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H. 4875
STATUS INFORMATION
General Bill
Sponsors: Rep. Kirsh
Document Path: l:\council\bills\agm\19155mm08.doc
Companion/Similar bill(s): 1226
Introduced in the House on March 25, 2008
Currently residing in the House Committee on Ways and Means
Summary: Tax credits
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number ------------------------------------------------------------------------------- 3/25/2008 House Introduced and read first time HJ-8 3/25/2008 House Referred to Committee on Ways and Means HJ-9
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
TO AMEND SECTION 12-6-3360, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CREDIT AGAINST THE STATE'S INCOME, BANK, OR INSURANCE PREMIUM TAX FOR THE CREATION OF NEW FULL-TIME JOBS, SO AS TO PROVIDE FOR AN ENHANCED CREDIT FOR HEADQUARTERS GENERALLY AND SPECIFICALLY FOR COMPANIES WHO CREATE FEWER JOBS BUT AT A HIGHER RATE OF COMPENSATION; TO AMEND SECTION 12-6-3410, AS AMENDED, RELATING TO THE TAX CREDIT FOR ESTABLISHING OR EXPANDING HEADQUARTERS IN THIS STATE, SO AS TO CHANGE "CORPORATION" TO "TAXPAYER" REFLECTING THAT THE QUALIFYING HEADQUARTERS DO NOT HAVE TO BE CORPORATE, AND TO DEFINE "TAXPAYER"; TO AMEND SECTION 12-10-80, AS AMENDED, RELATING TO THE ENTERPRISE ZONE ACT OF 1995, SO AS TO DELETE THE REFERENCE TO "CORPORATE" IN CONNECTION WITH HEADQUARTERS; TO AMEND SECTION 12-20-105, AS AMENDED, RELATING TO TAX CREDITS FOR UTILITIES INFRASTRUCTURES, SO AS TO CLARIFY THAT THE CREDITS MAY BE USED ONLY IN CONNECTION WITH INDUSTRIAL OR COMMERCIAL PARKS, OR BOTH, USED FOR ECONOMIC DEVELOPMENT, TO CLARIFY THAT WASTEWATER AND ENVIRONMENTAL COSTS ARE PART OF THE INFRASTRUCTURE, AND TO RAISE THE AGGREGATE AMOUNT OF THE CREDIT; TO AMEND SECTIONS 12-44-30, 4-12-10, AND 4-29-67, ALL AS AMENDED, ALL RELATING TO DEFINITIONS IN CONNECTION WITH VARIOUS FEES IN LIEU OF TAX PROVISIONS, ALL SO AS TO INCLUDE IN THE DEFINITION OF "PROJECT" AN AIRPLANE HANGERED OR USING AN AIRPORT IN A COUNTY, IF THE COUNTY CONSENTS; AND TO AMEND SECTIONS 12-44-120, 4-12-30, AND 4-29-67, ALL AS AMENDED, ALL RELATING TO A COUNTY'S PRIOR APPROVAL OR LATER RATIFICATION OF TRANSFER OF ITS AGREEMENTS IN CONNECTION WITH A FEE IN LIEU OF TAXES TRANSACTION, SO AS TO PROVIDE THREE DIFFERENT METHODS FOR EVIDENCING ITS APPROVAL OR RATIFICATION.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-6-3360(M)(13) of the 1976 Code, as last amended by Act 394 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-halfquarter 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 twice one 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 of 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)."
SECTION 2. Section 12-6-3410 of the 1976 Code, as last amended by Act 386 of 2006, is further amended to read:
"Section 12-6-3410. (A) A corporation taxpayer establishing a corporate headquarters in this State, or expanding or adding to an existing corporate headquarters, is allowed a credit against any tax due pursuant to Section 12-6-530 this chapter, Section 12-11-20, or Section 12-20-50 as set forth in this section.
(B) In order to To qualify for this credit, each of the following criteria must be satisfied:
(1) The qualifying real property costs of the corporate headquarters establishment, expansion, or addition must be at least fifty thousand dollars. Qualifying real property costs are:
(a) costs incurred in the design, preparation, and development of establishing, expanding, or adding to a corporate headquarters,; and
(b)(i) direct construction costs,; or
(ii) with respect to leased facilities, direct lease costs during the first five years of operations for the corporate headquarters.
(2) The headquarters establishment, expansion, or addition must result in the creation of:
(a) at least forty new jobs performing headquarters-related functions and services or research and development-related functions and services. These jobs must be permanent, full-time positions located in this State,; and
(b) at least twenty of the above-referenced new jobs must be classified as headquarters staff employees.
(C) The amount of the credit is equal to twenty percent of the qualifying real property costs listed in subsection (B)(1).
