on the taxpayer to establish eligibility for the exemption. The Department of Revenue shall assist the applicant and the assessor to the extent practicable in providing information necessary or helpful in determining eligibility. If the assessor determines the applicant ineligible, the value of the property shall be determined by the assessor.
No further application is necessary from the owner who qualified the property for the exemption while the property continues to meet the eligibility requirements. If a change in ownership occurs, the owner who had qualified for the exemption shall notify the assessor within six months of the transfer of title. Another application is required by the new owner if the new owner seeks to qualify for the exemption provided by this section.
If a person signs the certification, obtains the exemption, and is, thereafter, found not eligible, a penalty may be imposed equal to one hundred percent of the tax paid, plus interest on that amount at a rate of one-half of one percent a month, but in no case less than thirty dollars nor more than the current year's taxes assessed on the value of the property without regard to the exemption.
(G) An ordinance allowed by this section may be given retroactive effect but shall not affect taxes due prior to its enactment. A county governing body may repeal an ordinance adopted pursuant to this section but the repeal may only apply prospectively to tax years subsequent to the year of repeal."
B. Section 12-60-2510(A)(1) of the 1976 Code is amended to read:
"(A)(1) In the case of property tax assessments made by the county assessor, whenever the assessor increases the fair market or special use value in making a property tax assessment by one thousand dollars or more, or whenever the first property tax assessment is made on the property by a county assessor, the assessor, by July first in the year in which the property tax assessment is made, or as soon after as is practical, shall send the taxpayer a property tax assessment notice. In years when real property is appraised and assessed under a county equalization program, substantially all property tax assessment notices must be mailed by February first of the implementation year. In these reassessment years, if substantially all of the tax assessment notices are not mailed by February first, the prior year's property tax assessment must be the basis for all property tax assessments for the current tax year. A property tax assessment notice under this subsection must be in writing and must include:
(a) the fair market value;
(b) value as limited by Section 12-37-223A, if applicable;
(bc) the special use value, if applicable;
(cd) the assessment ratio;
(de) the property tax assessment;
(ef) the number of acres or lots;
(fg) the location of the property;
(gh) the tax map number; and
(hi) the appeal procedure."
C. Section 12-37-223, as added by Act 93 and as amended by Act 119 and Part II, Section 68 of Act 100, all from 1999, is repealed.
D. Notwithstanding the general effective date of this act, this section takes effect upon approval by the Governor.
SECTION 5. Except where otherwise stated, this section takes effect upon approval by the Governor.
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