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COMMITTEE REPORT
May 16, 2001
H. 3993
S. Printed 5/16/01--H.
Read the first time April 24, 2001.
To whom was referred a Bill (H. 3993) to amend Section 4-12-30, as amended, Code of Laws of South Carolina, 1976, relating to qualifications of certain inducement lease agreements in connection with property, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, SECTION 5, page 8, by striking Section 4-29-67(C)(2)(d) and inserting:
/ (d) For purposes of those businesses qualifying under pursuant to Section 4-29-67(D)(4), the five-year period referred to in this subsection is eight years and the seven-year period is ten years. However, for those businesses which, after qualifying under Section 4-29-67(D)(4), have more than five hundred million dollars in capital invested in this State and employ more than one thousand people in this State, the five-year period referred to in this subsection is ten years, and the ten-year extended period referred to in the previous sentence is fifteen years."/
Amend further, SECTION 5, beginning on page 8, by striking Section 4-29-67(C)(3) and inserting:
/ (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 a period of 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 pursuant to 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 forty years or, for those businesses qualifying for the fifteen-year extended period, forty-five years." /
Amend further, beginning on page 21 and line 38 by striking Section 12-44-50(A)(1)(b)(i) as contained in SECTION 6, and inserting
/ (i) by the county, which must not be lower than the a cumulative property tax millage rate legally levied by or on behalf of all millage levying entities within which the project is to be located, which is the cumulative rate that is applicable during the period beginning on the thirtieth day of June preceding the calendar year in which the fee agreement is executed and ending on the date the initial lease agreement is executed; or" /
Renumber sections to conform.
Amend totals and title to conform.
Majority favorable. Minority unfavorable.
ROBERT W. HARRELL, JR. LARRY L. KOON
For Majority. For Minority.
REVENUE IMPACT1
This bill is not expected to have an impact on state general fund or local revenue in FY 2001-02.
Explanation
This bill clarifies language and makes technical changes to existing language and updates administrative procedures for consistent application of the fee-in-lieu of property taxes among the various fee arrangements a company may enter into with a local government. Under current law, a millage rate agreement is prohibited from being lower than the millage rate applicable on June 30 of the preceding calendar year in which the millage agreement is executed. If no millage rate agreement is executed on or before the initial lease agreement is executed, then the millage rate will be deemed to be the rate applicable on June 30 of the calendar year preceding the execution of the initial lease agreement. This bill would provide flexibility for companies negotiating a fee in lieu of property tax agreement with counties by allowing the local government to negotiate a millage rate equal to any millage rate legally levied by the locality during the period beginning on June 30 of the calendar year preceding the year in which the millage rate agreement is executed, and ending on the date the initial lease agreement is executed. The bill, therefore, is not expected to reduce state general fund or local revenue in FY 2001-02.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND SECTION 4-12-30, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO QUALIFICATIONS OF CERTAIN INDUCEMENT LEASE AGREEMENTS IN CONNECTION WITH PROPERTY QUALIFYING FOR A FEE IN LIEU OF PROPERTY TAXES, SO AS TO PROVIDE GUIDELINES FOR THE QUALIFICATION OF A SPONSOR AND SPONSOR AFFILIATE FOR THE FOUR PERCENT FEE AND TO PROVIDE FOR THE TIME PERIODS FOR EXECUTION OF THE MILLAGE RATE AGREEMENT AND FOR COMPUTATION OF THE APPLICABLE CUMULATIVE PROPERTY TAX MILLAGE, AND TO PROVIDE FOR ALTERNATIVE DETERMINATION OF THE MILLAGE RATE; TO AMEND SECTION 4-29-10, AS AMENDED, RELATING TO DEFINITIONS FOR PURPOSES OF INDUSTRIAL DEVELOPMENT PROJECTS REQUIRING A FEE IN LIEU OF PROPERTY TAXES, SO AS TO DEFINE CERTAIN TYPES OF INVESTORS; TO AMEND SECTION 4-29-67, AS AMENDED, RELATING TO INDUSTRIAL DEVELOPMENT