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COMMITTEE REPORT
April 22, 2004
S. 1075
Introduced by Senators Short, Hayes, Hutto, Leventis, Peeler, Martin, Moore, Giese, Verdin, Fair, Reese, Setzler, O'Dell, Malloy, Knotts and Cromer
S. Printed 4/22/04--H. [SEC 4/26/04 11:26 AM]
Read the first time April 20, 2004.
To whom was referred a Bill (S. 1075) to amend Title 6, Code of Laws of South Carolina, 1976, relating to local governments, by adding Chapter 32 so as to enact the "South Carolina Textiles Communities Revitalization Act", 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. Title 6 of the 1976 Code is amended by adding:
Section 6-32-10. This chapter is known and may be cited as the 'South Carolina Textiles Communities Revitalization Act'.
Section 6-32-20. (A) The primary purpose of this chapter is to create a meaningful incentive for the renovation, improvements, and redevelopment of abandoned textile mill sites located in South Carolina.
(B) The abandonment of textile mill sites 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 mill sites pose safety concerns. A public and corporate purpose of the local governments will be served by restoring the 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 manufacturing related or owned facilities. The stable economic and physical development of these areas is endangered by the presence of these abandoned facilities as manifested by progressive and advanced deterioration of structures. As a result of the existence of these abandoned facilities, 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 and threatens the sound growth and the tax base of taxing districts in the 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 facilities.
Section 6-32-30. For the purposes of this chapter, unless the context requires otherwise:
(1) 'Abandoned' means that at least eighty percent of the facilities of the eligible site has been continuously closed to business or otherwise nonoperational for a period of at least one year immediately preceding the time at which the determination is to be made.
(2) 'Eligible site' means a site that is designed for use or has in fact been used as a textile manufacturing facility or uses ancillary to it and is located in South Carolina.
(3) 'Local taxing entities' means a county, municipality, school district, special purpose district, and any other entity or district with the power to levy ad valorem property taxes against the eligible site.
(4) '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 eligible site.
(5) 'Placed in service' means the date upon which the eligible site is suitable for occupancy for the purposes intended.
(6) 'Rehabilitation expenses' means the expenses incurred in the rehabilitation of the eligible site, excluding the cost of acquiring the eligible site or the cost of personal property maintained at the eligible site.
(7) 'State historic credit' means the South Carolina historic rehabilitation tax credit under Section 12-6-3535.
Section 6-32-40. (A) Subject to the terms and conditions of this chapter, a taxpayer who improves, renovates, or redevelops an eligible site is eligible for one of the following two tax credits:
(1) a credit against real property taxes levied by local taxing entities equal to twenty-five percent of the rehabilitation expenses made to the eligible site times the local taxing entity ratio of each local taxing entity that has consented to the tax credit pursuant to subsection (B) below; or
(2) a credit against any taxes to which the state historic credit may apply equal to twenty-five percent of the rehabilitation expenses.
(B) If the taxpayer elects to receive the credit pursuant to subsection (A)(1) the following provisions shall apply:
(1) The municipality or, if the eligible site is located in an unincorporated area, the county first by resolution shall determine the eligibility of the eligible site and the eligibility of the proposed project seeking the credit. Any proposed project beginning after July 1, 2004, must be approved by a majority vote of the local governing body. The foregoing determinations and the municipality's or county's approval of the eligible site and proposed project must be by ordinance and public hearing. The ordinance shall provide for the credit to be taken as a credit against up to seventy-five percent of the real property taxes due on the site each year not to exceed eight years. Before determining the eligibility of the proposed eligible site, the municipality or county shall make a finding that the credit will not violate any covenant, representation, or warranty in any of its tax increment financing transactions.
(2) Not less than forty-five days before holding the public hearing contemplated in subsection (B)(1), the governing body of the municipality or county shall give notice to all affected local taxing entities where the eligible site is located of its intention to grant a tax credit for an eligible site and the amount of the tax credit proposed to be granted. 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, provided that the actual tax credit granted is equal to or less than the tax credit stated in the notice of public hearing.
(3) The tax credit shall vest in the taxpayer in the tax year when the eligible site is placed in service and may be carried forward, in whole or in part, for up to eight years following that date.
(C) If the taxpayer elects to receive the credit pursuant to subsection (A)(2), the following provisions apply:
(1) The entire credit may not be taken for the taxable year in which the eligible site is placed in service but must be taken in equal installments over a five-year period beginning with the year in which the property is placed in service. Any unused portion of a credit installment may be carried forward for the succeeding five years.
(2) The credit earned pursuant to this subsection by an '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.
(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 pursuant to Subchapter K of the Internal Revenue Code 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. As used in this subsection, the term 'partner' means a partner, member, or owner of an interest in the pass-through entity, as applicable.
(4) The credit earned pursuant to this subsection is in addition to and does not offset the state historic credit in the event the eligible site also is eligible for the state historic credit.
