2001-2002 Bill 886 Text of Previous Version (Feb. 21, 2002)

South Carolina General Assembly
114th Session, 2001-2002

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Bill 886

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COMMITTEE REPORT

February 19, 2002

S. 886

Introduced by Senators Leatherman, McGill, Land, Glover, Saleeby, Rankin and Elliott

S. Printed 2/19/02--S. [SEC 2/21/02 9:13 AM]

Read the first time January 16, 2002.

THE COMMITTEE ON FINANCE

To whom was referred a Bill (S. 886) to amend Section 12-6-3360, as amended, Code of Laws of South Carolina, 1976, relating to the Targeted Jobs Tax Credit, so as to establish the designation of "distressed county", etc., respectfully

REPORT:

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, by striking SECTION 1 and inserting:

/ SECTION 1. A. Subsections (A) and (B) of Section 12-6-3360 of the 1976 Code, as last amended by Act 89 of 2001, are amended to read:

"(A) Taxpayers that operate manufacturing, tourism, processing, warehousing, distribution, research and development, corporate office, qualifying service-related facilities, and qualifying technology intensive facilities are allowed an annual job tax credit as provided in this section. In addition, taxpayers that operate retail facilities and service-related industries qualify for an annual jobs tax credit in counties designated as least developed or distressed. Credits under this section may be claimed against income taxes imposed by Section 12-6-510 or 12-6-530, and insurance premium taxes imposed pursuant to Chapter 7 of Title 38, and are limited in use to fifty percent of the taxpayer's South Carolina income tax, insurance premium tax liability. In computing any tax payable by a taxpayer under Section 38-7-90, the credit allowable under this section must be treated as a premium tax paid under Section 38-7-20.

(B) The department shall rank and designate the state's counties by December thirty-first each year using data from the South Carolina Employment Security Commission and the United States Department of Commerce. The counties are ranked using the last three years of available per capita income data and the last thirty-six months or three years of available unemployment rate data, with equal weight given to unemployment rate and per capita income as follows:

(1) (a) The six counties with a combination of the highest unemployment rate and lowest per capita income are designated distressed counties. Notwithstanding any other provision of law, no more than six counties may be designated or classified as distressed and notwithstanding any other provision of this section, a county may be designated as distressed only by virtue of the criteria provided in this subitem.

(b) The ~~twelve~~ six counties with a combination of the next highest unemployment rate and lowest per capita income are designated least developed counties.

(2) The twelve counties with a combination of the next highest unemployment rate and next lowest per capita income are designated ~~under developed~~ underdeveloped counties.

(3) The eleven counties with a combination of the next highest unemployment rate and the next lowest per capita income are designated moderately developed counties.

(4) The eleven counties with a combination of the lowest unemployment rate and the highest per capita income are designated developed counties. The designation by the department is effective for corporate taxable years which begin after the date of designation.

(5)(a) A county, any portion of which is located within twenty-five miles of the boundaries of an applicable military installation or applicable federal facility as defined in Section 12-6-3450(1), shall receive the next increased credit designation for five years beginning with the year in which the military installation or federal facility became an applicable military installation or applicable federal facility as defined in Section 12-6-3450(1), with the additional requirement that the military installation must have reduced employment on the installation of at least three thousand employees.

(b) In addition to the designation in subitem (a), a county in which an applicable military installation or applicable federal facility is located is allowed an additional increased credit designation for five years beginning with the year the installation or facility meets the requirements.

(c) Notwithstanding the designations in Section 12-6-3360, Laurens, Cherokee, and Union Counties shall qualify for the next increased credit designation.

(d) In a county where less than five percent of the work force is in manufacturing, the credit allowed is one tier higher than the credit for which the county would otherwise qualify.

(e) For a job created in a county that is not traversed by an interstate highway, the credit allowed is one tier higher than the credit for which jobs created in the county would otherwise qualify. This subitem does not apply to a job created in a county eligible for a higher tier pursuant to another provision of this item.

