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COMMITTEE AMENDMENT ADOPTED
March 3, 1999
Introduced by Senators Matthews, Passailaigue, Elliott, Hutto, Glover, Washington and Reese
S. Printed 3/3/99--S.
Read the first time January 12, 1999.
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO BANKING, FINANCIAL INSTITUTIONS, AND MONEY, BY ADDING CHAPTER 43 SO AS TO CREATE THE SOUTH CAROLINA COMMUNITY ECONOMIC DEVELOPMENT COMMISSION FOR THE PURPOSE OF CERTIFYING ENTITIES AS COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS, TO PROVIDE FOR THE APPOINTMENT OF COMMISSION MEMBERS AND THE OPERATION OF THE COMMISSION, AND TO DEFINE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS; AND TO AMEND ARTICLE 25, CHAPTER 6, TITLE 12, RELATING TO INCOME TAX CREDITS, BY ADDING SECTION 12-6-3520 SO AS TO PROVIDE A TAX CREDIT EQUAL TO FIFTY PERCENT OF A TAXPAYER'S INVESTMENT IN A COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION, UP TO A MAXIMUM OF FOURTEEN MILLION DOLLARS FOR ALL TAXPAYERS FOR ALL TAXABLE YEARS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The General Assembly finds that:
(1) Many of South Carolina's urban and rural communities face critical social and economic problems arising in part from people living in poverty because of the lack of economic growth, employment, and other opportunities.
(2) The restoration and maintenance of these communities requires increased access to credit and capital for development activities, including investment in businesses, housing, human development, and other activities that promote the long-term economic and social viability of the community.
(3) Access to credit and capital is essential to unleash the untapped entrepreneurial energy of South Carolina's poorest communities and to empower individuals and communities to become self-sufficient.
(4) Community development financial institutions have the proven ability to identify and respond to community needs for capital, credit, and development services in the absence of, or as a complement to, services provided by other lenders.
(5) Community development corporations have a proven ability to identify and respond to community needs and manage community assets for the purpose of community and economic development on a local level.
(6) For the above reasons, it has determined to enact the provisions of this act as being consistent with public policy objectives of our State, including economic growth, higher employment, and community development.
SECTION 2. Title 34 of the 1976 Code is amended by adding:
Section 34-43-10. (A) There is created a South Carolina Community Economic Development Commission. The commission shall exist for the purpose of certifying entities as community development financial institutions, as defined in Section 34-43-40, and as community development corporations, as defined in Section 34-43-50. The commission also may make grants to community development financial institutions and community development corporations from grant funds made available to it by the General Assembly or from other available funds. The General Assembly may appropriate funds to the commission to be used to make grants to community development financial institutions and community development corporations as authorized in this chapter. The General Assembly also may provide funds in the annual general appropriation act to pay salaries, employee benefits, and administrative expenses of the commission.
(B) In addition to other powers provided for in this chapter, the commission may:
(1) promulgate regulations necessary to carry out its functions;
(2) contract for and accept, for use in carrying out the provisions of this chapter, any grant or contribution of funds from a political subdivision of the State or from another source, and comply, subject to the provisions of this chapter, with the terms and conditions of those contracts; and
(3) do anything necessary or convenient to carry out its powers and functions.
(C) The commission may receive funds from, among other sources, state appropriations and private contributions.
Section 34-43-20. (A) The governing body of the commission consists of the following seven members which must represent the diverse ethnic population of the State:
(1) a chairman, representing a federally-chartered or state-chartered financial institution doing business in this State, who must be appointed by the Governor, with the advice and consent of the Senate;
(2) the Secretary of Commerce, or his designee;
(3) three members from the community economic development field appointed by the Governor, with the advice and consent of the Senate; and
(4) two members representing federally-chartered or state-chartered financial institutions or other business entities doing business in this State, other than the institution represented by the chairman, who must be appointed by the Governor, with the advice and consent of the Senate.
(B) A commission member serves a term of four years and until his successor is appointed and qualifies.
(C) A member who is appointed to fill a vacancy on the commission serves only for the remainder of the unexpired term and until a successor is appointed and qualifies.
