Reference is to the bill as introduced.
Amend the bill, as and if amended, by striking all after the enacting words and inserting:
/ SECTION 1. A. Title 11 of the 1976 Code is amended by adding:
Section 11-44-10. This chapter may be cited as the 'High Growth Small Business Job Creation Act of 2013'.
Section 11-44-20. The
General Assembly desires to support the economic development
goals of this State by improving the availability of early stage
capital for emerging high-growth enterprises in South Carolina.
To further these goals, this chapter is intended to:
(1) encourage
individual angel investors to invest in early stage,
high-growth, job-creating businesses;
(2) enlarge the number
of high quality, high paying jobs within the State;
(3) expand the economy
of this State by enlarging its base of wealth-creating
businesses; and
(4) support businesses
seeking to commercialize technology invented in this state's
institutions of higher education.
Section 11-44-30.
For purposes of this chapter:
(1) 'Angel investor'
means an accredited investor as defined by the United States
Securities and Exchange Commission, who is:
(a)
an individual person who is a resident of this State or a
nonresident who is subject to taxes imposed by Chapter 6, Title
12; or
(b)
a pass-through entity which is formed for investment
purposes, has no business operations, does not have committed
capital under management exceeding five million dollars, and is
not capitalized with funds raised or pooled through private
placement memoranda directed to institutional investors. A
venture capital fund or commodity fund with institutional
investors or a hedge fund does not qualify as an angel
investor.
(2) '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.
(3) 'Net income tax
liability' means South Carolina state income tax liability
reduced by all other credits allowed under Titles 11, 12, and
48.
(4) 'Pass-through
entity' means a partnership, an S-corporation, or a limited
liability company taxed as a partnership.
(5) 'Qualified
business' means a registered business that:
(a)
is either a corporation, limited liability company, or a
general or limited partnership located in this State and has its
headquarters located in this State at the time the investment
was made and has maintained these headquarters for the entire
time the qualified business benefitted from the tax credit
provided for pursuant to this section;
(b)
was organized no more than five years before the qualified
investment was made;
(c)
employs twenty-five or fewer people in this State at the
time it is registered as a qualified business;
(d)
has had in any complete fiscal year before registration
gross income as determined in accordance with the Internal
Revenue Code of two million dollars or less on a consolidated
basis;
(e)
is primarily engaged in manufacturing, processing,
warehousing, wholesaling, software development, information
technology services, research and development, or a business
providing services set forth in Section 12-6-3360(M)(13), other
than those described in subitem (f); and
(f)
does not engage substantially in:
(i)
retail sales;
(ii)
real estate or construction;
(iii)
professional services;
(iv)
gambling;
(v)
natural resource extraction;
(vi)
financial brokerage, investment activities, or
insurance;
(vii)
entertainment, amusement, recreation, or athletic or
fitness activity for which an admission or fee is charged.
A business is substantially engaged in one
of the activities defined in subitem (f) if its gross revenue
from an activity exceeds twenty-five percent of its gross
revenues in a fiscal year or it is established pursuant to its
articles of incorporation, articles of organization, operating
agreement, or similar organizational documents to engage as one
of its primary purposes such activity.
(6) 'Qualified
investment' means an investment by an angel investor of cash in
a qualified business for common or preferred stock or an equity
interest or a purchase for cash of subordinated debt in a
qualified business. Investment of common or preferred stock or
an equity interest or purchase of subordinated debt does not
qualify as a qualified investment if a broker fee or commission
or a similar remuneration is paid or given directly or
indirectly for soliciting an investment or a purchase.
(7) 'Registered' or
'registration' means that a business has been certified by the
secretary as a qualified business at the time of application to
the secretary.
(8) 'Secretary' means
the Secretary of State.
Section 11-44-40. (A)
An angel investor is entitled to a
nonrefundable income tax credit of thirty-five percent of its
qualified investment made pursuant to this chapter.
