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Indicates Matter Stricken
Indicates New Matter
COMMITTEE REPORT
February 12, 2008
H. 4470
Introduced by Reps. Harrell, Leach, Cato, Hagood, Hamilton, Harrison, Limehouse, Merrill, Scarborough, W.D. Smith, Stavrinakis, Walker, Young, Gambrell, Haley, Bedingfield, Mahaffey, Cotty, McLeod, Owens, Rice, Bowen and Viers
S. Printed 2/12/08--H.
Read the first time January 15, 2008.
To whom was referred a Bill (H. 4470) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-6-3680 so as to allow a state income tax credit for the purchase, 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, in Section 12-6-3680(A), as contained in SECTION 1, page 2, by inserting after /automated/ on line 33 /commercial or residential / so that when amended, Section 12-6-3680(A) reads:
/ (A) Subject to the terms and conditions of this article, a taxpayer who improves, or purchases an automated commercial or residential fire sprinkler system in accordance with the standards most recently adopted by the National Fire Protection Association is allowed a credit against a tax imposed pursuant to this chapter in an amount equal to eighty percent of the costs of purchase, installation, and retrofitting of the system, not to exceed fifty thousand dollars. /
Amend further, as and if amended, by striking Section 12-37-220(B)(50), as contained in SECTION 4, page 3, and inserting:
/ (50) all additions of or upgrades to fire sprinkler systems costing less than fifty thousand dollars installed in structures in existence before July 1, 2008, for five years from the time the addition or upgrade is put in service. This exemption extends to county and municipal taxes. To be eligible for this exemption, additions and upgrades must comply with the standards most recently adopted by the National Fire Protection Association as verified by the State Fire Marshal. /
Renumber sections to conform.
Amend title to conform.
DANIEL T. COOPER for Committee.
REVENUE IMPACT 1/
This bill is expected to reduce general fund revenues by $4,916,825, the EIA fund by $1,150,000, and the Homestead Exemption for homeowner relief by $1,150,000 in FY2008-09. This bill is expected to reduce local government revenues by $27,057 in FY2008-09.
Explanation
The following is a review of sections of the bill related to revenues:
Section 1: This section would add Section 12-6-3680 allowing a state income tax credit equal to eighty percent of the costs of the purchase, installation, and retrofitting of fire sprinkler systems. Based on data provided by the State Fire Marshal's office, the BEA estimates that the income tax credit is expected to reduce general fund income tax revenues by $316,825 in FY2008-09.
Section 2: This section would amend Section 5-31-670 stipulating that compensation and charges in excess of actual costs of installing water taps supporting fire sprinkler systems are not to exceed the actual costs of installation. Based upon a survey of local water services indicating that local municipalities have eliminated tap fees, the BEA estimates that this stipulation is expected to have no impact on local government revenues in FY2008-09.
Section 3: This section would amend Section 12-6-2120 by adding a sales tax exemption on the purchase of fire sprinkler systems. Based upon data provided by the State Fire Marshal's office and the SC Fire Sprinkler Association, the BEA estimates that the sales tax exemption is expected to reduce state sales and use tax revenue by $6,900,000 in FY2008-09. Of this total sales tax exemption, $4,600,000 will be a reduction in general fund revenues, $1,150,000 will be a reduction in EIA fund revenues, and $1,150,000 will be a reduction in Homestead Exemption fund revenues for homeowner relief.
Section 4: This section would amend Section 12-37-220(B) by adding a county property tax exemption for additions/upgrades costing less than $50,000 to fire sprinkler systems in manufacturing establishments. Based upon data provided by the State Fire Marshal's office and the SC Fire Sprinkler Association, the BEA estimates that the county property tax exemption is expected to reduce county property tax revenues by $2,158 in FY2008-09.
Section 5: This section would amend Section 12-37-930 by adding an annual allowance of twenty percent for manufacturers to depreciate the value of fire sprinkler systems installed or upgraded. Based upon data provided by the State Fire Marshal's office and the SC Fire Sprinkler Association, the BEA estimates that the annual allowance for depreciation is expected to reduce county property tax revenues by $24,899 in FY2008-09.
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 by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-3680 SO AS TO ALLOW A STATE INCOME TAX CREDIT FOR THE PURCHASE, INSTALLATION, OR IMPROVEMENT OF A FIRE SPRINKLER SYSTEM AND TO PROVIDE THE ADMINISTRATION OF THE CREDIT; TO AMEND SECTION 5-31-670, RELATING TO MUNICIPAL AND SPECIAL SERVICE DISTRICT WATER SYSTEMS, SO AS TO LIMIT CHARGES FOR SEPARATE LINES FOR FIRE SPRINKLER SYSTEMS TO ACTUAL COSTS; TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO EXEMPT FIRE SPRINKLER SYSTEMS; TO AMEND SECTION 12-37-220, AS AMENDED, RELATING TO PROPERTY TAX EXEMPTIONS, SO AS TO ALLOW AN EXEMPTION FROM COUNTY TAXES FOR FIVE YEARS FOR THE FIRST FIFTY THOUSAND DOLLARS OF THE COST OF ADDING TO AND UPGRADES OF FIRE SPRINKLER SYSTEMS IN MANUFACTURING ESTABLISHMENTS IN EXISTENCE BEFORE JULY 1, 2008; TO AMEND SECTION 12-37-930, AS AMENDED, RELATING TO DEPRECIATION ALLOWED IN THE VALUATION OF MANUFACTURING PROPERTY FOR PURPOSES OF THE PROPERTY TAX, SO AS TO ALLOW A TWENTY PERCENT ANNUAL DEPRECIATION FOR THE ADDITION OR UPGRADE OF A FIRE SPRINKLER SYSTEM INSTALLED OR UPGRADED IN A MANUFACTURING ESTABLISHMENT IN EXISTENCE BEFORE JULY 1, 2008, AND TO ALLOW THIS COST TO BE COMPLETELY DEPRECIATED; AND TO AMEND SECTION 23-9-40, RELATING TO THE DUTIES OF THE STATE FIRE MARSHAL, SO AS TO ADD AUTHORITY RELATING TO FIRE SPRINKLER SYSTEMS.
