South Carolina General Assembly
117th Session, 2007-2008

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Bill 1171

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COMMITTEE REPORT

May 15, 2008

S. 1171

Introduced by Senators Peeler and Setzler

S. Printed 5/15/08--H.    [SEC 5/19/08 3:03 PM]

Read the first time April 1, 2008.

            

THE COMMITTEE ON WAYS AND MEANS

To whom was referred a Bill (S. 1171) to amend Section 12-37-900 of the 1976 Code, relating to the listing and returning of personal property, to provide that a manufacturer is not required to list, 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 adding four SECTIONS appropriately numbered to read:

/ SECTION    __.    A.        1.    Section 12-36-2120(67) of the 1976 Code, as amended by Act 116 of 2007, is further amended to read:

"(67)(a)    effective July 1, 2011 2008, construction materials used in the construction of a new or expanded single manufacturing or distribution facility, or one that serves both purposes, with a capital investment of at least one hundred fifty million in real and personal property at a single site 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); and

(b)    effective July 1, 2008, construction materials used in the construction of a new or expanded office facility meeting the requirements for an enhanced investment provided pursuant to Section 12-44-30(7) and Section 12-44-30(13). The taxpayer shall notify the department of its intent to qualify and use this exemption and, upon receipt of the notification, the department shall issue an appropriate exemption certificate to the taxpayer to be used for qualifying purposes pursuant to this subitem. No later than six months after the end of the eight-year period specified in Section 12-44-30(13), the taxpayer shall notify the department in writing whether or not it has met the investment and job requirements of this item. If the taxpayer fails to meet the investment and job requirements, the taxpayer shall pay to the State the amount of the tax that would have been paid but for this exemption. The running of the period of limitations for assessment of taxes provided in Section 12-54-85 is suspended for the time period beginning with the taxpayer's first use of this exemption and ending with notice to the department that the taxpayer has or has not met the investment and job requirements of this item."

2.        Section 11B of Act 384 of 2006 is amended to read:

"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."

B.        Section 12-6-3310 of the 1976 Code, as last amended by Act 69 of 2003, is further amended by adding a new subsection at the end to read:

"(C)    A limited liability company not organized as a legal entity which is a taxpayer, a corporation, or other form of business entity expressly specified as qualifying for the credits allowed pursuant to this article nevertheless qualifies for such credits in a manner consistent with Section 12-2-25 as follows:

(1)    Limited liability companies taxed for South Carolina income tax purposes as partnerships shall apply the credits as provided in subsection (B). If a member is an individual, the limited liability company may earn and pass through any credits allowed by this article to be applied against income tax imposed pursuant to Section 12-6-510. If a member is a corporation, the limited liability company may earn and pass through any credits allowed by this article to be applied against income tax imposed pursuant to Section 12-6-530.

(2)    Limited liability companies taxed for South Carolina income tax purposes as corporations are entitled to all credits otherwise applicable to corporations.

(3)    With respect to single members of limited liability companies which are not regarded as a separate entity from its owner, members who are individuals may claim any credits allowed by this article to be applied against income tax imposed pursuant to Section 12-6-510 and members which are corporations may claim any credits allowed by this article to be applied against income tax imposed pursuant to Section 12-6-530.

(4)    For limited liability companies owned by limited liability companies or other pass through entities described in subsection (B), subsections (1) through (3) are applied at each successive stage of ownership until the credit is applied against the tax imposed pursuant to either Section 12-6-510 or Section 12-6-530, as applicable.

C.        1.        Section 12-6-3410(D)(2) of the 1976 Code is amended to read:

"(2)    The establishment, expansion, or addition of a corporate headquarters or research and development facility must result in:

(a)    the creation of at least seventy-five new full-time jobs performing either:

(i)(a)    headquarters related functions and services; or

(ii)(b)    research and development related functions and services.

The seventy-five required jobs must have an average cash compensation level of more than one and one-half times twice the per capita income of this State based on the most recent per capita income data available as of the end of the taxpayer's taxable year in which the jobs are filled; and

(b)    an average South Carolina employee cash compensation level for all employees in this State of more than twice the per capita income in the State based on the most recent per capita income data available as of the end of the taxpayer's taxable year in which the jobs are filled."

2.        Section 12-6-3410(J) of the 1976 Code, as amended by Act 384 of 2006, is further amended by deleting item (9) which reads:

"(9)    'corporation', 'corporate', 'company', and 'taxpayer' for purposes of this section also include a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791(a)) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act regardless of whether the limited liability company is treated as a partnership or as a corporation for South Carolina income tax purposes. If treated as a partnership, a limited liability company that qualifies for a credit under this section passes the credit through to its members in proportion to their interests in the limited liability company. Each member's share of the credit is nonrefundable but is allowed as a credit against any tax under Section 12-6-530 or Section 12-20-50 and bank taxes imposed pursuant to Chapter 11 of this title. Each member may carry any unused credit forward as provided in subsection (F). The limited liability company may not carry forward a credit that passes through to its members."

D.        Section 12-6-3520 of the 1976 Code, as last amended by Act 89 of 2001, is further amended by deleting subsection (E) which reads:

"(E)(1)        An 'S' corporation, limited liability company, or partnership that qualifies for the credit pursuant to this section may pass through the credit earned to each shareholder of the 'S' corporation, member of the limited liability company, or partner of the partnership.