(D) A headquarters establishment, expansion, or addition which meets the criteria of subsection (B) of this section is entitled to an additional credit equal to twenty percent of cost for tangible personal property if the following conditions are met:
(1) the personal property is:
(a) capitalized as personal property for income tax purposes under the Internal Revenue Code; and
(b) purchased for the establishment, expansion, or addition of a corporate headquarters, or for the establishment, expansion, or addition of a research and development facility which is part of the same corporate project as the headquarters establishment, addition, or expansion; and
(c) used for corporate headquarters-related functions and services or research and development-related functions and services in South Carolina.
(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) headquarters related functions and services; or
(ii) research and development related functions and services.
(b) The seventy-five jobs must have an average cash compensation level of more than one and one-half times 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.
(E)(1)(a) For facilities which that are constructed, the credit can only may be claimed only for the taxable year when the headquarters establishment, expansion, or addition, and the research and development facility establishment, expansion, or addition, in the case of corporations taxpayers qualifying under pursuant to subsection (D), is placed in service for federal income tax purposes. For construction projects completed in phases and placed in service for federal income tax purposes in more than one taxable year, the corporation can taxpayer may claim the credit on the South Carolina income tax return for the taxable year in which property, which that qualifies for the credit, is placed in service. Credits cannot must not be obtained for costs incurred more than three taxable years after the taxable year in which the first property for which the credit is claimed is placed in service. Notwithstanding any other provisions of this subsection, if the entire project is not completed by the end of the three taxable years, the corporation taxpayer may claim the credit for all property placed in service within the time limitation set forth in the preceding sentence. The credit may not be claimed for personal property which that is replacing personal property for which the credit can may be claimed. The department may, for good cause, may extend the time for incurring additional costs and for claiming the credit if the project is not completed within the time period allowed by this subsection. For purposes of this subsection, the term 'property' includes qualifying real property and, where the conditions of subsection (D) are met, personal property.
(b) for For leased real property, the credit must be claimed in the taxable year in which the first direct lease costs are incurred.
(2) The corporation taxpayer must meet the staffing requirements of subsections (B)(2) and, if applicable, (D)(2), by the end of the second taxable year following the last taxable year for which the credit is claimed. The corporation taxpayer must have documented plans to meet the initial staffing requirements at the time the credit is claimed. If the corporation taxpayer fails to meet the staffing requirements within the time required by this subsection, the corporation taxpayer must increase its tax liability for the current taxable year by an amount equal to the amount of credit, or any a portion of the credit for which the corporation taxpayer would not qualify, which was used to reduce tax in the earlier years.
(F) The credit provided in this section is nonrefundable, but an unused credit may be carried forward for ten years. An unused credit may be carried forward fifteen years if the criteria set forth in subsection (D)(2) are met. In addition, a taxpayer may assign its rights to the unused credit to a succeeding taxpayer if the taxpayer transfers all or substantially all of the assets of the taxpayer or all or substantially all of the assets of a trade, business, or operating division of a taxpayer to the succeeding taxpayer, and the succeeding taxpayer maintains the corporate headquarters of the taxpayer. No A credit may must not be claimed for a taxable year during which the taxpayer or succeeding taxpayer fails to meet the qualifying employment requirements provided in this section and the carry forward carryforward period is not extended for any year in which the credit may must not be claimed for failure to meet the employment requirements. The credit may be claimed for a taxable year in the unextended carry forward carryforward period if the taxpayer or succeeding taxpayer requalifies for the credit by meeting the employment requirements during that taxable year.
(G) If a fee-in-lieu arrangement under pursuant to Section 4-29-67 is entered into with respect to all or part of property involving a corporate headquarters, and the corporation taxpayer claiming the credit provided under pursuant to this section is treated as the owner of the property for federal income tax purposes, then the corporation taxpayer must be treated as the owner of the property for purposes of the credit provided by this section.
(H) To the extent that this credit applies to the cost of certain property, the basis of the property for South Carolina income tax purposes must be reduced by the amount of the credit claimed with respect to the property. This basis reduction does not reduce the basis or limit or disallow any depreciation allowable under the law of this State for other than income tax purposes, even if the depreciation is based upon or otherwise relates to income tax depreciation including, without limitation, basis or depreciation which is allowable under pursuant to this title for property tax purposes. If the corporation taxpayer fails to meet the staffing requirements of subsection (E)(2), the corporation taxpayer may increase the basis of the property by the amount of the original basis reduction with regard to that property in the year in which the credit is recaptured.
(I) The amount of a credit allowed under pursuant to this section must be reduced by the amount of any past-due debt owed this State by the taxpayer.