(D) The taxpayer shall elect the mode of credit pursuant to subsection (A)(1) or subsection (A)(2) by providing written notification of its intent to the South Carolina Department of Commerce prior to the date the eligible site is placed in service; provided, that, if the taxpayer did not obtain the approvals contained in subsection (B) or fails to affirmatively make the election prescribed in this chapter before the date the eligible site is placed in service, the taxpayer is considered to have elected to receive the credit provided in subsection (A)(2) without the need for a written election.
Section 6-32-50. The provisions of Chapter 31 of this title also shall apply to this chapter, except the requirements of Section 6-31-40 which may not apply.
SECTION 2. Chapter 32 of Title 6 of the 1976 Code, as added by the provisions of Section 1 of this act, is repealed on July 1, 2014.
SECTION 3. This act takes effect July 1, 2004, and applies for rehabilitation expenses incurred, without regard to the date such expenses were incurred, for eligible sites placed in service on or after July 1, 2004. /
Renumber sections to conform.
Amend title to conform.
ROBERT W. HARRELL, JR. for Committee.
REVENUE IMPACT 1/
This bill, as amended, is expected to decrease general fund income tax revenue by an estimated $900,000 in FY 2004-05 and by $1,800,000 in FY 2005-06. This bill is expected to decrease local property tax revenue by an estimated $282,000 in FY 2004-05 and by $564,000 in FY 2005-06.
Explanation
This bill, as amended, allows a taxpayer who renovates an abandoned textile manufacturing facility to take property tax and income tax credits under certain conditions. The property tax credit is equal to 25% of the rehabilitation expenses times the applicable millage rate. A municipality or county must hold a public hearing and pass an ordinance to grant this property tax credit. The ordinance can allow for a property tax credit of up to seventy-five percent of the property taxes due on the site each year for up to eight years. Local taxing entities can choose not to participate in granting this property tax credit. The other possible tax credit that could be claimed is an additional income tax credit against any taxes to which the state historic tax credit may apply that is equal to the lesser of the net present value of the local incentive granted by the municipality or county or 15% of the rehabilitation expenses. This credit is in addition to and does not offset the state historic credit in the event the eligible site is also eligible for the state historic credit. According to information from the Department of Archives and History, the average renovation of an income producing property takes at least one year to complete. Based on additional information from the Department of Archives and History, we estimate that two properties at a renovation cost of $15,000,000 per project will be placed in service in 2005. Multiplying an estimated project cost of $15,000,000 by the 15% credit generates a total income tax credit of $2,250,000 per project. Because this credit must be taken in equal installments over five years, this would reduce general fund income tax revenue by $450,000 in FY 2004-05 per project and by equal amounts in future years until the full credit is exhausted. The property tax credit is equal to 25% of the rehabilitation costs times the applicable millage rate. Multiplying an estimated project cost of $15,000,000 by the 25% credit generates $3,750,000 times an average millage rate of .300 yields a total property tax credit of $1,125,000 per project. Because this credit can be taken for up to 8 years, we estimate this will reduce property taxes paid by an estimated $141,000 per project in FY 2005-06. In total, this bill, as amended is expected to decrease general fund income tax revenue by an estimated $900,000 in FY 2004-05 and by $1,800,000 in FY 2005-06. This bill is expected to decrease local property tax revenue by an estimated $282,000 in FY 2004-05 and by $564,000 in FY 2005-06. This bill would take effect July 1, 2004.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND TITLE 6, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO LOCAL GOVERNMENTS, BY ADDING CHAPTER 32 SO AS TO ENACT THE "SOUTH CAROLINA TEXTILES COMMUNITIES REVITALIZATION ACT" INCLUDING PROVISIONS TO PROVIDE PROPERTY TAX CREDITS OR INCOME AND OTHER TAX CREDITS FOR REHABILITATION EXPENSES MADE TO ELIGIBLE SITES WHICH HAVE BEEN USED AS A TEXTILE MANUFACTURING FACILITY OR FOR ANCILLARY PURPOSES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 6 of the 1976 Code is amended by adding:
Section 6-32-10. This chapter is known and may be cited as the 'South Carolina Textile Communities Revitalization Act'.
Section 6-32-20. (A) The primary purpose of this chapter is to create a meaningful incentive for the renovation, improvements, and redevelopment of abandoned textile mill sites.
(B) The abandonment of textile mill sites 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 mill sites pose safety concerns. A public and corporate purpose of the local governments will be served by restoring the 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 manufacturing related or owned facilities. The stable economic and physical development of these areas is endangered by the presence of these abandoned facilities as manifested by progressive and advanced deterioration of structures. As a result of the existence of these abandoned facilities, 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 and threatens the sound growth and the tax base of taxing districts in the 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 facilities.
Section 6-32-30. For the purposes of this chapter, unless the context requires otherwise:
(1) 'Abandoned' means that at least eighty percent of the facilities of the eligible site has been continuously closed to business or otherwise nonoperational for a period of at least one year immediately preceding the time at which the determination is to be made.
(2) 'Eligible site' means a site that is designed for use or has in fact been used as a textile manufacturing facility or uses ancillary to it.