(B) Fifty percent of
the allowed credit may be applied to the angel investor's net
income tax liability in the tax year during which the qualified
investment is made, and fifty percent of the allowed credit may
be applied to the angel investor's net income tax liability in
the tax years after the qualified investment is made and may be
carried forward for a period not to exceed ten years for these
purposes as provided in Section 11-44-50.
(C) For any
pass-through entity making a qualified investment directly in a
qualified business, each individual who is a shareholder,
partner, or member of the entity must be allocated the credit
allowed the pass-through entity in an amount determined in the
same manner as the proportionate shares of income or loss of
such pass-through entity would be determined. The pass-through
entity must make an irrevocable election with the Department of
Revenue as to the manner in which the credit is allocated. If
an individual's share of the pass-through entity's credit is
limited due to the maximum allowable credit under this chapter
for a taxable year, the pass-through entity and its owners may
not reallocate the unused credit among the other owners.
Section 11-44-50. Tax
credits claimed pursuant to this chapter are subject to the
following conditions and limitations:
(1) the total amount of
credits allowed pursuant to this chapter may not exceed in the
aggregate five million dollars for all taxpayers for any one
calendar year;
(2) the aggregate
amount of credit allowed an individual for one or more qualified
investments in a single taxable year under this chapter, whether
made directly or by a pass-through entity and allocated to an
individual, shall not exceed one hundred thousand dollars each
year, not including any carry forward credits;
(3) the amount of the
tax credit allowed an individual under this chapter for a
taxable year shall not exceed an individual's net income tax
liability. An unused credit amount is allowed to be carried
forward for ten years from the close of the taxable year in
which the qualified investment was made. Credit is not allowed
against prior years' tax liability;
(4) the credit is
transferrable by the angel investor to his heirs and legatees
upon his or her death and to his or her spouse or incident to
divorce;
(5) the credit may be
sold, exchanged, or otherwise transferred, and may be carried
forward for a period of ten taxable years following the taxable
year in which the credit originated until fully expended. A tax
credit or increment of a tax credit may be transferred only
once. The credit may be transferred to any taxpayer. A
taxpayer to whom a credit has been transferred may use the
credit for the taxable year in which the transfer occurred and
unused amounts may be carried forward to succeeding taxable
years, but the transferred credit may not be used more than ten
years after it was originally issued; and
(6) the Department of
Revenue may develop procedures for the transfer of the credits.
Section 11-44-60. (A)
A qualified business shall register with the
secretary for purposes of this chapter. Approval of this
registration constitutes certification by the Secretary for
twelve months after being issued. A business is permitted to
renew its registration with the secretary so long as, at the
time of renewal, the business remains a qualified business.
(B) If the secretary
finds that any information contained in an application of a
business for registration under this chapter is false, the
secretary shall revoke the registration of the business. The
secretary shall not revoke the registration of a business only
because it ceases business operations for an indefinite period
of time, as long as the business renews its registration.
(C) A registration as a
qualified business may not be sold or otherwise transferred,
except that, if a qualified business enters into a merger,
conversion, consolidation, or other similar transaction with
another business and the surviving company would otherwise meet
the criteria for being a qualified business, the surviving
company retains the registration for the twelve-month
registration period without further application to the
secretary. In this case, the qualified business shall provide
the secretary with written notice of the merger, conversion,
consolidation, or similar transaction and other information as
required by the secretary.
(D) The secretary shall
report to the House Ways and Means Committee and the Senate
Finance Committee each year all of the businesses that have
registered with the secretary as a qualified business. The
report must include the name and address of each business, the
location of its headquarters, a description of the type of
business in which it engages, the amount of capital it has
raised, the number of jobs created by the business during the
period covered by the report, and the average wages paid by
these jobs.
Section 11-44-65. (A)
For purposes of this section:
(1)
'Angel investor taxpayer' means a taxpayer who invested in
a capital asset and as a result of that investment was eligible
to claim the tax credit allowed pursuant to this chapter.
