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AMENDED
May 3, 2000
S. 80
Introduced by Senators Matthews, Passailaigue, Elliott, Hutto, Glover, Washington, Reese, Patterson, Courson, Moore, Holland, Saleeby, Giese, McGill, Jackson, Ford, Short, Land and Anderson
S. Printed 5/3/00--H.
Read the first time March 10, 1999.
REVENUE IMPACT1
This bill would reduce general fund revenue by $500,000 in FY 2000-01 and an additional $1 million each fiscal year thereafter until a $5 million maximum aggregate amount is reached.
Explanation of Amendment
This bill would enact the South Carolina Community Economic Development Act to assist owners of small businesses to gain access to capital, provide affordable housing, and enhance economic opportunities in low-income communities and neighborhoods. This bill would create community development corporations and community development financial institutions that would make grants and loans from grant funds made available to it by the General Assembly, private investors, or other available funds. The SC Department of Commerce would certify each community development corporation and community development financial institution and review applications for re-certification every two years. This bill would allow a private investor to claim a credit against State income tax, bank tax, or premium tax liability of thirty-three percent of all amounts invested in a community development corporation or in a community development financial institution. The total amount of the credits may not exceed $1 million for all taxpayers in one taxable year and is limited to a total of $5 million for all taxpayers and all taxable years, and may be carried forward up to ten years. Based on past experience with existing credits, it is anticipated that the full amount of available credits will be used. This bill applies to tax years beginning after 2000 and would affect one-half of FY2000-01, reducing general fund income, bank, and premium tax revenue by $500,000 in FY2000-01. This bill would also reduce general fund revenue by an additional $1 million in each of the next four fiscal years thereafter until a $5 million maximum aggregate amount is reached. This bill would be repealed on June 30, 2005, unless the General Assembly reauthorizes the laws and regulations governing community development corporations and community development financial institutions.
Amendment
This amendment would lower the amount a private investor could claim as a credit against State income tax liability from fifty percent to twenty-five percent of all amounts invested in a community development financial institution or in a community development corporation. Even though the credit limit will be reduced to twenty-five percent for a particular taxpayer, it is expected that more investors will participate until the $2 million limit is reached. This bill applies to tax years beginning after 1999, and would reduce general fund income, bank, and premium tax revenue by $2 million in FY2000-01, and would reduce general fund revenue by an additional $2 million in each of the next four fiscal years thereafter until a $10 million maximum aggregate amount is reached.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO BANKING, FINANCIAL INSTITUTIONS, AND MONEY, BY ADDING CHAPTER 43 SO AS TO CREATE THE SOUTH CAROLINA COMMUNITY ECONOMIC DEVELOPMENT COMMISSION FOR THE PURPOSE OF CERTIFYING ENTITIES AS COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS, TO PROVIDE FOR THE APPOINTMENT OF COMMISSION MEMBERS AND THE OPERATION OF THE COMMISSION, AND TO DEFINE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS; AND TO AMEND ARTICLE 25, CHAPTER 6, TITLE 12, RELATING TO INCOME TAX CREDITS, BY ADDING SECTION 12-6-3520 SO AS TO PROVIDE A TAX CREDIT EQUAL TO FIFTY PERCENT OF A TAXPAYER'S INVESTMENT IN A COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION, UP TO A MAXIMUM OF FOURTEEN MILLION DOLLARS FOR ALL TAXPAYERS FOR ALL TAXABLE YEARS.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 34 of the 1976 Code is amended by adding:
Section 34-43-10. This chapter may be cited as the South Carolina Community Economic Development Act.
Section 34-43-20. As used in this chapter:
(1) 'Department' means the South Carolina Department of Commerce .
(2) 'Community development corporation' means a nonprofit corporation which:
(a) is chartered pursuant to Chapter 31, Title 33;
(b) is tax exempt pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986 as amended;
(c) has a primary mission of developing and improving low-income communities and neighborhoods through economic and related development;
(d) has activities and decisions initiated, managed, and controlled by the constituents of those local communities;
(e) has a primary function of developing projects and activities designed to enhance the economic opportunities of the people in the community served, including efforts to enable them to become owners and managers of small businesses and producers of affordable housing and jobs in the community served;
(f) does not provide credit, capital, or other assistance from public funds in an amount greater than twenty-five thousand dollars at one time or in one transaction. The department may adjust that dollar amount in the manner provided in Section 37-1-109; and
(g) is not a nonprofit organization with the sole purpose of providing housing to neighborhoods or technical assistance to other nonprofit organizations.
