Current Status Introducing Body:House Bill Number:3828 Primary Sponsor:Wilkins Type of Legislation:GB Subject:Industrial development projects Residing Body:House Companion Bill Number:595 Date Tabled:19930511 Computer Document Number:JIC/5725HC.93 Introduced Date:19930401 Last History Body:House Last History Date:19930511 Last History Type:Tabled Scope of Legislation:Statewide All Sponsors:Wilkins Felder Clyborne Kirsh McKay Snow J. Bailey Holt Hallman Gonzales Cato Fulmer Harrell Wells Thomas A. Young Baker Walker Jaskwhich Vaughn Haskins Inabinett Hutson R. Young Law Breeland Allison Wright Riser Barber Williams Quinn Marchbanks Harrison Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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3828 House 19930511 Tabled
3828 House 19930506 Debate adjourned until
Tuesday, 19930511
3828 House 19930422 Committee Report: Favorable 30
with amendment
3828 House 19930401 Introduced, read first time, 30
referred to Committee
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Indicates Matter Stricken
Indicates New Matter
COMMITTEE REPORT
April 22, 1993
H. 3828
Introduced by REPS. Wilkins, Felder, Clyborne, Kirsh, McKay, Snow, J. Bailey, Holt, Hallman, Gonzales, Cato, Fulmer, Harrell, Wells, Thomas, A. Young, Baker, Walker, Jaskwhich, Vaughn, Haskins, Inabinett, Hutson, R. Young, Law, Breeland, Allison, Wright, Riser, Barber, Williams, Quinn, Marchbanks and Harrison
S. Printed 4/22/93--H.
Read the first time April 1, 1993.
To whom was referred a Bill (H. 3828), to amend Section 4-29-67, as amended, Code of Laws of South Carolina, 1976, relating to the fee in lieu of taxes allowed certain industrial development projects, 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, beginning on page 25, by striking SECTION 2 and inserting:
/SECTION 2. Nothing in this act may be construed as amending or repealing any provision of Section 39, Act 361 of 1992.
SECTION 3. If any provision of this act or its application to any circumstance is held by a court of competent jurisdiction to be invalid for any reason, this holding does not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to this end, the provisions of this act are severable.
SECTION 4. This act takes effect upon approval by the Governor and applies prospectively to any project for which an inducement agreement was not entered into before the effective date of this act; provided, however, that projects with respect to which an inducement agreement, millage rate agreement, or both, has been entered into before the effective date of this act are entitled but not required to use the provisions of Section 4-29-67 of the 1976 Code, as amended by this act, and also one or more of the provisions of the following subsections of Section 4-29-67 of the 1976 Code as in existence before the amendments contained in this act: (B); (F)(1)(c); (F)(2); (G); and (I); and provided further that investors having a lease agreement which was entered into before the effective date of this act meeting the eighty-five million dollar minimum level of investment required under Section 4-29-67(C) within five years from the date the lease agreement was signed shall have seven years from the date the lease agreement was signed to complete the investment, unless a longer period is otherwise stipulated in the lease agreement. The last sentence of Section 4-29-67(I) of the 1976 Code as amended by this act is not applicable to any project with respect to which an inducement agreement was entered into or an inducement or similar resolution was adopted by the governing body of the county before the effective date of this act; provided, however, that if an inducement agreement has not been entered into before the effective date of this act, such an agreement must be entered into with respect to any such project within one year of the effective date of this act in order for pre-inducement agreement project expenditures to qualify for the fee provided in subsection (D)(2). Any lease which was entered into with a county prior to the effective date of this act, in order to preserve the eligibility of certain property for subsequent inclusion in a fee-in-lieu of taxes arrangement, and which lease provides for lease payments within two dollars of what the property taxes on the leased property would otherwise have been, shall not be considered a lease agreement of any kind for purposes of beginning the running of any time period provided under Section 4-29-67 of the 1976 Code, including but not limited to, the five, seven, and twenty year periods provided therein. For purposes of this SECTION 4, references to inducement or millage rate agreements shall be considered to exclude any amendments or replacements of such agreements./
Renumber sections to conform.
Amend title to conform.
WILLIAM D. BOAN, for Committee.
This Bill amends Section 4-29-67, as amended, relating to the fee in lieu of taxes allowed certain industrial development projects, so as to revise the manner in which and conditions under which fees in lieu of taxes are authorized, including a requirement that the minimum eighty-five million dollar investment threshold for the fee arrangement may not be reduced except by a special vote of the General Assembly, defined as an affirmative vote of two-thirds of the members of each House present and voting but not less than three-fifths of the total membership of each House, and the transferability of an interest in a fee in lieu of taxes agreement.
This Bill would have no effect on state or local revenue.
This legislation expands the provisions for allowing members of a controlled group of corporations or partnerships to make a single investment which qualifies for the fee. Members of the controlled group who will be using the fee no longer have to be identified at the time of the inducement agreement.
The legislation also allows members of the same controlled group to transfer property among members and have the property continue to qualify for the fee.
Thirdly, subject to certain limitations, the legislation allows a corporation which qualifies for the fee to sell assets which are subject to the fee and allow the purchaser to receive the fee on those assets provided the $85 million investment is maintained.
