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COMMITTEE REPORT
May 18, 2005
H. 3885
Introduced by Reps. Hagood, Scarborough, Limehouse, Anderson, Dantzler, Cotty, Brady, Taylor, Perry, R. Brown, Cobb-Hunter, Harrell and Chellis
S. Printed 5/18/05--S.
Read the first time April 28, 2005.
To whom was referred a Bill (H. 3885) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-6-3375 so as to provide either an additional jobs tax credit or an additional, 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, Page 3 by striking lines 20 - 23 and inserting:
/ Coordinating Council for Economic Development. /
Amend the bill further, as and if amended, by striking SECTION 2 in its entirety.
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN, SR. for Committee.
REVENUE IMPACT 1/
This bill, as amended, is expected to reduce state general fund income tax revenue by an estimated $8,000,000 in FY2006-07.
Explanation of Amendment (May 17, 2005) - By the Senate Finance Committee
The amended bill strikes the provision that would have allowed the Coordinating Council for Economic Development the sole discretion in determining the eligibility of an additional $2,000,000 of tax credits. The amended bill also deletes the requirement that all new hires, existing employees, and individuals engaged in activities related to cargo movement on a State Ports Authority facility undergo a fingerprint-based criminal history check performed by the SC Law Enforcement Division and the FBI.
Explanation of Amendment (April 18, 2005) - By the House Ways & Means Committee
The amended bill would establish a maximum cap of $8,000,000 of tax credits per calendar year pursuant to Section 12-6-3375(G), and allow the Coordinating Council for Economic Development the sole discretion in determining the eligibility of an additional $2,000,000 of tax credits. The Coordinating Council would allocate the tax credits based on a first-come, first-served basis according to the date of receipt of an application for the tax credits.
Explanation of Bill filed April 7, 2005
This bill would add Section 12-6-3375 of the Code of Laws of South Carolina to allow companies primarily engaged in manufacturing, warehousing, or distribution which use state port facilities to claim either an additional job tax credit of $500 or an additional investment tax credit of two percent, but not both, for companies that increase their base port cargo volume through the State Ports Authority facilities by five percent or more during 2006 over 2005 volume figures. The total amount of additional job tax credits may not exceed $1,250 per job or an additional investment tax credit of six percent per year.
The large impact is expected to come from the investment tax credit portion of the bill. Increasing volume through the port by five percent does not appear to be a very high threshold. For this reason, many companies could become eligible for the credit. Based upon data supplied by the S.C. Department of Commerce, companies invested $2,759,340,000 in capital improvements to new and existing facilities in calendar year 2004. We have identified 85 percent of those companies that have the ability or potential to import or export products through the Port of Charleston. Applying the maximum investment tax credit of an additional six percent would amount to nearly $141,000,000 of tax credits. Even Wal-Mart could become eligible for the credit. Fortunately, this amount would not happen because six percent is not a huge savings for an investment and the amount taken in a year is limited to 50 percent of tax liability. Based on our experience with tax credit carry forwards, we expect that twenty percent will not be used, because of the tax liability limitation. Multiplying $141,000,000 of tax credits by 80 percent that would be applied against income tax liability and reduced by the 50 percent tax liability limitation would reduce state general fund income tax revenue by an estimated $56,400,000 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 THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-3375 SO AS TO PROVIDE EITHER AN ADDITIONAL JOBS TAX CREDIT OR AN ADDITIONAL INVESTMENT TAX CREDIT FOR COMPANIES USING STATE PORTS AUTHORITY FACILITIES WHICH INCREASE THEIR BASE PORT CARGO VOLUME AT THESE FACILITIES BY A MINIMUM OF FIVE PERCENT OVER 2005 TOTALS AND TO PROVIDE PROCEDURES NECESSARY TO IMPLEMENT THESE TAX CREDITS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3375. (A) Companies primarily engaged in manufacturing, warehousing, or distribution, which use port facilities in this State and which increase their base port cargo volume at these facilities by a minimum of five percent over 2005 totals, are eligible to take either a five hundred dollar additional tax credit for each new full-time job created, or an additional two percent investment tax credit for investments in new facilities, plant, and equipment. Companies may also take an additional two hundred fifty dollar tax credit for each new full-time job created, or an additional one percent investment tax credit for each incremental two and one-half percent increase in port cargo volume which is over and above the minimum five percent increase in base volume. An annual maximum of one thousand five hundred dollars per job or a six percent investment tax credit applies in regard to the tax credits authorized by this section. The credit may only be claimed by the manufacturer, warehouse, or distribution company which owns the cargo at the time the State Ports Authority facilities are used.
