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COMMITTEE REPORT
April 18, 2017
S. 446
Introduced by Senators Leatherman, Setzler, Williams and Campbell
S. Printed 4/18/17--S.
Read the first time February 21, 2017.
To whom was referred a Bill (S. 446) to amend Section 12-6-3585, Code of Laws of South Carolina, 1976, relating to the Industry Partnership Fund tax credit, so as to increase the aggregate, 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. A. Section 12-6-3585(A), (E), and (F) of the 1976 Code are amended to read:
"(A) For each tax year beginning after 2016, a taxpayer may claim as a credit against state income tax imposed by Chapter 6, Title 12, bank tax imposed by Chapter 11, Title 12, license fees imposed by Chapter 20 of Title 12, or insurance premiums imposed by Chapter 7, Title 38, or any combination of them, one hundred percent of an amount contributed to the Industry Partnership Fund at the South Carolina Research Authority (SCRA), or an SCRA-designated affiliate, or both, pursuant to Section 13-17-88(E), up to a maximum credit of six hundred fifty thousand dollars for a single taxpayer, not to exceed an aggregate credit of two million dollars for all taxpayers in tax year 2006; up to a maximum credit of one million three hundred thousand dollars for a single taxpayer, not to exceed an aggregate credit of four million dollars for all taxpayers in tax year 2007; and up to a maximum credit of two million dollars for a single taxpayer, not to exceed an aggregate credit of six million dollars for all taxpayers for each tax year beginning after December 31, 2007 two hundred fifty thousand dollars for a single taxpayer, not to exceed an aggregate credit of twelve million dollars for all taxpayers. For purposes of determining a taxpayer's entitlement to the credit for qualified contributions for a given tax year in which more than the applicable aggregate annual limit on the credit is contributed by taxpayers for that year, taxpayers who have made contributions that are intended to be qualified contributions earlier in the applicable tax year than other taxpayers must be given priority entitlement to the credit. The SCRA shall certify to taxpayers who express a bona fide intention of making one or more qualified contributions as to whether the taxpayer is entitled to that priority.
(E) 'Taxpayer' means an individual, corporation, partnership, trust, bank, insurance company, or other entity having a state income or insurance premium tax or license fee liability who has made a qualified contribution. However, for purposes of this section, any member of the SCRA board of trustees or the SC Launch!, Inc. board of directors is not considered a taxpayer, and may not claim the credit allowed by this section.
(F) To qualify for the credit, the taxpayer shall retain a form provided by SCRA identifying the taxpayer and the year and amount of credit for which the taxpayer qualifies. The Department of Revenue may require a copy of the form be attached to the taxpayer's income tax return or be provided otherwise to the department. Also, to qualify for the credit, a taxpayer who is certified by SCRA under subsection (A) as having priority entitlement to the credit for an applicable year must make a commitment satisfactory to SCRA, at such time as SCRA may deem appropriate but not later than April 1st of such year, to make the contribution during such year."
B. Notwithstanding the increase in the annual maximum credit amount for all taxpayers from six million dollars to twelve million dollars in Section 12-6-3585, as amended by this SECTION, the increased maximum credit amount shall be phased in in two equal and cumulative installment amounts beginning in tax years beginning after 2016.
SECTION 2. Section 12-6-3585 of the 1976 Code is amended by adding an appropriately lettered subsection to read:
"( ) By March fifteenth of each year, the South Carolina Research Authority shall issue a report to the Chairman of the Senate Finance Committee, the Chairman of the House Ways and Means Committee, and the Governor detailing the amount contributed to the Industry Partnership Fund in the previous tax year that entitled the taxpayer to the credit allowed by this section, the taxpayers that received the credit, and the manner in which such contributions were expended or are expected to be expended. The report also must be posted in a conspicuous place on the website maintained by the South Carolina Research Authority."
SECTION 3. This act takes effect upon approval by the Governor and applies to tax years beginning after 2016, except that the Section 1 amendment to Section 12-6-3585 (F) and Section 2 shall not take effect until January 1, 2018. /
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN, SR. for Committee.
Explanation of Fiscal Impact
Introduced on February 21, 2017
State Expenditure
The Department of Revenue indicates that there will be no expenditure impact to the general fund, federal funds, or other funds from this bill. The Department can administer the legislative changes with existing resources.
State Revenue
Section 1. The Industry Partnership Fund was first available to taxpayers in tax year 2006. Pursuant to Section 12-6-3585, a taxpayer is allowed a nonrefundable credit against corporate and individual income taxes, bank taxes, license fees, or insurance premium taxes, or any combination of them equal to one hundred (100) percent of the taxpayer's qualified contributions to the Industry Partnership Fund at the South Carolina Research Authority, or a Research Authority designated affiliate, or both. Any unused credit may be carried forward for ten (10) years from the end of the tax year in which the qualifying contribution is made. The credit is subject to the following limitations:
For tax year 2006, the maximum credit is $650,000 for a single taxpayer, and $2,000,000 for all taxpayers,
For tax year 2007, the maximum credit is $1,300,000 for a single taxpayer, and $4,000,000 for all taxpayers, and
For tax years beginning after December 31, 2007, the maximum credit is $2,000,000 for a single taxpayer and $6,000,000 for all taxpayers.