(2)
'Credit asset' means a capital asset acquired by an angel
investor taxpayer who was eligible to claim the tax credit
allowed pursuant to this chapter with respect to the
acquisition.
(3)
'Net capital gain' is as defined in Internal Revenue Code
Section 1222 and related sections.
(4)
'Net capital loss' is as defined in Internal Revenue Code
Section 1211(b), not including the limitation imposed pursuant
to Section 1211(b)(1).
(B)(1) If an angel
investor taxpayer recognized net capital gain on the sale or
exchange of credit assets in a taxable year, then the amount of
net capital gain of that taxpayer eligible for the deduction
otherwise allowed pursuant to Section 12-6-1150 must be reduced
by the net capital gain on the sale or exchange of credit assets
by the angel investor taxpayer.
(2)
In a separate computation in each taxable year the angel
investor taxpayer shall attribute the net capital gain on credit
assets to each credit asset in the ratio that the long term
capital gain on each separate credit asset as a proportion of
all such long term gain bears to the net capital gain reduction
required pursuant to item (1). If cumulative net capital gain on
a credit asset multiplied by seven percent equals the total
credit claimed on the credit asset, the excess of the net
capital gain attributable to this credit asset over that
necessary to produce the total credit amount in the computation
is deducted from the reduction otherwise required pursuant to
item (1).
(C)(1) If an angel
investor taxpayer recognized net capital loss on the sale or
exchange of credit assets in a taxable year in an amount equal
to or less than the total of tax credits claimed on those credit
assets, then there is added to the angel investor taxpayer's
South Carolina taxable income for that taxable year the amount
of the net capital loss on those credit assets not to exceed the
tax credits claimed on those credit assets.
(2)
If an angel investor taxpayer recognized net capital loss
on the sale or exchange of credit assets in a taxable year in an
amount greater than the amount of the tax credits claimed on
those credit assets, then there is added to the angel investor
taxpayer's South Carolina taxable income for that taxable year
the amount of the tax credit claimed on those credit assets.
Section 11-44-70. (A)
An angel investor seeking to claim a tax
credit provided for under this chapter shall submit an
application to the Department of Revenue for tentative approval
for the tax credit in the year for which the tax credit is
claimed or allowed. The Department of Revenue shall provide for
the manner in which the application is to be submitted. The
Department of Revenue shall review the application and
tentatively shall approve the application upon determining that
it meets the requirements of this chapter.
(B) The Department of
Revenue shall provide tentative approval of the applications by
the date provided in subsection (C).
(C) The Department of
Revenue shall notify each qualified investor of the tax credits
tentatively approved and allocated to the qualified investor by
January thirty-first of the year after the application was
submitted. If the credit amounts on the tax credit applications
filed with the Department of Revenue exceed the maximum
aggregate limit of tax credits, then the tax credit must be
allocated among the angel investors who filed a timely
application on a pro rata basis based upon the amounts otherwise
allowed by this chapter. Once the tax credit application has
been approved and the amount has been communicated to the
applicant, the angel investor then may apply the amount of the
approved tax credit to its tax liability for the tax year of
which the approved application applies.
Section 11-44-80. Tax credits generated as a result of these investments are not considered securities under the laws of this State."
B. The provisions of Chapter 44, Title 11 contained in this act are repealed on December 31, 2019. Any carry forward credits shall continue to be allowed until the ten year time period in Section 11-44-40(B) is completed.
SECTION 2. Section 12-54-240(B) 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:
"( ) exchange between the Department of Revenue and the Secretary of State of any information that assists the Department of Revenue or the Secretary of State in determining or verifying information concerning whether a business is a qualified business pursuant to Section 11-44-60."
SECTION 3. This act takes effect upon approval by the Governor, and the tax credits permitted by this chapter are first available for investments made after December 31, 2012. /
Renumber sections to conform.
Amend title to conform.