(3) 'Community development financial institution' means an organization that:
(a) has a primary mission of promoting community development by providing credit, capital, or development services to small businesses or home mortgage assistance to individuals, including, but not limited to, capital access programs, microlending, franchise financing, and guaranty performance bonds;
(b) maintains, through representation on its governing board, accountability to persons in need of the institution's services;
(c) is not an agent or instrumentality of the United States, or of a state or political subdivision of a state nor maintains an affiliate relationship with any of them;
(d) maintains a goal of providing a majority of its services to low-income individuals, minorities, females, or rural areas;
(e) provides capital and technical assistance to small and micro businesses, or mortgage assistance to individuals;
(f) does not provide credit, capital, or other assistance in an amount greater than two hundred fifty thousand dollars at one time or in one transaction. That dollar amount may be adjusted in the manner provided in Section 37-1-109;
(g) has been certified or recertified as a community development financial institution as provided in this chapter; and
(h) may be a federally-chartered or state-chartered financial institution holding company which qualifies as a community development financial institution only if the holding company and the subsidiaries and affiliates of the holding company collectively satisfy the requirements of this section.
(4) 'Low income' means an income level that falls within the eightieth percentile of the mean income for a family of similar size within this State.
(5) The term 'invest' includes an advance of funds to a community development corporation or a community development financial institution.
Section 34-43-30. (A) The department may use a portion of funds appropriated for carrying out the provisions of this chapter to contract with an appropriate entity or entities to assist in carrying out its duties and responsibilities pursuant to this chapter. These duties and responsibilities include, but are not limited to:
(1) certifying entities as community development corporations and community development financial institutions;
(2) administering grants and loans to community development corporations and community development financial institutions from grant funds made available to it by the General Assembly for that purpose; and
(3) providing technical support to assist community development corporations served pursuant to this section in developing their organizational capacity and implementing their projects successfully.
(B) The department shall make an annual report to the General Assembly regarding the grants and loans administered and tax credits given pursuant to this chapter.
Section 34-43-40. (A) The department shall establish criteria for the certification of an entity as a community development corporation and as a community development financial institution consistent with the requirements of this chapter.
(B) Application for certification must be in writing under oath and in the form prescribed by the department. It must contain the information the department requires, including names and addresses of the partners, officers, directors or trustees, and those principal owners or members who provide the basis for investigations and findings contemplated by subsection (C). At the time of making the application, the applicant must pay to the department a fee for investigating the application, as prescribed by the department, in an amount sufficient to defray the department's costs of investigating the applicant.
(C) Upon the filing of the application and payment of the fees, the department shall investigate the facts concerning the application and the requirements of either Section 34-43-20(2) or (3).
(D) Certification of a community development corporation or a community development financial institution expires two years from the date of certification. This certification may be renewed for additional two-year periods upon application by the corporation or institution and approval by the department.
(E) A community development corporation and a community development financial institution shall file with the department, on or before the anniversary date of its certification, an annual report for the preceding calendar year. The report must give information about its financial condition, and must include balance sheets for the beginning and end of the accounting period, a statement of income and expenses for the period, a reconciliation of surplus with the balance sheets, a schedule of assets used by and useful for the corporation or the institution to conduct its business, an analysis of charges, size and type of loans, and other relevant information in form and detail as the department prescribes. The report must be made under oath and in the form prescribed by the department, which shall make and publish annually an analysis and recapitulation of the reports for inclusion in its annual report to the Governor and General Assembly as provided in Section 34-43-30(B).
(F) The department may not renew certification of a corporation or an institution unless it continues to comply with the regulations of the department and provisions of Section 34-43-20(2) or (3).
(G) The department may revoke the certification of a corporation or an institution upon a finding that the corporation or institution does not comply with the provisions of Section 34-43-20(2) or (3).
(H) The department shall serve a notice of intent not to grant certification, intent not to renew certification, or intent to revoke certification upon the corporation or institution with a brief statement of the reasons alleged. The corporation or institution may request a hearing within thirty days of receiving notice by filing a request for a hearing with the department. The hearing must be held in accordance with Article 3, Chapter 23, Title 1, the Administrative Procedures Act.
(I) A taxpayer may not claim the tax credit provided for in Section 12-6-3530 unless the corporation or institution in which the investment is made is certified by the department at the time the investment is made. A taxpayer who invested in good faith in a certified corporation or institution may claim the credit provided in Section 12-6-3530 notwithstanding the fact that the certification is later revoked or not renewed by the department.
Section 34-43-50. (A) The department shall establish and implement criteria for grants and loans to community development corporations and community development financial institutions. The criteria must require that the applicant demonstrate a capacity to engage in community development projects and sufficient organizational structure to ensure proper management. However, if the applicant is created after the effective date of this section, the applicant must present a strategic plan for community development projects and show evidence of developing an organizational structure which ensures proper management.
(B) The total amount of grants and loans administered pursuant to this chapter may not exceed in the aggregate, five million dollars for all recipients and all tax years, and one million dollars for all recipients in one tax year.
(C) A single community development corporation or community development financial institution may not receive more than ten percent of the total amount of grants and loans funds administered pursuant to this chapter in any one tax year.
(D) The department may receive funds from, among other sources, state appropriations and private contributions."
SECTION 2. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3530. (A) A taxpayer may claim as a credit against his state income tax, bank tax, or premium tax liability thirty-three percent of all amounts invested in a community development corporation or in a community development financial institution, as defined in Section 34-43-20(2) or (3).