(f) Notwithstanding the designations in this section, counties which enter into a qualified regional development alliance are designated as least developed counties, except for counties in the alliance which are designated as distressed. A qualified regional development alliance is:

(i) composed of no less than six, nor more than ten, counties which are contiguous to each other;

(ii) at least five of the counties are designated as either distressed or but for the application of this item least developed;

(iii) the arithmetic average of at least eight of the counties, if the alliance is composed of ten counties, or six, if composed of less than ten counties annual unemployment rate is at least seventy-five percent greater than the total state annual unemployment rate; and

(iv) each of the counties adopts an ordinance pursuant to Section 13, Article VIII of the Constitution of this State and Section 4-9-41 or Section 4-1-170 which states that it will join the alliance for the purposes of promoting a regional approach to economic development. A county may not join more than one regional alliance."

B. Section 12-6-3360(C)(1) of the 1976 Code is amended to read:

"(1)(a) Eight thousand dollars for each new full-time job created in distressed counties.

(b) Four thousand five hundred dollars for each new full-time job created in least developed counties."

C. Section 12-6-3360, subsections (J) and (N) of the 1976 Code are amended to read:

"(J) For a taxpayer which plans a significant expansion in its labor forces at a location in this State, the appropriate agency shall prescribe certification procedures to ensure that the taxpayer can claim credits in future years even if a particular county is removed from the list of distressed, least developed, under developed, or moderately developed counties.

(N) Except for employees employed in distressed counties, the maximum aggregate credit that may be claimed in any tax year for a single employee under this section and Section 12-6-34(A)(1) is five thousand five hundred dollars." /

Amend further by adding three penultimate sections appropriately numbered to read:

/ SECTION ___. Section 12-10-80(D)(1)(a) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:

"(a) one hundred percent of the maximum job development credits may be claimed by businesses located in counties designated as distressed or least developed;"

SECTION ____. Section 12-10-81(E)(1)(a) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:

"(a) one hundred percent of the maximum job development credits may be claimed by businesses located in counties designated as distressed or least developed;"

SECTION ____. Section 12-10-85(B) of the 1976 Code, as last amended by Act 387 of 2000, is further amended to read:

"(B) Rural Infrastructure Fund grants must be available to benefit counties designated as 'distressed', 'least developed', or 'underdeveloped' as defined in Section 12-6-3360 according to guidelines established by the council, except that up to twenty-five percent of the funds annually available in excess of five million dollars must be set aside for grants to areas of 'moderately developed' and 'developed' counties. A governing body of a 'moderately developed' or 'developed' county must apply to the council for these set-aside grants stating the reasons that certain areas of the county qualify for these grants because the conditions in that area of the county are comparable to those conditions qualifying a county as 'distressed', 'least developed', or 'underdeveloped'. /

Renumber sections to conform.

Amend title to conform.

HUGH K. LEATHERMAN, SR. for Committee.

STATEMENT OF ESTIMATED FISCAL IMPACT

REVENUE IMPACT1

This bill is not expected to impact general fund income tax revenue in FY 2002-03. This bill is expected to reduce general fund income tax revenue by an estimated $523,635 in FY 2003-04 and by an estimated $4,463,365 in FY 2004-05.