Whereas, when fire sprinklers are present, the chances of a person dying in a fire are reduced by one-half to three-fourths; and
Whereas, when fire sprinklers are present, the average property loss per fire is cut by one-half to two-thirds, compared to fires where fire sprinklers are not present; and
Whereas, the National Fire Protection Association has no record of a fire killing more than two people in a completely sprinklered public assembly, educational, institutional or residential building where the system was working properly; and
Whereas, fire caused 10,672,000,000 dollars in direct property damage in the United States in 2005; and
Whereas, fire sprinklers are highly reliable, and when present in the fire area operate in all but seven percent of fires large enough to activate the system. Human error was a factor in most of the failures, and the system was shut off in approximately two-thirds of the failures; and
Whereas, it is the purpose of this Act to create meaningful incentives for the installation of fire sprinkler systems. Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3680. (A) Subject to the terms and conditions of this article, a taxpayer who improves, or purchases an automated fire sprinkler system in accordance with the standards most recently adopted by the National Fire Protection Association is allowed a credit against a tax imposed pursuant to this chapter in an amount equal to eighty percent of the costs of purchase, installation, and retrofitting of the system, not to exceed fifty thousand dollars.
(B) Notwithstanding the provisions of Section 12-6-3310(B)(3), the credit earned pursuant to this subsection by a general partnership, limited partnership, limited liability company, or any other entity taxed as a partnership must be passed through to its partners and may be allocated among any of its partners, including without limitation, an allocation of the entire credit to one partner, in any manner agreed by the partners that is consistent with Subchapter K of the Internal Revenue Code. As used in this subsection, the term 'partner' means a partner, member, or owner of an interest in the pass through entity, as applicable.
(C) The credit is first allowed for the taxable year in which the system or improvements were placed in service. The maximum credit that may be claimed pursuant to this section in a taxable year is ten thousand dollars and, subject to this limit, unused credit may be carried forward to the five succeeding taxable years."
SECTION 2. Section 5-31-670 of the 1976 Code is amended to read:
"Section 5-31-670. Any city or townA municipality or special service district may, after acquiring a waterworks or sewer system, may furnish water to persons for reasonable compensation and charge a minimum and reasonable sewerage charge for maintenance or construction of suchthe sewerage system within such city or townthe municipality or special service district. Where a separate line is installed solely to support a fire sprinkler system, compensation and charges must not exceed the actual costs associated with that line."
SECTION 3. Section 12-36-2120 of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding an appropriately numbered item at the end to read:
"( ) fire sprinkler systems complying with the standards most recently adopted by the National Fire Protection Association."
SECTION 4. Section 12-37-220(B) of the 1976 Code, as last amended by Act 116 of 2007, is further amended by adding a new item at the end to read:
"(50) all additions of or upgrades to fire sprinkler systems costing less than fifty thousand dollars installed in manufacturing establishments in existence before July 1, 2008, for five years from the time the addition or upgrade is put in service. This exemption extends only to county taxes. To be eligible for this exemption, additions and upgrades must comply with the standards most recently adopted by the National Fire Protection Association as verified by the State Fire Marshal."
SECTION 5. The schedule included in the first undesignated paragraph of Section 12-37-930 of the 1976 Code, as last amended by Act 187 of 2004, is further amended by adding at the end:
"36. Addition or upgrade of fire sprinkler systems............20%
This depreciation percentage applies to the cost of any systems installed or upgraded in manufacturing establishments in existence before July 1, 2008. The limit on depreciation imposed pursuant to Section 12-37-935 does not apply to depreciation taken pursuant to this item. To be eligible for this allowance, all additions or upgrades must meet the most recently adopted standards of the National Fire Protection Association."
SECTION 6. Section 23-9-40 of the 1976 Code is amended to read:
"Section 23-9-40. It shall beis the duty of the State Fire Marshal to enforce all laws and ordinances of the State, and the severalits counties, citiesmunicipalities, and other political subdivisions thereof, with reference to the following:
(a) The prevention of fires;
(b) The storage, sale, and use of combustibles and explosives;
(c) The installation and maintenance of automatic or other fire alarm systems and fire extinguishing equipment;
(d) The construction, maintenance and regulation of fire escapes;
(e) The means and adequacy of exits, in case of fire, from factories, asylums, hospitals, churches, schools, halls, theaters, amphitheaters and all other places in which numbers of persons work, live or congregate from time to time for any purpose;
(f) Investigationinvestigation of the cause, origin, and circumstances of fire;
(g) installation and maintenance of sprinkler systems in new construction as provided pursuant to Chapter 10 of Title 40;
(h) any sprinkler systems installed in existing commercial and residential buildings; and
(i) verifying and reporting to the Department of Revenue any taxpayers eligible to receive an income tax credit in accordance with Section 12-6-3680 and to report to the proper county authorities any manufacturing establishments qualifying for property tax reduction in accordance with Section 12-37-220(B)(50) as it pertains to the installation of sprinkler systems."
SECTION 7. This act takes effect upon approval by the Governor and with respect to its income and property tax provisions applies for tax years beginning after 2007.
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