PROJECTS REQUIRING A FEE IN LIEU OF PROPERTY TAXES, SO AS TO PROVIDE FOR INVESTORS AND INVESTOR AFFILIATES, TO PROVIDE GUIDELINES FOR THEIR QUALIFICATION FOR THE FOUR PERCENT FEE, TO PROVIDE FOR TIME PERIODS FOR EXECUTING THE MILLAGE RATE AGREEMENT AND FOR COMPUTATION OF THE APPLICABLE CUMULATIVE PROPERTY TAX MILLAGE, TO PROVIDE FOR ALTERNATIVE DETERMINATION OF THE MILLAGE RATE, AND TO MAKE NUMEROUS TECHNICAL CHANGES; AND TO AMEND SECTION 12-44-50, RELATING TO THE ESTABLISHMENT OF THE MILLAGE RATE FOR PURPOSES OF DETERMINING THE FEE PURSUANT TO THE FEE IN LIEU OF TAX SIMPLIFICATION ACT, SO AS TO PROVIDE FOR GUIDELINES FOR INVESTORS AND INVESTOR AFFILIATES AND THEIR QUALIFICATION FOR THE FOUR PERCENT FEE, TO PROVIDE FOR TIME PERIODS FOR EXECUTING THE MILLAGE RATE AGREEMENT AND FOR COMPUTATION OF THE APPLICABLE CUMULATIVE PROPERTY TAX MILLAGE, TO PROVIDE FOR ALTERNATIVE DETERMINATION OF THE MILLAGE RATE, AND TO MAKE NUMEROUS TECHNICAL CHANGES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 4-12-30(D)(4)(a) of the 1976 Code, as last amended by Act 399 of 2000, is further amended to read:
"(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; or
(iv) in the case of a sponsor and a sponsor affiliate, who together are investing at least four hundred million dollars and creating at least two hundred new full time jobs at the site qualifying for the fee and:
a. the investment by the sponsor affiliate is considered necessary and suitable for the operation of the sponsor facility;
b. the sponsor affiliate is located contiguous to the sponsor project;
c. one hundred percent of the output of the sponsor affiliate is provided to the sponsor for the project; and
d. the sponsor affiliate is not considered a supplier of manufactured parts or of any value added output of the sponsor."
SECTION 2. Section 4-12-30(G) of the 1976 Code, as last amended by Act 399 of 2000, is further amended to read:
"(G)(1) The county and the 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 may be executed on the date of the inducement agreement or at any time thereafter up to and including, but not later than, 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 established pursuant to subsection (G)(1) must cannot be lower than the a 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 that is applicable during the period beginning on the thirtieth day of June preceding the calendar year in which the millage rate agreement is executed and ending on the date the initial lease agreement is executed. If no a millage rate agreement is not executed on or before the date of the initial lease agreement, the millage rate is deemed considered 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 pursuant to subsection (G)(2), the millage rate assessed by a municipality must may not be included in the computation even if the subject property was located in the jurisdiction of the taxing entity as of June thirtieth 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."
SECTION 3. Section 4-29-10(3) of the 1976 Code, as last amended by Act 151 of 1997, is further 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 investors 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."
SECTION 4. Section 4-29-10 of the 1976 Code, as last amended by Act 151 of 1997, is further amended by adding at the end:
"(9) 'Investor' means one or more entities that sign the inducement agreement with the county and also includes an investor affiliate unless the context clearly indicates otherwise.
(10) 'Investor affiliate' means an entity that joins with, or is an affiliate of, an investor and that participates in the investment in, or financing of, a project.
(11) 'Business' means a single entity or two or more entities if they meet the qualifications of Section 4-12-30."
SECTION 5. Section 4-29-67 of the 1976 Code as last amended by Act 279 of 2000, is further to read:
"(A) Notwithstanding the provisions of Section 4-29-60, in the case of a financing agreement in the form of one or more lease agreements for a project qualifying under pursuant to subsection (B), the county and the investor may enter into an inducement agreement which that provides for payment of a fee in lieu of taxes (fee) as provided in this section. All A references reference in this section to a lease agreement shall be deemed also to refer is considered a reference also to a lease purchase agreement.