Explanation

This bill would designate the top six counties with a combination of the state's highest unemployment rate and lowest per capita income as "distressed". Companies creating jobs in "distressed counties" would be eligible for an $8,000 tax credit for each new full-time job created. Current law does not permit companies creating new full-time jobs to claim a credit against those jobs until the beginning of the second year after the creation of those jobs. S.C. Code Section 12-6-3360(N) caps the maximum aggregate credit that a company may claim for a single employee in any tax year at $5,500. Based upon this cap, companies creating jobs in "distressed counties" would be limited to a $5,500 tax credit beginning in the second year after the investment for each new full-time job created. Under current law, the six counties that would be designated as "distressed" under this bill are presently designated as "least developed". Companies creating jobs in "least developed" counties are eligible for a $4,500 tax credit for each new full-time job created. This bill also provides that specific contiguous counties may create a "regional development alliance" provided that the alliance as a whole meets certain minimum qualifying criteria. Counties entering into an alliance would be designated as "least developed" except for those already designated as "distressed". Based on the criteria set forth in this bill, the BEA estimates that a likely alliance would include five counties that would be designated as "distressed" under the provisions of this bill and five counties that would be re-designated as "least developed" under this bill. Companies creating new full-time jobs in the five counties re-designated as "distressed" would be eligible for a larger jobs tax credit than previously received. Based upon the capital investment data for 2001 from the S.C. Department of Commerce (DOC), investors created 3,377 jobs and invested over $524 million in capital expenditures in the counties that the BEA estimates would be designated as "distressed" and re-designated as "least developed" under this bill. Under the incentive structure currently in place, the BEA projects that the same level of investment will occur in these counties over its forecast period. Since credits for jobs created during this forecast period cannot be claimed until tax year 2003 and filed for in calendar year 2004, the BEA estimates that this bill will not impact general fund income tax revenue in FY 2002-03. The BEA estimates that 10.5 percent of taxpayers may adjust their estimated tax payments in FY 2003-04 resulting in a loss of general fund income tax revenue of $523,635 in FY 2003-04. The full impact of this bill would not be realized until FY 2004-05. Since BEA included these new jobs in its forecast at the current level of tax credits, allowing a jobs tax credit that is more per job than previously received for the same number of jobs would reduce general fund income tax revenue by an estimated $4,463,365 in FY 2004-05. The BEA recognizes that these estimated reductions in revenue could potentially be offset by "spin off" benefits resulting from these credits. However, due to the uncertainty of such benefits and the long lag times before we would see tangible results, the BEA expects to adjust its estimate only for the "up front" impact, which is the amount that should be set aside in the budget to cover the credit in the initial years for those already in business.

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.

A BILL

TO AMEND SECTION 12-6-3360, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE TARGETED JOBS TAX CREDIT, SO AS TO ESTABLISH THE DESIGNATION OF "DISTRESSED COUNTY", PROVIDE THE CRITERIA FOR THE DESIGNATION AND ALLOW A TAX CREDIT EQUAL TO EIGHT THOUSAND DOLLARS FOR EACH NEW FULL-TIME JOB CREATED IN A DISTRESSED COUNTY, TO LIMIT THE "DISTRESSED" DESIGNATION TO NO MORE THAN SIX COUNTIES, AND TO PROVIDE FOR GROUPS OF AT LEAST SIX, BUT NOT MORE THAN TEN, CONTIGUOUS COUNTIES TO JOIN IN A REGIONAL ALLIANCE AREA TO PROMOTE REGIONAL DEVELOPMENT AND TO ALLOW A COUNTY IN THE ALLIANCE TO BE DESIGNATED AS A "LEAST DEVELOPED COUNTY" IF CERTAIN AVERAGE UNEMPLOYMENT CRITERIA ARE MET IN THE COUNTIES COMPRISING THE ALLIANCE AREA COUNTIES; AND TO AMEND SECTION 12-10-85, AS AMENDED, RELATING TO THE STATE RURAL INFRASTRUCTURE FUND, SO AS TO CONFORM THE USE OF FUND REVENUES TO THE "DISTRESSED COUNTY" DESIGNATION AND TO INCREASE FROM FIVE TO TEN MILLION DOLLARS THE THRESHOLD ABOVE WHICH TWENTY-FIVE PERCENT OF FUND REVENUES MUST BE AVAILABLE FOR GRANTS IN COUNTIES ABOVE THE BOTTOM TWO DESIGNATIONS.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. A. Section 12-6-3360(B) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:

"(B) The department shall rank and designate the state's counties by December thirty-first each year using data from the South Carolina Employment Security Commission and the United States Department of Commerce. The counties are ranked using the last three years of available per capita income data and the last thirty-six months or three years of available unemployment rate data, with equal weight given to unemployment rate and per capita income as follows: