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COMMITTEE REPORT
May 10, 2006
S. 1175
S. Printed 5/10/06--H.
Read the first time March 23, 2006.
To whom was referred a Bill (S. 1175) to amend Section 12-6-3360, as amended, Code of Laws of South Carolina, 1976, relating to definitions for purposes of the targeted jobs tax credit, 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, by adding a penultimate SECTION appropriately numbered to read:
/ SECTION __. A. Section 12-6-3360(B)(5) of the 1976 Code, as last amended by Act 161 of 2005, is further amended by adding a subitem at the end of the item to read:
"(g) In a county which is at least one thousand square miles in size and which has had an unemployment rate greater than the state average for the past ten years and an average per capita income lower than the average state per capita income for the past ten years, and which is not included in any of the county classifications contained in subitems (a) through (f) of this item, the credit allowed is two tiers higher than the credit for which the county otherwise would qualify."
B. Notwithstanding the general effective date provided in this act, this SECTION takes effect upon approval of this act by the Governor and applies for taxable years beginning after 2005 and applies for any company which applied for job development credits pursuant to Section 12-6-3360 of the 1976 Code after 2005./
Renumber sections to conform.
Amend title to conform.
DANIEL T. COOPER for Committee.
REVENUE IMPACT 1/
This bill, as amended, would reduce general fund income tax revenue by $958,500 in FY2006-07.
Explanation of Amendment (May 3, 2006) - By the House Ways & Means Committee
This amendment combines the language from H.B. 4951 to amend Section 12-6-3360(B)(5) to allow a county that is at least one thousand square miles in size and has had an unemployment rate greater than the state average and an average per capita income lower than the state average for the past ten years to receive a job tax credit two tiers higher than that level currently imposed pursuant to Section 12-6-3360(B)(1)(a). Based upon those criteria, only Orangeburg County is eligible under this provision. In calendar year 2005, Orangeburg County was designated a distressed county with an $8,000 income tax credit for each eligible new job created in the county. In calendar year 2006, the county is designated a moderately-developed county with each eligible new job receiving a $3,500 tax credit, or two tiers lower than the prior year. According to the Department of Commerce, two companies in Orangeburg County applied for and received approval for eligible job tax credits for 213 new jobs during calendar year 2005. Job tax credits may be taken by a company once the new jobs are "created". These companies have been "approved" for job tax credits; however, the associated new jobs have not been "created" as of January 1, 2006. If the same number of new jobs is created in Orangeburg County during calendar year 2006, the jobs would be eligible for a tax credit of $8,000 per new job instead of the present $3,500 per new job. Multiplying 213 new qualified jobs by a tax credit increase of $4,500 per job would yield an estimated reduction in general fund income tax revenue of $958,500 in FY2006-07.
Explanation of Amendment (March 7, 2006) - By the Senate Finance Committee
This amendment combines the language from H.B. 4739 to allow a taxpayer to claim a job tax credit beginning with the first full month wages are paid for each new full-time job created pursuant to Section 12-6-3360(C)(2). The tax credit is equal to 8.33 percent (100 percent divided by 12 months equals 8.33 percent) of the maximum credit allowed based upon the county designation of where the new full-time job is created. Under current law, a taxpayer may claim a job tax credit if the minimum number of new jobs created is maintained for the entire tax year. This amendment would allow a taxpayer to claim a job tax credit for a partial tax year instead of for a full tax year. A minimum of two new full-time jobs must be created and maintained for the taxpayer to be eligible to claim the tax credit. The BEA currently incorporates this analysis into its revenue forecast by using an average of net new job creation in the annual forecast of the fiscal impact of Section 12-6-3360(C)(2). This amendment, therefore, has no impact on state general fund revenue in FY2006-07.
Explanation of Amendment (March 7, 2006) - By the Senate Finance Committee
This amendment combines the language from H.B. 4727 to add a clause to the end of Section 5(B) of Act 157 of 2005 (H.B. 3006) to ensure that each tax incentive contained in Act 157 scheduled to be repealed after five years from the date of enactment does not apply to the small business targeted jobs tax credit allowed pursuant to Section 12-6-3360(C)(2). This amendment, therefore, has no impact on state general fund revenue in FY2006-07.
