South Carolina General Assembly
110th Session, 1993-1994

Bill 595


                    Current Status
 
Introducing Body:               Senate
Bill Number:                    595
Ratification Number:            162
Act Number:                     123
Primary Sponsor:                Drummond
Type of Legislation:            GB
Subject:                        Industrial development
                                projects
Companion Bill Number:          3828
Date Bill Passed both Bodies:   19930520
Computer Document Number:       JIC/5498HC.93
Governor's Action:              S
Date of Governor's Action:      19930614
Introduced Date:                19930325
Date of Last Amendment:         19930506
Last History Body:              ------
Last History Date:              19930614
Last History Type:              Act No. 123
Scope of Legislation:           Statewide
All Sponsors:                   Drummond
                                Russell
                                J. Verne Smith
                                Passailaigue
Type of Legislation:            General Bill

History

 Bill  Body    Date          Action Description              CMN  Leg Involved
 ----  ------  ------------  ------------------------------  ---  ------------
595    ------  19930614      Act No. 123
595    ------  19930614      Signed by Governor
595    ------  19930610      Ratified R 162
595    Senate  19930520      Concurred in House amendment,
                             enrolled for ratification
595    House   19930511      Read third time, returned
                             with amendment
595    House   19930506      Amended, read second time
595    House   19930422      Introduced, read first time,
                             placed on Calendar without
                             reference
595    Senate  19930421      Amended, read third time,
                             sent to House
595    Senate  19930420      Amended, read second time,
                             ordered to third reading with
                             notice of general amendments
595    Senate  19930415      Committee Report: Favorable     06
                             with amendment
595    Senate  19930325      Introduced, read first time,    06
                             referred to Committee
View additional legislative information at the LPITS web site.


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A123, R162, S595)

AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 4-29-69 SO AS TO ALLOW A PAYMENT IN LIEU OF PROPERTY TAXES FOR QUALIFIED PROPERTY OF A QUALIFIED MANUFACTURER COMPLETING A QUALIFIED CONSOLIDATION BETWEEN JUNE 1, 1992, AND DECEMBER 31, 1993, AND TO PROVIDE DEFINITIONS AND FOR DISTRIBUTION OF THE PAYMENT; TO AMEND SECTION 4-1-170, AS AMENDED, RELATING TO JOINT DEVELOPMENT PROJECTS, SO AS TO PROVIDE FOR THE COMPUTATION OF THE BONDED DEBT LIMIT; TO AMEND 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; TO AMEND SECTION 4-29-68, RELATING TO SPECIAL SOURCE REVENUE BONDS, SO AS TO PROVIDE THAT SPECIAL PURPOSE DISTRICTS MAY ISSUE SUCH BONDS AND PROVIDE THAT INFRASTRUCTURE MAY INCLUDE IMPROVED AND UNIMPROVED PROPERTY AND PROVIDE FOR AN ADDITIONAL METHOD OF THE USE OF BOND PROCEEDS AND DELETE A CONSTITUTIONAL REFERENCE; TO PROVIDE THAT THIS ACT MAY NOT BE CONSTRUED AS AMENDING OR REPEALING ANY PROVISION OF SECTION 39, ACT 361 OF 1992, TO PROVIDE THAT THE PROVISIONS OF THIS ACT ARE SEVERABLE, AND TO PROVIDE PROVISIONS RELATING TO EFFECTIVE DATES.

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

Payment in lieu of taxes

SECTION 1. A. Chapter 29, Title 4 of the 1976 Code is amended by adding:

"Section 4-29-69. (A) For purposes of this section:

(1) `Qualified property' means all real and tangible personal property owned, leased, licensed, or acquired by a qualified manufacturer during the consolidation period regardless of (a) when the property is placed into service in this State, and (b) whether the property has been previously subject to property taxes in this State.

