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COMMITTEE REPORT
May 28, 2008
H. 4470
Introduced by Reps. Harrell, Leach, Cato, Hagood, Hamilton, Harrison, Limehouse, Merrill, Scarborough, W.D. Smith, Stavrinakis, Walker, Young, Gambrell, Haley, Bedingfield, Mahaffey, Cotty, McLeod, Owens, Rice, Bowen, Viers and Shoopman
S. Printed 5/28/08--S.
Read the first time February 19, 2008.
To whom was referred a Bill (H. 4470) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-6-3680 so as to allow a state income tax credit for the purchase, 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 striking all after the enacting words and inserting:
/ SECTION 1. Chapter 5, Title 58 of the 1976 Code is amended by adding:
"Section 58-5-390. A publicly or privately owned utility may not impose a tap fee, other fee, or a recurring maintenance fee of any nature or however described for the installation and maintenance of a fire sprinkler system that exceeds the actual costs associated with the water line to the system.
For purposes of this section, actual costs include direct labor, direct material, the necessity of increased capacity, and other direct charges associated with the separate fire sprinkler line. The direct costs must be documented by either an invoice or work order that specifically assigns the costs to the separate fire sprinkler line. In the case of a planned discharge not related to fire suppression, the entity discharging the water shall report the amount of water used to the utility who provides water to the sprinkler system."
SECTION 2. A. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3622. (A)(1) Subject to the terms and conditions of this section, a taxpayer who installs a fire sprinkler system in a commercial or residential structure, whether the structure or fire sprinkler is new or existing, when such installation is not required by law, regulation, or code is eligible for a credit against real property taxes levied by a local taxing entity equal to twenty-five percent of the direct expenses, not including any type of fee charged by the publicly or privately owned utility, incurred by the taxpayer if the local taxing entity has consented to the tax credit.
(2) In any year in which the local taxing entity consents to a tax credit, the taxpayer may also claim an income tax credit equal to the amount of the credit against real property taxes.
(3) The credit earned pursuant to this subsection by a "S" corporation owing corporate level income tax must be used first at the entity level. Any remaining credit passes through to each shareholder in a percentage equal to each shareholder's percentage of stock ownership.
(4) The credit earned pursuant to this subsection by a general partnership, limited partnership, limited liability company, or any other entity taxed as a partnership must be passed through to its partners and may be allocated among any of its partners, including without limitation, an allocation of the entire credit to one partner, in a manner agreed by the partners that is consistent with Subchapter K of the Internal Revenue Code. As used in this subsection, the term "partner" means a partner, member, or owner of an interest in the pass-through entity, as applicable.
(B) The Department of Revenue shall develop a form on which a taxpayer may claim the credit against real property taxes. The taxpayer may claim the credit against real property taxes by submitting the form with the payment of real property taxes to the local taxing entity. The taxpayer may claim the credit against income taxes by submitting the form with the taxpayer's return.
(C) The owner of the structure may transfer, devise, or distribute any unused credit to the tenant of the eligible site. To be effectual, the local taxing entity must receive written notification.
(D) For purposes of this section, fire sprinkler system has the same meaning as in Section 40-10-20."
B. This section takes effect upon approval of this act by the Governor and applies for taxable years beginning after 2007.
SECTION 3.A. Section 12-37-3130(1) of the 1976 Code is amended to read:
"Section 12-37-3130. As used in this article:
(1) "Additions" or "improvements" mean an increase in the value of an existing parcel of real property because of:
(a) new construction;
(b) reconstruction;
(c) major additions to the boundaries of the property or a structure on the property;
(d) remodeling; or
(e) renovation and rehabilitation, including installation.
Additions or improvements do not include minor construction or ongoing maintenance and repair of existing structures. The repair or reconstruction of a structure damaged or destroyed by a disaster, to include, but not limited to, construction defects, defective materials, fire, wind, hail, flood, and acts of God, is not an addition or improvement to the extent that the structure as repaired or reconstructed is similar in size, utility, and function of the structure damaged or destroyed, and the rebuilding or reconstruction is begun within eight years after determination of the damage or destruction. Construction of facilities in a home that make the home handicapped accessible is not an addition or improvement if the utility and function of the structure remains unchanged. The installation of a fire sprinkler system in a commercial or residential structure when the installation is not required by law, regulation, or code is not an addition or improvement if the utility and function of the structure remains unchanged."