(B) Base year port cargo volume must be at least seventy-five net tons of noncontainerized cargo or ten loaded TEUs for a company to be eligible for the credits provided for in this section.
(C) For every year in which a taxpayer claims the credit, the taxpayer shall attach a schedule to the taxpayer's state income tax return, which shall set forth the following information, as a minimum, in addition to the information required by law and by the Department of Revenue:
(1) a description of how the base year port traffic and the increase in port traffic was determined;
(2) the amount of the base year port traffic;
(3) the amount of the increase in port traffic for the taxable year, including information which demonstrates an increase in port traffic in excess of the minimum amount required to claim the tax credits under this section;
(4) any tax credit utilized by the taxpayer in prior years;
(5) the amount of tax credit carried over from prior years;
(6) the amount of tax credit utilized by the taxpayer in the current taxable year; and
(7) the amount of tax credit to be carried over to subsequent tax years.
(D) As used in this section:
(1) 'TEU' means twenty-foot equivalent unit.
(2) 'Base port cargo volume' means the total amount of net tons of noncontainerized or twenty-foot equivalent units (TEUs) of product actually transported by way of a waterborne ship through a port facility during the period from January 1, 2005, through December 31, 2005.
(3) 'Port facility' means any publicly owned facility located within this State through which cargo is transported by way of a waterborne ship or vehicle to or from destinations outside this State.
(4) 'Port traffic' means the total amount of net tons of noncontainerized cargo or containers measured in twenty-foot equivalent units (TEUs) of cargo transported by way of a waterborne ship or vehicle through a port facility.
(5) 'New job' has the meaning defined in Section 12-6-3360(M)(3).
(6) 'Full-time' has the meaning defined in Section 12-6-3360(M)(4).
(7) 'Warehousing facility' has the meaning defined in Section 12-6-3360(M)(7).
(8) 'Distribution facility' has the meaning defined in Section 12-6-3360(M)(8).
(E) Job tax credit provisions and procedures contained in Section 12-6-3360 and investment tax credit provisions and procedures contained in Section 12-14-60 apply to the tax credits provided by this section mutatis mutandi in the manner determined by the Department of Revenue.
(F) A company which increases its base port cargo volume at Ports Authority facilities may take either the additional job tax credits or the additional investment tax credits as provided by this section, but not both.
(G) The maximum amount of tax credits allowed to all qualifying taxpayers pursuant to this section may not exceed eight million dollars per calendar year. Tax credits allowed shall be allocated based on the date an application is received by the Coordinating Council for Economic Development. In addition, the Coordinating Council, in its discretion, may allocate an additional two million dollars of tax credits per calendar year. Coordination of this amount is the responsibility of the Coordinating Council.
The Coordinating Council has sole discretion in determining eligibility for additional credits provided by this section.
An application must be submitted to the Coordinating Council with the same information as required by subsection (C), and any other information required by the Coordinating Council."
SECTION 2. Chapter 3, Title 54 of the 1976 Code is amended by adding:
Section 54-3-1200. (A)(1) A fingerprint-based criminal history check must be performed by the South Carolina Law Enforcement Division and the Federal Bureau of Investigation on new hires, all existing employees, on persons seeking issuance or renewal of State Ports Authority credentials, and all other persons on terminals engaged in activities related to cargo movement on a State Ports Authority facility. Subsequent to the issuance or renewal of State Ports Authority credentials, a criminal history check must be performed by the State Ports Authority every two years for six years from the date the credentials are issued, at which time a new fingerprint-based criminal history check is required.
(2) For purposes of this section, employees who are engaged in activities related to cargo movement on State Ports Authority facilities are State Ports Authority employees, stevedores, companies registered to operate on State Ports Authority facilities, and members of the International Longshoremen's Association.
(3) This section does not apply to those making deliveries to or from State Ports Authority facilities.
(B) An individual subject to the background criminal history check must file a complete set of fingerprints with SLED taken in a manner required by the division. Fingerprints must be submitted to SLED for state processing and the FBI for federal processing. The results of each fingerprint-based check must be reported to the State Ports Authority, to other employers, SLED, and the FBI, and the State Ports Authority facility shall be subject to both state and federal National Crime Information Center auditing procedures. The costs of the criminal history checks must be paid by the employing entity or by the person being checked.
(C) A person who within the seven years preceding the date of the criminal history check has been convicted of or pleaded guilty or nolo contendere to a violent crime as contained in Section 16-1-60 or an act of terrorism may not work within a State Ports Authority facility. However, if a person remains free from a subsequent conviction for any of these crimes for a period of seven years following completion of his sentence, including incarceration, probation, and parole, he is eligible to work within a State Ports Authority facility."
SECTION 3. This act takes effect upon approval by the Governor.
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