This bill would amend the Industry Partnership Fund program limitations and maximum aggregate credit limitations for tax years beginning after December 31, 2016 up to a maximum credit of $2,000,000 for a single taxpayer, not to exceed an aggregate credit of $12,000,000 for all taxpayers for each tax year. The table below describes the Industry Partnership Fund program limitations and the aggregate tax credits claimed by all taxpayers in each tax year of the fund's history.
Industry Partnership Fund - Program Limitations and Tax Credits Claimed
Aggregate
Maximum Credit Aggregate Credit Credits Claimed
Tax Year Single Taxpayer All Taxpayers By AllTaxpayers
2006 $650,000 $2,000,000 $843,997
2007 $1,300,000 $4,000,000 $2,862,707
2008 $2,000,000 $6,000,000 $3,717,351
2009 $2,000,000 $6,000,000 $3,422,718
2010 $2,000,000 $6,000,000 $4,602,476
2011 $2,000,000 $6,000,000 $5,509,008
2012 $2,000,000 $6,000,000 $5,981,826
2013 $2,000,000 $6,000,000 $5,729,854
2014 $2,000,000 $6,000,000 $5,551,151
2015 $2,000,000 $6,000,000 N/A
2016 $2,000,000 $6,000,000 N/A
2017 & beyond $2,000,000 $12,000,000 N/A
Historical Total $38,221,088
Notes: N/A - Not Available
Sources: Board of Economic Advisors; S.C. Department of Revenue
After the first tax year the tax credit was made available, the aggregate tax credit limitation for all taxpayers was increased the next two tax years to $6,000,000 by tax year 2008. The aggregate tax credit limitation for all taxpayers has not changed since tax year 2008. Over the next six tax years, the aggregate tax credits claimed by all taxpayers have approached the maximum tax credit limitation of $6,000,000. By raising the maximum aggregate tax credit limitation to $12,000,000 for all taxpayers, the Industry Partnership Fund will be able to attract additional investment for use at the South Carolina Research Authority or its affiliates. The maximum tax credit available for a single taxpayer, however, would be unchanged at $2,000,000 per taxpayer.
The historical table above suggests that it takes some time for aggregate tax credits claimed to reach a new maximum tax credit threshold; therefore, it is not unreasonable to expect that annual contributions may increase in the future with taxpayers claiming an additional $1,000,000 in tax credits per tax year. This bill, therefore, would reduce corporate and individual income taxes, bank taxes, license fees, or insurance premium taxes by an estimated $1,000,000 in FY2017-18, and each fiscal year thereafter, until the maximum aggregate tax credits claimed reaches the maximum threshold of $12,000,000 in the future.
Section 2. This act takes effect upon approval by the Governor and applies to tax years beginning after 2016.
Frank A. Rainwater, Executive Director
Revenue and Fiscal Affairs Office
TO AMEND SECTION 12-6-3585, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE INDUSTRY PARTNERSHIP FUND TAX CREDIT, SO AS TO INCREASE THE AGGREGATE ANNUAL CREDIT AMOUNT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-6-3585(A) of the 1976 Code is amended to read:
"(A) A taxpayer may claim as a credit against state income tax imposed by Chapter 6, Title 12, bank tax imposed by Chapter 11, Title 12, license fees imposed by Chapter 20 of Title 12, or insurance premiums imposed by Chapter 7, Title 38, or any combination of them, one hundred percent of an amount contributed to the Industry Partnership Fund at the South Carolina Research Authority (SCRA), or an SCRA-designated affiliate, or both, pursuant to Section 13-17-88(E), up to a maximum credit of six hundred fifty thousand dollars for a single taxpayer, not to exceed an aggregate credit of two million dollars for all taxpayers in tax year 2006; up to a maximum credit of one million three hundred thousand dollars for a single taxpayer, not to exceed an aggregate credit of four million dollars for all taxpayers in tax year 2007; and up to a maximum credit of two million dollars for a single taxpayer, not to exceed an aggregate credit of six million dollars for all taxpayers for each tax year beginning after December 31, 2007; and up to a maximum credit of two million dollars for a single taxpayer, not to exceed an aggregate credit of twelve million dollars for all taxpayers for each tax year beginning after December 31, 2016. For purposes of determining a taxpayer's entitlement to the credit for qualified contributions for a given tax year in which more than the applicable aggregate annual limit on the credit is contributed by taxpayers for that year, taxpayers who have made contributions that are intended to be qualified contributions earlier in the applicable tax year than other taxpayers must be given priority entitlement to the credit. The SCRA shall certify to taxpayers who express a bona fide intention of making one or more qualified contributions as to whether the taxpayer is entitled to that priority."
SECTION 2. This act takes effect upon approval by the Governor and applies to tax years beginning after 2016.
This web page was last updated on April 18, 2017 at 6:38 PM