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COMMITTEE REPORT
May 17, 2006
H. 4874
Introduced by Reps. Harrell, Merrill, Cotty, Ballentine, G. Brown, Duncan, Barfield, Haley, Bailey, Bales, Bannister, Battle, Bingham, Brady, Breeland, Cato, Ceips, Chalk, Chellis, Clemmons, Cooper, Dantzler, Delleney, Edge, Frye, Hardwick, Harrison, Haskins, Herbkersman, Hinson, Hodges, Huggins, Kirsh, Leach, Limehouse, Littlejohn, Loftis, Mack, McGee, Miller, Norman, Ott, Perry, Pinson, E.H. Pitts, M.A. Pitts, Rhoad, Rice, Sandifer, Scarborough, Simrill, G.R. Smith, J.E. Smith, Talley, Thompson, Townsend, Tripp, Umphlett, Vick, Viers, Walker, White, Whitmire, Young, Lucas and Mitchell
S. Printed 5/17/06--S. [SEC 5/18/06 4:23 PM]
Read the first time April 26, 2006.
To whom was referred a Bill (H. 4874) to amend the Code of Laws of South Carolina, 1976, so as to enact the South Carolina Economic Development Incentive Act, by adding Section 12-6-3589, 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 deleting SECTION 3 in its entirety.
Amend the bill further, as and if amended, by striking SECTION 4 and inserting:
/ SECTION 4. A. Section 12-6-2250 of the 1976 Code is amended to read:
"Section 12-6-2250. A taxpayer whose principal business in this State is (a i) manufacturing or any form of collecting, buying, assembling, or processing goods and materials within this State, or (b ii) selling, distributing, or dealing in tangible personal property within this State, shall make returns and pay annually an income tax which that includes its income apportioned to this State. Its income apportioned to this State is determined by multiplying the net income remaining after allocation under pursuant to Sections 12-6-2220 and 12-6-2230 by a fraction, the numerator of which is the property ratio, plus the payroll ratio, plus twice the number of sales ratio made in South Carolina, and the denominator of which is four the total number of sales for the taxpayer. However, where the if a sales ratio does not exist, the denominator of the fraction is the number of existing ratios, and where the sales ratio exists but the payroll ratio or the property ratio does not exist, the denominator of the fraction is the number of existing ratios plus one. The property, payroll, and sales ratios must be determined in accordance with Sections 12-6-2260, 12-6-2270, and Section 12-6-2280, respectively."
B. Notwithstanding the provisions of Section 12-6-2250 of the 1976 Code as amended by this section and for taxable years beginning in 2007 through 2010 only, a taxpayer allocating income pursuant to Section 12-6-2250 shall apportion income by using the method provided in the former provisions of Section 12-6-2250 and the method provided in Section 12-6-2250 of the 1976 Code as amended by this section. If the calculation permitted in Section 12-6-2250 as amended by this section results in a reduction in income allocated to this State, the reduction is allowed as follows:
Taxable year beginning in: Percentage of reduction allowed
2007 20
2008 40
2009 60
2010 80.
C. 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 2006. /
Amend the bill further, as and if amended, by striking SECTION 5 in its entirety and inserting:
/ SECTION 5. A. Section 12-6-3360(A) of the 1976 Code, as last amended by Act 332 of 2002, is further 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, and banks as defined pursuant to this title 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. As used in this section, 'corporate office' includes general contractors licensed by the South Carolina Department of Labor, Licensing and Regulation. Credits under pursuant to 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, or insurance premium tax liability. In computing any a tax payable by a taxpayer under pursuant to Section 38-7-90, the credit allowable under pursuant to this section must be treated as a premium tax paid under pursuant to Section 38-7-20."
B. Except as otherwise provided, this section takes effect upon approval by the Governor. As this section applies to general contractors, this section takes effect upon approval by the Governor and applies to taxable years beginning after December 31, 2006. /
Amend the bill further, as and if amended, by striking SECTION 12 in its entirety and inserting:
/ SECTION 12. A. Section 12-36-2120 of the 1976 Code, as last amended by Act 164 of 2005, is amended by adding an appropriately numbered item at the end:
"( ) effective July 1, 2011, construction materials used in the construction of a single manufacturing and distribution facility with a capital investment of at least one hundred million in real and personal property in the State over an eighteen-month period. The taxpayer must provide notice of the exemption, and the Department of Revenue may assess taxes owing in the manner provided in Section 12-36-2120(51)."
B. Notwithstanding the sales and use rates imposed pursuant to Chapter 36, Title 12 of the 1976 Code, the rate of tax imposed pursuant to that chapter on the gross proceeds of qualifying construction materials used in the construction of a single manufacturing and distribution facility, created by this act, is four percent for sales from July 1, 2007, through June 30, 2008, three percent for such sales from July 1, 2008, through June 30, 2009, two percent for such sales from July 1, 2009, through June 30, 2010, and one percent for such sales from July 1, 2010, through June 30, 2011. /
Amend the bill further, as and if amended, by deleting SECTION 20 in its entirety.
Amend the bill further, as and if amended, by adding two appropriately numbered new SECTIONS to read:
/ SECTION ___. Section 4-12-30(B)(1) of the 1976 Code is amended to read:
"(1) Title to the property must be held by the county. 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, if each county is a member of the industrial development park. Any real property transferred to the county through a lease agreement must include a legal description and plat of the real property. Property titled in the name of a county pursuant to this section is considered privately owned for purposes of Section 58-3-240."
SECTION ___. Section 4-29-67(B)(1) of the 1976 Code is amended to read:
"(1) Title to the property must be held by the county. 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, if each county is a member of the industrial development park. Real property transferred to the county through a lease agreement must include a legal description and plat of the real property. Property titled in the name of a county pursuant to this section is considered privately owned for purposes of Section 58-3-240." /
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 general fund revenue by an estimated $26,371,475 and E.I.A. funds by $3,480,000 in FY2006-07. This bill would reduce general fund income tax revenue by an estimated $2,115,000 in FY2007-08.
Explanation of Amendment (April 20, 2006) - By the House Ways and Means Committee
This amendment would add 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.
This amendment would also add the language from H.B. 4611 to amend Section 12-6-3360(M)(3) to include an apprentice as a "new job" to be eligible for a job tax credit by an employer pursuant to Section 12-6-3360(B). An apprentice is defined by The National Apprenticeship Act, 29 U.S.C. 50, and as provided in applicable regulations 29 CFR 29.5. According to federal regulations, an apprentice is one that is offered employment and training in a skilled trade with not less than 2,000 hours of work experience consistent with training requirements as established by industry practice. An apprentice receives supervised work experience and training on the job supplemented with a minimum of 144 hours of instruction in technical subjects related to the trade. An apprentice is paid a wage consistent with the skill acquired and which is not less than the minimum wage as prescribed by the Fair Labor Standards Act. The apprentice receives a progressively increasing schedule of wages until reaching the rank of journeyman. The most common apprenticeship occupations are electricians, carpenters, and plumbers. According to the South Carolina branch of the U.S. Department of Labor, Employment and Training Administration, there are 810 total active apprentices registered in 71 active programs with the Office of Apprenticeship Training, Employer, and Labor Services, Bureau of Apprenticeship Training in South Carolina. Based on data from the Bureau of Apprenticeship Training, the number of new apprentices is expected to increase by 150 in FY2006-07. Multiplying 960 active, registered apprentices in the state by an average statewide job tax credit of $2,500 per "new job" yields a reduction of general fund income tax revenue of an estimated $2,400,000 in FY2006-07.
This amendment would also make a scrivener's correction in Section 18 and Section 19 to amend Section 4-20-67(D)(4)(a) such that for a company to qualify for the four percent assessment ratio a single sponsor investing at least $200 million for a total investment of $400 million and creating at least "200" new full-times jobs is reduced to "125" new full-time jobs. Since this amendment deals with local fee-in-lieu agreements, it would have no impact on state revenue in FY2006-07. Since local counties have the option to enter into fee-in-lieu agreements, this section is not expected to have an adverse impact on local revenue.
Explanation of Amendment (April 18, 2006) - By the House Ways and Means Committee
This amendment would amend Section 5 of the bill to amend Section 12-6-3360(A) by including general contractors licensed by the South Carolina Department of Licensing, Labor, and Regulations in "corporate offices" as used in this section. Based upon data from the SC Employment Security Commission, employment in the general contracting sector in South Carolina has averaged a net annual increase of 900 jobs each year over the latest three years. It is expected that this pace of new jobs created in this sector will continue in 2006. It is estimated that 75% of these jobs, or 675 jobs, would qualify for the job tax credit considering the minimum full-time job creation of two jobs. Multiplying 675 new jobs by an average tax credit of $2,500 per new job created would reduce general fund income tax revenue by an estimated $1,687,500 in FY2007-08 as this credit is claimed one year after a job is created.
Explanation of Bill filed March 22, 2006
The following is a review of sections of the bill related to revenues:
Section 2: This section would add Section 12-6-3589 to allow manufacturing facilities a nonrefundable tax credit equal to 25 percent of the costs incurred in complying with whole effluent toxicity testing. According to the Department of Health and Environment Control, Bureau of Water, 47 manufacturing facilities in the state are required to complete whole effluent toxicity (WET) testing through their possession of a National Pollutant Discharge Elimination System (NPDES) permit. Applying average costs for acute and chronic WET tests and varying frequencies of testing for each facility, total average WET tests for all 47 manufacturing facilities cost an average of $200,000 per year. Multiplying the average cost of a WET test of $200,000 by a tax credit of 25 percent yields a reduction to general fund income tax revenue of an estimated $50,000 in FY2006-07.
Section 3: This section would add Section 12-36-2140 to allow purchases of natural gas made by a manufacturing property to be exempt from the sales tax if natural gas prices equal or exceed $6.50 for each decatherm. According to data from the U.S. Department of Energy, Energy Information Administration, industrial users of natural gas in the state have consumed an average of 80,000,000 decatherms of natural gas each year over the past five years. The price of natural gas for industrial users has average $13.50 per decatherm during the first quarter of 2006. Currently, the sale of natural gas to industrial users for manufacturing purposes is exempt from sales tax. This section would exempt the sales tax on natural gas sales to industrial users on the non-manufacturing portion, e.g., heating the office or warehouse, of their gas bills once the price of natural gas meets or exceeds $6.50 per decatherm. An estimated twenty percent of industrial users' natural gas consumption is for non-manufacturing uses. Multiplying the average statewide industrial consumption of natural gas of 80,000,000 decatherms by twenty percent and an average price differential of $7.00 per decatherm ($13.50 less the $6.50 price limit) and applying a sales and use tax rate of five percent yields a reduction of sales and use tax revenue by an estimated $5,600,000 in FY2006-07. Of this amount, general fund sales and use tax would be reduced by $4,480,000 and E.I.A. funds would be reduced by $1,120,000 in FY2006-07.
Section 4: This section would amend Section 12-6-2250 to replace the three-factor, double-weighted sales factor apportionment ratio for calculating the fraction of corporation income tax attributable to South Carolina for corporation income tax purposes with a single sales factor ratio. At the request of the Board of Economic Advisors, the Department of Revenue compared the corporate income tax returns of 150 companies filing income tax forms with the state using the three-factor ratio and with the single sales factor ratio. Based on the findings of the Department of Revenue, the change to a single sales factor ratio would reduce general fund corporation income tax revenue by 4.4%, amounting to an estimated $10,000,000 in FY2006-07.
Section 5: This section would amend Section 12-6-3360(A) to allow "banks" an annual job tax credit against income taxes or insurance premium taxes. Based upon data from the SC Employment Security Commission, employment in the banking sector (NAICS codes: 522110, 522120, 522130) in South Carolina has averaged a net annual increase of 171 jobs each year over the latest three years. It is expected that this pace of new jobs created in this sector will continue in 2006. Multiplying 171 new jobs by an average job tax credit of $2,500 per new job created would reduce general fund income tax revenue by an estimated $427,500 in FY2007-08 as this credit is claimed one year after a job is created.
Section 6: This section amends Section 12-6-3360(M)(1) to further define a "taxpayer" as a qualification for a job tax credit as an entity that is subject to bank taxes. This section allows banks to qualify for job tax credits the same as non-bank corporations. Since this reclassification was taken into account in another Section, this provision would not have an additional impact on revenues.
Section 7: This section amends Section 12-6-3375(G) to change the method of allocation of tax credits allowed to all qualifying taxpayers that use state port facilities. The aggregate amount of tax credits allowed to all qualifying taxpayers is unchanged at $8,000,000 per year; however, tax credits would be allocated on a share basis instead of on the date the application is received by the Coordinating Council for Economic Development. Since these credits have already been included in the forecast, this change would have no additional impact on general fund revenue in FY2006-07.
Section 8: This section would amend Section 12-6-3410(A) to allow "banks" that establish a corporate headquarters in this State, or expand or add to an existing corporate headquarters, and create at least 40 new jobs performing headquarter related functions, to claim a corporate headquarters tax credit equal to 20 percent against any tax due against bank taxes. In the last five year, the state has not attracted new bank headquarters with 40 or more employees. In making the projection of revenues, the expectation was for this trend to continue, in the absence of this section. Since the projection does not include revenues from these new headquarters, the revenue projection would not be impacted. This section would have no impact on general fund revenue in FY2006-07.
Section 9: This section amends Section 12-6-3410(J)(1) to expand the definition of "corporate headquarters" to include banks, and also expands the definition to include "global" corporations. This section also adds a definition of "company business unit" to include an organizational unit of a corporation or bank and is defined by the particular product or category of products it sells. This section would have no impact on general fund revenue in FY2006-07.
Section 10: This section amends Section 12-10-80(A)(2) to allow a company that is current with respect to its withholding tax and other tax due and has maintained its minimum employment and investment levels identified in its revitalization agreement with the Department of Commerce, to remain eligible to claim as quarterly job development credit only in an amount reduced by the amount of taxes due and owing to the state as of the date of the return on which the credit is claimed. Currently, if a company is not current with respect to its quarterly withholding tax and other tax due, the company is barred from receiving a job development credit for that quarter. This section would make a business become current with all taxes and withholding before receiving a quarterly distribution of a job development credit. This section would help with the enforcement of current law, but is not expected to impact general fund revenue in FY2006-07.
Section 11: This section amends Section 12-10-80(C)(1)(f) to allow relocation expenses associated with an expanded research and development facility to include personnel and laboratory research and development equipment as qualified expenditures in order to claim a job development credit. Since these credits would apply to new jobs that would not be created in the absence of the credit, there would be no impact on projected revenue. This section would have no impact on general fund revenue in FY2006-07.
Section 12: This section would add item (8) to Section 12-20-110 to eliminate the payment of a corporate license fee for community development entities (CDE) certified by the U.S. Department of the Treasury through the Community Development Financial Institution Fund as a company established to distribute allocations received as a part of the New Market Tax Credit Program. As of March 1, 2006, there are twenty CDE's in South Carolina. Based upon licensing fee data from the Secretary of State's office, five of the CDE's are for-profit LLC's, five are for-profit corporations, and ten are non-profit corporations. Multiplying five for-profit LLC, CDE's by $110 each, five for-profit corporate CDE's by $135 each, and ten non-profit CDE's by $25 each yields a reduction of general fund corporation license fee revenue of $1,475 in FY2006-07.
Section 13: This section would add an approximately numbered item to Section 12-36-2120 to include a sales and use tax exemption for construction materials used in the construction of a single manufacturing and distribution facility with a capital investment of at least $100,000,000 in real property in the State over an 18 month period. According to data from the SC Department of Commerce, an average of $590,000,000 in capital investment was made by manufacturing and distribution facilities in the state between calendar year 2003 to 2005. An estimated forty percent of total construction expenditures are for construction materials. Multiplying an average of $590,000,000 in capital investment projects per year by construction material costs of forty percent and applying a sales and use tax rate of five percent yields a reduction of sales and use tax revenue of an estimated $11,800,000 in FY2006-07. Of this amount, general fund sales and use tax revenue would be reduced by $9,440,000 and E.I.A. funds would be reduced by $2,360,000 in FY2006-07.
Section 16: This section amends Section 4-12-30(B)(3) to lower the minimum level of investment in a project from $5,000,000 to $2,500,000 for a fee-in-lieu of tax arrangement that must be invested within the time period provided in subsection (C)(2). Since this amendment deals with local fee-in-lieu agreements, it would have no impact on state revenue in FY2006-07. Since local counties have the option to enter into fee-in-lieu agreements, this section is not expected to have an adverse impact on local revenue.
Section 17: This section amends Section 4-12-30(H)(3) to lower the minimum level of investment in a project from $5,000,000 to $2,500,000 to maintain an inducement agreement or a lease agreement even if the sponsor of the project fails to meet or maintain the required investment or required number of jobs. Since this amendment deals with local fee-in-lieu agreements, it would have no impact on state revenue in FY2006-07. Since local counties have the option to enter into fee-in-lieu agreements, this section is not expected to have an adverse impact on local revenue.
Section 18: This section amends Section 4-12-30(D)(4) such that for a company to qualify for the four percent assessment ratio, a single sponsor must invest at least $150 million for a total investment of $300 million and create at least 2,500 new full-time jobs. This qualification is lowered from a single sponsor investing at least $200 million for a total investment of $400 million and creating at least 200 new full-time jobs. Since this amendment deals with local fee-in-lieu agreements, it would have no impact on state revenue in FY2006-07. Since local counties have the option to enter into fee-in-lieu agreements, this section is not expected to have an adverse impact on local revenue.
Section 19: This section amends Section 4-20-67(D)(4)(a) such that for a company to qualify for the four percent assessment ratio, a single sponsor must invest at least $150 million for a total investment of $300 million and create at least 2,500 new full-time jobs. This qualification is lowered from a single sponsor investing at least $200 million for a total investment of $400 million and creating at least 200 new full-times jobs. Since this amendment deals with local fee-in-lieu agreements, it would have no impact on state revenue in FY2006-07. Since local counties have the option to enter into fee-in-lieu agreements, this section is not expected to have an adverse impact on local revenue.
Section 20: This act takes effect upon approval by the Governor.
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, SO AS TO ENACT THE SOUTH CAROLINA ECONOMIC DEVELOPMENT INCENTIVE ACT, BY ADDING SECTION 12-6-3589 SO AS TO PROVIDE FOR A CREDIT AGAINST THE STATE CORPORATE INCOME TAX FOR COSTS INCURRED BY A MANUFACTURING FACILITY IN COMPLYING WITH WHOLE EFFLUENT TOXICITY TESTING, THE AMOUNT OF THE CREDIT, AND A TEN-YEAR CARRY FORWARD PERIOD, AND TO DEFINE "MANUFACTURING FACILITY"; BY ADDING SECTION 12-36-2140 SO AS TO PROVIDE FOR AN EXEMPTION FOR A MANUFACTURING PROPERTY FROM THE STATE SALES TAX ON NATURAL GAS ONCE THE PRICE OF NATURAL GAS EXCEEDS $6.50 FOR A DECATHERM; TO AMEND SECTION 12-6-2250, RELATING TO APPORTIONMENT OF INCOME FOR CERTAIN BUSINESSES, SO AS TO PROVIDE FOR THE CALCULATION OF APPORTIONED INCOME USING SALES FIGURES; TO AMEND SECTION 12-6-3360, AS AMENDED, RELATING TO THE JOB TAX CREDIT, SO AS TO INCLUDE A BANK AS A TAXPAYER WHO MAY QUALIFY FOR THE CREDIT; TO AMEND SECTION 12-6-3375, RELATING TO A TAX CREDIT AGAINST INCOME TAX FOR COMPANIES USING THE STATE'S PORT FACILITIES, SO AS TO PROVIDE FOR THE ALLOCATION OF THE TOTAL AMOUNT OF THE CREDITS ANNUALLY; TO AMEND SECTION 12-6-3410, AS AMENDED, RELATING TO THE INCOME TAX CREDIT FOR CORPORATE HEADQUARTERS, SO AS TO INCLUDE A BANK'S HEADQUARTERS AND TO REDEFINE "COMPANY BUSINESS UNIT"; TO AMEND SECTION 12-10-80, AS AMENDED, RELATING TO THE JOB DEVELOPMENT TAX CREDIT, SO AS TO ALLOW FOR A REDUCTION AGAINST THE CREDIT FOR TAXES DUE AND TO INCLUDE CERTAIN EMPLOYEE RELOCATION EXPENSES AS QUALIFYING EXPENSES; TO AMEND SECTION 12-20-110, AS AMENDED, RELATING TO CERTAIN ENTITIES TO WHICH CORPORATION LICENSE FEES PROVISIONS DO NOT APPLY, SO AS TO INCLUDE A CERTIFIED COMMUNITY DEVELOPMENT ENTITY; TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO EXEMPTION FROM THE STATE SALES TAX, SO AS TO EXEMPT CONSTRUCTION MATERIALS USED IN BUILDING A SINGLE MANUFACTURING AND DISTRIBUTION CENTER WITH CERTAIN MINIMUM INVESTMENTS; TO AMEND SECTIONS 12-44-130 AND 12-44-140, BOTH AS AMENDED, RELATING TO THE FEE IN LIEU OF PROPERTY TAXES, SO AS TO CORRECT A CROSS REFERENCE; TO AMEND SECTION 4-12-30, AS AMENDED, RELATING TO QUALIFICATION OF AN INDUCEMENT LEASE AGREEMENT FOR THE FEE IN LIEU OF PROPERTY TAXES, SO AS TO REDUCE THE MINIMUM INVESTMENT REQUIREMENT AND TO DELETE CERTAIN INVESTMENTS FROM A FOUR PERCENT MINIMUM ASSESSMENT RATIO; AND TO AMEND SECTION 4-29-67, AS AMENDED, RELATING TO THE FEE IN LIEU OF PROPERTY TAXES FOR INDUSTRIAL DEVELOPMENT PROJECTS, SO AS TO DELETE CERTAIN INVESTMENTS FROM A FOUR PERCENT MINIMUM ASSESSMENT RATIO AND TO REDUCE THE MINIMUM INVESTMENT REQUIREMENT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act may be cited as the South Carolina Economic Development Incentive Act.
SECTION 2. Chapter 6 of Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3589. (A) A manufacturing facility may claim a tax credit equal to twenty-five percent for costs it incurs in complying with whole effluent toxicity testing. The credit is allowed only against taxes imposed by Section 12-6-530. Unused credits may be carried forward for ten years.
(B) For purposes of this section, 'manufacturing facility' is as defined in Section 12-6-3360(M)(5)."
SECTION 3. Article 21, Chapter 36, Title 12 of the 1976 Code is amended by adding:
"Section 12-36-2140. Purchases of natural gas made by a manufacturing property including, but not limited to, distribution and warehouse space are exempt from the sales tax if natural gas prices equal or exceed $6.50 for each decatherm."
SECTION 4. Section 12-6-2250 of the 1976 Code is amended to read:
"Section 12-6-2250. A taxpayer whose principal business in this State is (a i) manufacturing or any form of collecting, buying, assembling, or processing goods and materials within this State, or (b ii) selling, distributing, or dealing in tangible personal property within this State, shall make returns and pay annually an income tax which that includes its income apportioned to this State. Its income apportioned to this State is determined by multiplying the net income remaining after allocation under pursuant to Sections 12-6-2220 and 12-6-2230 by a fraction, the numerator of which is the property ratio, plus the payroll ratio, plus twice the number of sales ratio made in South Carolina, and the denominator of which is four the total number of sales for the taxpayer. However, where the if a sales ratio does not exist, the denominator of the fraction is the number of existing ratios, and where the sales ratio exists but the payroll ratio or the property ratio does not exist, the denominator of the fraction is the number of existing ratios plus one. The property, payroll, and sales ratios must be determined in accordance with Sections 12-6-2260, 12-6-2270, and Section 12-6-2280, respectively."
SECTION 5. Section 12-6-3360(A) of the 1976 Code, as last amended by Act 332 of 2002, is further 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, and banks as defined pursuant to this title 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. As used in this section, 'corporate office' includes general contractors licensed by the South Carolina Department of Labor, Licensing and Regulation. Credits under pursuant to 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, or insurance premium tax liability. In computing any a tax payable by a taxpayer under pursuant to Section 38-7-90, the credit allowable under pursuant to this section must be treated as a premium tax paid under pursuant to Section 38-7-20."
SECTION 6. Section 12-6-3360(M)(1) of the 1976 Code is amended to read:
"(1) 'Taxpayer' means a sole proprietor, partnership, corporation of any classification, limited liability company, or association taxable as a business entity which that is subject to South Carolina taxes as contained in Sections 12-6-510 and 12-6-530, Chapter 11 of Title 12, and Chapter 7 of Title 38."
SECTION 7. Section 12-6-3375 of the 1976 Code, as added by Act 124 of 2005, is amended to read:
"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, plants, 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 port 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. For companies who locate in South Carolina after the effective date of this section, their base cargo volume will be measured by their first calendar year as long as they meet the requirements of seventy-five net tons of noncontainerized cargo or ten loaded TEUs. Base port cargo volume must be recalculated during the period from January 1, 2015 to December 31, 2015 and every tenth year thereafter.
(3) "Port facility" means any publicly or privately 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 and which handles cargo owned by third parties in addition to cargo owned by the port facility's owner.
(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.
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.
(A)(1) A taxpayer engaged in manufacturing, warehousing, or distribution which uses port facilities in this State and which increases its port cargo volume at these facilities by a minimum of five percent in a single calendar year over its base year port cargo volume is eligible to claim a tax credit in the amount determined by the Coordinating Council for Economic Development (council).
(2) The maximum amount of tax credits allowed to all qualifying taxpayers pursuant to this section may not exceed eight million dollars for each calendar year. A qualifying taxpayer may not receive more than one million dollars for each calendar year except as provided in subsection (B)(2). The coordinating council has sole discretion in allocating credits provided by this section, taking into consideration the following factors:
(a) the amount of base year port cargo volume;
(b) the total and percentage increase in port cargo volume;
(c) the number of qualifying taxpayers;
(d) the type of cargo transported; and
(e) other factors related to the economic benefit of the State, as determined by the coordinating council.
(3) If the credit exceeds the taxpayer's tax liability for the taxable year, the excess amount may be carried forward and claimed against income taxes in the next five succeeding taxable years.
(4) The credit may be claimed by the taxpayer as provided in (A)(1) only if the taxpayer owns the cargo at the time the port facilities are used.
(B)(1) For every year in which a taxpayer claims the credit, the taxpayer shall submit an application to the council by March first of the calendar year after the calendar year in which the increase in port cargo volume occurs. The taxpayer shall attach a schedule to the taxpayer's application to the council with the following information and information requested by the council or the department:
(a) a description of how the base year port cargo volume and the increase in port cargo volume was determined;
(b) the amount of the base year port cargo volume;
(c) the amount of the increase in port cargo volume for the taxable year stated both as a percentage increase and as a total increase in net tons of noncontainerized cargo and TEUs of cargo, including information which demonstrates an increase in port cargo volume in excess of the minimum amount required to claim the tax credits pursuant to this section;
(d) any tax credit utilized by the taxpayer in prior years; and
(e) the amount of tax credit carried over from prior years.
(2) If on March fifteenth of each year, the eight-million-dollar amount of credit is not fully allocated among qualifying taxpayers, then those taxpayers who have been allocated the maximum one million dollar credit for a year must be allowed a pro-rata share of the remaining allocated credit up to eight million dollars.
(3) To receive the credit the taxpayer shall claim the credit on its income tax return in a manner prescribed by the department. The department may require a copy of the certification form issued by the council be attached to the return or otherwise provided.
(C) As used in this section:
(1) 'TEU' means a 'twenty-foot equivalent unit'; a volumetric measure based on the size of a container twenty feet long by eight feet wide by eight feet, six inches high.
(2) 'Base year port cargo volume' initially means the total amount of net tons of noncontainerized cargo or TEUs of cargo actually transported by way of a waterborne ship through a port facility during the period from January 1, 2005, through December 31, 2005. Base year port cargo volume must be at least seventy-five net tons of noncontainerized cargo or ten TEUs for a taxpayer to be eligible for the credits provided in this section. For a taxpayer that does not ship that amount in the year ending December 31, 2005, including a taxpayer who locates in South Carolina after December 31, 2005, its base cargo volume will be measured by the initial January first through December thirty-first calendar year in which it meets the requirements of seventy-five net tons of noncontainerized cargo or ten loaded TEUs. Base year port cargo volume must be recalculated each calendar year after the initial base year.
(3) 'Port facility' means any publicly or privately 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 and which handles cargo owned by third parties in addition to cargo owned by the port facility's owner.
(4) 'Port cargo volume' 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.
(D) Notwithstanding Section 12-54-240, the department and the Department of Commerce may exchange information submitted by a taxpayer pursuant to this section."
SECTION 8. Section 12-6-3410(J)(1) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:
"(J) As used in this section:
(1) 'Corporate headquarters' means the facility or portion of a facility where corporate staff employees are physically employed, and where the majority of the company's or company business unit's financial, personnel, legal, planning, information technology, or other headquarters-related functions are handled either on a regional, or national, or global basis. A corporate headquarters must be a regional corporate headquarters, or a national corporate headquarters, or global corporate headquarters as defined below:
(a) National corporate headquarters must be the sole corporate headquarters in the nation and handle headquarters-related functions at least on a national basis. A national headquarters shall be deemed is considered to handle headquarters-related functions on a national basis from this State if the corporation has a facility in this State from which the corporation engages in interstate commerce by providing goods or services for customers outside of this State in return for compensation.
(b) Regional corporate headquarters must be the sole corporate headquarters within the region and must handle headquarters-related functions on a regional basis. For purposes of this section, 'region' or 'regional' means a geographic area comprised of either:
(i) at least five states, including this State; or
(ii) two or more states, including this State, if the entire business operations of the corporation are performed within fewer than five states.
(c) A 'company business unit' is an organizational unit of a corporation or bank and is defined by the particular product or category of products it sells."
SECTION 9. Section 12-10-80(A)(2) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:
(2) A business that is current with respect to its withholding tax and other tax due and owing the State and that has maintained its minimum employment and investment levels identified in the revitalization agreement may claim the credit on a quarterly basis beginning with the first quarter after the council's certification to the department that the minimum employment and capital investment levels were met for the entire quarter. If a qualifying business is not current as to all taxes due and owing to the State as of the date of the return on which the credit would be claimed, without regard to extensions, the business is barred from claiming the credit that would otherwise be allowed for that quarter may claim the credit only in an amount reduced by the amount of taxes due and owing to the State as of the date of the return on which the credit is claimed.
SECTION 10. Section 12-10-80(C)(1)(f) of the 1976 Code, as last amended by Act 89 of 2001, is further amended to read:
"(f) employee relocation expenses associated with new or expanded technology intensive facilities as defined in Section 12-6-3360(M)(14) or relocation expenses associated with new national, regional, or global corporate headquarters as defined in Section 12-6-3410(J)(1)(a) that qualify for the enhanced corporate income tax credit under pursuant to Section 12-6-3410(D) or relocation expenses associated with an expanded research and development facility to include personnel and laboratory research and development equipment;"
SECTION 11. Section 12-20-110 of the 1976 Code, as last amended by Act 89 of 2001, is further amended by adding at the end:
"(8) a community development entity certified by the United States Department of the Treasury through the Community Development Financial Institution Fund as a company established to distribute allocations received as a part of the New Market Tax Credit Program."
SECTION 12. Section 12-36-2120 of the 1976 Code, as last amended by Act 164 of 2005, is amended by adding an appropriately numbered item at the end:
"( ) construction materials used in the construction of a single manufacturing and distribution facility with a capital investment of at least one hundred million in real and personal property in the State over an eighteen-month period. The taxpayer must provide notice of the exemption, and the Department of Revenue may assess taxes owing in the manner provided in Section 12-36-2120(51)."
SECTION 13. Section 12-44-130(A) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:
"(A) Except as otherwise provided in Section 12-44-30(18), to be eligible for the fee, a sponsor and each sponsor affiliate must invest the minimum investment as defined in Section 12-44-30(14). For an enhanced investment pursuant to Section 12-44-30(87), a single sponsor must make the investment, unless otherwise provided in that section. The county and the sponsors who are part of the fee agreement may agree that investments by other sponsor affiliates within the investment period qualify for the fee regardless of whether the sponsor affiliate was part of the fee agreement, except that each new sponsor affiliate must invest at least the minimum investment or the enhanced investment if applicable in the project, unless the project is a manufacturing, research and development corporate office, or distribution facility as provided in Section 12-44-30(18). To qualify for the fee, the sponsor affiliates must be approved specifically by the county and must agree to be bound by agreements with the county relating to the fee. These sponsor affiliates are not bound by agreements, or portions of agreements, to the extent the agreements do not affect the county. The investments pursuant to this subsection must be at the sponsor's project. The fee agreement may provide for a process for approval of sponsor affiliates."
SECTION 14. Section 12-44-140(B) and (C) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:
"(B) Except as provided in Section 12-44-100(A), a fee agreement is automatically terminated if the sponsor fails to satisfy the minimum investment level provided in Section 12-44-30(14) within the investment period or the applicable minimum investment or job creation requirements provided in Section 12-44-30(87). If the fee agreement is terminated under this subsection, all economic development property is subject, as of the commencement date, to ad valorem property taxation as imposed by law. At the time of termination, the sponsor shall pay to the county an additional fee equal to the difference between the total amount of property taxes that would have been paid by the sponsor had the project been taxable, taking into account exemptions from property taxes that would have been available to the sponsor, and the total amount of fee payments actually made by the sponsor. This additional amount is subject to interest as provided in Section 12-54-25.
(C) If at any time a sponsor or sponsor affiliate no longer has the minimum level of investment as provided in Section 12-44-30(14), without regard to depreciation, that sponsor or sponsor affiliate no longer qualifies for the fee. If the sponsor qualifies for the enhanced investment, the sponsor must maintain the applicable level of investment, without regard to depreciation. If the sponsor fails to maintain the applicable level of investment in Section 12-44-30(87), it no longer qualifies for the fee unless the provisions of Section 12-44-100 apply."
SECTION 15. Section 4-12-30(B)(3) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:
"(3) The minimum level of investment in the project must be at least five two and one-half million dollars and must be invested within the time period provided in subsection (C)(2). If a county has an average annual unemployment rate of at least twice the state average during the last twenty-four months based on data available on the most recent November first, the minimum level of investment is one million dollars. The department shall designate these reduced investment counties by December thirty-first of each year using data from the South Carolina Employment Security Commission and the United States Department of Commerce. The designations are effective for a sponsor whose inducement agreement is signed in the calendar year following the county designation. Investments may include amounts expended by a sponsor as a nonresponsible party in a voluntary cleanup contract on the property at a project pursuant to Article 7, Chapter 56 of Title 44, the Brownfields Voluntary Cleanup Program, if the Department of Health and Environmental Control has issued a certificate of completion for the cleanup. If the amounts, under the Brownfields Voluntary Cleanup Program, equal at least one million dollars, the investment threshold requirement of this chapter is deemed to have been met."
SECTION 16. Section 4-12-30(H)(3) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:
"(3) An inducement agreement or a lease agreement may provide that a sponsor who has committed to an investment under subsection (D)(4) may continue to receive the benefits of this chapter even if the sponsor fails to make or maintain the required investment or fails to create the jobs required by subsection (D)(4), if the sponsor meets the five two and one-half million dollar minimum investment. If the sponsor fails to make or maintain the required investment or create the required number of jobs, the inducement agreement or the lease agreement may not provide for an assessment ratio and an exemption period more favorable than those allowed for the minimum investment. To the extent that the sponsor obtained a four percent assessment ratio under subsection (D)(4), the sponsor must recalculate the fee using a six percent ratio or such other ratio as the inducement agreement or lease agreement may provide for all years in which the four percent assessment ratio was used and pay the county any difference. This difference is subject to interest as provided in Section 12-54-25."
SECTION 17. Section 4-12-30(D)(4)(a) of the 1976 Code, as last amended by Act 161 of 2005, is further amended to read:
"(4)(a) The assessment ratio may not be lower than four percent:
(i) in the case of a single sponsor investing at least two one hundred fifty million dollars, resulting in a total investment of at least four three hundred million dollars when added to previous investments by a sponsor, and creating at least two one hundred twenty-five new full-time jobs at a project;
(ii) in the case of a single sponsor investing at least four hundred million dollars and which is creating at least two hundred new full-time jobs at a project;
(iii) in the case of a single sponsor investing at least six hundred million dollars in this State;
(iv) in the case of a business including a corporation, its subsidiaries, and its limited liability company members, that: A. builds a project consisting of gas-fired combined-cycle power facility and invests at least four hundred million dollars and creates at least twenty-five full-time jobs as defined in Section 12-6-3360(M) at that project; and
B. invests an additional five hundred million dollars in this State; or
(v)(iv) in the case of a project that satisfies the requirements of Section 11-41-30(2)(a), and for which the Secretary of Commerce has delivered certification pursuant to Section 11-41-70(2)(a)."
SECTION 18. Section 4-29-67(D)(4)(a) of the 1976 Code, as last amended by Act 161 of 2005, is further amended to read:
"(a) The assessment ratio may not be lower than four percent:
(i) in the case of a single sponsor investing at least two one hundred fifty million dollars, resulting in a total investment of at least four three hundred million dollars when added to previous investments by a sponsor, and which is creating at least two one hundred twenty-five new full-time jobs at the project;
(ii) in the case of a single sponsor investing at least four hundred million dollars and which is creating at least two hundred new full-time jobs at the project;
(iii) in the case of a single sponsor which is investing at least six hundred million dollars in this State;
(iv) in the case of a business including a corporation, its subsidiaries, and its limited liability company members, that: A. builds a project consisting of gas-fired combined-cycle power facility and invests at least four hundred million dollars and creates at least twenty-five full-time jobs as defined in Section 12-6-3360(M) at that project; and
B. invests an additional five hundred million dollars in this State; or
(v)(iv) in the case of a project that satisfies the requirements of Section 11-41-30(2)(a), and for which the Secretary of Commerce has delivered certification pursuant to Section 11-41-70(2)(a)."
SECTION 19. A. Section 12-6-3360(B)(5) of the 1976 Code, as last amended by Act 161 of 2005, is further amended by adding an appropriately numbered subitem at the end to read:
"( ) In a county that is at least one thousand miles in size and that 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 that 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. This section takes effect upon approval by the Governor and applies for taxable years beginning after 2005 and applies for any company that applied for job development credits pursuant to Section 12-6-3360 after 2005.
SECTION 20. A. Section 12-6-3360(M)(3) of the 1976 Code, as last amended by Act 145 of 2005, is further amended by adding at the end a new undesignated paragraph:
"Notwithstanding another provision of law, 'new job' includes an apprenticeship created by a taxpayer when the taxpayer employs an apprentice as defined by the applicable state occupational or professional licensing board described in Title 40 or, if a state licensing board does not exist, as defined by The National Apprenticeship Act, 29 U.S.C. 50, and applicable regulations. The eligibility of the apprenticeship for the tax credit is not contingent on the amount of gross wages associated with it, except that the amount must be that amount required, if any, by the applicable state licensing board or the standards of apprenticeship as provided in 29 CFR 29.5. The apprenticeship also must meet the other standards established by the applicable state licensing board or as established in 29 CFR 29.5. The apprenticeship program must be certified to the department as eligible for the credit by the applicable state occupational or professional licensing board or the Office of Apprenticeship Training, Employer and Labor Services, U.S. Department of Labor, or its designee."
B. This section takes effect July 1, 2006.
SECTION 21. This act takes effect upon approval by the Governor.
This web page was last updated on Tuesday, June 23, 2009 at 2:43 P.M.