(B) In order for For property to qualify for the fee as provided in subsection (D)(2):
(1) Title to the property must be held by the county or, in the case of a project located in an industrial development park as defined in Section 4-1-170, title may be held by more than one county, provided each county is a member of the industrial development park. Any real Real property transferred to the county must include a legal description and plat of the property.
(2) The investment must be a project which that 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 provided if: (a) the counties agree on the terms of the fee and the distribution of the fee payment; (b) the minimum millage rate cannot be is not lower than the millage rate applicable to the county in which the greatest amount of investment occurs; and (c) all such the counties must be parties to all agreements establishing the terms of the fee.
(3) The minimum level of investment must be at least forty-five million dollars and must be invested within the time period provided in subsection (C).
(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 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). Investment may be made by a business or a combination of businesses, except that each business must invest at least five million dollars at the project.
(b)(i) The members of the same controlled group of corporations can qualify for the fee if the combined investment in the county by the members meets the minimum investment requirements. The county and the members investors and investor affiliates who are part of the inducement agreement may agree that any investments by other members of the controlled group investor affiliates within the time periods provided in subsections (C)(1) and (C)(2) shall qualify for the payment regardless of whether or not the member investor affiliate was part of the inducement agreement; provided, however, in order. to To qualify for the fee, such other members of the controlled group investor affiliates must be specifically approved approved specifically by the county and must agree to be bound by agreements with the county relating to the fee; provided, however, such controlled group members except that investor affiliates need not be bound by agreements, or portions of agreements, to the extent such those agreements do not affect the county; provided,. further, that with the consent of the county,such members will not be Investor affiliates are not bound by agreements or portions of agreements which do affect the county., if the affected county consents not to bind them. Except as otherwise provided in subsection (B)(2), the investments under pursuant to this subsection (B)(4)(b) must be within the same county or industrial park at the same project. Any controlled group member which is claiming the fee must invest at least ten million dollars in the county or industrial park.
(ii) The Department of Revenue must be notified in writing of all members investors and investor affiliates which that have investments subject to the fee before or within thirty days after the execution of the lease agreement covering the investment by the member investor or investor affiliate. The Department of Revenue may extend the thirty-day period upon written request. Failure to meet this notice requirement will does not adversely affect the fee, but a penalty 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 may be assessed by the Department of Revenue for late notification for up to ten thousand dollars a month or portion of a month with the total penalty not to exceed one hundred twenty thousand dollars. Members of the controlled group must provide the information considered necessary by the Department of Revenue to ensure that the investors are part of a controlled group.
(iii) If, at any time, the controlled group or any former member (who has left the controlled group) no longer has the minimum forty-five million dollars of investment (without regard to depreciation), that group or former member no longer holding the minimum amount of investment as provided in subsection (B)(3) (without regard to depreciation) will investment at the project falls below forty-five million dollars, the investor and investor affiliate no longer qualify for the fee.
(iv) For purposes of this section, 'controlled group' or 'controlled group of corporations' shall have the meaning provided under Section 1563(a) of the Internal Revenue Code as defined in Chapter 6 of Title 12 as of the date of the execution of the inducement agreement (without regard to amendments or replacements thereof), without regard to subsections (a)(4) and (b) of Section 1563 If, at any time, a business no longer has a minimum investment of five million dollars at the project, without regard to depreciation, the investor or investor affiliate no longer qualifies for the fee.
(C)(1) From the end of the property tax year in which the investor and the county execute an inducement agreement, the investor has seven years in which to enter into an initial lease agreement with the county.
(2)(a) From the end of the property tax year in which the investor and the county execute the initial lease agreement, the investor has five years in which to complete its investment for purposes of qualifying for this section. If the investor does not anticipate completing the project within five years, the investor may apply to the county before the end of the five-year period for an extension of time, up to two years, to complete the project. If the The county county's agrees agreement to grant the extension, the county must do so be in writing, and a copy must be delivered to the Department of Revenue within thirty days of the date the extension was granted. The extension may not exceed two years in which to complete the project.