(2)    The amount of the credit allowed a shareholder, member, or partner pursuant to this section is equal to the shareholder's percentage of stock ownership, the member's interest in the limited liability company, or the partner's interest in the partnership for the taxable year, multiplied by the amount of the credit earned by the entity. Credit earned by an 'S' corporation owing corporate level income tax must be used first at the entity level. Only the remaining credit passes through to the shareholders of the 'S' corporation.

(3)    For purposes of this subsection, 'limited liability company' means a limited liability company taxed like a partnership."

E.        Section 12-10-30 of the 1976 Code, as last amended by Act 89 of 2001, is further amended by adding a new item at the end to read:

"(18)    'Significant business' means a qualifying business making a significant capital investment as defined in Section 12-44-30(7)."

F.        Section 12-10-80(D)(2), as last amended by Act 386 of 2006, is further amended to read:

"(2)    The amount that may be claimed as a job development credit by a qualifying business is limited by this subsection and by the revitalization agreement. The council may approve a waiver of ninety-five percent of the limits provided in item (1) for a qualifying business making a significant capital investment as defined in Section 12-44-30(7).:

(a)    a significant business; and

(b)    a related person to a significant business if the related person is located at the project site of the significant business and qualifies for job development credits pursuant to this chapter.

For purposes of this item, a related person includes any entity or person that bears a relationship to a significant business as provided in Internal Revenue Code Section 267 and includes, without limitation, a limited liability company of which more than fifty percent of the capital interest or profits is owned directly or indirectly by a significant business or by a person or entity, or group of persons or entities which owns, more than fifty percent of the capital interest or profits in the significant business."

G.        Section 12-44-30(7) of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new paragraph at the end to read:

"For purposes of this item, if a single sponsor enters into a financing arrangement of the type described in Section 12-44-120(B), the investment in or financing of the property by a developer, lessor, financing entity, or other third party in accordance with this arrangement is considered investment by the sponsor. Investment by a related person to the sponsor, as described in Section 12-10-80(D)(2), is considered investment by the sponsor."

H.        Section 4-29-67(D)(4)(a) of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new paragraph at the end to read:

"For purposes of this item, if a single sponsor enters into a financing arrangement of the type described in Section 4-29-67(O)(2), the investment in or financing of the property by a developer, lessor, financing entity, or other third party in accordance with this arrangement is considered investment by the sponsor. Investment by a related person to the sponsor, as described in Section 12-10-80(D)(2), is considered investment by the sponsor."

I.    Section 4-12-30(D)(4)(a) of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new paragraph at the end to read:

"For purposes of this item, if a single sponsor enters into a financing arrangement of the type described in Section 4-12-30(M)(2), the investment in or financing of the property by a developer, lessor, financing entity, or other third party in accordance with this arrangement is considered investment by the sponsor. Investment by a related person to the sponsor, as described in Section 12-10-80(D)(2), is considered investment by the sponsor."

J.    1.    a.    Section 12-10-80(C)(3)(f) of the 1976 Code, as last amended by Act 384 of 2006, is further amended to read:

"(f)    employee relocation expenses associated with new or expanded qualifying service-related facilities as defined in Section 12-6-3360(M)(13) or 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 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;"

b.        Section 12-10-80 of the 1976 Code, as last amended by Act 384 of 2006, is amended by adding an appropriately lettered subsection at the end to read:

"( )        Where the qualifying business that creates new jobs under this section is a qualifying service-related facility as defined in Section 12-6-3360(M)(13), the determination of the number of jobs created must be based on the total number of new jobs created within five years of the effective date of the revitalization agreement, without regard to monthly or other averaging."

2.        Subsections (B) and (C) of Section 12-20-105 of the 1976 Code, as last amended by Act 116 of 2007, are further amended to read:

"(B)(1)        To be considered an eligible project for purposes of this section, the project must qualify for income tax credits under Chapter 6, Title 12, withholding tax credit under Chapter 10, Title 12, income tax credits under Chapter 14, Title 12, or fees in lieu of property taxes under either Chapter 12, Title 4, Chapter 29, Title 4, or Chapter 44, Title 12.

(2)    If a project consists of an office, business, commercial, or industrial park, or combination of these, used exclusively for economic development which is owned or constructed by a county or political subdivision of this State when the qualifying improvements are paid for, the project does not have to meet the qualifications of item (1) to be considered an eligible project. As provided in subsection (C)(4), the county or political subdivision may sell all or a portion of the business or industrial park.

(C)    For the purpose of this section, 'infrastructure' means improvements for water, wastewater, hydrogen fuel, sewer, gas, steam, electric energy, and communication services made to a building or land that are considered necessary, suitable, or useful to an eligible project. These improvements include, but are not limited to:

(1)    improvements to both public or private water and sewer systems;

(2)    improvements to both public or private electric, natural gas, and telecommunications systems including, but not limited to, ones owned or leased by an electric cooperative, electric utility, or electric supplier, as defined in Chapter 27, Title 58;

(3)    fixed transportation facilities including highway, road, rail, water, and air;

(4)    for a qualifying project under subsection (B)(2), infrastructure improvements include industrial shell buildings and the purchase of land for an office, business, commercial, or industrial park, or combination of these, used exclusively for economic development which is owned or constructed by a county or political subdivision of this State. Nothing in this section shall prohibit the The county or political subdivision from selling may sell the industrial shell building or industrial all or a portion of the park at any time after the company has paid in cash to provide the infrastructure for an eligible project.; and

(5)    for a qualifying project pursuant to subsection (B)(2), infrastructure improvements also include due diligence expenditures relating to environmental conditions made by a county or political subdivision after it has acquired contractual rights to an industrial park. Due diligence expenditures include such items as Phase I and II studies and environmental or archeological studies required by state or federal statutes or guidelines or similar lender requirements. Contractual rights include options to purchase real property or other similar contractual rights acquired before the county or political subdivision files a deed to the property with the Register of Mesne Conveyances."

3.        Section 12-44-30(16) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:

"(16)    'Project' means land, buildings, and other improvements on the land, including water, sewage treatment and disposal facilities, air pollution control facilities, and all other machinery, apparatus, equipment, office facilities, and furnishings which are considered necessary, suitable, or useful by a sponsor. 'Project' also may consist of or include aircraft hangered or utilizing an airport in a county so long as the county expressly consents to its inclusion. Aircraft previously subject to taxation in South Carolina qualify pursuant to this provision."

4.        Section 12-44-120(D) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:

"(D)        A sponsor may transfer a fee agreement, or substantially all the economic development property to which the fee agreement relates, if it obtains the prior approval, or subsequent ratification, of the county with which it entered into the fee agreement. The county's prior approval or subsequent ratification may be evidenced by any one of the following, in the absolute and sole discretion of the county providing the approval or ratification: (i) a letter or other writing executed by an authorized county representative as designated in the respective fee agreement; (ii) a resolution passed by the county council; or (iii) an ordinance passed by the county council following three readings and a public hearing. That approval is not required in connection with transfers to sponsor affiliates or other financing-related transfers."

5.        Section 4-12-10(2) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:

"(2)    'Project' means land, buildings and other improvements on the land including water, sewage treatment and disposal facilities, air pollution control facilities, and all other machinery, apparatus, equipment, office facilities, and furnishings which are considered necessary, suitable, or useful by a sponsor. 'Project' also may consist of or include aircraft hangered or utilizing an airport in a county so long as the county expressly consents to its inclusion. Aircraft previously subject to taxation in South Carolina qualify pursuant to this provision."

6.        Section 4-12-30(M)(4) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:

"(4)    A sponsor may transfer an inducement agreement, millage rate agreement, lease agreement, or the assets subject to the lease agreement, if it obtains the prior approval, or subsequent ratification, of the county with whom it entered into the original inducement agreement, millage rate agreement, or lease agreement. The county's prior approval or subsequent ratification may be evidenced by any one of the following, in the absolute and sole discretion of the county providing the approval or ratification: (i) a letter or other writing executed by an authorized county representative as designated in the respective inducement, millage rate, or lease agreement; (ii) a resolution passed by the county council; or (iii) an ordinance passed by the county council following three readings and a public hearing. However, no such That approval is not required in connection with transfers to sponsor affiliates or other financing-related transfers."

7.        Section 4-29-67(A)(1)(c) and (O)(4) of the 1976 Code, as last amended by Act 69 of 2003, is further amended to read:

"(c)    'Project' means land, buildings and other improvements on the land including water, sewage treatment and disposal facilities, air pollution control facilities, and all other machinery apparatus, equipment, office facilities, and furnishings which are considered necessary, suitable, or useful by a sponsor. 'Project' also may consist of or include aircraft hangered or utilizing an airport in a county so long as the county expressly consents to its inclusion. Aircraft previously subject to taxation in South Carolina qualify pursuant to this provision.

(4)    A sponsor may transfer an inducement agreement, millage rate agreement, lease agreement, or the assets subject to the lease agreement, if it obtains the prior approval, or subsequent ratification, of the county with which it entered into the original agreement. The county's prior approval or subsequent ratification may be evidenced by any one of the following, in the absolute and sole discretion of the county providing the approval or ratification: (i) a letter or other writing executed by an authorized county representative as designated in the respective inducement, millage rate, or lease agreement; (ii) a resolution passed by the county council; or (iii) an ordinance passed by the county council following three readings and a public hearing. That approval is not required in connection with transfers to sponsor affiliates or other financing-related transfers."

8.        This subsection takes effect upon approval of this act by the Governor and applies for property tax years beginning after 2007.

K.        1.    Section 12-43-220(a) of the 1976 Code is amended to read:

"(a)(1)    All real and personal property owned by or leased to manufacturers and utilities and used by the manufacturer or utility in the conduct of the business must be taxed on an assessment equal to ten and one-half percent of the fair market value of the property.

(2)    Real property owned by or leased to a manufacturer and used primarily for research and development is not considered used by a manufacturer in the conduct of the business of the manufacturer for purposes of classification of property under pursuant to this item (a) of this section. The term 'research and development' means basic and applied research in the sciences and engineering and the design and development of prototypes and processes.

(3)    Real property owned by or leased to a manufacturer and used primarily as an office building is not considered used by a manufacturer in the conduct of the business of the manufacturer for purposes of classification of property under pursuant to this item (a) of this section if the office building is not located on the premises of or contiguous to the plant site of the manufacturer.

(4)    Real property owned by or leased to a manufacturer and used primarilyexclusively for warehousing and wholesale distribution of clothing and wearing apparel is not considered used by a manufacturer in the conduct of the business of the manufacturer for purposes of classification of property under pursuant to this item (a) of this section if the property is not located on the premises of or contiguous to the manufacturing site of the manufacturer."

2.        This subsection takes effect upon approval of this act by the Governor and applies in each county in the year after the next countywide reassessment is implemented. The owners of existing warehouses affected by Section 12-43-220(a)(4) as amended by this section who are paying a 10.5 percent assessment ratio in 2008 shall notify the county in writing by July 1, 2009, for the ratio to be reduced. Warehouses must continue to be assessed at 10.5 percent of fair market value until this written notification is given.

L.        1.    Section 12-37-900 of the 1976 Code is amended to read:

"Section 12-37-900.    Every person required by law to list property shall, annually, between the first day of January and the first day of March, make out and deliver to the auditor of the county in which the property is by law to be returned for taxation a statement, verified by his oath, of all the real estate which has been sold or transferred since the last listing of property for which he was responsible and to whom, and of all real and personal property possessed by him, or under his control, on the thirty-first day of December next preceding, either as owner, agent, parent, husband, guardian, executor, administrator, trustee, receiver, officer, partner, factor, or holder with the value thereof, on such thirty-first day of December, at the place of return, estimating according to the rules prescribed by law, except that the returns of corn, cotton, wheat, oats, rice, peas, and long forage, made on the day specified by law, shall be the amounts actually on hand in the hands of the producer thereof on the first day of August, immediately preceding the date of such return. But any county upon the written approval of a majority of the county legislative delegation, including the Senator, may waive penalties for failing to make such statement or may provide that such statement shall be made every fourth year. This section shall not repeal or alter any prior law or laws applying to particular counties which allow or provide for returns of real property more frequently than every four years.

A manufacturer not under a fee agreement is not required to return personal property for ad valorem tax purposes if the property remains in this State at a manufacturing facility that has not been operational for one fiscal year and the personal property has not been used in operations for one fiscal year. The personal property is not required to be returned until the personal property becomes operational in a manufacturing process or until the property has not been returned for ad valorem tax purposes for four years, whichever is earlier. A manufacturer must continue to list the personal property annually and designate on the listing that the personal property is not subject to tax pursuant to this section."

2.        Notwithstanding the general effective date of this act, this subsection takes effect upon approval of this act by the Governor and applies to tax years beginning after 2007.

M.    Section 12-6-3360(M)(13) of the 1976 Code, as last amended by Act 390 of 2006, is further amended to read:

"(13)    'Qualifying service-related facility' means:

(a)    an establishment engaged in an activity or activities listed under the North American Industry Classification System Manual (NAICS) Section 62, subsectors 621, 622, and 623; or

(b)    a business, other than a business engaged in legal, accounting, banking, or investment services or retail sales, which has a net increase of at least:

(i)        two hundred fifty jobs at a single location;

(ii)    one hundred twenty-five jobs at a single location and the jobs have an average cash compensation level of more than one and one-halfone-quarter times the lower of state per capita income or per capita income in the county where the jobs are located;

(iii)    seventy-five jobs at a single location and the jobs have an average cash compensation level of more than twiceone and one-half times the lower of state per capita income or per capita income in the county where the jobs are located; or

(iv)    thirty jobs at a single location and the jobs have an average cash compensation level of more than two and one-half times the lower of state per capita income or per capita income in the county where the jobs are located; or

(v)    fifteen jobs at a single location and the jobs have an average cash compensation level or more than two and one-half times the lower of the state per capita income or per capita income of the county in which the jobs are located.

A taxpayer shall use the most recent per capita income data available as of the end of the taxable year in which the jobs are filled. Determination of the required number of jobs is in accordance with the monthly average described in subsection (F)."

N.        1.    Section 12-14-80 of the 1976 Code, as last amended by Act 116 of 2007, is further amended to read:

"Section 12-14-80.    (A)    There is allowed an economic impact zone an investment tax credit pursuant to Section 12-14-60 for qualifying investments made by a manufacturer which for any taxable year in which the taxpayer places in service qualified manufacturing and productive equipment and which taxpayer:

(1)    is engaged in this State in at least one economic impact zone, as defined in Section 12-14-30(1), in an activity or activities listed under the North American Industry Classification System Manual (NAICS) Section 326;

(2)    is employing five thousand or more full-time workers in this State and having a total capital investment in this State of not less than two billion dollars; and

(3)    has invested commits to invest five hundred million dollars in capital investment in this State between January 1, 2006, and July 1, 2011.

(B)    For purposes of this section, 'qualified manufacturing and productive equipment property' means property that satisfies the requirements of Section 21-14-60(B)(1)(a), (b), and (c).

(C)    The amount of the credit allowed by this section is equal to the aggregate amount computed based on Section 12-14-60(A)(2).

(B)(D)    A taxpayer that qualifies for the tax credit allowed by this section may claim the credit earned pursuant to this section and credits earned pursuant to Section 12-6-3360 in the manner provided pursuant to Sections 12-6-3360 and 12-14-60, or as a credit in an amount equal to not more than fifty percent of the employee's withholding on the taxpayer's quarterly withholding tax returns. The taxpayer must elect to take the credit either as an income tax or a withholding tax credit but not both. A taxpayer must first take the credits as an income tax credit in a year in which the taxpayer has a corporate income tax liability. The withholding tax credit may be taken only when the taxpayer has used the maximum investment tax credit allowed against the corporate income tax for that year. The withholding credit may only be taken for qualifying investments made or placed in service after July 1, 2007. To claim the credit against the employee's withholding, the taxpayer must be in compliance with its withholding tax and other taxes due to the State. allowed by this section in addition to the credit allowed by Section 12-6-3360 as a credit against withholding taxes imposed by Chapter 8 of this title. The taxpayer must first apply the credit allowed by this section and Section 12-6-3360 against income tax liability. To the extent that the taxpayer has unused credit pursuant to this section for the taxable year after the application of the credits allowed by this section and Section 12-6-3360 against income tax liability, the taxpayer may claim the excess credit as a credit against withholding taxes on its four quarterly withholding tax returns for the taxpayer's taxable year; except that the credit claimed against withholding tax may not exceed fifty percent of the withholding tax shown as due on the return before the application of other credits including other credits pursuant to Sections 12-10-80 or 12-10-81. For the period July 1, 2007, to June 30, 2008, a taxpayer using this section may not reduce its state withholding tax to less than the withholding tax remitted for the period June 30, 2006, to July 1, 2007.

(E)    Unused credits allowed pursuant to this section may be carried forward for use in a subsequent tax year. During the first ten years of each tax credit carryforward, the credit may not reduce a taxpayer's state income tax liability by more than fifty percent, and for a subsequent year the credit carryforward may not reduce a taxpayer's state income tax liability by more than twenty-five percent. Investment tax credit carryforwards pursuant to this section and credit carryforwards pursuant to Section 12-6-3360 must first be used as a credit against income taxes for that year. Any excess may be used pursuant to subsection (D) as a credit against withholding taxes; except that the limitations of subsection (D) apply each year and the Economic Impact Zone tax credit carryforwards that existed on the effective date of Act 83 of 2007 may not be used to reduce withholding tax liabilities pursuant to this section.

(F)    The amount of credit used against withholding taxes must reduce the amount of credit that may be used against income tax liability. The amount of credit used against withholding taxes must reduce the amount of credit that may be used against income taxes.

(G)    If the taxpayer disposes of or removes qualified manufacturing and productive equipment property from the State during any taxable year and before the end of applicable recovery period for such property as determined under Section 168(e) of the Internal Revenue Code, then the income tax due pursuant to this chapter for the current taxable year must be increased by an amount of any credit claimed in prior years with respect to that property, determined by assuming the credit is earned ratably over the useful life of the property and recapturing pro rata the unearned portion of the credit. This recapture applies to credit previously claimed as a credit against income taxes pursuant to this chapter or withholding tax pursuant to Chapter 8.

(H)    For South Carolina income tax purposes, the basis of the qualified manufacturing and productive equipment property must be reduced by the amount of any credit claimed with respect to the property, whether claimed as a credit against income taxes or withholding. If a taxpayer is required to recapture the credit in accordance with subsection (G), the taxpayer may increase the basis of the property by the amount of basis reduction attributable to claiming the credit in prior years. The basis must be increased in the year in which the credit is recaptured.

(I)    A credit must not be taken pursuant to this section for capital investments placed in service outside of an Economic Impact Zone until the taxpayer has invested two hundred million dollars of the five hundred million-dollar investment requirement described in subsection (A)(3), and the taxpayer files a statement with the department stating that it (i) commits to invest a total of five hundred million dollars in this State between January 1, 2006, and July 1, 2011; and (ii) shall refund any credit received with interest at the rate provided for underpayments of tax if it fails to meet the requirement of (A)(3). This statement and proof of qualification must be filed with the notice required in subsection (J). Credit is not allowed pursuant to this section for property placed in service before June 30, 2007. For credit claimed before the investment of the full five hundred million dollars, the company claiming the credit must execute a waiver of the statute of limitations pursuant to Section 12-54-85, allowing the department to assess the tax for a period commencing with the date that the return on which the credit is claimed is filed and ending three years after the company notifies the department that the full five hundred million dollar investment has been made. A waiver of the statute of limitations must accompany the return on which the credit is claimed.

(J)    The taxpayer shall notify the department before taking any credits pursuant to this section. Taxpayer shall state it has met the requirements of subsection (A). Additionally, in a taxable year after the year of qualification for credit pursuant to this section, the taxpayer shall include with its tax return for that year (i) a statement that the taxpayer has continued to meet the requirements of subsections (A)(1) and (A)(2); (ii) the reconciliation required in subsection (D); and (iii) any statement and support for subsection (I)."

2.        This subsection takes effect July 1, 2007, and applies for capital investments placed in service outside of an economic impact zone after June 30, 2007, and for quarterly state withholding returns due on and after that date, provided that for the period July 1, 2007, to June 30, 2008, a taxpayer using this section may not reduce its state withholding tax to less than the withholding tax remitted for the period June 30, 2006, to July 1, 2007.

O.        If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.

P.        Except where otherwise stated, this section takes effect upon approval of this act by the Governor.

SECTION    __.    A.        Title 12 of the 1976 Code is amended by adding:

"CHAPTER 65

South Carolina Textiles Communities Revitalization Act

Section 12-65-10.    This chapter is known and may be cited as the 'South Carolina Textiles Communities Revitalization Act'.

(A)    The primary purpose of this chapter is to create an incentive for the rehabilitation, renovation, and redevelopment of abandoned textile mill sites located in South Carolina.

(B)    The abandonment of textile mills has resulted in the disruption of communities and increased the cost to local governments by requiring additional police and fire services due to excessive vacancies. Many abandoned textile mills pose safety concerns. A public and corporate purpose is served by restoring these textile mill sites to a productive asset for the communities and result in increased job opportunities.

(C)    There exists in many communities of this State abandoned textile mills. The stable economic and physical development of these textile mill sites is endangered by the presence of these abandoned textile mills as manifested by the progressive and advanced deterioration of these structures. As a result of the existence of these abandoned mills, there is an excessive and disproportionate expenditure of public funds, inadequate public and private investment, unmarketability of property, growth in delinquencies and crime in the areas, together with an abnormal exodus of families and businesses, so that the decline of these areas impairs the value of private investments, threatens the sound growth and the tax base of taxing districts in these areas, and threatens the health, safety, morals, and welfare of the public. To remove and alleviate these adverse conditions, it is necessary to encourage private investment and restore and enhance the tax base of the taxing districts in the areas by the redevelopment of these abandoned textile mill sites.

Section 12-65-20.    For the purposes of this chapter, unless the context requires otherwise:

(1)    'Abandoned' means that at least eighty percent of the textile mill has been closed continuously to business or otherwise nonoperational as a textile mill for a period of at least one year immediately preceding the date on which the taxpayer files a 'Notice of Intent to Rehabilitate'. For purposes of this item, a textile mill site that otherwise qualifies as abandoned may be subdivided into separate parcels, which parcels may be owned by the same taxpayer or different taxpayers, and each parcel is deemed to be a textile mill site for purposes of determining whether each subdivided parcel is considered to be abandoned.

(2)    'Ancillary uses' means uses related to the textile manufacturing, dying, or finishing operations on a textile mill site consisting of sales, distribution, storage, water runoff, wastewater treatment and detention, pollution control, landfill, personnel offices, security offices, employee parking, dining and recreation areas, and internal roadways or driveways directly associated with such uses.

(3)    'Textile mill' means a facility or facilities that were last used for textile manufacturing, dying, or finishing operations and for ancillary uses to those operations.

(4)    'Textile mill site' means the textile mill together with the land and other improvements on it which were used directly for textile manufacturing operations or ancillary uses. However, the area of the site is limited to the land located within the boundaries where the textile manufacturing, dying, or finishing facility structure is located and does not include land located outside the boundaries of the structure or devoted to ancillary uses. Notwithstanding the provisions of this item, with respect to any site acquired by a taxpayer before January 1, 2008, or a site located on the Catawba River near Interstate 77, the textile mill site includes the textile mill structure, together with all land and improvements which were used directly for textile manufacturing operations or ancillary uses, or were located on the same parcel within one thousand feet of any textile mill structure or ancillary uses.

(5)    'Local taxing entities' means a county, municipality, school district, special purpose district, and other entity or district with the power to levy ad valorem property taxes against the textile mill site.

(6)    'Local taxing entity ratio' means that percentage computed by dividing the millage rate of each local taxing entity by the total millage rate for the textile mill site.

(7)    'Placed in service' means the date upon which the textile mill site is completed and ready for its intended use. If the textile mill site is completed and ready for use in phases or portions, each phase or portion is considered to be placed in service when it is completed and ready for its intended use.

(8)    'Rehabilitation expenses' means the expenses or capital expenditures incurred in the rehabilitation, renovation, or redevelopment of the textile mill site, including without limitations, the demolition of existing buildings, environmental remediation, site improvements and the construction of new buildings and other improvements on the textile mill site, but excluding the cost of acquiring the textile mill site or the cost of personal property located at the textile mill site. For expenses associated with a textile mill site to qualify for the credit, the textile mill and buildings on the textile mill site must be either renovated or demolished.

(9)    'Notice of Intent to Rehabilitate' means, with respect to a textile mill site acquired by a taxpayer after December 31, 2007, a letter submitted by the taxpayer to the department or the municipality or county as specified in this chapter, indicating the taxpayer's intent to rehabilitate the textile mill site, the location of the textile mill site, the amount of acreage involved in the textile mill site, and the estimated expenses to be incurred in connection with rehabilitation of the textile mill site. The notice also must set forth information as to which buildings the taxpayer intends to renovate, which buildings the taxpayer intends to demolish, and whether new construction is to be involved.

Section 12-65-30.    (A)    Subject to the terms and conditions of this chapter, a taxpayer who rehabilitates a textile mill site is eligible for either:

(1)    a credit against real property taxes levied by local taxing entities; or

(2)    a credit against income taxes imposed pursuant to Chapter 6 and Chapter 11 of this title or corporate license fees pursuant to Chapter 20 of this title, or both.

(B)    If the taxpayer elects to receive the credit pursuant to subsection (A)(1), the following provisions apply:

(1)    The taxpayer shall file a Notice of Intent to Rehabilitate with the municipality, or the county if the textile mill site is located in an unincorporated area, in which the textile mill site is located before incurring its first rehabilitation expenses at the textile mill site. Failure to provide the Notice of Intent to Rehabilitate results in qualification of only those rehabilitation expenses incurred after notice is provided.

(2)    Once the Notice of Intent to Rehabilitate has been provided to the county or municipality, the municipality or the county shall first by resolution determine the eligibility of the textile mill site and the proposed rehabilitation expenses for the credit. A proposed rehabilitation of a textile mill site must be approved by a positive majority vote of the local governing body. For purposes of this subsection, 'positive majority vote' is as defined in Section 6-1-300(5). If the county or municipality determines that the textile mill site and the proposed rehabilitation expenses are eligible for the credit, there must be a public hearing and the municipality or county shall approve the textile mill site for the credit by ordinance. Before approving a textile mill site for the credit, the municipality or county shall make a finding that the credit does not violate a covenant, representation, or warranty in any of its tax increment financing transactions or an outstanding general obligation bond issued by the county or municipality.

