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COMMITTEE REPORT
April 19, 2001
H. 3885
Introduced by Reps. Meacham-Richardson, Simrill, Kirsh and Vaughn
S. Printed 4/19/01--H.
Read the first time April 5, 2001.
To whom was referred a Bill (H. 3885) to amend Section 12-24-40, Code of Laws of South Carolina, 1976, relating to exemptions from deed recording fees and Section 12-36-2120, 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, by striking Section 12-24-40(15), as contained in SECTION 1, page 1, and inserting:
/ (15) transferring title to facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions to a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791(a)) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act; /
Amend further, as and if amended, by striking Section 12-36-2120(59), as contained in SECTION 2, page 1, and inserting:
/ (59) facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions to a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791(a)) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act; /
Amend further, in Section 12-6-3410(J)(9), as contained in SECTION 3, page 2, line 3, by striking / only / and inserting / also / so that when amended, Section 12-6-3410(J)(9) reads:
/(9) 'corporation', 'corporate', 'company', and 'taxpayer' for purposes of this section also include a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791a) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act regardless of whether the limited liability company is treated as a partnership or as a corporation for South Carolina income tax purposes. If treated as a partnership, a limited liability company that qualifies for a credit under this section passes the credit through to its members in proportion to their interests in the limited liability company. Each member's share of the credit is nonrefundable, but is allowed as a credit against any tax under Section 12-6-530 or Section 12-20-50. Each member may carry any unused credit forward as provided in subsection (F). The limited liability company may not carry forward a credit that passes through to its members. /
Amend title to conform.
ROBERT W. HARRELL, JR. for Committee.
REVENUE IMPACT1
This bill is expected to reduce general fund corporate income and license tax revenue an estimated $6,300,000, deed-recording fees by $20,000, and general fund sales tax by $400,000, and EIA funds by $100,000 in FY 2001-02.
Explanation
The federal government has taken steps to deregulate the wholesale market for the transmission of electricity. Subsequent to new Federal Energy Regulatory Commission (FERC) regulations, wholesale electric energy transmitters have moved to form regional transmission organizations (RTO's) to coordinate and manage the transmission of electric power. The RTO would be organized as a limited liability company (LLC) called Grid South, and be comprised of Duke Power, SCANA, and Carolina Power & Light. The State Constitution prohibits Santee-Cooper, the state's publicly-owned utility, from joining the RTO if the entity is operated as a for-profit enterprise. Grid South would operate as a joint command center constructed by the three electric companies with assets and equipment transferred to the center's location.
Section 1. This section would amend Section 12-24-40 by exempting the deed-recording fee for those entities that transfer title to facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions. Grid South is a proposed $300 million project comprised of land, a new corporate headquarters building, and machinery and equipment transferred from three public utilities. The state portion of the deed-recording fee is $1.30 for each $500 of the realty's value, of which, $1.00 is transferred to the state's general fund, 20-cents is transferred to the SC Housing Trust Fund, and 10-cents is transferred to the Heritage Land Trust. Applying this rate to the $300 million project yields an estimated reduction of $600,000 in general fund deed-recording fees, an estimated reduction of $120,000 to the Housing Trust Fund, and an estimated reduction of $60,000 to the Heritage Land Trust in FY 2001-02. Since this RTO project is an extraordinary incident resulting from new federal initiatives, the BEA did not include this in its revenue estimate, and the BEA would not adjust its estimate for this provision. The provision, however, allows an exemption for any sale of transmission assets by any electric supplier, including municipalities and co-ops. These sales occur from time to time and are included in the BEA's projection. The BEA preliminarily estimates this impact at $20,000.
Section 2. This section would amend Section 12-36-2120 by adding a sales and use tax exemption for facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions. Since this RTO project is an extraordinary incident resulting from new federal initiatives, the BEA did not include this in its revenue estimate, and the BEA would not adjust its estimate for the RTO. As for on-going sales for all suppliers, the BEA estimates an impact of $500,000.
Section 3. This section would amend Section 12-6-3410(J) to allow a LLC that is formed to operate or to take functional control of electric transmission assets to apply a nonrefundable corporate headquarters tax credit against corporate income and license tax of twenty percent on the direct costs of constructing a corporate headquarters, and may be carried forward for ten years. According to officials with the Department of Revenue and the Department of Commerce, the qualified direct construction costs of the Grid South project are an estimated $31,500,000. Since Grid South may be set up as a LLC, the tax credits would pass through to its members - Duke Power, SCANA, and Carolina Power & Light. Applying a twenty percent tax credit to $31,500,000 of capital investment yields an estimated reduction of general fund corporate income and license tax revenue of $6,300,000 in FY 2001-02.
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 SECTION 12-24-40, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EXEMPTIONS FROM DEED RECORDING FEES AND SECTION 12-36-2120, RELATING TO EXEMPTIONS FROM SALES TAX, SO AS TO PROVIDE EXEMPTIONS FROM SALES TAX AND DEED RECORDING FEES FOR SALES, EXCHANGES, AND TRANSFERS OF ELECTRIC TRANSMISSION FACILITIES; AND TO AMEND SECTION 12-6-3410, RELATING TO THE CORPORATE INCOME TAX CREDIT FOR CORPORATE HEADQUARTERS, SO AS TO ALLOW CERTAIN LIMITED LIABILITY COMPANIES TO BE TREATED AS CORPORATIONS FOR THIS PURPOSE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-24-40 of the 1976 Code is amended by adding a new item (15) to read:
"(15) transferring title to facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions;"
SECTION 2. Section 12-36-2120 of the 1976 Code is amended by adding a new item (59) to read:
"(59) facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions;"
SECTION 3. Section 12-6-3410(J) of the 1976 Code is amended by adding the following item (9) to read:
"(9) 'corporation', 'corporate', 'company', and 'taxpayer' for purposes of this section only include a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791a) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act regardless of whether the limited liability company is treated as a partnership or as a corporation for South Carolina income tax purposes. If treated as a partnership, a limited liability company that qualifies for a credit under this section passes the credit through to its members in proportion to their interests in the limited liability company. Each member's share of the credit is nonrefundable, but is allowed as a credit against any tax under Section 12-6-530 or Section 12-20-50. Each member may carry any unused credit forward as provided in subsection (F). The limited liability company may not carry forward a credit that passes through to its members."
SECTION 4. This act takes effect upon approval by the Governor and Sections 1 and 2 apply with respect to sales or deeds made or recorded after this date, and Section 3 is applicable to taxable years beginning after December 31, 2000.
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