South Carolina General Assembly
116th Session, 2005-2006

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Bill 3067

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COMMITTEE REPORT

May 18, 2005

H. 3067

Introduced by Reps. J.R. Smith, Clark, Clyburn, Perry, D.C. Smith, Stewart and G.R. Smith

S. Printed 5/18/05--S.

Read the first time March 9, 2005.

            

THE COMMITTEE ON FINANCE

To whom was referred a Bill (H. 3067) to amend Section 12-14-60, Code of Laws of South Carolina, 1976, relating to the investment tax credit against state income tax allowed for economic impact zone, 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, Page 1, by striking lines 31-33 and inserting:

/    (2)    In the case of credit unused within the initial ten-year period, a taxpayer may continue to carry forward unused credits for use in any subsequent tax years if the taxpayer:    /

Amend further, as and if amended, Page 2, by striking Section 2 and inserting:

/    SECTION    2.    This act takes effect upon approval by the Governor and the provisions of Section 12-14-60(D)(2) of the 1976 Code, as amended by this act, apply for credits earned in taxable years beginning after 1996.    /

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 state general or other fund revenue in FY2005-06 or FY2006-07. This bill is expected to reduce general fund corporate income tax revenue by an estimated $150,000 in FY2007-08 and by an estimated $1,500,000 in FY2008-09.

Explanation

This bill would extend the carry forward period for unused Economic Impact Zone Act investment tax credits for certain taxpayers beyond ten-years. Only taxpayers meeting stringent employment and capital investment criteria would benefit from the proposed extension. The current ten-year carry forward provision was enacted in 1997 and was effective for taxable years beginning after 1996. Because the current investment tax credit carry forward provision did not become effective until tax year 1997, the initial ten-year carry forward period referenced under current law would not expire until the end of tax year 2007. Therefore, the proposed extension of the carry forward period beyond the current ten-year window would not fully impact general fund revenue until tax year 2008, or FY2008-09. Because filers accounting for an estimated 10 percent of this credit would be expected to adjust their estimated tax payments to take advantage of this carry forward extension as soon as possible, this bill would impact general fund revenue in FY2007-08. This bill would not impact general fund revenue in FY2005-06 or FY2006-07. DOR cannot release proprietary data regarding characteristics of corporations currently benefiting from investment tax credits. However, according to publicly available data from DOR, investment tax credits claimed by companies in the state averaged a total of $28,900,000 per year over the last three years. Based on additional information provided by DOR, an estimated $5,800,000 of investment tax credits are carried forward annually by corporations that do not have enough tax liability in a given year to take the full credit. Because this bill imposes a credit cap of 25 percent of tax liability for filers carrying forward credit beyond ten years along with additional employment and capital investment criteria, and because it is unlikely that every eligible taxpayer would reach the ten-year window in 2007, this bill would reduce general fund corporate income tax revenue by an estimated $1,500,000 in FY2008-09. However, accounting for filers expected to take advantage of this carry forward extension as soon as possible reduces general fund corporate income tax revenue by an estimated $150,000 in FY2007-08 and by the full $1,500,000 in FY2008-09.

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.

A BILL

TO AMEND SECTION 12-14-60, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE INVESTMENT TAX CREDIT AGAINST STATE INCOME TAX ALLOWED FOR ECONOMIC IMPACT ZONE QUALIFIED MANUFACTURING AND PRODUCTIVE EQUIPMENT PROPERTY, SO AS TO EXTEND FOR CERTAIN TAXPAYERS THE TEN-YEAR CARRY-FORWARD PERIOD FOR UNUSED TAX CREDITS AND PROVIDE THE REQUIREMENTS NECESSARY FOR A TAXPAYER TO RECEIVE THE ADDITIONAL CARRY-FORWARD PERIOD.

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

SECTION    1.    Section 12-14-60(D) of the 1976 Code is amended to read:

"(D)(1)    Unused credit allowed pursuant to this section may be carried forward for ten years from the close of the tax year in which the credit was earned.

(2)    In the case of credit earned and unused within the initial ten-year period, a taxpayer may continue to carry forward unused credits for use in any subsequent tax years if the taxpayer:

(a)    is engaged in this State in an activity or activities listed under the North American Industry Classification System Manual (NAICS) Section 31, 32, or 33;

(b)(i)    is employing one thousand or more full-time workers in this State and having a total capital investment in this State of not less than five hundred million dollars; or

(ii)    is employing eight hundred fifty or more full-time workers in this State and having a total capital investment in this State of not less than seven hundred fifty million dollars; and

(c)    made a total capital investment of not less than fifty million dollars in the previous five years.

Credits carried forward beyond the initial ten-year period may not reduce a taxpayer's state income tax liability in any subsequent tax year by more than twenty-five percent."

SECTION    2.    This act takes effect upon approval by the Governor.

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