(D) The commission ceases to exist on July 1, 2004, unless further authorized by the General Assembly.
Section 34-43-30. (A) Four appointed members of the commission are a quorum. However, the commission may not act on a matter unless at least four members in attendance concur.
(B) The commission determines the times and places of its meetings.
(C) Members of the commission, while serving on business of the commission, shall receive, to the extent funding is available, per diem, mileage, and subsistence as provided by law for members of state boards, committees, and commissions.
(D) The commission, to the extent funding is available, may employ or contract for staff and consultants it considers necessary to assist in carrying out its duties and responsibilities pursuant to this chapter.
(E) In its internal functions, the commission shall keep proper records of its accounts and follow the procedures of this State governing the purchase of office space, supplies, facilities, materials, equipment, and professional services. The commission must be audited by the State Auditor as provided in Chapter 7 of Title 11.
(F) The commission shall make an annual report on its condition and operations to the General Assembly and the Governor, including the information required to be reported by Section 34-43-80.
Section 34-43-40. (A) The commission may certify an entity as a community development financial institution if it meets the definition provided in subsection (B).
(B) For purposes of this section:
(1) 'Community development financial institution' means an organization that:
(a) has a primary mission of promoting community development through the provision of credit, capital, or development services to small businesses including, but not limited to, the provision of capital access programs, microlending, franchise financing, and guaranty performance bonds;
(b) provides service delivery throughout the State;
(c) maintains, through representation on its governing board, accountability to persons in need of the institution's services;
(d) is not an agent or instrumentality of the United States, or of a state or political subdivision of a state or maintains an affiliate relationship with none of them;
(e) maintains a goal of providing a majority of its services to low-income individuals, minorities, females, or rural areas;
(f) provides capital and technical assistance to small and micro businesses;
(g) does not provide credit, capital, or other assistance in an amount greater than two hundred fifty thousand dollars at one time or in one transaction. That dollar amount must be adjusted in the manner provided in Section 37-1-109; and
(h) has been certified or recertified previously as a community development financial institution as provided in this chapter.
(2) 'Low-income' means individuals whose income level falls within the eightieth percentile of the mean income for a family of four within this State.
(3) The term 'invest' includes any advance of funds to a community development financial institution whether by purchase of stock or other equity interest or by charitable contribution.
(C) Banks and financial institutions chartered by the State of South Carolina are authorized to invest in community development financial institutions incorporated under the laws of this State, up to a maximum of ten percent of a chartered bank or financial institution's total capital and surplus.
(D) A federally-chartered or state-chartered financial institution holding company may qualify as a community development financial institution only if the holding company and the subsidiaries and affiliates of the holding company collectively satisfy the requirements of subsection (B).
(E) A community development financial institution is not subject to taxes based upon or measured by income which are levied now or may be levied later by the State.
Section 34-43-50. (A) The commission may certify an entity as a community development corporation if it meets the definition provided in subsection (B).
(B) 'Community development corporation' means a nonprofit corporation that:
(1) is chartered pursuant to Chapter 31, Title 33;
(2) is tax-exempt pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986;
(3) has a primary mission of developing and improving low-income communities and neighborhoods through economic and related development;
(4) has activities and decisions initiated, managed, and controlled by the constituents of those local communities;
(5) has a primary function of developing projects and activities designed to enhance the economic opportunities of the people in the community served, including efforts to enable them to become owners and managers of small businesses and producers of affordable housing and jobs in the community served; and
(6) does not provide credit, capital, or other assistance in an amount greater than twenty-five thousand dollars at any time or in one transaction. The commission must adjust that dollar amount as provided in Section 37-1-109.
(7) is not a nonprofit organization which has the sole purpose of providing housing to neighborhoods or technical assistance to other nonprofit organizations.
(C) The commission shall establish and implement criteria for grants made to community development corporations pursuant to Section 34-43-10. The criteria must require that the applicant has demonstrated a capacity to engage in community development projects and has sufficient organizational structure to ensure proper management. However, if the applicant is created after the effective date of this section, the applicant shall present a strategic plan for community development projects and shall show evidence of developing an organizational structure which ensures proper management.