To qualify for this credit the taxpayer must obtain a certificate from the South Carolina Department of Commerce certifying that the entity into which the funds are invested is a community development corporation or a community development financial institution within the meaning of Section 34-43-20(2) or (3) and certifying that the credit taken or available to that taxpayer will not exceed the aggregate five million dollar limitation of all those credits as provided in subsection (B) when added to the credits previously taken or available to other taxpayers making similar investments. A taxpayer who invested in good faith in a certified corporation or institution may claim the credit provided in this section, notwithstanding the fact that the certification is later revoked or not renewed by the department .
(B) The total amount of credits allowed pursuant to this section may not exceed, in the aggregate, five million dollars for all taxpayers and all taxable years and one million dollars for all taxpayers in one taxable year.
(C) A single community development corporation or community development financial institution may not receive more than twenty-five percent of the total tax credits authorized pursuant to this section in any one taxable year.
(D) The department shall monitor the investments made by taxpayers in community development corporations and community development financial institutions as permitted by this section and shall perform the functions as provided in subsection (A) above.
(E) If the amount of the credit determined, pursuant to subsection (A), exceeds the taxpayer's state tax liability for the applicable taxable year, the taxpayer may carry over the excess to the immediately succeeding taxable years. However, the credit carry-over may not be used for a taxable year that begins on or after ten years from the date of the acquisition of stock or other equity interest that is the basis for a credit pursuant to this section. The amount of the credit carry-over from a taxable year must be reduced to the extent that the carry-over is used by the taxpayer to obtain a credit provided for in this section for a later taxable year.
(F) Notwithstanding the provisions of subsections (A), (B), (C), (D), and (E) above, if on April 1, 2001, or as soon after that as the department is able to determine, the total amount of tax credits which may be claimed by all taxpayers exceeds the total amount of tax credits authorized by this section, the credits must be determined on a pro rata basis. For purposes of this subsection, a community development corporation or community development financial institution for which an investment may be claimed as a tax credit pursuant to this section must report all investments made before April 1, 2001, to the department by April 1, 2001, which shall inform, as soon as reasonably possible, all community development corporations and community development financial institutions of the total of all investments in all institutions and corporations as of April 1, 2001.
(G) If stock or another equity interest that is the basis for a credit provided for in this section is redeemed by the community development corporation or the community development financial institution within five years of the date it is acquired, the credit provided by this section for the stock or other equity interest is disallowed, and credit previously claimed and allowed with respect to the redeemed stock or other equity interest must be paid to the Department of Revenue with the appropriate return of the taxpayer covering the period in which the redemption occurred. When payments are made to the Department of Revenue pursuant to this section, the amount collected must be handled as if no credit had been allowed.
(H) To receive the credit provided by this section, a taxpayer shall:
(1) claim the credit on his annual state income or premium tax return as prescribed by the Department of Revenue; and
(2) file with the Department of Revenue and with his annual state income or premium tax return a copy of the form issued by the department as to the stock or other equity interest that is the basis for a credit claimed pursuant to this section, by the taxpayer, including an undertaking by the taxpayer to report to the Department of Revenue a redemption of the stock or other equity interest by the community development corporation or the community development financial institution.
(I) The department shall complete forms prescribed by the Department of Revenue which must show as to each stock or other equity interest in a community development corporation or a community development financial institution that is the basis for a credit pursuant to this section:
(1) the name, address, and identification number of the taxpayer who acquired the stock or other equity interest; and
(2) the nature of the stock or other equity interest acquired by the taxpayer and the amount advanced for it.
These forms must be filed with the Department of Revenue on or before the fifteenth day of the third month following the month in which the stock or other equity interest is acquired. Copies of the forms to be provided to the Department of Revenue must be mailed to the taxpayer on or before the fifteenth day of the second month following the month in which the acquisition is made.
(J) A taxpayer may not claim the tax credit provided in this section unless the community development corporation or community development financial institution in which the investment is made has been certified at the time the investment is made.
(K) If the community development financial institution in which the investment is made is a tax-exempt nonprofit corporation, the tax credit provided in this section is not allowed if the taxpayer claims the investment as a deduction pursuant to Section 170 of the Internal Revenue Code.
(L) Banks and financial institutions chartered by the State of South Carolina may invest in community development corporations and community development financial institutions incorporated pursuant to the laws of this State, up to a maximum of ten percent of a chartered bank or financial institution's total capital and surplus."
SECTION 3. The department shall contract for a performance audit at the end of the fourth year of implementation of this chapter.
SECTION 4. Unless reauthorized by the General Assembly, the provisions of this chapter shall terminate on June 30, 2005 and this chapter and all other laws and regulations governing, authorizing, and otherwise dealing with community development corporations and community development financial institutions are deemed repealed on that date.
SECTION 5. This act takes effect upon approval of the Governor, except that Section 2 applies to tax years beginning after 2000.
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