(3)(a)    The amount of the credit is equal to twenty-five percent of the actual rehabilitation expenses made at the textile mill site times the local taxing entity ratio of each local taxing entity that has consented to the credit pursuant to item (4), if the actual rehabilitation expenses incurred in rehabilitating the textile mill site are between eighty percent and one hundred twenty-five percent of the estimated rehabilitation expenses set forth in the Notice of Intent to Rehabilitate. If the actual rehabilitation expenses exceed one hundred twenty-five percent of the estimated expenses set forth in the Notice of Intent to Rehabilitate, the taxpayer qualifies for the credit based on one hundred twenty-five percent of the estimated expenses as opposed to the actual expenses it incurred in rehabilitating the textile mill site. If the actual rehabilitation expenses are below eighty percent of the estimated rehabilitation expenses, the credit is not allowed. The ordinance must provide for the credit to be taken as a credit against up to seventy-five percent of the real property taxes due on the textile mill site each year for up to eight years.

(b)    The local taxing entity ratio is set as of the time the Notice of Intent to Rehabilitate is filed and remains set for the entire period that the credit may be claimed by the taxpayer.

(4)    Not fewer than forty-five days before holding the public hearing required by subsection (B)(2), the governing body of the municipality or county shall give notice to all affected local taxing entities in which the textile mill site is located of its intention to grant a credit against real property taxes for the textile mill site and the amount of estimated credit proposed to be granted based on the estimated rehabilitation expenses. If a local taxing entity does not file an objection to the tax credit with the municipality or county on or before the date of the public hearing, the local taxing entity is considered to have consented to the tax credit.

(5)    The credit against real property taxes for each applicable phase or portion of the textile mill site may be claimed beginning for the property tax year in which the applicable phase or portion of the textile mill site is first placed in service.

(C)    If the taxpayer has acquired the textile mill site after December 31, 2007, and elects to receive the credit pursuant to subsection (A)(2), the following provisions apply:

(1)    The taxpayer shall file with the department a notice of Intent to Rehabilitate before incurring its first rehabilitation expenses at the textile mill site. Failure to provide the Notice of Intent to Rehabilitate results in qualification of only those rehabilitation expenses incurred after the notice is provided.

(2)    The amount of the credit is equal to twenty-five percent of the actual rehabilitation expenses made at the textile mill site if the actual rehabilitation expenses incurred in rehabilitating the textile mill site are between eighty percent and one hundred twenty-five percent of the estimated rehabilitation expenses set forth in the Notice of Intent to Rehabilitate. If the actual rehabilitation expenses exceed one hundred twenty-five percent of the estimated expenses set forth in the Notice of Intent to Rehabilitate, the taxpayer qualifies for the credit based on one hundred twenty-five percent of the estimated expenses as opposed to the actual expenses it incurred in rehabilitating the textile mill site. If the actual rehabilitation expenses are below eighty percent of the estimated rehabilitation expenses, the credit is not allowed.

(3)    The entire credit is earned in the taxable year in which the applicable phase or portion of the textile mill site is placed in service but must be taken in equal installments over a five-year period beginning with the tax year in which the applicable phase or portion of the mill site is placed in service. Unused credit may be carried forward for the succeeding five years.

(4)    If the taxpayer qualifies for both the credit allowed by this subsection and the credit allowed pursuant to Section 12-6-3535, the taxpayer may claim both credits.

(5)    The credit allowed by this subsection is limited in use to fifty percent of either:

(a)    the taxpayer's income tax liability for the taxable year if taxpayer claims the credit allowed by this section as a credit against income tax imposed pursuant to Chapter 6 or Chapter 11 of the title;

(b)    the taxpayer's corporate license fees for the taxable year if the taxpayer claims the credit allowed by this section as a credit against license fees imposed pursuant to Chapter 20.

(6)(a)    If the taxpayer leases the textile mill site, or part of the textile mill site, the taxpayer may transfer any applicable remaining credit associated with the rehabilitation expenses incurred with respect to that part of the site to the lessee of the site. The provisions of item (5) of this subsection apply to a lessee that is an entity taxed as a partnership. If a taxpayer sells the textile mill site, or any phase or portion of the textile mill site, the taxpayer may transfer all, or part of the remaining credit, associated with the rehabilitation expenses incurred with respect to that phase or portion of the site to the purchaser of the applicable portion of the textile mill site.

(b)    To the extent that the taxpayer transfers the credit, the taxpayer must notify the department of the transfer in the manner the department prescribes.

(7)    To the extent that the taxpayer is a partnership or a limited liability company taxed as a partnership, the credit may be passed through to the partners or members and may be allocated among any of its partners or members including, without limitation, an allocation of the entire credit to one partner or member.

Section 12-65-40.    The provisions of Chapter 31 of this title also apply to this chapter; except that, the requirements of Section 6-31-40 do not apply."

B.        Chapter 32, Title 6 of the 1976 Code is repealed.

C.        With respect to a site acquired by a taxpayer after December 31, 2007, the area of the site is limited to the land located within the boundaries where the textile manufacturing facility structure is located and does not include land located outside the boundaries of the structure.

D.        Notwithstanding the general effective date provided for this act, this section takes effect upon approval of this act by the Governor.