(D) The commission may provide, or contract with an appropriate entity to provide, technical support to assist community development corporations to be successful in developing their organizational capacity and implementing their projects.
(E) The commission shall make an annual report to the General Assembly regarding grants made pursuant to this section. The report required by this subsection may be included with the report required by Section 34-43-30.
Section 34-43-60. (A) Application for certification must be in writing, under oath and in the form prescribed by the commission, and must contain information as the commission may require, including the names and addresses of the partners, officers, directors or trustees, and those principal owners or members as will provide the basis for investigations and findings contemplated by subsection (B). At the time of making the application, the applicant shall pay to the commission a fee for investigating the application, as prescribed by the commission, which will yield sufficient revenue to defray the commission's costs of investigating the applicant.
(B) Upon the filing of the application and payment of the fees, the commission shall investigate the facts concerning the application and the requirements provided for in either Section 34-43-40 or in Section 34-43-50.
Section 34-43-70. (A) Certification of a community development financial institution or a community development corporation expires two years from the date of certification.
(B) Certification of a community development financial institution or a community development corporation may be renewed for additional two-year periods upon application by the institution or corporation and approval by the commission.
(C) The commission may not renew certification of an institution or corporation absent continuous compliance with the provisions of Section 34-43-40 or Section 34-43-50.
(D) The commission may revoke the certification of an institution or corporation upon a finding that the institution or corporation does not comply with the provisions of Section 34-43-40 or Section 34-43-50.
(E) The commission shall serve a notice of intent not to grant certification, intent not to renew certification, or intent to revoke certification upon the institution or corporation with a brief statement of the reasons alleged. The institution or corporation may request a hearing within thirty days of receiving notice by filing a request for a hearing with the commission. The hearing must be held in accordance with Article 3, Chapter 23, Title 1, the Administrative Procedures Act.
(F) A taxpayer may not claim the tax credit provided for in Section 12-6-3520 unless the institution or corporation in which the investment is made is certified by the commission at the time the investment is made. A taxpayer who invested in good faith in a certified institution or corporation may claim the credit provided in Section 12-6-3520 notwithstanding the fact that the certification is subsequently revoked or not renewed by the commission.
Section 34-43-80. A community development financial institution shall file with the commission, on or before the anniversary date of its certification, an annual report for the preceding calendar year. The report must give information about the financial condition of the institution, and must include balance sheets at the beginning and end of the accounting period, a statement of income and expenses for the period, a reconciliation of surplus with the balance sheets, a schedule of assets used by and useful to the institution to conduct its business, an analysis of charges, size and type of loans, and other activities described in Section 34-43-40(B)(1)(a), and other relevant information in form and detail as prescribed by the commission. The report must be made under oath and be in the form prescribed by the commission. The commission shall make and publish annually an analysis and recapitulation of the reports for inclusion in its annual report to the Governor and General Assembly as provided in Section 34-43-30(F)."
SECTION 3. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3520. (A) A taxpayer may claim as a credit against his state income tax, bank tax, or premium tax liability fifty percent of all amounts invested in a community development financial institution, as defined in Section 34-43-40, or in a community development corporation, as defined in Section 34-43-50.
To qualify for this credit the taxpayer must obtain a certificate from the South Carolina Community Economic Development Commission certifying that the entity into which the funds are invested is a community development financial institution within the meaning of Section 34-43-40 or a community development corporation within the meaning of Section 34-43-50 and certifying that the credit taken or available to that taxpayer will not exceed the aggregate fourteen million dollar limitation of all those credits as provided in subsection (B) when added to the credits previously taken or available to other taxpayers making similar investments.
(B) The total amount of credits allowed pursuant to this section may not exceed, in the aggregate, fourteen million dollars for all taxpayers and all taxable years. The total amount of credits allowed for investments in community development financial institutions may not exceed, in the aggregate, ten million dollars for all taxpayers and all taxable years. The total amount of credits allowed for investments in community development corporations may not exceed, in the aggregate, four million dollars for all taxpayers and all taxable years. The credit must be allowed to taxpayers in the order of the time of the making of the qualified investments in community development financial institutions and community development corporations.