Finally, the legislation allows corporations to enter into certain sale-leaseback transactions and maintain the fee whether or not the sale-leaseback transfers ownership for income tax purposes.
Approved By:
A. Crawford Clarkson, Jr.
S.C. Tax Commission
TO AMEND SECTION 4-29-67, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE FEE IN LIEU OF TAXES ALLOWED CERTAIN INDUSTRIAL DEVELOPMENT PROJECTS, SO AS TO REVISE THE MANNER IN WHICH AND CONDITIONS UNDER WHICH FEES IN LIEU OF TAXES ARE AUTHORIZED, INCLUDING A REQUIREMENT THAT THE MINIMUM EIGHTY-FIVE MILLION DOLLAR INVESTMENT THRESHOLD FOR THE FEE ARRANGEMENT MAY NOT BE REDUCED EXCEPT BY A SPECIAL VOTE OF THE GENERAL ASSEMBLY, DEFINED AS AN AFFIRMATIVE VOTE OF TWO-THIRDS OF THE MEMBERS OF EACH HOUSE PRESENT AND VOTING BUT NOT LESS THAN THREE-FIFTHS OF THE TOTAL MEMBERSHIP OF EACH HOUSE, AND THE TRANSFERABILITY OF AN INTEREST IN A FEE IN LIEU OF TAXES AGREEMENT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 4-29-67 of the 1976 Code, as last amended by Act 361 of 1992, is further amended to read:
"Section 4-29-67. (A) Notwithstanding the provisions of Section 4-29-60, in the case of a financing agreement in the form of a lease one or a more lease purchase, agreements for a project qualifying under subsection (B), the county and the investor may enter into an inducement agreement which provides for payment in lieu of taxes (fee) as provided in this section. All references in this section to a lease agreement shall be deemed also to refer to a lease purchase agreement.
(B) In order for property to qualify for the fee as provided in subsection (D)(2):
(1) Title to the property must be held by the county or in the case of a project located in an industrial development park as defined in Section 4-1-170 title may be held by more than one county provided each county is a member of the industrial development park. Any real property transferred to the county must include a legal description and plat of the property.
(2) The investment must be a project which is located in a single county or an industrial development park as defined in Section 4-1-170. A project located on a contiguous tract of land in more than one county, but not in such an industrial development park, may qualify for the fee provided (a) the counties agree on the terms of the fee and the distribution of the fee payment; (b) the minimum millage rate cannot be lower than the millage rate applicable to the county in which the greatest amount of investment occurs; and (c) all such counties must be parties to all agreements establishing the terms of the fee.
(3) The minimum level of investment must be at least eighty-five million dollars and must be invested within the time period provided in subsection (C).
(4) (a) Except as provided in subsection (B)(4)(b), the investment must be made by a single taxpayer in the form of a corporation or a partnership. entity. For purposes of this section, (i) any partnership or other association which properly files its South Carolina income tax returns as a partnership for South Carolina income tax purposes will be treated as a single entity and as a partnership, and (ii) any corporation or other association which properly files its South Carolina income tax returns as a corporation for South Carolina income tax purposes will be treated as a single entity and as a corporation.
(b)(b)(i) The members of the same controlled group of corporations as defined in Section 1563 of the Internal Revenue Code of 1986 can qualify for the fee if the combined investment in the county by the members meets the minimum investment requirements. The members whose investments will be used to meet the minimum level of investment must all be parties to any agreements providing the terms for payment of the fee. The county and the members who are part of the inducement agreement may agree that any investments by other members of the controlled group within the time period periods provided in subsection subsections (C)(1) and (C)(2) shall qualify for the payment regardless of whether the member was part of the inducement agreement. Members; provided however, in order to qualify for the fee, such other members of the controlled group which are not parties to the inducement agreement must invest at least ten million dollars in must be specifically approved by the county and must notify the Tax Commission that the investment is subject to the fee before the execution of the lease agreement covering the investment by the member. The investments under subsection (B)(4)(b) must be within the same county. agree to be bound by agreements with the county relating to the fee; provided, however, such controlled group members need not be bound by agreements, or portions of agreements, to the extent such agreements do not affect the county; provided, further, that with the consent of the county, such members will not be bound by agreements or portions of agreements which do affect the county. Except as otherwise provided in subsection (B)(2), the investments under this subsection (B)(4)(b) must be within the same county or industrial park. Any controlled group member which is claiming the fee must invest at least ten million dollars in the county or industrial park.
In order to qualify under this provision, investors claiming the fee must be members of the same controlled group at the time of the inducement agreement and all lease agreements which are executed by the parties
(ii) The Tax Commission must be notified in writing of all members which have investments subject to the fee before or within thirty days after the execution of the lease agreement covering the investment by the member. The Tax Commission may extend the thirty-day period upon written request. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the Tax Commission for late notification for up to ten thousand dollars a month or portion of a month with the total penalty not to exceed one hundred twenty thousand dollars. Members of the controlled group must provide the information considered necessary by the Tax Commission to ensure that the investors are part of a controlled group.
(iii) If at any time the controlled group or any former member (who has left the controlled group) no longer has the minimum eighty-five million dollars of investment (without regard to depreciation), that group or former member no longer holding the minimum amount of investment as provided in subsection (B)(3) (without regard to depreciation) will no longer qualify for the fee.