B. This section takes effect upon approval of this act by the Governor and applies for taxable years beginning after 2007.
SECTION 4.A. Section 12-37-220(B) of the 1976 Code is amended by adding an appropriately numbered item at the end to read:
"( ) All fire sprinkler system equipment and the value attached thereto that is installed on a commercial or residential structure when the installation is not required by law, regulation, or code until there is an accessible transfer of interest as determined by Section 12-37-3150."
B. This section takes effect upon approval of this act by the Governor and applies for taxable years beginning after 2007.
SECTION 5. Except as otherwise provided, this act takes effect upon approval by the Governor. /
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN for Committee.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-3680 SO AS TO ALLOW A STATE INCOME TAX CREDIT FOR THE PURCHASE, INSTALLATION, OR IMPROVEMENT OF A FIRE SPRINKLER SYSTEM AND TO PROVIDE THE ADMINISTRATION OF THE CREDIT; TO AMEND SECTION 5-31-670, RELATING TO MUNICIPAL AND SPECIAL SERVICE DISTRICT WATER SYSTEMS, SO AS TO LIMIT CHARGES FOR SEPARATE LINES FOR FIRE SPRINKLER SYSTEMS TO ACTUAL COSTS; TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO EXEMPT FIRE SPRINKLER SYSTEMS; TO AMEND SECTION 12-37-220, AS AMENDED, RELATING TO PROPERTY TAX EXEMPTIONS, SO AS TO ALLOW AN EXEMPTION FROM COUNTY TAXES FOR FIVE YEARS FOR THE FIRST FIFTY THOUSAND DOLLARS OF THE COST OF ADDING TO AND UPGRADES OF FIRE SPRINKLER SYSTEMS IN MANUFACTURING ESTABLISHMENTS IN EXISTENCE BEFORE JULY 1, 2008; TO AMEND SECTION 12-37-930, AS AMENDED, RELATING TO DEPRECIATION ALLOWED IN THE VALUATION OF MANUFACTURING PROPERTY FOR PURPOSES OF THE PROPERTY TAX, SO AS TO ALLOW A TWENTY PERCENT ANNUAL DEPRECIATION FOR THE ADDITION OR UPGRADE OF A FIRE SPRINKLER SYSTEM INSTALLED OR UPGRADED IN A MANUFACTURING ESTABLISHMENT IN EXISTENCE BEFORE JULY 1, 2008, AND TO ALLOW THIS COST TO BE COMPLETELY DEPRECIATED; AND TO AMEND SECTION 23-9-40, RELATING TO THE DUTIES OF THE STATE FIRE MARSHAL, SO AS TO ADD AUTHORITY RELATING TO FIRE SPRINKLER SYSTEMS.
Whereas, when fire sprinklers are present, the chances of a person dying in a fire are reduced by one-half to three-fourths; and
Whereas, when fire sprinklers are present, the average property loss per fire is cut by one-half to two-thirds, compared to fires where fire sprinklers are not present; and
Whereas, the National Fire Protection Association has no record of a fire killing more than two people in a completely sprinklered public assembly, educational, institutional or residential building where the system was working properly; and
Whereas, fire caused 10,672,000,000 dollars in direct property damage in the United States in 2005; and
Whereas, fire sprinklers are highly reliable, and when present in the fire area, operate in all but seven percent of fires large enough to activate the system. Human error was a factor in most of the failures, and the system was shut off in approximately two-thirds of the failures; and
Whereas, it is the purpose of this Act to create meaningful incentives for the installation of fire sprinkler systems. Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3680. (A) Subject to the terms and conditions of this article, a taxpayer who improves or purchases an automated fire sprinkler system in accordance with the National Fire Protection Association standards referenced in the Building and Fire Prevention Codes adopted by the South Carolina Building Code Council is allowed a credit against a tax imposed pursuant to this chapter in an amount equal to eighty percent of the costs of purchase, installation, and retrofitting of the system, not to exceed fifty thousand dollars.