(b) There is no An extension allowed for of the five-year period in which to meet the minimum level of investment is not allowed. If the minimum level of investment is not met within five years, all property under covered by the lease agreement or agreements reverts retroactively to the payments required by Section 4-29-60. The difference between the fee actually paid by the investor and the payment which is due under pursuant to Section 4-29-60 is subject to interest, as provided in Section 12-54-25(D).
(c) Unless property qualifies as replacement property under pursuant to a contract provision enacted pursuant to subsection (F)(2), any property placed in service after the five-year period, or seven years in the case of a project which has received an extension, is not part of the fee agreement under pursuant to subsection (D)(2) and is subject to the payments required by Section 4-29-60 if the county has title to:
(i) the property,; or
(ii) to property taxes, as provided in Chapter 37 of Title 12, if the investor has title to the property.
(d) For purposes of those businesses qualifying under pursuant to Section 4-29-67(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 a period of 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 pursuant to 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 During the time period allowed to meet the minimum investment level, the investor annually must provide inform the total amount invested to the appropriate county official of the total amount invested.
(D) The inducement agreement must provide for fee payments, to the extent applicable, as follows:
(1)(a) Any property, If title to which is of property is transferred to the county, will be the property is subject, before being placed in service, to an annual fee payment as provided in Section 4-29-60 before being placed in service.
(b) Any undeveloped land, If title to which undeveloped land, is transferred to the county, will be the undeveloped land is subject, before being developed and placed in service, to an annual fee payment as provided in Section 4-29-60 developed land is before being developed and placed in service. The time during which fee payments are made under pursuant to Section 4-29-60 will not be considered are not part of the maximum periods provided in subsections (C)(2) and (C)(3), and no a lease shall be considered is not an 'initial lease agreement' for purposes of this section unless and until the first day of the calendar year for which a fee payment is due under pursuant to subsection (D)(2) in connection with such the lease.
(2) After property qualifying under pursuant 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:
(i) an assessment ratio of not less than at least six percent, except as provided in subsection (D)(4),; and
(ii) a fixed millage rate as provided in subsection (G),: and
(iii) a fair market value estimate determined by the South Carolina Department of Revenue as follows:. (i) The estimate for real property using is the original income tax basis for South Carolina income tax purposes without regard to depreciation. However, if real property is constructed for the fee or is purchased in an arm's length transaction, fair market value is deemed to equal equals the original income tax basis, otherwise the Department of Revenue will shall determine fair market value by appraisal; and. The estimate (ii) for personal property using is the original income tax basis for South Carolina income tax purposes, less depreciation allowable for property tax purposes,; except that the investor is not entitled to any extraordinary obsolescence.;
(b) an annual payment based on any an alternative arrangement yielding a net present value of the sum of the fees for the life of the agreement not less than the net present value of the fee schedule as calculated under pursuant to subsection (D)(2)(a). Net present value calculations performed under pursuant to this subsection must use a discount rate equivalent to the yield in effect for new or existing United States Treasury bonds of similar maturity as published during the month in which the inducement agreement is executed. If no yield is available for the month in which the inducement agreement is executed, the last published yield for the appropriate maturity must be used. If there are no bonds of appropriate maturity available, bonds of different maturities may be averaged to obtain the appropriate maturity.; or
(c) an annual payment using a formula that results in a fee not less than the amount required pursuant to subsection (D)(2)(a), except that every fifth year the applicable millage rate is allowed to may 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 the annual fee payment is equal to the taxes due on the project as if it were taxable. When the property is no longer subject to the fee under pursuant to 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 the property under the fee, and thereafter after that continuing with the South Carolina property tax depreciation schedule.
(4)(a) The assessment ratio may not be lower than must be at least 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 resulting in a total investment of at least four hundred million dollars when added to previous investments, 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 totalling totaling at least four hundred million dollars, in a county classified as either least developed or underdeveloped, by a limited liability company and/or or one or more of its members or equity holders, or both of them, where if the member or equity holder is creating, at the site qualifying for the fee, at least one hundred new full-time jobs, at the site qualifying for the fee, with an annual average salary of at least forty thousand dollars within four years of the date of execution of a millage rate agreement.; or
(iv) in the case of a business which is investing at least six hundred million dollars in this State.