(iv) For purposes of this section, `controlled group' or `controlled group of corporations' shall have the meaning provided under Section 1563(a) of the Internal Revenue Code as defined in Chapter 7 of Title 12 as of the date of the execution of the inducement agreement (without regard to amendments or replacements thereof), without regard to subsection `(b)' of such Section 1563.
(C) (1) From the end of the property tax year in which the investor and the county execute an inducement agreement, the investor has seven years in which to enter into an initial lease agreement with the county.
(2) From the end of the property tax year in which the investor and the county execute the initial lease or lease purchase agreement, the investor has five years in which to complete its investment for purposes of qualifying for this section. If the investor does not anticipate completing the project within five years, the investor may apply to the county before the end of the five-year period for an extension of time to complete the project. If the county agrees to grant the extension, the county must do so in writing and a copy must be delivered to the Tax Commission within thirty days of the date the extension was granted. The extension may not exceed two years in which to complete the project.
There is no extension allowed for the five-year period in which to meet the minimum level of investment. If the minimum level of investment is not met within five years, all property financed under the lease agreement or agreements reverts retroactively to the payments required by Section 4-29-60. The difference between the fee actually paid by the investor and the payment which is due under Section 4-29-60 is subject to interest as provided in Section 12-43-305.
Unless property qualifies as replacement property under a contract provision enacted pursuant to subsection (F)(2), any property placed in service after the five-year period, or seven years in the case of a project which has received an extension, is not part of the fee agreement under subsection (D)(2) and is subject to the payments required by Section 4-29-60 if the county has title to the property, or to property taxes as provided in Chapter 37 of Title 12 if the investor has title to the property.
(2)(3) The annual fee provided by subsection (D)(2) is available for no more than twenty years. For projects which are completed and placed in service during more than one year, each year's investment may be subject to the fee in subsection (D)(2) for twenty years to a maximum total of twenty-seven years for the fee for a single project which has been granted an extension. Replacement property as defined in subsection (F)(2) is entitled to the fee payment for the period of time remaining on the fee for the property which it is replacing.
(D) The inducement agreement must provide for fee payments, to the extent applicable, as follows:
(1) (a) before property is placed in service which qualifies under subsection (B), Any property, title to which is transferred to the county, will be subject, before being placed in service, to an annual fee payment equal to the property taxes that would have been due on any previously taxed property had it remained taxable. as provided in Section 4-29-60.
(b) on undeveloped property, Any undeveloped land, title to which is transferred to the county, will be subject, before being developed and placed in service, to an annual fee payment equal to the property taxes that would have been due on any previously taxed property had it remained taxable. as provided in Section 4-29-60.
(c) The time during which fee payments are made under subsection (D)(1) Section 4-29-60 will not be considered part of the maximum period for the fee periods provided in subsection (C)(2) and (C)(3), and no lease shall be considered an `initial lease agreement' for purposes of this section unless and until the first day of the calendar year for which a fee payment is due under subsection (D)(2) in connection with such lease.
(2) After property qualifying under subsection (B) is placed in service, an annual fee payment determined in accordance with one of the following is due:
(a) an annual payment in an amount not less than the property 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 fixed millage rate as provided in subsection (G), and a fair market value estimate determined by the South Carolina Tax Commission as follows:
(i) for the real property using the original cost, and income tax basis for South Carolina income tax purposes without regard to depreciation (provided, however, if real property is constructed for the fee or is purchased in an arm's length transaction, fair market value will be deemed to equal the original income tax basis, otherwise the Tax Commission will determine fair market value by appraisal); and
(ii) for personal property using the original cost(ii) for personal property using the original income tax basis for South Carolina income tax purposes less depreciation allowable for property tax purposes, except that the investor is not entitled to any extraordinary obsolescence deduction.
(b) an annual payment based on any alternative arrangement 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 under subsection (D)(2)(a). Net present value calculations performed under this subsection must use a discount rate identical equivalent to the interest rate yield in effect for new or existing United States Treasury bonds of similar maturity as published during the month in which the inducement agreement is executed. If no interest rate yield is available for the month in which the inducement agreement is executed, the last published rate 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.
(c) an annual payment using a formula that results in a fee not less than the amount required pursuant to subsection (D)(2)(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 in the district where the project is located based on the preceding five-year period.
(3) At the conclusion of the payments determined pursuant to items (1) and (2) of this subsection, an annual payment equal to the taxes due on the project as if it were taxable. When the property is no longer subject to the fee under subsection (D)(2), the fee or property taxes must be assessed:
(a) with respect to real property, based on the fair market value as of the latest reassessment date for similar taxable property; and
(b) with respect to personal property, based on the then depreciated value applicable to such property under the fee, and thereafter continuing with the South Carolina property tax depreciation schedule.
(E) Calculations pursuant to subsection (D)(2) must be made on the basis that the property, if taxable, is allowed all applicable property tax exemptions except the exemption allowed under Section 3(g) of Article X of the Constitution of this State and the exemption allowed pursuant to Section 12-37-220B(32) and (34).