The commission shall monitor the investments made by taxpayers in community development financial institutions and community development corporations as permitted by this section and shall perform the functions as provided for in subsection (A).
(C) If the amount of the credit determined under subsection (A) exceeds the taxpayer's state tax liability for the applicable taxable year, the taxpayer may carry over the excess to the immediately succeeding taxable years. However, the credit carryover may not be used for any taxable year that begins on or after ten years from the date of the qualified investment. The amount of the credit carryover from a taxable year must be reduced to the extent that the carryover is used by the taxpayer to obtain a credit pursuant to this chapter for a subsequent taxable year.
(D) Notwithstanding the provisions of subsections (A), (B), and (C), if on April 1, 1999, or as soon after that as the commission is able to determine, the total amount of tax credits which may be claimed by all taxpayers exceeds the total amount of tax credits authorized by this section, the credits must be determined on a pro rata basis. For purposes of this subsection, a community development financial institution or community development corporation for which an investment may be claimed as a tax credit pursuant to this section must report all investments made before April 1, 1999, to the commission by April 1, 1999, which shall inform, as soon as reasonably possible, all community development financial institutions and community development corporations of the total of all investments in all institutions and corporations as of April 1, 1999.
(E) If a qualified investment which is the basis for a credit pursuant to this section is redeemed by a taxpayer within five years of the date it is purchased, the credit provided by this section for the qualified investment is disallowed, and a credit previously claimed and allowed with respect to the redeemed qualified investment must be paid to the Department of Revenue with the appropriate return of the taxpayer covering the period in which the redemption occurred. When payments are made to the Department of Revenue pursuant to this section, the amount collected must be handled in the same manner as if no credit had been allowed.
(F) To receive the credit provided by this section, a taxpayer shall:
(1) claim the credit on the taxpayer's annual state income or premium tax return in the manner prescribed by the Department of Revenue; and
(2) file with the Department of Revenue and with the taxpayer's annual state income or premium tax return a copy of the form, described in subsection (G), issued by the commission as to the qualified investment by the taxpayer, including an undertaking by the taxpayer to report to the Department of Revenue a redemption of the qualified investment.
(G)(1) The commission shall complete forms prescribed by the Department of Revenue, showing as to each qualified investment in a community development financial institution or a community development corporation:
(a) the name, address, and identification number of the taxpayer who purchased a qualified investment; and
(b) the nature of the qualified investment purchased by the taxpayer and the amount paid for it.
(2) These forms must be filed with the Department of Revenue on or before the fifteenth day of the third month following the month in which the qualified investment is purchased. Copies of the forms to be provided to the Department of Revenue must be mailed to the taxpayer on or before the fifteenth day of the second month following the month in which the qualified investment is purchased.
(H) A taxpayer may not claim the tax credit provided in this section unless the community development financial institution or community development corporation in which the investment is made has been certified at the time the investment is made. A taxpayer who invested in good faith in a certified institution or corporation may claim the credit provided in this section, notwithstanding the fact that the certification is subsequently revoked or not renewed by the commission.
(I) An investor in a qualified community development corporation or a community development financial institution may transfer or assign the tax credit provided in this section, except that for purposes of a time period within which an act must occur pursuant to this section, the transfer or assignment must relate back to the time of original investment made by the transferor or assignor.
(J) If the community development financial institution in which the investment is made is a tax-exempt nonprofit corporation, the tax credit provided in this section may not be allowed if the taxpayer claims the investment as a deduction pursuant to Section 170 of the Internal Revenue Code.
(K) The total amount of credits which may be allowed by the Department of Revenue may not exceed two million dollars in a community development corporation for fiscal year 1999-2000 and each fiscal year thereafter until the total aggregate amount of four million dollars is reached. The total amount of credits allowed by the Department of Revenue may not exceed five million five hundred thousand dollars in a community development financial institution for fiscal year 1999-2000 and each fiscal year after that until the total aggregate amount of ten million dollars is reached. A credit which is disallowed because of this subsection may be carried forward as provided in this section."
SECTION 4. This act takes effect upon approval of the Governor, except that Section 3 applies to tax years beginning after 1998.
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