(v) in the case of investments totaling at least four hundred million dollars and creating at least two hundred new full-time jobs at the site qualifying for the fee and:
a. the investment by the investor affiliate is considered necessary and suitable for the operation of the sponsor facility;
b. the investor affiliate is located contiguous to the investor project;
c. one hundred percent of the output of the investor affiliate is provided to the investor for the project; and
d. the investor affiliate is not considered a supplier of manufactured parts or of any value added output of the investor.
(b) The new full-time jobs requirement of this item does not apply in the case of a taxpayer which business that paid more than fifty percent of all property taxes actually collected in the county for more than the twenty-five years ending on the date of the agreement 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, has provided for a change in fee-in-lieu of taxes arrangements conditioned on a future legislative enactment, any a new enactment shall does 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 an investor qualifying under pursuant to 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 The lowest assessment ratio allowed is the lowest ratio for which the business investor 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 pursuant to Section 3(g) of Article X of the Constitution of this State and the exemption exemptions allowed pursuant to Section 12-37-220B(32) and (34).
(F) With regard to calculation of the fee provided in subsection (D)(2), the inducement agreement may provide for the disposal of property and the replacement of property subject to the fee as follows:
(1)(a) If an investor disposes of property subject to the fee, the fee must be reduced by the amount of the fee applicable to that property. (b) Property is disposed of only when it is scrapped or sold in accordance with the lease agreement. (c) If the investor used any method to compute the fee other than that provided in subsection (D)(2)(a), the fee on the property which was disposed of must be recomputed in accordance with subsection (D)(2)(a) and to the extent that the amount which that would have been paid under pursuant to subsection (D)(2)(a) exceeds the fee actually paid by the investor, the investor must pay the difference with the next fee payment due after the property is disposed of. If the investor used the method provided in subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must be used to calculate the amount which would have been paid under pursuant to subsection (D)(2)(a). (d) If there is no provision in the agreement dealing with the disposal of property in accordance with this subsection, the fee remains fixed and no adjustment to the fee is allowed for disposed property.
(2) Any property Property which is placed in service as a replacement for property which that 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 may have a function as that differs from the property it is replacing. Replacement property is deemed considered to replace the oldest real or personal property subject to the fee, whether real or personal, which is and 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 replaces. More than one piece of replacement property can may 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 replaces, the excess amount is subject to payments as provided in Section 4-29-60. Replacement property is entitled to the fee payment for the period of time remaining on the twenty-year fee period for the property which it is replacing replaces.
(b) The new replacement property which that qualifies for the fee provided in subsection (D)(2) is recorded using its income tax basis, and the fee is calculated using the millage rate and assessment ratio provided on the original fee property. The fee payment for replacement property must be based on subsection (D)(2)(a) or (D)(2)(c), if the investor originally used this that method, without regard to present value.
(c) In order to 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 4-29-60 if the county has title to:
(i) the property,; or
(ii) to property taxes, as provided in Chapter 37 of Title 12, if the investor has title to the property.
(G)(1) The county and the investor may enter into an agreement to establish the millage rate (millage rate agreement) for purposes of calculating payments under pursuant to subsection (D)(2)(a) and the first five years under pursuant to subsection (D)(2)(c). This millage rate agreement must may be executed on the date of the inducement agreement or at anytime any time thereafter up to and including, but not later than, 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 established pursuant to item (1) of this subsection cannot must be lower than the a 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 that is applicable during the period beginning on the thirtieth day of June preceding the calendar year in which the millage rate agreement is executed and ending on the date the initial lease agreement is executed. If no a millage rate agreement is not executed on or 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.
(H)(1) Upon agreement of the parties county, investors, and investor affiliates, and except as provided in subsection (H)(2), an inducement agreement, a millage rate agreement, or both, may be amended or terminated and replaced with regard to all matters including, but not limited to, the addition or removal of controlled group members investors or investor affiliates.