(B) Notwithstanding the provisions of Section 12-6-3310(B)(3), the credit earned pursuant to this subsection by a general partnership, limited partnership, limited liability company, or any other entity taxed as a partnership must be passed through to its partners and may be allocated among any of its partners, including without limitation, an allocation of the entire credit to one partner, in any manner agreed by the partners that is consistent with Subchapter K of the Internal Revenue Code. As used in this subsection, the term 'partner' means a partner, member, or owner of an interest in the pass through entity, as applicable.
(C) The credit is first allowed for the taxable year in which the system or improvements were placed in service. The maximum credit that may be claimed pursuant to this section in a taxable year is ten thousand dollars and, subject to this limit, unused credit may be carried forward to the five succeeding taxable years."
SECTION 2. Section 5-31-670 of the 1976 Code is amended to read:
"Section 5-31-670. Any city or town A municipality or special service district may, after acquiring a waterworks or sewer system, may furnish water to persons for reasonable compensation and charge a minimum and reasonable sewerage water charge for maintenance or construction of such sewerage the water system within such city or town the municipality or special service district. Where a separate line is installed solely to support a fire sprinkler system, compensation and charges must not exceed the actual costs associated with that line.
For purposes of this section, actual costs include direct labor, direct material, and other direct charges associated with the separate line. These direct costs must be documented by either an invoice or work order that specifically assigns the costs to the separate fire sprinkler line."
SECTION 3. Section 12-36-2120 of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding an appropriately numbered item at the end to read:
"( ) fire sprinkler systems complying with the standards most recently adopted by the National Fire Protection Association."
SECTION 4. Section 12-37-220(B) of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new item at the end to read:
"(50) all additions of or upgrades to fire sprinkler systems costing less than fifty thousand dollars installed in structures in existence before July 1, 2008, for five years from the time the addition or upgrade is put in service. This exemption extends to county and municipal taxes. To be eligible for this exemption, additions and upgrades must comply with the standards most recently adopted by the National Fire Protection Association as verified by the State Fire Marshal."
SECTION 5. The schedule included in the first undesignated paragraph of Section 12-37-930 of the 1976 Code, as last amended by Act 187 of 2004, is further amended by adding at the end:
"36. Addition or upgrade of fire sprinkler systems............20%
This depreciation percentage applies to the cost of any systems installed or upgraded in manufacturing establishments in existence before July 1, 2008. The limit on depreciation imposed pursuant to Section 12-37-935 does not apply to depreciation taken pursuant to this item. To be eligible for this allowance, all additions or upgrades must meet the most recently adopted standards of the National Fire Protection Association."
SECTION 6. Section 23-9-40 of the 1976 Code is amended to read:
"Section 23-9-40. It shall be is the duty of the State Fire Marshal to enforce all laws and ordinances of the State, and the several its counties, cities municipalities, and other political subdivisions thereof, with reference to the following:
(a) The prevention of fires;
(b) The storage, sale, and use of combustibles and explosives;
(c) The installation and maintenance of automatic or other fire alarm systems and fire extinguishing equipment;
(d) The construction, maintenance, and regulation of fire escapes;
(e) The means and adequacy of exits, in case of fire, from factories, asylums, hospitals, churches, schools, halls, theaters, amphitheaters, and all other places in which numbers of persons work, live, or congregate from time to time for any purpose;
(f) Investigation investigation of the cause, origin, and circumstances of fire;
(g) installation and maintenance of sprinkler systems in new construction as provided pursuant to Chapter 10 of Title 40 and any sprinkler systems installed in an existing commercial or residential structure;
(h) installation and maintenance of new sprinkler systems in new or existing residential or commercial structures only when the local government has designated the fire marshal as the authority having jurisdiction. If the fire marshal is not designated, the local building code official shall perform these duties when that local building code official has been designated by the local government as the authority having jurisdiction. In either case, the company doing the fire sprinkler installation inspection must have a NICET or ICC fire sprinkler inspection certification; and
(i) verifying and reporting to the Department of Revenue any taxpayers eligible to receive an income tax credit in accordance with Section 12-6-3680 and to report to the proper county authorities any manufacturing establishments qualifying for property tax reduction in accordance with Section 12-37-220(B)(50) as it pertains to the installation of sprinkler systems."
SECTION 7. This act takes effect upon approval by the Governor and with respect to its income and property tax provisions applies for tax years beginning after 2007.
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