(F) With regard to calculation of the fee provided in subsection (D)(2), the inducement agreement may provide for the disposal of property and the replacement of property subject to the fee as follows:
(1) (a) If an investor disposes of property subject to the fee, the fee must be reduced by the amount of the fee applicable to that property.
(b) Property is disposed of only when it is scrapped or sold in accordance with the lease agreement.
(c) (i) If the investor used any method to compute the fee other than that provided in subsection (D)(2)(a), the fee on the property which was disposed of must be recomputed in accordance with subsection (D)(2)(a) and to the extent that the amount which would have been paid under subsection (D)(2)(a) exceeds the fee actually paid by the investor, the investor must pay the difference in the manner provided in subsection (F)(1)(c)(ii) with the next fee payment due after the property is disposed of. If the investor used the method provided in subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must be used to calculate the amount which would have been paid under subsection (D)(2)(a).
(ii) If the investor replaces the property which was disposed of under subsection (F)(2), then the difference calculated in subsection (F)(1)(c)(i) may be paid using the same present value structure used to calculate the fee for the replacement property. If the fee payment for the replacement property is calculated using subsection (D)(2)(a), the difference may be paid using a present value method which results in equal payments over the remaining life of the fee. If when replacing the property the investor does not choose to pay the difference over the remaining life of the fee, the difference must be paid with the next fee payment. If the investor does not replace the property which has been disposed of, the investor shall pay the difference calculated in subsection(F)(1)(c)(i) with the next fee payment.
(d) If at any time following the period provided in subsection (C), the investment based on income tax basis with no deduction for depreciation falls below the eighty-five million dollar minimum investment, the fee provided in subsection (D)(2) is no longer available and the investor is required to make the payments which are due under Section 4-29-60 for the remainder of the lease period.
(e) (d) If there is no provision in the agreement dealing with the disposal of property in accordance with this subsection, the fee remains fixed and no adjustment to the fee is allowed for disposed property.
(2) Any property which is placed in service as a replacement for property which is subject to the fee payment may become part of the fee payment as provided in this item:
(a) Replacement property does not have to serve the same function as the property it is replacing. Replacement property qualifies for fee treatment provided in subsection (D)(2) only up to the original income tax basis of fee property which is being disposed of in the same property tax year. More than one piece of property can replace a single piece of property. To the extent that the income tax basis of the replacement property exceeds the original income tax basis of the property which it is replacing, the excess amount is subject to payments as provided in Section 4-29-60. Replacement property is entitled to the fee payment for the period of time remaining on the twenty year fee period for the property which it is replacing; provided, however, that where a single piece of property replaces two or more pieces of property, such fee period shall be measured from the earliest of the dates on which the replaced pieces of property were placed in service.
(b) The new replacement property which qualifies for the fee provided in subsection (D)(2) is recorded using its income tax basis and the fee is calculated using the millage rate and assessment ratio provided on the original fee property. If the investor uses the method of making the payment provided in subsection (D)(2)(b) with either a fixed millage rate, or a changing millage rate as provided in subsection (D)(2)(c) if the fee on the original investment uses that method, then the investor and the county shall negotiate the method of calculating the present value of the fee payments for each year remaining in the fee period. This method must be provided to the Tax Commission at the time information concerning the calculation of the original fee payment is provided to the Tax Commission. If a method of calculating the The fee payment for replacement property is not negotiated, then the method of calculating the payment must be based on subsection (D)(2)(a) or (D)(2)(c), if the investor originally used this method, without regard to present value.
(c) In order to qualify as replacement property title to the replacement property must be held by the county.
(d) If there is no provision in the fee inducement agreement dealing with replacement property, any property placed in service after the five-year period, or seven years in the case of a project which has received an extension, is not part of the fee agreement under subsection (D)(2) and is subject to the payments required by Section 4-29-60 if the county has title to the property, or to property taxes as provided in Chapter 37 of Title 12 if the investor has title to the property.
(G) (1) The county and the investor may enter into an agreement to establish the millage rate (millage rate agreement) for purposes of calculating payments under subsection (D)(2)(a) and the first five years under subsection (D)(2)(c). This millage rate agreement must be executed on the date of the inducement agreement or anytime thereafter up to and including the date of the initial lease agreement. This millage rate agreement may be a separate agreement or may be made a part of either the inducement agreement or the initial lease agreement.
(2) The millage rate cannot be lower than the cumulative property tax millage rate legally levied by or on behalf of all taxing entities within which the subject property is to be located which is the latest such cumulative rate at the time the millage agreement is executed, regardless of the tax year to which that property tax millage applies. If no millage rate agreement is signed cumulative rate applicable on the thirtieth day of June preceding the calendar year in which the millage rate agreement is executed. If no millage rate agreement is executed before the date of the initial lease agreement, the millage rate is deemed to be the existing cumulative property tax millage rate on the date applicable on the thirtieth day of June preceding the calendar year in which the initial lease agreement is executed by both the parties.
(H) The investor and the county may amend the terms of their inducement agreement as it concerns the fee payment, except with regard to the minimum millage rate(1) Upon agreement of the parties, and except as provided in subsection (G) and the discount rate, at any time before the initial lease agreement date. The contract provisions concerning the fee payment may not be amended (H)(2), an inducement agreement, a millage rate agreement or both may be amended or terminated and replaced with regard to all matters, including, but not limited to, the addition or removal of controlled group members; provided, however, that no such amendment or termination and replacement may take place after the initial lease agreement date.
(I) At the time of the (2) No amendment or replacement of an inducement agreement (first agreement), the investor and the county may agree that if within five years following the five-year minimum investment period, the investor invests an additional eighty-five million dollars in a new project, the parties shall enter into a new inducement agreement (second agreement) providing for a fee in connection with the new investment. The first agreement may establish the assessment ratio to be used in the second agreement and may also provide that the millage rate is calculated using the lowest millage rate available for the second agreement using the provisions of subsections (D)(2)(c) and (G). All other terms must be negotiated by the parties in the second or millage rate agreement may be used to change the millage rate or discount rate under any such agreement.
(I) Any and all investment expenditures made or incurred by any investor in connection with a project (or relevant phase thereof in connection with a project completed and placed in service in more than one year) shall qualify as expenditures subject to the fee in subsection (D)(2), so long as such expenditures are made:
(1) after the county takes action reflecting or identifying the project or proposed project or investment, including but not limited to the adoption of an inducement or similar resolution by county council; and
(2) before the end of the applicable five or seven year period referenced in subsection (C)(2) and (C)(3).
An inducement agreement must be executed within two years after the date on which the county takes action reflecting or identifying the project or proposed project or investment, including but not limited to the adoption of an inducement or similar resolution by county council; otherwise, only investment expenditures made or incurred by any investor after the date of such inducement agreement in connection with a project shall qualify as expenditures subject to the fee in subsection (D)(2).
(J) (1) Subject to subsection (K), project investment expenditures which are incurred within the applicable time period provided in subsection (I) by an entity whose investments are not being computed in the level of investment for purposes of subsections (B) or (C) shall qualify as investment expenditures subject to the fee in subsection (D)(2) where:
(a) such expenditures are part of the original cost of the property which is transferred, within the applicable time period provided in subsection (I), to one or more other entities which are members of the same controlled group as the transferor entity and whose investments are being computed in the level of investment for purposes of subsections (B) or (C); and
(b) such property would have qualified for the fee in subsection (D)(2) if it had been initially acquired by the transferee entity rather than the transferor entity.
(2) The income tax basis of such property immediately before such transfer must equal the income tax basis of such property immediately after such transfer; provided, however, that to the extent income tax basis of such property immediately after such transfer unintentionally exceeds the income tax basis of such property immediately before such transfer, such excess shall be subject to payments under Section 4-29-60.
(3) The county must agree to any inclusion in the fee of the property described in subsection (J)(1).
(K) (1) Property which has been previously subject to property taxes in South Carolina will not qualify for the fee except as provided in this subsection:
(a) Land, excluding improvements thereon, on which a new project will be located may qualify for the fee even if it has previously been subject to South Carolina property taxes;
(b) Property which has been subject to South Carolina property taxes, but which has never been placed in service in South Carolina, may qualify for the fee; and
(c) Property which has been placed in service in South Carolina and subject to South Carolina property taxes which is purchased in a transaction other than between any of the entities specified in Section 267(b) of the Internal Revenue Code, as defined under Chapter 7 of Title 12 as of the time of the transfer, may qualify for the fee provided the fee-paying entity invests at least an additional eighty-five million dollars in the project.
(2) Repairs, alterations or modifications to real or personal property which are not subject to a fee will not be eligible for a fee, even if they are capitalized expenditures, except for modifications to existing real property improvements which constitute an expansion of such improvements.
(L)(J) (1) For a project not located in an industrial development park as defined in Section 4-1-170, distribution of the fee in lieu 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. For this purpose, the relative proportions must be calculated based on the following procedure: holding constant the millage rate set in subsection (G) and using all tax abatements automatically granted for taxable property, a full schedule of the property taxes that would otherwise have been distributed to each millage-levying-entity in the county must be prepared for the life of the agreement, up to twenty years maximum. These separate schedules must then be reduced to present value using the discount rate provided under subsection (D)(2)(b). The resulting values for each millage-levying-entity as a percentage of the present value total for all such entities determines each entity's relative shares of each year's fee payment for all subsequent years of the agreement.
(2) For a project located in an industrial development park as defined in Section 4-1-170, distribution of the fee in lieu taxes on the project must be made in the manner provided for by the agreement establishing the industrial development park.
(K)(M) As a directly foreseeable result of negotiating the fee, gross revenue of a school district in which a project is located in any year a fee negotiated pursuant to this section 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 inducement agreement must remain unchanged for the duration of the lease agreement.
(L)(N) Projects on which a fee in lieu of taxes is paid pursuant to this section are considered taxable property at the level of the negotiated payments 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). However, for a project located in an industrial development park as defined in Section 4-1-170, projects are considered taxable property in the manner provided in Section 4-1-170 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).
(O) (M) The minimum amount of the initial investment provided in subsection (B)(2) of this Section 4-29-67 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.