(2) No An amendment or a replacement of an inducement agreement or millage rate agreement may not be used to change the millage rate, discount rate, assessment ratio, or length duration of the agreement under any such agreement.; However, except that an existing inducement agreements agreement which that have has 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 an investor in connection with a project, or relevant phase of a project for those projects completed and placed in service in more than one year, qualify as expenditures subject to the fee in subsection (D)(2), so long as these expenditures are incurred:
(1) any time 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 time period for investments 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 an investor after the date of such the inducement agreement in connection with a project shall qualify as expenditures subject to the fee in subsection (D)(2).
(J)(1) Subject to subsection (K), project investment expenditures which are incurred within the applicable time period provided in subsection (I) by an entity investor whose investments are not being computed in at the level of investment for purposes of subsections (B) or (C) shall qualify as investment expenditures subject to the fee in subsection (D)(2) where if the:
(a) such expenditures are part of the original cost of the property which is that is transferred, within the applicable time period provided in subsection (I), to one or more other entities which are members of the same controlled group as the transferor entity and investors or investor affiliates whose investments are being computed in at the level of investment for purposes of subsections (B) or (C); and
(b) such property would have qualified for the fee in subsection (D)(2) if it had been initially acquired by the transferee entity rather than instead of the transferor entity.
(2) The income tax basis of such the property immediately before such the transfer must equal the income tax basis of such the property immediately after such the transfer; provided, however, except that, to the extent income tax basis of such the property immediately after such the transfer unintentionally exceeds the income tax basis of such the property immediately before such the transfer, such the excess shall be is subject to payments under pursuant to Section 4-29-60.
(3) The county must agree to any an inclusion in the fee of the property described in subsection (J)(1).
(K)(1) Property which has been previously subject to property taxes in South Carolina will does not qualify for the fee except as provided in this subsection:
(a) land, excluding improvements thereon on it, on which a new project will be is located may qualify for the fee even if it has previously been subject to South Carolina property taxes;
(b) property which that has been subject previously to South Carolina property taxes, but which has never been placed in service in South Carolina, may qualify for the fee; and
(c) property which has been placed in service in South Carolina and subject to South Carolina property taxes which that is purchased in a transaction other than between any of the entities specified in Section 267(b) of the Internal Revenue Code, as defined under pursuant to Chapter 6 of Title 12 as of the time of the transfer, may qualify for the fee provided if the fee-paying entity investor invests at least an additional forty-five million dollars in the project.
(2) Repairs, alterations, or modifications to real or personal property which are not subject to a fee will are not be eligible for a fee, even if they are capitalized expenditures, except for modifications to existing real property improvements which constitute constituting an expansion of such the improvements.
(L)(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, for the maximum time period allowed under pursuant to (C)(3). The property taxes which that would have been paid on the property if it was were owned by the investor to each millage-levying entity as a percentage of the total of such the property taxes for all such the 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).
(M) As a directly foreseeable result of negotiating the fee, gross revenue of a school district in which a project is located in any year a fee negotiated pursuant to this section is paid, may not be less than gross revenues of the district in the year before the first year for which a fee in lieu of taxes is paid. In negotiating the fee, the parties shall assume that the formulas for the distribution of state aid at the time of the execution of the inducement agreement must remain unchanged for the duration of the lease agreement.
(N) 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). Provided, however, that the computation of bonded indebtedness limitation is subject to the requirements of Section 4-29-68(E).
(O)(1) Any An interest in an inducement agreement, millage rate agreement, and lease agreement, and property to which the agreement relates, may be transferred to any other another entity at any time. Notwithstanding any other another provision of this chapter, any an equity interest in any an entity investor or investor affiliate with an interest in any inducement agreement, millage rate agreement, or lease agreement may be transferred to any other another entity or person at any time.