(J) As used in this section:
(1) 'Corporate headquarters 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 either on a regional, national, or global basis. A corporate headquarters must be a regional corporate headquarters, a national corporate headquarters, or global corporate headquarters as defined below; provided, however except that, for taxpayers which that are subject to tax under pursuant to Chapter 11 of Title 12, a corporate headquarters must be a regional corporate headquarters:
(a) National corporate headquarters must be the sole corporate headquarters in the nation and handle headquarters-related functions at least on a national basis. A national headquarters is considered to handle headquarters-related functions on a national basis from this State if the corporation taxpayer has a facility in this State from which the corporation taxpayer engages in interstate commerce by providing goods or services for customers outside of this State in return for compensation.
(b) Regional corporate headquarters must be the sole corporate headquarters within the region and must handle headquarters-related functions on a regional basis. For purposes of this section, 'region' or 'regional' means a geographic area comprised of either:
(i) at least five states, including this State; or
(ii) two or more states, including this State, if the entire business operations of the corporation taxpayer are performed within fewer than five states; provided, however, except that, with respect to taxpayers which that are subject to tax under pursuant to Chapter 11 of Title 12, the requirement that 'the entire business operations of the corporation taxpayer are performed within fewer than five states', is replaced with 'if all branches of the taxpayer, as defined below, are physically located in fewer than five states'. For taxpayers which are A taxpayer that is subject to tax under pursuant to Chapter 11 of Title 12, such taxpayer must have two or more branches, as that term is defined in Section 34-25-10(8), in each state within its region.
(c) A 'company business unit' is an organizational unit of a corporation taxpayer or bank and is defined by the particular product or category of products it sells.
(2) 'New job' means a job created by an employer in this State at the time a new facility, expansion, or addition is initially staffed, but does not include a job created when an employee is shifted from an existing location in this State to work in a new or expanded facility. An employee may be employed at a temporary location in this State pending completion of the new facility, expansion, or addition.
(3) 'Full-time' means a job requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of corporate taxpayer operations or a job requiring a minimum of thirty-five hours of an employee's time for a week for a year in which the employee was initially hired for or transferred to the corporate headquarters or research and development facility in this State.
(4) 'Headquarters-related functions and services' are those functions involving financial, personnel, administrative, legal, planning, information technology, or similar business functions.
(5) 'Headquarters staff employees' means executive, administrative, or professional workers performing headquarters-related functions and services.
(a) An executive employee is a full-time employee in which, at least eighty percent of his whose business functions involve the management of the enterprise and directing the work of at least two employees. An executive employee has the authority to hire and fire or has the authority to make recommendations related to hiring, firing, advancement, and promotion decisions, and an executive employee must customarily must exercise discretionary powers.
(b) An administrative employee is a full-time employee who is not involved in manual work and whose work is directly related to management policies or general headquarters operations. An administrative employee must customarily must exercise discretion and independent judgment.
(c) A professional employee is an employee whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This knowledge is characterized by a prolonged course of specialized study. The work must be original and creative in nature, and the work cannot must not be standardized over a specific period of time. The work must require consistent exercise of discretion and the employee must spend at least eighty percent of the time performing headquarters-related functions and services.
(6) 'Research and development' means laboratory, scientific, or experimental testing and development related to new products, new uses for existing products, or improving existing products, but 'research. 'Research and development' does not include efficiency surveys, management studies, consumer surveys, economic surveys, advertising, promotion, banking, or research in connection with literary, historical, or similar projects.
(7) 'Research and development facility' means the building or buildings or portion of a building where research and development functions and services are physically located.
(8) 'Direct lease costs' are cash lease payments. The term does not include any accrued, but unpaid, costs.
(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. 'Taxpayer' means a sole proprietor, partnership, corporation of any classification, limited liability company, or association taxable as a business entity. If treated as a partnership, a limited liability company that qualifies for a credit under pursuant to 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 is allowed the credit in the manner provided by Section 12-6-3310. Each member of a limited liability company treated like a partnership that receives a credit pursuant to this section may carry any unused credit forward as provided in subsection (F). The A limited liability company may not carry forward a credit that passes through to its members."
SECTION 3.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."
SECTION 4. Section 12-20-105(B)-(E) of the 1976 Code, as last amended by Act 116 of 2007, is 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, a business, commercial, or industrial park, or both, 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, 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, a business, commercial, or industrial park, or both, 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 Mense Conveyances.
(D) A company is not allowed the credit provided by this section for actual expenses it incurs in the construction and operation of any building or infrastructure it owns, leases, manages, or operates.
(E) The maximum aggregate credit that may be claimed in any tax year by a single company is three five hundred thousand dollars."
SECTION 5. 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."
SECTION 6. 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."
SECTION 7. 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."
SECTION 8. 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."
SECTION 9. 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."
SECTION 10. This act takes effect upon approval by the Governor and applies to property tax years beginning in 2008.
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