(1) (a) Any corresponding interest in each of an inducement agreement, millage rate agreement, and lease agreement (collectively referred to as a `fee interest'), representing an investment of at least eighty-five million dollars (based on income tax basis without regard to depreciation, and regardless of whether such investment comprises all or part of a project), may be transferred by any entity to any entity, whether or not such transferee entity is a member of the same controlled group of which the transferor entity is a member, and (b) any or all equity interests in any partnership, corporation, or other association which properly files its South Carolina income tax returns as a partnership or corporation and which has an interest in an inducement agreement, millage rate agreement, and lease agreement (such equity interests collectively and individually referred to as an `entity interest') may be transferred by any entity to any entity, whether or not such transferee entity is a member of the same controlled group of which the entity in which one or more interests is being transferred is a member, provided that the entity or entities whose entity interest is or are being transferred hold at least an eighty-five million dollars investment (based on income tax basis without regard to depreciation) in the project as of the time of the transfer.
(N) The investor shall file the returns, contracts,(2) Except for transfers pursuant to subsections (P) or (Q), no transfer of a fee interest or entity interest may be undertaken:
(a) until twenty-four months after the project has been placed in service, or relevant portion thereof in the case of a project placed in service in more than one year; or
(b) within twenty-four months after a prior transfer of the fee interest or entity interest to be transferred.
Provided, however, the running of such applicable twenty-four month period shall be suspended for any period during which a transferor's (under subsection (0)(2)(a)) or transferee's (under subsection (0)(2)(b)) risk of loss with respect to the fee interest or entity interest to be transferred is in fact substantially diminished by:
(i) the holding by any entity of a contractual right to require any transfer of such interest by an entity which is not a member of the transferor's (under subsection (0)(2)(a)) or transferee's (under subsection (0)(2)(b)) controlled group;
(ii) the holding by any entity which is not a member of the transferor's (under subsection (0)(2)(a)) or transferee's (under subsection (0)(2)(b)) controlled group of a right to acquire the interest; or
(iii) a short sale or any similar transaction with respect to the interest which is undertaken by the transferor (under subsection (0)(2)(a)) or transferee (under subsection (0)(2)(b)) which is not a member of any such transferee's or transferor's controlled group.
(3) All transfers of fee interests or entity interests authorized under subsection (O)(1) must meet the following requirements:
(a) The county must approve such transfer within six months prior to the transfer.
(b) The Tax Commission must receive notification in writing of the identity of each transferee and other information which may be required by the Tax Commission in order to report investments in connection with the fee.
(O) Failure to make a timely fee payment and file required returns shall result in penalties being assessed in accordance with Sections 12-45-180 and 12-37-800.
(P) The Tax Commission may require returns and other information it considers appropriate to administer the provisions of this section, and may issue the rulings and regulations it determines necessary or appropriate to carry out the purpose of this Section." within thirty days after the transfer becomes effective. The Tax Commission may extend the thirty-day period upon written request. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the Tax Commission for late notification for up to ten thousand dollars a month or portion of a month, with the total penalty not to exceed one hundred twenty thousand dollars.
(c) No election under Internal Revenue Code of 1986, as amended, Sections 338 or 754 may be made with respect to the transfer.
(4) All transfers of fee interests authorized under subsection (O)(1) must meet the following additional requirements:
(a) The transferor must pay the county any present value fee differential (as defined under subsection (O)(5)) within ninety days after the transfer. Failure to make this payment will result in interest and penalties computed in the same manner and amounts applicable to property tax.
(b) Each transferee must agree to be bound by the applicable agreements constituting the fee arrangement as to that portion of the project to which the transfer relates.
(c) The income tax basis of property interests which are subject to the fee in the hands of the transferee immediately after such transfer (i) cannot exceed the original income tax basis of such property (without regard to depreciation) in the hands of the transferor and (ii) cannot be less than the income tax basis of such property (taking depreciation into account) in the hands of the transferor immediately before transfer. The fee to be paid under subsection (D) with respect to such transferred property interests for the remaining term of the fee shall be recomputed using the transferee's income tax basis immediately after the transfer; the same millage rate and discount rate used by the transferor; and the fee payment method provided under subsection (D)(2)(a); provided, however, that if the pre-transfer fee payments were made under subsection (D)(2)(c), then post-transfer fee payments must be made under subsection (D)(2)(c), but without any present value method applicable to such payments.
(5) The present value fee differential shall mean the amount by which the fee that would have been paid under subsection (D)(2)(a) with respect to the transferred fee interest until the time of the transfer exceeds the amount which was paid under subsection (D)(2)(b) or (D)(2)(c) until such time with respect to such fee interest. If the investor used the method provided in subsection (D)(2)(c), the millage rate provided in subsection (D)(2)(c) must be used to calculate the amount which would have been paid under subsection (D)(2)(a). If subsection (D)(2)(b) is not applicable to such fee interest, or if no present value fee computation was used under subsection (D)(2)(c), no present value fee differential shall be required to be paid on a transfer thereof.
(P) (1) Any interests in an inducement agreement, millage rate agreement, or lease agreement (collectively and individually referred to as a `group fee interest') may be transferred by any entity to:
(a) any corporation which is a member of the same controlled group as the transferring corporation;
(b) any corporation which is a member of the same controlled group as all of the partners comprising the transferring partnership;
(c) any partnership all of the partners of which are members of the same controlled group of which the transferring corporation is a member; and
(d) any partnership all of the partners of which are members of the same controlled group as all of the partners comprising the transferring partnership.