(2) `Qualified manufacturer' means a manufacturing facility in this State which:

(a) employed at least seven hundred persons at the beginning of the consolidation period; and

(b) is located in a county which is designated at the beginning of the consolidation period as a less-developed county by the South Carolina Tax Commission pursuant to Section 12-7-1220.

(3) `Qualified consolidation' means:

(a) a restructuring or transfer or series of transfers involving assets of a manufacturing facility in this State and a manufacturing facility which is located in a state other than this State, pursuant to which all or a portion of the assets of the manufacturing facility located in the other state are transferred to a manufacturing facility in this State;

(b) during the consolidation period, (i) the corporations which own or lease the manufacturing facility in the other state and the facility in this State are members of the same controlled group as defined under Internal Revenue Code Section 1563, or (ii) the same corporation owns or leases the facility in this State and the facility in the other state;

(c) at least one hundred new jobs are created at the facility in this State during the consolidation period; and

(d) during the consolidation period, at least ten million dollars of original cost, without regard to depreciation at the time of the transfer to the facility, of manufacturing and related property are added to the facility in this State, either from the manufacturing facility in the other state, or purchased or leased from a third party.

(4) `Payment in lieu of taxes' means one or more payments made to the county at the times and in the amounts as the county, and entity or entities which will initially make the payment in lieu of taxes, may agree, pursuant to a transfer of title to the property which is subject to such payments to the county, and a lease of the property by the county to the entity or entities which will initially make such payments.

(5) `Consolidation period' means the eighteen-month period beginning on the first date that assets are transferred to the facility in this State from the manufacturing facility in the other state. The South Carolina Economic Development Board shall certify in writing to the South Carolina Tax Commission the specific date that the consolidation period begins.

(B) In the case of a financing agreement in the form of a lease or a lease purchase, the county and the investor may enter into an inducement agreement which provides for a payment in lieu of property taxes under this section for qualified property owned by, or leased or licensed to, one or more qualified manufacturers which complete a qualified consolidation between June 1, 1992, and December 31, 1993.

(C) Any interest in the assets which are subject to the payment in lieu of taxes, or the lease relating to the assets, may be freely transferred without restriction, except as the county, and the entity or entities which will make such payment, may otherwise agree. This agreement, and any inducement agreement, may be freely amended or replaced at any time.

(D) 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.

(E) The provisions of this section do not apply to any construction of Section 4-29-67, and to the extent that Sections 4-29-60, 4-29-67, or any other provision of Title 4 are inconsistent with this section, this section controls."

B. This section takes effect upon approval by the Governor.

Joint developments

SECTION 2. The last paragraph of Section 4-1-170 of the 1976 Code, as amended by Act 361 of 1992, is further amended to read:

"For the purpose of bonded indebtedness limitation and for the purpose of computing the index of taxpaying ability pursuant to Section 59-20-20(3), allocation of the assessed value of property within the park to the participating counties and to each of the taxing entities within the participating counties must be identical to the allocation of revenue received and retained by each of the counties and by each of the taxing entities within the participating counties. Provided, however, that the computation of bonded indebtedness limitation is subject to the requirements of Section 4-29-68(E)."

Fee in lieu of taxes

SECTION 3. 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 one or more lease 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 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)(i) The members of the same controlled group of corporations can qualify for the fee if the combined investment in the county by the members meets the minimum investment requirements. 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 periods provided in subsections (C)(1) and (C)(2) shall qualify for the payment regardless of whether the member was part of the inducement agreement; provided, however, in order to qualify for the fee, such other members of the controlled group must be specifically approved by the county and must 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.

(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 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 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.

(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.

(D) The inducement agreement must provide for fee payments, to the extent applicable, as follows:

(1) (a) Any property, title to which is transferred to the county, will be subject, before being placed in service, to an annual fee payment as provided in Section 4-29-60.

(b) 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 as provided in Section 4-29-60. The time during which fee payments are made under Section 4-29-60 will not be considered part of the maximum periods provided in subsections (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 real property using the original 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 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.

