Journal of the House of Representatives
of the Second Session of the 111th General Assembly
of the State of South Carolina
being the Regular Session Beginning Tuesday, January 9, 1996

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property improvements which constitute an expansion of such improvements.

(L)(1) For a project not located in an industrial development park as defined in Section 4-1-170, distribution of the fee in lieu of taxes on the project must be made in the same manner and proportion that the millage levied for school and other purposes would be distributed if the property were taxable. For this purpose, the relative proportions must be calculated based on the following procedure: holding constant the millage rate set in subsection (G) and using all tax abatements automatically granted for taxable property, a full schedule of the property taxes that would otherwise have been distributed to each millage-levying entity in the county must be prepared for the life of the agreement, up to twenty years maximum for the maximum time period allowed under (C)(3). These separate schedules must then be reduced to present value using the discount rate provided under subsection (D)(2)(b). The resulting values for each millage-levying entity as a percentage of the present value total for all such entities The property taxes which would have been paid on the property if it was owned by the investor to each millage-levying entity as a percentage of the total of such property taxes for all such entities determines each entity's relative shares of each year's fee payment for all subsequent years of the agreement.

(2) For a project located in an industrial development park as defined in Section 4-1-170, distribution of the fee in lieu of taxes on the project must be made in the manner provided for by the agreement establishing the industrial development park.

(3) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes may use a portion of this revenue for the purposes outlined in Section 4-29-68 without the requirement of issuing special source revenue bonds.

(M) As a directly foreseeable result of negotiating the fee, gross revenue of a school district in which a project is located in any year a fee negotiated pursuant to this section is paid, may not be less than gross revenues of the district in the year before the first year for which a fee in lieu of taxes is paid. In negotiating the fee, the parties shall assume that the formulas for the distribution of state aid at the time of the execution of the inducement agreement must remain unchanged for the duration of the lease agreement.

(N) Projects on which a fee in lieu of taxes is paid pursuant to this section are considered taxable property at the level of the negotiated payments for purposes of bonded indebtedness pursuant to Sections 14 and 15 of Article X of the Constitution of this State, and for purposes of

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computing the index of taxpaying ability pursuant to Section 59-20-20(3). However, for a project located in an industrial development park as defined in Section 4-1-170, projects are considered taxable property in the manner provided in Section 4-1-170 for purposes of bonded indebtedness pursuant to Sections 14 and 15 of Article X of the Constitution of this State, and for purposes of computing the index of taxpaying ability pursuant to Section 59-20-20(3). Provided, however, that the computation of bonded indebtedness limitation is subject to the requirements of Section 4-29-68(E).

(O)(1)(a) Any corresponding interest in each of an inducement agreement, millage rate agreement, and lease agreement, and property to which the agreement relates, (collectively referred to as a `fee interest'). representing an investment of at least eighty-five million dollars (based on income tax basis without regard to depreciation, and regardless of whether such investment comprises all or part of a project), may be transferred to any other entity at any time. by an entity to any entity, whether or not such transferred entity is a member of the same controlled group of which the transferor entity is a members, and (n) any or all equity interests, in any partnership, corporation, or other association which properly files its South Carolina income tax returns as partnership or corporation and which has an interest in an inducement agreement, millage rate agreement, and lease agreement (such equity interest collectively and individually referred to as an `entity interest') may be transferred by any entity to any entity, whether or not such transferee entity is a member of the same controlled group of which the entity in which one or more interests is being transferred is a member, provided that the entity or entities whose entity interest is or are being transferred hold at least an eighty-five million dollar investment (based on income tax basis without regard to depreciation) in the project as of the time of the transfer.

(2) Except for transfers pursuant to subsections (P) or (Q), no transfer of a fee interest or entity interest may be undertaken:

(a) until twenty-four months after the project has been placed in service, or relevant portion thereof in the case of a project placed in service in more than one year; or

(b) within twenty-four months after a prior transfer of the fee interest or entity interest to be transferred.

