Bill 3666

                    Current Status

Bill Number:               3666
Ratification Number:       268
Act Number                 175
Introducing Body:          House
Subject:                   Jobs tax credit revisions

(A175, R268, H3666)

AN ACT TO AMEND SECTION 12-7-1220, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO JOBS TAX CREDIT, SO AS TO FURTHER PROVIDE FOR THIS CREDIT AND FOR THE ENTITIES AND AREAS THAT QUALIFY FOR THIS CREDIT, PROVIDE THAT THE CREDIT ALSO APPLIES TO INSURANCE PREMIUM TAXES, AND PROVIDE FOR DEFINITIONS TO BE USED FOR PURPOSES OF THIS CREDIT.

Be it enacted by the General Assembly of the State of South Carolina:

Jobs tax credit revisions

SECTION 1. Section 12-7-1220 of the 1976 Code (formerly Section 12-7-616, redesignated by Act 170 of 1987) is amended to read:

"Section 12-7-1220. (A) Annually by December thirty-first, using the most current data available from the South Carolina Employment Security Commission and the United States Department of Commerce, the Tax Commission shall rank and designate the state's counties as provided in this section. The sixteen counties in this State having a combination of the highest unemployment rate and lowest per capita income for the most recent thirty-six month period with equal weight being given to each category are designated less developed counties. The fifteen counties in the State with a combination of the next highest unemployment rate and next lowest per capita income for the most recent thirty-six month period with equal weight being given to each category are designated moderately developed counties. The fifteen counties in the State with a combination of the lowest unemployment rate and the highest per capita income for the most recent thirty-six month period with equal weight being given to each category are designated developed counties. Corporations which create new full-time jobs qualify for the appropriate tax credit as provided in subsections (B), (C), and (D). The designation by the commission is effective for corporate tax years which begin after the date of designation. For corporations which plan a significant expansion in their labor forces at a South Carolina location, the appropriate commission shall prescribe certification procedures to insure that the corporations can claim credits in future years without regard to whether or not a particular county is removed from the list of less developed or moderately developed counties.

(B) Corporations operating manufacturing, processing, warehousing, distribution, research and development, and corporate office facilities in counties designated by the commission as less developed are allowed a job tax credit for taxes imposed by Section 12-7-230 and for insurance premium taxes imposed pursuant to Chapter 7 of Title 38 equal to one thousand dollars annually for each new full-time employee job for five years beginning with years two through six after the creation of the job. The number of new full-time jobs must be determined by comparing the monthly average number of full-time employees subject to South Carolina income tax withholding in the applicable county for the taxable year with the corresponding period of the prior taxable year. Only those corporations that increase employment by ten or more in a less developed county are eligible for the credit. Credit is not allowed during any of the five years if the net employment increase falls below ten. The appropriate commission shall adjust the credit allowed each year for net new employment fluctuations above the minimum level of ten.

(C) Corporations operating manufacturing, processing, warehousing, distribution, research and development, and corporate office facilities in counties that have been designated by the commission as moderately developed are allowed a job tax credit for taxes imposed by Section 12-7-230 and for insurance premium taxes imposed pursuant to Chapter 7 of Title 38 equal to six hundred dollars annually for each new full-time employee job for five years beginning with years two through six after the creation of the job. The number of new full-time jobs must be determined by comparing the monthly average number of full-time employees in the applicable county subject to South Carolina income tax withholding for the taxable year with the corresponding period of the prior taxable year. Only those corporations that increase employment by eighteen or more in a county that has been designated moderately developed are eligible for the credit. The credit is not allowed during any of the five years if the net employment increase falls below eighteen. The appropriate commission shall adjust the credit allowed each year for net new employment fluctuations above the minimum level of eighteen.

(D) Corporations operating manufacturing, processing, warehousing, distribution, research and development, and corporate office facilities in counties designated by the commission as developed are allowed a job tax credit for taxes imposed by Section 12-7-230 and for insurance premium taxes imposed pursuant to Chapter 7 of Title 38 equal to three hundred dollars annually for each new full-time employee job for five years beginning with years two through six after the creation of the job. The number of new full-time jobs must be determined by comparing the monthly average number of full-time employees in the applicable county subject to South Carolina income tax withholding for the taxable year with the corresponding period of the prior taxable year. Only those corporations that increase employment by fifty or more in a county that has been designated developed are eligible for the credit. The credit is not allowed during any of the five years if the net employment increase falls below fifty. The appropriate commission shall adjust the credit allowed each year for net new employment fluctuations above the minimum level of fifty.