(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 equivalent to the 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 yield is available for the month in which the inducement agreement is executed, the last published 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) 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 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).

(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. The fee payment for replacement property 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 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 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 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 cumulative property tax millage rate applicable on the thirtieth day of June preceding the calendar year in which the initial lease agreement is executed by the parties.

(H) (1) Upon agreement of the parties, and except as provided in subsection (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.

(2) No amendment or replacement of an inducement agreement 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) (1) For a project not located in an industrial development park as defined in Section 4-1-170, distribution of the fee 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. 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 of taxes on the project must be made in the manner provided for by the agreement establishing the industrial development park.

(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.

(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). Provided, however, that the computation of bonded indebtedness limitation is subject to the requirements of Section 4-29-68(E).

(O) (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 dollar investment (based on income tax basis without regard to depreciation) in the project as of the time of the transfer.

(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 (O)(2)(a)) or transferee's (under subsection (O)(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 (O)(2)(a)) or transferee's (under subsection (O)(2)(b)) controlled group;

(ii) the holding by any entity which is not a member of the transferor's (under subsection (O)(2)(a)) or transferee's (under subsection (O)(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 (O)(2)(a)) or transferee (under subsection (O)(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 required by the Tax Commission 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) Subsections (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."

Special source revenue bonds

SECTION 4. Section 4-29-68 of the 1976 Code, as added by Act 361 of 1992, is amended to read:

"Section 4-29-68. (A) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes pursuant to Section 4-29-60 or Section 4-29-67 may issue special source revenue bonds secured by and payable from all or a part of such revenues, subject to the following terms and conditions:

(1) The issuance of bonds is authorized by a duly adopted ordinance of the governing body of the issuer or, if the issuer is a special purpose district, an ordinance of the county council or councils in the county or counties in which the special purpose district is located, and a resolution of the governing body of the issuer, after a public hearing is held at least fifteen days after notice of the hearing is published in a newspaper of general circulation in the county or municipality or special purpose district.

(2) The bonds are issued solely for the purpose of paying the cost of designing, acquiring, constructing, improving, or expanding the infrastructure serving the issuer in order to enhance the economic development of the issuer and costs of issuance of the bonds. For purposes of this section, infrastructure includes improved and unimproved real property. Bonds issued pursuant to this section to finance the acquisition of real or personal property may be additionally secured by a mortgage of that real or personal property.

(3) The bonds may include amounts for capitalized interest for a period not to extend beyond the later of (a) the date that is three years from the date of issuance of the bonds and (b) the first date on which any ad valorem taxes (including, but not limited to, county or school district taxes) would have been payable on the property (other than unimproved real property) which is the subject of the payment in lieu of taxes.

(4) The issuer may use proceeds of the bonds (including by establishment of a reserve fund to be used) (a) directly for infrastructure owned or controlled by the issuer or (b) to make loans or grants to, or to participate in joint undertakings with, other agencies or political subdivisions of the State that own or control the infrastructure referred to in item (2) of this subsection.

(5) The bonds are, and must state on their face that they are, (a) payable solely from all or a specifically described part of the payments in lieu of taxes received and retained by the issuer under Section 4-29-60, Section 4-29-67, or Section 13 of Article VIII of the Constitution of this State, (b) not secured by, or in any way entitled to, a pledge of the full faith, credit, or taxing power of the issuer, (c) not an indebtedness of the issuer within the meaning of any state constitutional provision or statutory limitation but are payable solely from a special source that does not include revenues from any tax or license, and (d) not a pecuniary liability of the issuer or a charge against the issuer's general credit or taxing power.

(6) The ordinance authorizing the issuance of the bonds shall specifically describe the portion of the payments in lieu of taxes received and retained by the issuer from which the bonds are payable and by which the bonds are secured.