Explanation of Bill filed February 22, 2006
This bill would amend Section 12-6-3360(M)(8) to revise the definition of a "distribution facility" for a taxpayer electing to apply for an annual job tax credit. Currently, if an establishment makes retail sales of tangible personal property to retail customers on more than 12 days in a year, the establishment is considered a retail establishment and would be ineligible for an annual job tax credit. This restriction is moot, however, if an establishment processes customer sales orders by mail, telephone, or electronic means, and ships at least 75 percent of the dollar sales of tangible personal property to customers outside of the state. This bill would also add a provision to allow retail sales of tangible personal property to employees working at the distribution facility to be exempt from the twelve-day and seventy-five percent limitations. This amended language would ensure that the facility is classified as a "distribution facility" and would be eligible for an annual job tax credit. Because this bill would not impact establishments already located in South Carolina, it would have no impact on the general fund revenue estimate for FY2006-07. Additionally, this bill conforms the amended definition of a "distribution facility" pursuant to Section 12-37-220(B)(32)(7) to allow all new distribution facilities to be exempt from non-school county ad valorem taxes for a period of five years. Since all new distribution facilities placed in service after June 27, 1988 are currently exempt from non-school county property taxes, this bill would have no impact on local government revenue in FY2006-07.
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 by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND SECTION 12-6-3360, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO DEFINITIONS FOR PURPOSES OF THE TARGETED JOBS TAX CREDIT, SO AS TO REVISE THE DEFINITION OF "DISTRIBUTION FACILITY"; AND TO AMEND SECTION 12-37-220, AS AMENDED, RELATING TO PROPERTY TAX EXEMPTIONS, SO AS TO CONFORM THE DEFINITION OF DISTRIBUTION FACILITY TO THE REVISED DEFINITION PROVIDED BY THE AMENDMENT TO THE TARGETED JOBS TAX CREDIT IN THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-6-3360(M)(8) of the 1976 Code is amended to read:
"(8) 'Distribution facility' means an establishment where shipments of tangible personal property are processed for delivery to customers. The term does not include an establishment where retail sales of tangible personal property are made to retail customers on more than twelve days a year except for a facility which processes customer sales orders by mail, telephone, or electronic means, if the facility also processes shipments of tangible personal property to customers and if at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers outside of South Carolina. Retail sales made inside the facility to employees working at the facility are not considered for purposes of the twelve-day and seventy-five percent limitation. For purposes of this definition, 'retail sale' and 'tangible personal property' have the meaning provided in Chapter 36 of this title."
SECTION 2. Section 12-37-220(B)(32)(7) of the 1976 Code is amended to read:
"(7) 'distribution facility' means an establishment where shipments of tangible personal property are processed for delivery to customers, but the term "distribution facility" does not include an establishment which operates as a location where retail sales of tangible personal property are made to customers. A distribution facility includes establishments which process customer sales orders by mail, telephone, or electronic means, if the establishment also processes shipments of tangible personal property to customers. The terms "retail sale", and "tangible personal property", for purposes of this definition, have those meanings as contained in Chapter 36 of Title 12 has the meaning provided pursuant to Section 12-6-3360(M)(8)."
SECTION 3. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3367. (A) A taxpayer eligible, pursuant to Section 12-6-3360(C)(2), for the jobs tax credits allowed pursuant to Section 12-6-3360 may elect to claim the applicable credit in the manner provided pursuant to subsection (B) of this section rather than as provided in Section 12-6-3360(C)(2).
(B) Beginning with the first full month wages are paid for the new full-time jobs created, the taxpayer is allowed a jobs tax credit in an amount equal to 8.33 percent of the maximum credit amount each month, for not more than sixty consecutive months, multiplied by the number of new full-time jobs for which wages are paid for the full month. A credit is not allowed for any month in which the new employment increase falls below the minimum level of two. To claim the credits allowed pursuant to Section 12-6-3360(C)(2)(a), the minimum gross wages requirement is met if the gross wages paid for the month, when annualized, meet the minimum requirement.
(C) Except where altered by subsection (B) of this section, the provisions of Section 12-6-3360 are incorporated into this section."
SECTION 4. SECTION 5(B) of Act 157 of 2005 is amended to read:
"(B) Each tax incentive, including credits and exemptions, enacted by this act shall be repealed for tax years beginning after five years from the date of enactment, unless a different time frame is otherwise provided herein, but this repeal does not apply to the small business targeted jobs tax credit allowed pursuant to Section 12-6-3360(C)(2), as amended by this act."
SECTION 5. This act takes effect upon approval by the Governor.
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