Provided, however, the running of such applicable twenty-four month period shall be suspended for any period during which a transferor's (under subsection (O)(2)(a)) or transferee's (under subsection (O)(2)(b)) risk of loss with respect to the fee interest or entity interest to be transferred is in fact substantially diminished by:

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(i) the holding by any entity of a contractual right to require any transfer of such interest by an entity which is not a member of the transferor's (under subsection (O)(2)(a)) or transferee's (under subsection (O)(2)(b)) controlled group;

(ii) the holding by any entity which is not a member of the transferor's (under subsection (O)(2)(a)) or transferee's (under subsection (O)(2)(b)) controlled group of a right to acquire the interest; or

(iii) a short sale or any similar transaction with respect to the interest which is undertaken by the transferor (under subsection (O)(2)(a)) or transferee (under subsection (O)(2)(b)) which is not a member of any such transferee's or transferor's controlled group.

A single entity, or two or more entities which are members of a controlled group, may enter into any lending, financing, security or similar arrangement, or succession of such arrangements, with any financing entity, concerning all or part of a project and may enter into any sale-leaseback arrangement, including without limitation, an assignment, a sublease, or similar arrangement, or succession of such arrangements, with one or more financing entities, concerning all or part of a project, regardless of the identity of the income tax owner of the property which is subject to the fee payment under subsection (D)(2). Even though income tax basis is changed for income tax purposes, neither the original transfer to the financing entity nor the later transfer from the financing entity back to the original transferor or members of its controlled group, pursuant to terms in the sale-leaseback agreement, affects the amount of the fee due.

(3) All transfers undertaken with respect to the project to effect a financing of fee interests or entity interests authorized under subsection (O)(1) must meet the following requirements:

(a) The county must approve such transfer within six months prior to the transfer. The Department of Revenue and Taxation must receive notification in writing within sixty days after the transfer of the identity of each transferee and other information required by the department with the appropriate returns. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the department for late notification for up to ten thousand dollars a year or portion of a year up to a maximum penalty of one hundred twenty thousand dollars.

(b) The Department of Revenue and Taxation must receive notification in writing of the identity of each transferee and other information required by the Department of Revenue and Taxation within thirty days after the transfer becomes effective. The Department of

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Revenue and Taxation may extend the thirty-day period upon written request. Failure to meet this notice requirement will not adversely the fee, but a penalty may be assessed by the Department of Revenue and Taxation for late notification for up to ten thousand dollars a month or portion of a month, with the total penalty not to exceed one hundred twenty thousand dollars. If the financing entity is the income tax owner of property, either the financing entity is primarily liable for the fee as to that portion of the project to which the transfer relates with the original transferor remaining secondarily liable for the payment of the fee or the original transferor must agree to continue to be primarily liable for the payment of the fee as to that portion of the project to which the transfer relates.

(c) No election under Internal Revenue Code of 1986, as amended, Sections 338 or 754 may be made with respect to the transfer.

(4) All transfers of fee interests authorized under subsection (O)(1) must meet the following additional requirements:

(a) The transferor must pay the county any present value fee differential (as defined under subsection (O)(5) within ninety days after the transfer. Failure to make this payment will result in interest and penalties computed in the same manner and amounts applicable to property tax.

(b) Each transferee must agree to be bound by the applicable agreements constituting the fee arrangement as to that portion of the project to which the transfer relates.

(c) The income tax basis of property interests which are subject to the fee in the hands of the transferee immediately after such transfer (i) cannot exceed the original income tax basis of such property without regard to depreciation) in the hands of the transferor and (ii) cannot be less than the income tax bases of such property (taking depreciation into account) in the hands of the transferor immediately before transfer. The fee to be paid under subsection (D) with respect to such transferred property interests for the remaining term of the fee shall be recomputed using the transferee's income tax basis immediately after the transfer; the same millage rate and discount rate used by the transferor; and the fee payment method provided under subsection (D)(2)(a); provided, however, that if the pre-transfer fee payments were made under subsection (D)(2)(c), then post-transfer fee payments must be made under subsection (D)(2)(c), but without any present value method applicable to such payments. Before an investor may transfer an inducement agreement, millage rate agreement, lease agreement or the assets subject to the lease agreement, it must obtain the approval of the county with which it entered into the original inducement agreement, millage rate agreement, or lease

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agreement. However, no such approval is required in connection with financing-related transfers.