(E) Tax credits for five years for the taxes imposed by Section 12-7-230 and for insurance premium taxes imposed pursuant to Chapter 7 of Title 38 must be awarded for additional new full-time jobs created by corporations qualified under subsections (B), (C), and (D) of this section. Additional new full-time jobs must be determined by subtracting highest total employment of the corporation during years two through six, or whatever portion of year two through six completed, from the total increased employment. The appropriate commission shall adjust the credit allowed in the event of employment fluctuations during the additional five years of credit.

(F) The sale, merger, acquisition, or bankruptcy of any corporation may not create new eligibility in any succeeding corporation, but any unused job tax credit may be transferred and continued by any transferee of the corporation. The appropriate commission shall determine whether or not qualifying net increases or decreases have occurred and may require reports, promulgate regulations, and hold hearings as needed for substantiation and qualification.

(G) Any credit claimed under this section but not used in any taxable year may be carried forward for ten years from the close of the tax year in which the credit is earned by the corporation but the credit established by this section taken in any one tax year must be limited to an amount not greater than fifty percent of the taxpayer's state corporate income tax or premium tax liability which is attributable to income or premiums derived from operations in the State for that year.

(H) For the purpose of this section, the term:

(1) 'New job' means any job created by an employer in South Carolina at the time a new facility or an expansion is initially staffed, but does not include a job created when an employee is shifted from an existing South Carolina location to a new or expanded facility.

(2) '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 company 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 South Carolina facility.

(3) 'Corporation' means a business entity which is subject to South Carolina taxes as contained in Section 12-7-230 and Chapter 7 of Title 38.

(4) 'Manufacturing facility' means an establishment where tangible personal property is produced or assembled.

(5) 'Processing facility' means an establishment engaged in services such as manufacturing-related, computer-related, communications-related, energy-related, or transportation-related services, but the term 'processing facility' does not include an establishment where retail merchandise or retail services are sold directly to retail customers.

(6) 'Warehousing facility' means an establishment where tangible personal property is stored, but the term 'warehousing facility' does not include any establishment which operates as a location where retail sales of tangible personal property are made to retail customers.

(7) 'Distribution facility' means an establishment where shipments of tangible personal property are processed for delivery to customers, but the term 'distribution facility' does not include an establishment which operates as a location where retail sales of tangible personal property are made directly to retail customers. For the purpose of this definition, a 'distribution facility' includes establishments which process customer sales orders by mail, telephone, or electronic means, if the establishment also processes shipments of tangible personal property to customers and if at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers outside of South Carolina.

(8) 'Research and development facility' means an establishment engaged in laboratory, scientific, or experimental testing and development related to new products, new uses for existing products, or improving existing products, but a 'research and development facility' does not include an establishment engaged in efficiency surveys, management studies, consumer surveys, economic surveys, advertising, promotion, or research in connection with literary, historical, or similar projects.

(9) 'Corporate office facility' means the location where corporate managerial, professional, technical, and administrative personnel are domiciled and employed, and where corporate financial, personnel, legal, technical, support services, and other business functions are handled. Support services include, but are not limited to, claims processing, data entry, word processing, sales order processing, and telemarketing. A 'corporate office facility' does not include establishments engaged in the direct sale of retail merchandise or retail services to retail customers. For the purpose of this definition, 'sales order processing' facilities include establishments which process customer sales orders by mail, telephone, or electronic means, if the establishments also process shipments of tangible personal property to customers and if at least seventy-five percent of the dollar amount of goods sold through the facility are sold to customers outside of South Carolina.

(10) The terms 'retail sales' and 'tangible personal property', for purposes of this section, have those meanings as contained in Chapter 35 of Title 12."

Time effective

SECTION 2. This act takes effect upon approval by the Governor.