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Bill Number: 3459 Ratification Number: 266 Act Number 173 Introducing Body: House Subject: Fee in lieu of taxes
(A173, R266, H3459)
AN ACT TO AMEND SECTION 4-29-67, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE FEE IN LIEU OF TAXES FOR INDUSTRIAL REVENUE PROJECTS VALUED AT EIGHTY-FIVE MILLION DOLLARS OR MORE WHICH ARE FINANCED BY INDUSTRIAL REVENUE BONDS, SO AS TO PROVIDE THAT A FEE IN LIEU OF TAXES EQUAL TO THE AMOUNT OF THE TAX ON THE UNDEVELOPED PROPERTY IS REQUIRED FOR YEARS BEFORE THE COMPLETION OF THE PROJECT, TO PROVIDE AN ADDITIONAL ELEMENT IN THE CALCULATION OF THE FEE BY USING AN APPLICABLE MILLAGE RATE THAT EVERY FIFTH YEAR INCREASES OR DECREASES IN STEP WITH THE ACTUAL MILLAGE RATE APPLICABLE FOR THE PRECEDING FIVE YEARS IN THE DISTRICT WHERE THE PROJECT IS LOCATED, TO PROVIDE THAT THE RESULTS OF THE DETERMINATION OF MINIMUM PAYMENTS FOR AFFECTED SCHOOL DISTRICTS MUST BE DIRECTLY FORESEEABLE, TO PROVIDE THAT CALCULATION OF THE FEE IN LIEU OF TAXES MAY NOT INCLUDE THE EXEMPTION ALLOWED FOR CORPORATE HEADQUARTERS FACILITIES, TO PROVIDE A FIVE-YEAR PERIOD FOR A PROJECT TO MEET THE MINIMUM INVESTMENT REQUIREMENTS, TO PROVIDE FOR A FEE IN LIEU OF TAXES PLUS INTEREST WHEN A PROJECT FAILS TO MEET THE MINIMUM INVESTMENT REQUIREMENT IN A TIMELY MANNER, AND TO PROVIDE THE DISCOUNT RATE THAT MUST BE USED TO DETERMINE NET PRESENT VALUE FOR PURPOSES OF CALCULATING THE FEE IN LIEU OF TAXES.
Be it enacted by the General Assembly of the State of South Carolina:
Fee in lieu of taxes
SECTION 1. Section 4-29-67 of the 1976 Code, as added by Act 487 of 1988, is amended to read:
"Section 4-29-67. (A) Notwithstanding the provisions of Section 4-29-60, in a financing agreement in the form of a lease or a lease purchase, for a project involving an initial investment of at least eighty-five million dollars, the lease or lease purchase agreement may provide for a payment in lieu of taxes as provided in this section.
(B) The agreement must provide for:
(1) a payment equal to the taxes that would otherwise be due on the undeveloped property if it were taxable;
(2) an annual payment for not more than twenty years determined in accordance with one of the following:
(a) a predetermined annual payment in an amount not less than the ad valorem taxes that would be due on the project if it were taxable, but using an assessment ratio of not less than six percent, and a millage rate not less than the rate applicable at the time of execution of the agreement, and a fair market value estimate as determined by the South Carolina Tax Commission using original cost for the real property and original cost less allowable depreciation for the personal property as provided in Section 12-37-930;
(b) an annual payment based on any alternative agreement yielding a net present value of the sum of the fees for the life of the agreement not less than the net present value of the fee schedule as calculated pursuant to subitem (a);
(c) an annual payment using a formula that results in a fee not less than the amount required pursuant to subitem (a), except that every fifth year the applicable millage rate is allowed to increase or decrease in step with the average actual millage rate applicable for the preceding five years in the district where the project is located.
(3) At the conclusion of the payments determined pursuant to items (1) and (2), an annual payment equal to the taxes due on the project if it were taxable.
(4) As a directly foreseeable result of negotiating the fee, gross revenues of a school district in which a project is located in any year a fee negotiated pursuant to this subsection 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 agreement must remain unchanged for the duration of the agreement.
(C) Distribution of the payment 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. Millage rates must be determined for school and other purposes as if the property were taxable.
(D) Calculations pursuant to subsection (B)(2) must be made on the basis that the property, if taxable, is allowed all applicable ad valorem tax exemptions except the exemption allowed pursuant to Section 3(g) of Article X of the Constitution of this State and the exemption allowed pursuant to Section 12-37-220B(32).
(E) Projects on which payments in lieu of taxes are made pursuant to this section are considered taxable property at the level of the negotiated payment 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).
(F) From the date of execution of the agreement the lessee has no more than five years in which to meet the minimum investment level required by this section. If this requirement is not timely met, all property financed under the lease agreement reverts retroactively to the tax treatment required pursuant to Section 4-29-60 with any unpaid taxes due thereby subject to interest as provided in Section 12-54-20.
(G) Net present value calculations performed pursuant to subsection (B)(2)(b) of this section must use a discount rate identical to the interest rate effective for United States Treasury bonds of similar maturity as published during the month the agreement is executed.
(H) The minimum amount of the initial investment provided in subsection (A) of this section may not be reduced except by a special vote which, for purposes of this section, means an affirmative vote in each branch of the General Assembly by two-thirds of the members present and voting, but not less than three-fifths of the total membership in each branch."
SECTION 2. This act takes effect upon approval by the Governor.