(2) A single entity, or two or more entities which are members of a controlled group, An investor or investor affiliate may enter into any a lending, financing, security, or similar arrangement, or succession of such arrangements, with any a financing entity, concerning all or part of a project and may enter into any a sale-leaseback arrangement, including without limitation, 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 pursuant to 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, investor or investor affiliate pursuant to terms in the sale-leaseback agreement, affects the amount of the fee due.
(3) All A transfers transfer undertaken with respect to the project to effect a financing authorized under by subsection (O) must meet the following requirements:
(a) The Department of Revenue must receive written 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 will not adversely affect the fee, but a penalty up to ten thousand dollars a year or portion of a year up to a maximum penalty of one hundred twenty thousand dollars 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 one hundred twenty thousand dollars.
(b) If the financing entity is the income tax owner of property, either (i) 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 (ii) 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 may transfer an inducement agreement, millage rate agreement, lease agreement, or the assets subject to the lease agreement, it must obtain the approval of the county with which it entered into the original inducement agreement, millage rate agreement, or lease agreement. However, no such That approval is not required in connection with transfers to investor affiliates or other financing-related transfers.
(P) Reserved.
(Q) Reserved.
(R) For purposes of subsections (O)(1)(a) and (P), and subject to subsection (U), each transferee, with respect to a project which is the subject of a transfer, shall be considered to have made amounts of qualified investments represented by the property interest which is subject to the fee and which is transferred, without regard to depreciation.
(S) Reserved.
(T)(P) No An inducement agreement, a millage rate agreement, or a lease agreement, nor or the rights of any an entity investor or investor affiliate pursuant to any such that agreement, including, without limitation, the availability of the subsection (D)(2) fee, shall may not be adversely affected affected adversely if the bonds issued pursuant to any such that agreement are purchased by one or more of the entities which that are or become parties to any such agreement investor or investor affiliates.
(U)(1)(Q) Notwithstanding any other provision of this section, if If an investor fails to make the minimum investment required under by subsection (D)(2) within the time provided in subsection (C)(2), then if and to the extent allowed pursuant to an applicable agreement between the investor and the county, the investor is entitled to the benefits of Chapter 12 of this title if and to the extent allowed pursuant to an applicable agreement between the investor and the county, and if the requirements of subsection (B(4)(a) are satisfied. Otherwise, the fee provided in subsection (D)(2) is no longer available and the investor is required to must make the payments which are due under pursuant to Section 4-29-60 for the remainder of the lease period.
(2) Notwithstanding any other provision of this section, if at any time following the period provided in subsection (C)(2), the investment based income tax basis without regard to depreciation falls below the forty-five million dollar minimum investment to which the fee relates and is held by an entity or controlled group of entities, then if and to the extent allowed pursuant to any applicable agreement between the investor and the county, the investor is entitled to the benefits provided under Chapter 12 of this title. Otherwise, the fee provided in subsection (D)(2) is no longer available and the investor is required to make the payments which are due under Section 4-29-60 for the remainder of the lease period.
(V)(R) The minimum amount of the initial investment provided in subsection (B)(2) (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.
(W)(S)(1) The investor shall file the returns, contracts, and other information which that may be required by the Department of Revenue.
(2) Fee payments, and returns calculating fee payments, 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 investor or investor affiliate obligated to make such the fee payments and file such returns.
(3) Failure to make a timely fee payment and file required returns shall result results in penalties being assessed as if the payment or return was were a property tax payment or return.
(4) The Department of Revenue 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 that application, the fee shall be considered is considered a property tax. Sections 12-54-20, 12-54-80, and 12-54-155 do not apply to this section.
(6) Within thirty days of the date of execution of an inducement or lease agreement, a copy of the agreement must be filed with the Department of Revenue and the county auditors auditor and the county assessors assessor for the every 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.
(X)(T) Except as otherwise expressly provided in subsection (C)(2), any a loss of fee benefits under pursuant to this section shall be is prospective only from the date of noncompliance and, subject to subsection (U)(Q), only with respect to that portion of the project to which such the noncompliance relates; provided, however, except that such the loss of fee benefits cannot may not result in the recovery from the fee-paying entity investor and investor affiliate of fee payments for more than:
(1) three years from the date a return concerning the fee is filed for the time period during which the noncompliance occurs,. absent a A showing of bad faith noncompliance, in which case such increases the three-year period shall instead be to a ten-year period; or
(2) ten years if no such a return is not filed for the time period during which the noncompliance occurs.