(2) Transfers of group fee interests authorized under subsection (P)(1) must meet the requirements set forth in subsection (O)(3) and (O)(4); provided, however, in connection with subsection (O)(4)(c), to the extent a present value fee payment computation was used by the transferor, the transferee may, if the county agrees, use a fee payment method based on any present value fee payment method provided under subsection (D)(2). In addition, such transfers must involve at least a ten million dollar portion of the project investment or proposed investment (based on income tax basis without regard to depreciation).
(3) Any transfer of an interest in an inducement agreement must include a transfer of a corresponding interest in a millage rate agreement, if any, and lease agreement, if any; any transfer of an interest in a millage rate agreement must include a transfer of a corresponding interest in an inducement agreement, and lease agreement, if any; and any transfer of an interest in a lease agreement must include a transfer of a corresponding interest in an inducement agreement and millage rate agreement.
(4) One or more members of a controlled group, or a partnership all of the partners of which are members of the same controlled group, having an interest in a fee may enter into a sublease, concerning some or all of the project, with any other member of such controlled group, or with any partnership all the partners of which are members of such controlled group, without adversely affecting the fee and without regard to the other provisions of this subsection (P); provided, however, that such sublease may not transfer income tax ownership (as defined under subsection (S)) to the portion of the project which is the subject of the sublease, unless the applicable provisions of subsection (P) have been met.
(Q) (1) Any or all equity interests in any partnership, corporation, or other association which properly files its South Carolina income tax returns as a partnership or corporation and which has an interest in an inducement agreement, millage rate agreement, lease agreement, or any or all of the foregoing (such equity interests collectively and individually referred to as a `group entity interest') may be transferred to:
(a) any corporation which is a member of the same controlled group as the corporation in which an interest is being transferred;
(b) any corporation which is a member of the same controlled group as all of the partners comprising the partnership in which an interest is being transferred;
(c) any partnership in which all of the partners are members of the same controlled group as the corporation in which an interest is being transferred; and
(d) any partnership in which all of the partners are members of the same controlled group as all of the partners comprising the partnership in which an interest is being transferred.
(2) Transfers of group entity interests authorized under subsection (Q)(1) must meet the requirements set forth in subsection (O)(3).
(R) For purposes of subsections (O)(1)(a) and (P), and subject to subsection (U), each transferee shall, with respect to a project which is the subject of a transfer, be considered to have made amounts of qualified investments represented by the property interest which is subject to the fee and which is transferred, without regard to depreciation.
(S) (1) Notwithstanding anything in subsections (O), (P) and (Q), a single entity, or two or more entities which are members of a controlled group, may enter into any lending, financing, security or similar arrangement, or succession of such arrangements, with any financing entity, concerning all or part of a project, provided that the income tax ownership of the property which is subject to the fee payment under subsection (D)(2) is held, by the time the fee payments relating to such property begin under subsection (D)(2), by:
(a) the entity, or one or more members of the controlled group, which entered into the inducement agreement with the county;
(b) one or more transferees permitted under subsection (O)(1)(a) or (P); or
(c) one or more of the entities referenced in items (a) and (b).
Without limiting the foregoing, pursuant to any such arrangement or arrangements, the inducement agreement may permit one or more financing entities: (i) to make investments on behalf of such income tax owner or owners which will qualify for the fee once the property acquired by such investment is transferred to the county and leased or subleased pursuant to the requirements of this section; (ii) to transfer title to property to the county; and (iii) to enter into a lease agreement with the county for the project or portion of the project, provided the property which is subject to the fee is leased or subleased, by the time the fee payments relating to such property begin under subsection (D)(2), to the entity or entities which will be treated as the income tax owners of the project. After the transfer of title to the county and before subsection (D)(2) fee payments begin, subsection (D)(1) fee payments must be made.
(2) Notwithstanding anything in subsections (B), (O), (P), (Q), (S) (1) and (U), a single entity, or two or more entities which are members of a controlled group (the `original transferor'), may enter into any sale-leaseback arrangement (including, without limitation, an assignment, a sublease, or similar arrangement), or succession of such arrangements, with one or more financing entities, concerning all or part of a project, regardless of the identity of the income tax owner of the property which is subject to the fee payment under subsection (D)(2), provided that such sale-leaseback is executed prior to or contemporaneously with the time that fee payments under subsection (D)(2) begin with respect to property which is the subject of a sale-leaseback. Even though income tax basis is changed for income tax purposes, neither the original transfer to the financing entity nor the later transfer from the financing entity back to the original transferor or members of its controlled group, pursuant to terms in the sale-leaseback agreement, will affect the amount of the fee due. Nothing in this subsection (S)(2) shall prohibit a sale-leaseback where income tax ownership of the property which is subject to the fee payment under subsection (D)(2) is held only by the entities identified in subsection (S)(1).
(3) All transfers undertaken with respect to the project to effect a financing authorized under subsection (S)(2) must meet the following requirements:
(a) The county must approve such transfer in advance.