(5) The present value fee differential shall mean the amount by which the fee that would have been paid under subsection (D)(2)(a) with respect to the transferred fee interest until the time of the transfer exceeds the amount which was paid under subsection (D)(2)(b) or (D)(2)(c) until such time with respect to such fee interest. If the investor used the method provided in subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must be used to calculate the amount which would have been paid under subsection (D)(2)(a). If subsection (D)(2)(b) is not applicable to such fee interest, or if no present value fee computation was used under subsection (D)(2)(c), no present value fee differential shall be required to be paid on a transfer thereof.

(P) Reserved.

(1) Any interests in an inducement agreement, millage rate agreement, or lease agreement (collectively and individually referred to as a "group fee interest") may be transferred by any entity to:

(a) any corporation which is a member of the same controlled group as the transferring corporation;

(b) any corporation which is a member of the same controlled group as all of the partners comprising the transferring partnership;

(c) any partnership all of the partners of which are members of the same controlled group of which the transferring corporation is a member; and

(d) any partnership all of the partners of which are members of the same controlled group as all of the partners comprising the transferring partnership.

(2) Transfers of group fee interests authorized under subsection (P)(1) must meet the requirements set forth in subsection (O)(3) and (O)(4); provided, however, in connection with subsection (O)(4)(c), to the extent a present value fee payment computation was used by the transferor, the transferee may, if the county agrees, use a fee payment method based on any present value fee payment method provided under subsection (D)(2). In addition, such transfers must involve at least a ten million dollar portion of the project investment or proposed investment (based on income tax basis without regard to depreciation).

(3) Any transfer of an interest in an inducement agreement must include a transfer of a corresponding interest in a millage rate agreement, if any, and lease agreement, if any; any transfer of an interest in a millage rate agreement must include a transfer of a corresponding interest in an inducement agreement, and lease agreement, if any; and any transfer of

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an interest in a lease agreement must include a transfer of a corresponding interest in an inducement agreement and millage rate agreement.

(4) One or more members of a controlled group, or a partnership all of the partners of which are members of the same controlled group, having an interest in a fee may enter into a sublease, concerning some or all of the project, with any other member of such controlled group, or with any partnership all the partners of which are members of such controlled group, without adversely affecting the fee and without regard to the other provisions of this subsection (P); provided, however, that such sublease may not transfer income tax ownership (as defined under subsection (S)) to the portion of the project which is the subject of the sublease, unless the applicable provisions of subsection (P) have been met.

(Q) Reserved.

(1) Any or all equity interests in any partnership, corporation, or other association which properly files its South Carolina income tax returns as a partnership or corporation and which has an interest in an inducement agreement, millage rate agreement, lease agreement, or any or all of the foregoing (such equity interests collectively and individually referred to as a "group entity interest") may be transferred to:

(a) any corporation which is a member of the same controlled group as the corporation in which an interest is being transferred;

(b) any corporation which is a member of the same controlled group as all of the partners comprising the partnership in which an interest is being transferred;

(c) any partnership in which all of the partners are members of the same controlled group as the corporation in which an interest is being transferred; and

(d) any partnership in which all of the partners are members of the same controlled group as all of the partners comprising the partnership in which an interest is being transferred.

(2) Transfers of group entity interests authorized under subsection (Q)(1) must meet the requirements set forth in subsection (O)(3).
(R) For purposes of subsections (O)(1)(a) and (P), and subject to subsection (U), each transferee shall, with respect to a project which is the subject of a transfer, shall be considered to have made amounts of qualified investments represented by the property interest which is subject to the fee and which is transferred, without regard to depreciation.

(S) Reserved.