SECTION    __.    A.        Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:

"Section 12-6-3680.    (A)    For purposes of this section:

(1)    'Recycling facility' means a facility located in South Carolina that:

(a)    engages in recycling as defined in Section 44-96-40(37); and

(b)    manufactures product for sale composed of over fifty percent post-consumer recycled content and pre-consumer recycled content by weight or by volume.

(B)    A taxpayer owning and operating a recycling facility as defined in subsection (A) is allowed a refundable income tax credit equal to the yearly amount expended by the recycling facility for electric service used in the manufacturing process multiplied by the percentage of recycled content calculated in subsection (A)(1)(b) of this section, and multiplied by the following:

(1)    one percent in the first year the credit is claimed;

(2)    two percent in the second year the credit is claimed;

(3)    three percent in the third year the credit is claimed;

(4)    four percent in the fourth year the credit is claimed; and

(5)    four percent in subsequent years, not to exceed the amount of credit received pursuant to item (4).

(C)    The credit is first allowed against returns due to be filed in Fiscal Year 2009-2010. A credit is not allowed and may not be claimed for a taxable year except as provided in subsection (E).

(D)    A taxpayer may claim the credit allowed in this section only on the taxpayer's annual return. The taxpayer shall provide all information that the department determines is necessary for the calculation and administration of the credit.

(E)    Beginning with the February 15, 2009, forecast by the Board of Economic Advisors of annual general fund revenue growth for the upcoming fiscal year, and annually after that, if the forecast of that growth then and in any adjusted forecast made before the beginning of the fiscal year equals at least five percent of the most recent estimate by the board of general fund revenues for the current fiscal year, then the applicable credit is allowed for the taxable year returns for which are due in the fiscal year beginning July first. If the February fifteenth forecast or adjusted forecast of annual general fund revenue growth for the upcoming fiscal year meets the requirement for the credit, the board promptly shall certify this result in writing to the department.

(F)    The recycling facility must maintain or increase the number of employees in South Carolina in order to qualify for the credit. The benchmark for the number of employees of a recycling facility is the number of employees submitted to the department in the initial claim seeking the credit. The recycling facility must submit a notarized certification of the number of employees to the Department of Revenue each year."

B.        Notwithstanding the general effective date of this act, this section takes effect upon approval of this act by the Governor.

SECTION    __.    A.        (A)    In addition to the exemptions allowed from the admissions license tax imposed pursuant to Section 12-21-2420 of the 1976 Code, there is also exempt from that tax for five years beginning July 1, 2008, paid admissions to a motorsports entertainment complex.

(B)    For purposes of the exemption allowed by this section, a motorsports entertainment complex means a motorsports facility, and its ancillary grounds and facilities, that satisfies all of the following:

(1)    has at least sixty thousand fixed seats for race patrons;

(2)    has at least three scheduled days of motorsports events, and events ancillary and incidental thereto, each calendar year that are sanctioned by a nationally or internationally recognized governing body of motorsports that establishes an annual schedule of motorsports events;

(3)    engages in tourism promotion.

B.        Notwithstanding the general effective date provided in this act, this section takes effect July 1, 2008. /

Renumber sections to conform.

Amend title to conform.

DANIEL T. COOPER for Committee.

            

A BILL

TO AMEND SECTION 12-37-900 OF THE 1976 CODE, RELATING TO THE LISTING AND RETURNING OF PERSONAL PROPERTY, TO PROVIDE THAT A MANUFACTURER IS NOT REQUIRED TO LIST OR RETURN PERSONAL PROPERTY FOR AD VALOREM TAX PURPOSES IF THE PROPERTY REMAINS IN THIS STATE BUT HAS NOT BEEN USED IN OPERATIONS FOR THE ENTIRE REPORTING PERIOD OF THE MANUFACTURER.

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

SECTION    1.    Section 12-37-900 of the 1976 Code is amended to read:

"Section 12-37-900.    Every person required by law to list property shall, annually, between the first day of January and the first day of March, make out and deliver to the auditor of the county in which the property is by law to be returned for taxation a statement, verified by his oath, of all the real estate which has been sold or transferred since the last listing of property for which he was responsible and to whom, and of all real and personal property possessed by him, or under his control, on the thirty-first day of December next preceding, either as owner, agent, parent, husband, guardian, executor, administrator, trustee, receiver, officer, partner, factor, or holder with the value thereof, on such thirty-first day of December, at the place of return, estimating according to the rules prescribed by law, except that the returns of corn, cotton, wheat, oats, rice, peas, and long forage, made on the day specified by law, shall be the amounts actually on hand in the hands of the producer thereof on the first day of August, immediately preceding the date of such return. But any county upon the written approval of a majority of the county legislative delegation, including the Senator, may waive penalties for failing to make such statement or may provide that such statement shall be made every fourth year. This section shall not repeal or alter any prior law or laws applying to particular counties which allow or provide for returns of real property more frequently than every four years.

A manufacturer not under a fee agreement is not required to return personal property for ad valorem tax purposes if the property remains in this State at a manufacturing facility that has not been operational for one fiscal year and the personal property has not been used in operations for one fiscal year. The personal property is not required to be returned until the personal property becomes operational in a manufacturing process or until the property has not been returned for ad valorem tax purposes for four years, whichever is earlier. A manufacturer must continue to list the personal property annually and designate on the listing that the personal property is not subject to tax pursuant to this section."

SECTION    2.    This act takes effect upon approval by the Governor and applies to tax years beginning on or after January 1, 2008.

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