(3) 'Local taxing entities' means a county, municipality, school district, special purpose district, and any other entity or district with the power to levy ad valorem property taxes against the eligible site.
(4) '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 eligible site.
(5) 'Net present value' means a net present value established by using a discount rate equivalent to the yield in effect for new or existing United States Treasury bonds of similar maturity as published during the month in which the tax credit is granted. If no yield is available for the month in which the tax credit is granted, the last published yield for the appropriate maturity must be used. If there are no bonds of appropriate maturity available, bonds of different maturities may be averaged to obtain the appropriate maturity.
(6) 'Placed in service' means the date upon which the eligible site is suitable for occupancy for the purposes intended.
(7) 'Rehabilitation expenses' means the expenses incurred in the rehabilitation of the eligible site, excluding the cost of acquiring the eligible site or the cost of personal property maintained at the eligible site.
(8) 'State historic credit' means the South Carolina historic rehabilitation tax credit under Section 12-6-3535.
Section 6-32-40. (A) Subject to the terms and conditions of this chapter, a taxpayer who improves, renovates, or redevelops an eligible site is eligible to receive the tax credit under this subsection. The credit granted by this subsection is a credit against real property taxes levied by local taxing entities equal to twenty-five percent of the rehabilitation expenses made to the eligible site times the local taxing entity ratio of each local taxing entity that has consented to the tax credit pursuant to subsection (B) below.
(B) If the taxpayer receives the credit pursuant to subsection (A) the following provisions shall apply:
(1) The municipality or, if the eligible site is located in an unincorporated area, the county first by resolution shall determine the eligibility of the eligible site and the eligibility of the proposed project seeking the credit. The municipality's or county's granting of the tax credit pursuant to subsection (A) above shall be by ordinance and public hearing. The ordinance shall provide for the credit to be taken as a credit against up to seventy-five percent of the real property taxes due on the site each year not to exceed eight years. Before determining the eligibility of the proposed eligible site, the municipality or county shall make a finding that the credit will not violate any covenant, representation, or warranty in any of its tax increment financing transactions.
(2) Not less than forty-five days before holding the public hearing contemplated in subsection (B)(1), the governing body of the municipality or county shall give notice to all affected local taxing entities where the eligible site is located of its intention to grant a tax credit for an eligible site and the amount of the tax credit proposed to be granted. 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, provided that the actual tax credit granted is equal to or less than the tax credit stated in the notice of public hearing.
(3) The tax credit shall vest in the taxpayer in the tax year when the eligible site is placed in service and may be carried forward, in whole or in part, for up to eight years following that date.
(C)(1) Subject to the terms and conditions of this section, an eligible taxpayer who improves, renovates, or redevelops an eligible site shall be eligible to receive a credit against any taxes to which the state historic tax credit may apply that is equal to the lesser of the net present value of the local incentive granted by the municipality or county in (2)(a) through (e) below or fifteen percent of the rehabilitation expenses.
(2) In order for a taxpayer to receive a state tax credit under this subsection, the municipality or county where the eligible site is located must first have committed to at least one of the following:
(a) granting to the taxpayer the tax credit pursuant to subsection (A);
(b) granting to the taxpayer historic rehabilitation property tax abatements for the eligible site as provided in Section 4-9-195;
(c) if the eligible site is in or benefits a tax increment financing district, investing in publicly-owned infrastructure and improvements with tax increment revenues or financing to benefit the eligible site;
(d) grants to the taxpayer for the rehabilitation of the eligible site; or
(e) loans from a community development corporation acting on behalf of a municipality or county to the taxpayer for the rehabilitation of the eligible site.
(3) The entire credit may not be taken for the taxable year in which the eligible site is placed in service but must be taken in equal installments over a five-year period beginning with the year in which the property is placed in service. Any unused portion of a credit installment may be carried forward for the succeeding five years.
(4) The credit earned pursuant to this subsection by an '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.
(5) The credit earned pursuant to this subsection by a general partnership, limited partnership, limited liability company, or any other entity taxed as a partnership pursuant to Subchapter K of the Internal Revenue Code 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. As used in this subsection, the term 'partner' means a partner, member, or owner of an interest in the pass-through entity, as applicable.
(6) The credit earned pursuant to this subsection is in addition to and does not offset the state historic credit in the event the eligible site also is eligible for the state historic credit.
(D) Applications for the state tax credit under subsection (C) must be made by a sponsoring municipality or county to the Coordinating Council for Economic Development. The Coordinating Council for Economic Development shall grant or deny the matching state tax credit based on the coordinating council's certification that the required local incentive of subsection (C)(2) has been committed to the eligible site by the municipality or county.
Section 6-32-50. The provisions of Chapter 31 of this title also shall apply to this chapter, except the requirements of Section 6-31-40 which may not apply.
Section 6-32-60. Notwithstanding the provisions of Section 6-31-150, this chapter is severable from Section 6-31-140."
SECTION 2. This act takes effect July 1, 2004, and applies to expenditures made on and after July 1, 2002.
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