(Y)(U) Section 4-29-65 shall be inapplicable does not apply with respect to this section. All references in this section to taxes shall be considered to mean means South Carolina taxes unless otherwise expressly stated.
(Z) Reserved.
(AA)(W)(1) Notwithstanding any other another provision of this section, in the case of a qualified recycling facility the annual fee is available for no more than thirty years, and for those projects constructed or placed in service during a period of more than one year, the annual fee is available for a maximum of thirty-seven years.
(2) Notwithstanding any other another provision of this section, for a qualified recycling facility, the assessment ratio may not be less than must be at least three percent.
(3) Any machinery and equipment foundations, port facilities, or railroad track systems used, or to be used, for a qualified recycling facility is considered tangible personal property.
(4) Notwithstanding subsections (F) and (I) of this section, the total costs of all investments made for a qualified recycling facility are eligible for fee payments as provided in this section.
(5) For purposes of any fees that may be due on undeveloped property for which title has been transferred to the county by or for the owner or operator of a qualified recycling facility, the assessment ratio is three percent.
(6) Notwithstanding subsection (D)(2)(b) of this section, in the case of a qualified recycling facility, net present value calculations performed under pursuant to the that subsection must use a discount rate equivalent to the yield in effect for new or existing United States Treasury bonds of similar maturity as published on any day selected by the investor during the year in which assets are placed into service or in which the inducement agreement is executed.
(7) As used in this subsection, 'qualified recycling facility' and 'investment' have the meaning provided in Section 12-7-1275(A).
(BB)(1) Notwithstanding any other another provision of this section, the fair market value of property of a pharmaceutical company investing more than four hundred million dollars in one county in this State is the lower of the fair market value estimate (1) as determined determines:
(a) pursuant to subsection (D)(2)(a)(i),; or
(2)(b) as determined by the county in which the investment is located as follows:
(a) (i) for real property, using the original income tax basis for South Carolina income tax purposes without regard to depreciation, less any such basis amount attributable to cost overruns, including capitalized interest overruns; and
(b)(ii) for personal property, using the original income tax basis for South Carolina income tax purposes, less any such basis amount attributable to cost overruns, including capitalized interest overruns, and less depreciation allowable for property tax purposes, except that the investor is not entitled to any extraordinary obsolescence.
(2) This subsection applies only to property placed in service before January 1, 2000."
SECTION 6. Section 12-44-50(A)(1)(b)(i) of the 1976 Code is amended to read:
"(i) by the county, which must not be lower than the cumulative property tax millage rate legally levied by or on behalf of all millage levying entities within which the project is to be located, which is the cumulative rate that is applicable on the thirtieth day of June preceding the calendar year in which the fee agreement is executed and ending on the date the initial lease agreement is executed; or"
SECTION 7. Notwithstanding the provisions of Section 4-12-30(H)(2), Section 4-29-67(H)(2), and Section 12-44-40(L)(2), the parties may agree to change the millage rate under an existing inducement agreement or millage rate agreement for an investment that exceeds two hundred million dollars to a cumulative property tax millage rate legally levied by or on behalf of all taxing entities within which the subject property is to be located that is applicable during the period beginning on the thirtieth day of June preceding the calendar year in which the millage rate agreement is executed and ending on the date the initial lease agreement is executed. A change in millage rates pursuant to this section is applicable prospectively only and not retroactively.
SECTION 8. This act is effective upon approval by the Governor. The provisions of SECTION 2, SECTION 6, and the amendment to Section 4-29-67(G) in SECTION 5 apply to a fee in lieu of property taxes agreement in which an initial lease agreement is executed on or after that date. SECTION 7 is repealed effective December 31, 2001.
This web page was last updated on Thursday, June 25, 2009 at 2:17 P.M.