(1) Notwithstanding anything in subsections (O), (P), and (Q), a single entity, or two or more entities which are members of a controlled

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group, may enter into any lending, financing, security or similar arrangement, or succession of such arrangements, with any financing entity, concerning all or part of a project, provided that the income tax ownership of the property which is subject to the fee payment under subsection (D)(2) is held, by the time the fee payments relating to such property begin under subsection (D)(2), by:

(a) the entity, or one or more members of the controlled group, which entered into the inducement agreement with the county;

(b) one or more transferees permitted under subsection (O)(1)(a) or (P); or

(c) one or more of the entities referenced in items (a) and (b).

Without limiting the foregoing, pursuant to any such arrangement or arrangements, the inducement agreement may permit one or more financing entities: (i) to make investments on behalf of such income tax owner or owners which will qualify for the fee once the property acquired by such investment is transferred to the county and leased or subleased pursuant to the requirements of this section; (ii) to transfer title to property to the county; and (iii) to enter into a lease agreement with the county for the project or portion of the project, provided the property which is subject to the fee is leased or subleased, by the time the fee payments relating to such property begin under subsection (D)(2), to the entity or entities which will be treated as the income tax owners of the project. After the transfer of title to the county and before subsection (D)(2) fee payments begin, subsection (D)(1) fee payments must be made.

(2) Notwithstanding anything in subsections (B), (O), (P), (Q), (S)(1), and (U), a single entity, or two or more entities which are members of a controlled group (the "original transferor"), may enter into any sale-leaseback arrangement (including, without limitation, an assignment, a sublease, or similar arrangement), or succession of such arrangements, with one or more financing entities, concerning all or part of a project, regardless of the identity of the income tax owner of the property which is subject to the fee payment under subsection (D)(2), provided that such sale-leaseback is executed prior to or contemporaneously with the time that fee payments under subsection (D)(2) begin with respect to property which is the subject of a sale-leaseback. Even though income tax basis is changed for income tax purposes, neither the original transfer to the financing entity nor the later transfer from the financing entity back to the original transferor or members of its controlled group, pursuant to terms in the sale-leaseback agreement, will affect the amount of the fee due. Nothing in this subsection (S)(2) shall prohibit a sale-leaseback where income tax ownership of the property which is subject to the fee payment

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under subsection (D)(2) is held only by the entities identified in subsection (S)(1).

(3) All transfers undertaken with respect to the project to effect a financing authorized under subsection (S)(2) must meet the following requirements:

(a) The county must approve such transfer in advance.

(b) The Department of Revenue and Taxation must receive notification in writing of the identity of each transferee and other information required by the Department of Revenue and Taxation within thirty days after the transfer becomes effective. The Department of Revenue and Taxation may extend such thirty-day period upon written request. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the Department of Revenue and Taxation for late notification for up to ten thousand dollars a month or portion of a month up to a maximum penalty of one hundred twenty thousand dollars.

(c) If the financing entity is the income tax owner of property, the financing entity will be primarily liable for the fee as to that portion of the project to which the transfer relates. The original transferor must also agree to continue to be secondarily liable for the payment of the fee as to that portion of the project to which the transfer relates.

(d) Subsections (O) and (U) will apply to the extent:

(i) the financing entity transfers a fee interest to anyone other than the original transferor or one or more members of its controlled group, or

(ii) the lease to the original transferor is terminated and the fee interest is not transferred back to the original transferor or one or more members of its controlled group.

In addition, within ninety days of the occurrence of items (i) and (ii) in the immediate preceding sentence, the original transferor must pay the county any present value differential as defined in subsection (O)(5).

(4) For purposes of this subsection (S):

(a) The income tax owner of property shall mean the entity or entities which are entitled to depreciation deductions for such property for South Carolina income tax purposes.

(b) Financing entity shall include any entity or entities.

(c) Fee interest shall include any fee interest as defined in subsection (O) and any group fee interest as defined in subsection (P).

(5) The manner in which an arrangement is reported under generally accepted accounting principles shall not adversely affect the authorization of such an arrangement under this section.

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(T) No inducement agreement, millage rate agreement, or lease agreement, nor the rights of any entity pursuant to any such agreement, including without limitation the availability of the subsection (D)(2) fee, shall be adversely affected if the bonds issued pursuant to any such agreement are purchased by one or more of the entities which are or become parties to any such agreement.

(U) Notwithstanding any other provision of this section to the contrary, if at any time following the period provided in subsection (C)(2), the investment based on income tax basis without regard to depreciation falls below the eighty-five forty-five million dollar minimum investment to which the fee relates and is held by an entity or controlled group of entities, the fee provided in subsection (D)(2) is no longer available and the investor is required to make the payments which are due under Section 4-29-60 for the remainder of the lease period."

B.(1) Section 4-29-67(Z) of the 1976 Code, as added by Act 497 of 1994, is amended to read:

"(Z) Reserved. Notwithstanding any provision of Section 4-29-60 or this section:

(1) If at least two hundred new full-time jobs are created within the time period for qualifying expenditures set forth in subsection (I), the minimum level of investment required in order for property to qualify for the payment in lieu of taxes (fee) as provided in this section is sixty million dollars.

(2) If at least three hundred new full-time jobs are created within the time period for qualifying expenditures set forth in subsection (I), the minimum level of investment required in order for property to qualify for the payment in lieu of taxes (fee) as provided in this section is forty million dollars.

(3) If at least four hundred new full-time jobs are created within the time period for qualifying expenditures set forth in subsection (I), the minimum level of investment required in order for property to qualify for the payment in lieu of taxes (fee) as provided in this section is twenty million dollars.

(4) If the dollar amount in item (1), (2), or (3) applies, the applicable amount is substituted for each reference in this section to eighty-five million dollars.

(5) For purposes of this subsection, the terms `full-time' and `new job' are defined as provided in Section 12-7-1220."

(2) This item is effective January 1, 1996.

C. The provisions amending Section 4-29-67 of the 1976 Code contained in this section are effective for lease agreements entered into

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after December 31, 1995. The provisions affecting Section 4-29-67(B)(3), (H), and (O) of the 1976 Code are effective for lease agreements entered into before December 31, 1995, and the investor and a county having a lease agreement that was entered into before December 31, 1995, may amend the agreement to allow for the provisions in subsections (B)(3), (H), and (O). If an investor fails to qualify for the benefits provided under Section 4-29-67 of the 1976 Code because the investor fails to make the minimum investment required under that provision of law, then if and to the extent allowed pursuant to any applicable agreement between the company and county, the company is entitled to the benefits provided under Chapter 12, Title 4 of the 1976 Code.

SECTION 10. A. Section 12-6-2320(B) of the 1976 Code, as last amended by Act 32 of 1995, is further amended to read:

"(B) (1) For the purposes of this chapter, the department may enter into an agreement with the taxpayer establishing the allocation and apportionment of the taxpayer's income for a period not to exceed five years, if the following conditions are met:

(1) (a) the taxpayer is planning a new facility in this State or an expansion of an existing facility;

(2)(b) the taxpayer asks the department to enter into a contract under this subsection reciting an allocation and apportionment method; and

(3)(c) after reviewing the taxpayer's proposal and planned new facility or expansion, the Advisory Coordinating Council for Economic Development certifies that the new facility or expansion will have a significant beneficial economic effect on the region for which it is planned and that its benefits to the public exceed its costs to the public. It is within the Advisory Coordinating Council for Economic Development's sole discretion to determine whether a new facility or expansion has a significant economic effect on the region for which it is planned.

(2) For the purposes of this subsection the word `taxpayer' includes any one or more of the members of a controlled group of corporations authorized to file a consolidated return under Section 12-6-5020."

B. This section is effective April 4, 1995.

SECTION 11. A. Section 12-6-3360 of the 1976 Code, as last amended by an act of 1996 bearing ratification number 234, is further amended to read:

"Section 12-6-3360. (A) Taxpayers that operate manufacturing, tourism, processing, warehousing, distribution, certain health services, research and development, and corporate office facilities 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

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