Download This Version in Microsoft Word format
Indicates Matter Stricken
Indicates New Matter
COMMITTEE REPORT
May 28, 2003
H. 4166
S. Printed 5/28/03--H. [SEC 5/29/03 3:32 PM]
Read the first time May 6, 2003.
To whom was referred a Bill (H. 4166) to amend the Code of Laws of South Carolina, 1976, by adding Section 33-10-110 so as to authorize a corporation, by amendment of its articles of incorporation, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass:
JAMES H. HARRISON for Committee.
REVENUE IMPACT 1/
This is not expected to have a measurable impact on general fund income tax revenue in FY2003-04.
Explanation
This bill would permit a for-profit corporation to convert to a nonprofit public benefit corporation or a nonprofit mutual benefit corporation. The proposed bill would also permit an existing for-profit corporation to amend its articles of incorporation, so as to maintain the original name of the company after the change in corporate status.
There are three primary types of nonprofit corporations - public benefit, mutual benefit, and religious. A nonprofit public benefit corporation is a corporation organized primarily for charitable purposes and to act as a civic league or a social welfare organization, and which plans to obtain federal tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. A nonprofit mutual benefit corporation is a corporation organized for purposes other than religious, charitable, civic league or social welfare, and which plans to obtain federal tax-exempt status under Section 501(c)(4) of the Internal Revenue Code. A corporation organized to operate a church or to be structured for primarily religious purposes is a nonprofit religious corporation. The proposed bill would permit a for-profit corporation to convert to a nonprofit public benefit corporation or a nonprofit mutual benefit corporation.
Currently, Section 12-6-540 imposes a five percent tax rate on the state taxable income of federally-exempt organizations under the Internal Revenue Service. According to representatives in the legal department at the Department of Revenue, a change of a corporation's filing status from a for-profit corporation to a non-profit corporation does not necessarily mean that the company would not owe any tax. The non-profit corporation would still be subject to tax on their state taxable income and any unrelated business income. There has been a recent trend for corporations to switch away from the traditional "C"-corporations to other forms of incorporation. Also, based on discussions with private tax attorneys, the proposed legislation would not have a measurable impact on general fund income tax revenue in FY2003-04.
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 THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 33-10-110 SO AS TO AUTHORIZE A CORPORATION, BY AMENDMENT OF ITS ARTICLES OF INCORPORATION, TO CONVERT TO A NONPROFIT PUBLIC BENEFIT CORPORATION OR A NONPROFIT MUTUAL BENEFIT CORPORATION, TO PROVIDE FOR THE EFFECTIVE DATE OF THE CONVERSION, THE REQUIREMENTS FOR THE AMENDMENTS TO THE ARTICLES, AND THE VOTING REQUIREMENT FOR ANY SHAREHOLDERS; AND TO AMEND SECTION 33-31-401, RELATING TO THE NAME OF A NONPROFIT CORPORATION, SO AS TO PROVIDE THAT A CORPORATION THAT CONVERTS TO NONPROFIT MAY CONTINUE TO USE ITS ORIGINAL NAME.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 1, Chapter 10, Title 33 of the 1976 Code is amended by adding:
"Section 33-10-110. (A) A corporation formed under this chapter may, by amendment of its articles pursuant to this section, convert to a nonprofit public benefit corporation as defined in Section 33-31-140 or to a nonprofit mutual benefit corporation as defined in Section 33-31-140. The corporation will then be deemed to have previously filed articles of incorporation under Section 33-31-202 upon the date of its incorporation under this chapter and to have filed articles of amendment pursuant to Section 33-10-106.
(B) The amendment of the articles to convert to a nonprofit corporation shall:
(1) revise the statement of purpose for which the corporation is organized;
(2) set forth one of the statements provided for in Section 33-31-202(a)(2);
(3) set forth the address, including zip code, of the proposed principal office for the corporation which may be either within or outside this Sate;
(4) delete the authorization for shares and any other provisions relating to authorized or issued shares;
(5) state whether or not the corporation will have members;
(6) set forth provisions not inconsistent with law regarding the distribution of assets on dissolution;
(7) make other changes as necessary or desired pursuant to Section 33-31-202; and
(8) if any shares have been issued, provide for either for the cancellation of those shares or for the conversion of those shares to memberships of the nonprofit corporation.
(C) If shares have been issued, an amendment to convert to a nonprofit corporation must be approved by all of the outstanding shares of all classes regardless of limitations or restrictions on the voting rights of the shares.
(D) Upon conversion, the corporation's bylaws must be amended to comply with the provisions of Chapter 31 of this title, the South Carolina Nonprofit Corporation Act of 1994, and any successor act."
SECTION 2. Section 33-31-401 of the 1976 Code, as added by Act 384 of 1994, is amended by adding at the end:
"(f) A corporation that converts to a nonprofit corporation pursuant to Section 33-10-110 may continue to use the same name that it used prior to the conversion."
SECTION 3. This act takes effect upon approval by the Governor.
This web page was last updated on Thursday, June 25, 2009 at 9:46 A.M.