(7) The bonds may be executed and delivered at any time as a single issue or from time to time as several issues, be in the form and denominations, be of the tenor, be payable in the installments and at the time or times not to exceed the time over which payments in lieu of taxes are scheduled to be received, be subject to the terms of redemption, be payable at the place or places, bear interest at the rate or rates which is payable at the place or places, and contain provisions not inconsistent with this section, all of which must be provided in the ordinance authorizing the bonds.

(8) The bonds may be sold at public or private sale at the prices and in the manner and from time to time as may be determined by the governing board to be most advantageous, and the governing board may pay, as a part of the costs described in item (2) of this subsection, and out of the bond proceeds, all expenses, premiums, commissions, and expenses which the governing board considers necessary or advantageous in connection with the authorization, sale, and issuance of the bonds.

(9) The ordinance may provide for the issuance, in the future, of further bonds on a parity with those initially issued, but the proceedings may preclude the issuance of bonds or any obligations of any sort secured by a lien prior to the lien of the bond or bonds afterward issued on a parity with the bonds.

(10) Pending the issuance of bonds, bond anticipation notes may be issued, and to the end that a vehicle be provided therefor, the provisions of Section 11-17-10 to Section 11-17-110, as now or hereafter amended, are applicable to the bond anticipatory borrowing.

(11) The ordinance authorizing the issuance of the bonds may contain agreements and provisions customarily contained in the instruments securing revenue or special source bonds as the governing board considers advisable, but the issuer does not have the power to obligate itself to impose or maintain any particular level of tax rates.

(B) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes pursuant to Section 4-29-60 or Section 4-29-67 may pledge the revenues as additional security for general obligation debt or revenue debt of the issuer if the general obligation debt or revenue debt is issued in accordance with items (1) and (2) of this subsection.

(C) A county or municipality or special purpose district that receives and retains revenues from a payment in lieu of taxes pursuant to Section 4-29-60 or Section 4-29-67 may pledge the revenues as additional security for general obligation debt or revenue debt of other agencies or political subdivisions of the State referred to in item (4)(b) of this subsection if the pledge is authorized by a duly-adopted ordinance of the governing body of the county or municipality or special purpose district after a public hearing is held at least fifteen days after notice of the hearing is published in a newspaper of general circulation in the county or municipality or special purpose district, and if the general obligation debt or revenue debt to which the revenues received from a payment in lieu of taxes are pledged is issued solely for the purpose of paying the cost of designing, acquiring, constructing, improving, or expanding the infrastructure serving the county or municipality or special purpose district in order to enhance the economic development of the county or municipality or special purpose district and costs of issuance of the bonds.

(D) Revenues received by a county or municipality or special purpose district which may be pledged or from which bonds may be payable and secured pursuant to this Section 4-29-68 or Section 4-1-175 may be used jointly to pay or secure a single series of bonds.

(E) A political subdivision of this State subject to the limitation of Section 14(7)(a) of Article X of the Constitution of this State pledging pursuant to this section all or a portion of the revenues received and retained by that subdivision from a payment in lieu of taxes to the repayment of any bonds shall not include in the assessed value of taxable property located in the political subdivision for the purposes of calculating the limit imposed by that section of the Constitution any amount representing the value of the property that is the basis of the pledged portion of revenues. If the political subdivision, before pledging revenues pursuant to this section, has included an amount representing the value of a parcel or item of property that is the subject of a payment in lieu of taxes in the assessed value of taxable property located in the political subdivision and has issued general obligation debt within the debt limit calculated on the basis of such assessed value, then it may not pledge pursuant to this section revenues based on the item or parcel of property, to the extent that the amount representing its value is necessary to permit the outstanding general obligation debt within the debt limit of the political subdivision."

Not to be construed

SECTION 5. Nothing in this act may be construed as amending or repealing any provision of Section 39, Act 361 of 1992.

Severability

SECTION 6. 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.

Time effective

SECTION 7. 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, have 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 7, references to inducement or millage rate agreements shall be considered to exclude any amendments or replacements of such agreements.

Approved the 14th day of June, 1993.