(b) The Tax Commission must receive notification in writing of the identity of each transferee and other information required by the Tax Commission within thirty days after the transfer becomes effective. The Tax Commission may extend such thirty-day period upon written request. Failure to meet this notice requirement will not adversely affect the fee, but a penalty may be assessed by the Tax Commission for late notification for up to ten thousand dollars a month or portion of a month up to a maximum penalty of one hundred twenty thousand dollars.
(c) If the financing entity is the income tax owner of property, the financing entity will be primarily liable for the fee as to that portion of the project to which the transfer relates. The original transferor must also agree to continue to be secondarily liable for the payment of the fee as to that portion of the project to which the transfer relates.
(d) Subsection (O) and (U) will apply to the extent:
(i) the financing entity transfers a fee interest to anyone other than the original transferor or one or more members of its controlled group, or
(ii) the lease to the original transferor is terminated and the fee interest is not transferred back to the original transferor or one or more members of its controlled group.
In addition, within ninety days of the occurrence of items (i) and (ii) in the immediate preceding sentence, the original transferor must pay the county any present value differential as defined in subsection (O)(5).
(4) For purposes of this subsection (S):
(a) The income tax owner of property shall mean the entity or entities which are entitled to depreciation deductions for such property for South Carolina income tax purposes.
(b) Financing entity shall include any entity or entities.
(c) Fee interest shall include any fee interest as defined in subsection (O) and any group fee interest as defined in subsection (P).
(5) The manner in which an arrangement is reported under generally accepted accounting principles shall not adversely affect the authorization of such an arrangement under this section.
(T) No inducement agreement, millage rate agreement or lease agreement, nor the rights of any entity pursuant to any such agreement, including without limitation the availability of the subsection (D)(2) fee, shall be adversely affected if the bonds issued pursuant to any such agreement are purchased by one or more of the entities which are or become parties to any such agreement.
(U) Notwithstanding any other provision of this section to the contrary, if at any time following the period provided in subsection (C)(2), the investment based on income tax basis without regard to depreciation falls below the eighty-five million dollar minimum investment to which the fee relates and is held by an entity or controlled group of entities, the fee provided in subsection (D)(2) is no longer available and the investor is required to make the payments which are due under Section 4-29-60 for the remainder of the lease period.
(V) The minimum amount of the initial investment provided in subsection (B)(2) 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.
(W) (1) The investor shall file the returns, contracts, and other information which may be required by the Tax Commission.
(2) Fee payments, and returns calculating fee payments, are due at the same time as property tax payments and property tax returns would be due if the property were owned by the party obligated to make such fee payments and file such returns.
(3) Failure to make a timely fee payment and file required returns shall result in penalties being assessed as if the payment or return was a property tax payment or return.
(4) The Tax Commission may issue the rulings and promulgate regulations it determines necessary or appropriate to carry out the purpose of this section.
(5) The provisions of Chapters 4 and 54 of Title 12 applicable to property taxes shall apply to this section; and for purposes of such application, the fee shall be considered a property tax. Sections 12-54-20, 12-54-80, and 12-54-155 do not apply to this section.
(X) Except as otherwise expressly provided in subsection (C)(2), any loss of fee benefits under this section shall be prospective only from the date of noncompliance and, subject to subsection (U), only with respect to that portion of the project to which such noncompliance relates; provided, however, that such loss of fee benefits cannot result in the recovery from the fee-paying entity of fee payments for more than:
(1) three years from the date a return concerning the fee is filed for the time period during which the noncompliance occurs, absent a showing of bad faith noncompliance, in which case such three year period shall instead be a ten year period; or
(2) ten years if no such return is filed for the time period during which the noncompliance occurs.
(Y) Section 4-29-65 shall be inapplicable with respect to this section. All references in this section to taxes shall be considered to mean South Carolina taxes unless otherwise expressly stated.
SECTION 2. This act takes effect upon approval by the Governor; provided, however, that projects with respect to which an inducement agreement, millage rate agreement, or both, has been entered into before the effective date of this act are entitled to use the provisions of Section 4-29-67 of the 1976 Code, as amended by this act, and also one or more of the provisions of the following subsections of Section 4-29-67 of the 1976 Code as in existence before the amendments contained in this act: (B); (F)(1)(c); (F)(2); (G); and (I). The last sentence of Section 4-29-67 of the 1976 Code is not applicable to any project with respect to which an inducement agreement was entered into or an inducement or similar resolution was adopted by the governing body of the county before the effective date of this act; provided, however, that if an inducement agreement has not been entered into before the effective date of this act, such an agreement must be entered into with respect to any such project within one year of the effective date of this act in order for pre-inducement agreement project expenditures to qualify for the fee provided in subsection (D)(2). Any lease which was entered into with a county prior to the effective date of this act, in order to preserve the eligibility of certain property for subsequent inclusion in a fee-in-lieu of taxes arrangement, and which lease provides for lease payments within two dollars of what the property taxes on the leased property would otherwise have been, shall not be considered a lease agreement of any kind for purposes of beginning the running of any time period provided under Section 4-29-67 of the 1976 Code, including but not limited to, the five, seven, and twenty year periods provided therein. For purposes of this section, references to inducement or millage rate agreements shall be considered to exclude any amendments or replacements of such agreements.