NOTE: THIS IS A TEMPORARY VERSION. THIS DOCUMENT WILL REMAIN IN THIS VERSION UNTIL FINAL APPROVAL BY THE LEGISLATIVE COUNCIL.

(A222, R247, H4087)

AN ACT TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 12-6-3410, RELATING TO CORPORATE INCOME TAX CREDIT FOR CORPORATE HEADQUARTERS, SO AS TO PROVIDE CHANGES TO STAFFING REQUIREMENTS AND CERTAIN TIMING; BY AMENDING SECTION 12-6-3460, RELATING TO THE RECYCLING FACILITY TAX CREDIT DEFINITIONS, SO AS TO LOWER THE MINIMUM LEVEL OF INVESTMENT FOR A QUALIFIED RECYCLING FACILITY AND TO INCLUDE CERTAIN PRODUCTS TO THE DEFINITION OF "POSTCONSUMER WASTE MATERIAL"; BY AMENDING SECTIONS 12-10-20, 12-10-30, 12-10-40, 12-10-45, 12-10-50, 12-10-60, AND 12-10-80, ALL RELATING TO THE ENTERPRISE ZONE ACT OF 1995, SO AS TO ALLOW REMOTE EMPLOYEES WORKING IN SOUTH CAROLINA TO BE INCLUDED IN CERTAIN JOB CREATION REQUIREMENTS AND TO CREATE A NEW PROVISION TO INCENTIVIZE CERTAIN COMPANIES; BY AMENDING SECTION 12-10-95, RELATING TO THE ENTERPRISE ZONE ACT CREDIT AGAINST WITHHOLDING FOR RETRAINING, SO AS TO ADD WAREHOUSING AND DISTRIBUTION AND TO PROVIDE FOR APPROVAL REQUIREMENTS; AND BY AMENDING SECTION 12-6-1120, RELATING TO GROSS INCOME, SO AS TO PROVIDE FOR CERTAIN DEDUCTIONS TO TAXABLE INCOME.

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

Headquarters credit

SECTION 1.    Section 12-6-3410 of the S.C. Code is amended to read:

Section 12-6-3410.    (A) A taxpayer or a business unit of a taxpayer establishing a headquarters facility in this State, or expanding or adding to an existing headquarters facility, is allowed a credit against any tax due pursuant to Section 12-6-510, Section 12-6-530, Section 12-11-20, or Section 12-20-50 or any combination thereof.

(B) In order to qualify for this credit, each of the following criteria must be satisfied:

(1) The qualifying real property costs of the headquarters facility or expansion must be at least fifty thousand dollars. Qualifying real property costs are:

(a) costs incurred in the design, preparation, and development of establishing or expanding a headquarters facility; and

(b)(i) direct construction costs; or

(ii) with respect to leased facilities, direct-lease costs during the first five years of operations for the headquarters facility.

(2) The headquarters establishment or expansion must result in the creation of

at least forty new full-time jobs that are:

(a) performing headquarters-related functions and services;

(b) have gross wages equal to or greater than twice the per capita income of this State based on the most recent per capita income data available as of the end of the taxpayer's taxable year in which the jobs are filled and are subject to withholding pursuant to Chapter 8 of this title; and

(c) are provided a benefits package, including health care.

(C) The amount of the credit is equal to the sum of:

(1) twenty percent of the qualifying real property costs listed in subsection (B)(1); and

(2) twenty percent of the cost for tangible personal property if:

(a) the personal property is:

(i) capitalized as personal property for income tax purposes under the Internal Revenue Code; and

(ii) purchased for the establishment or expansion of the taxpayer's or business unit's headquarters facility; and

(iii) used for headquarters-related functions and services in South Carolina.

(D) Reserved.

(E)(1)(a) For headquarters facilities which are constructed, the credit can only be claimed for the taxable year when the facility is placed in service for federal income tax purposes. For facilities completed in phases and placed in service for federal income tax purposes in more than one taxable year, the credit can be claimed for the taxable year in which that phase of the headquarters facility is placed in service for federal income tax purposes. Credits cannot be obtained for costs incurred more than three taxable years after the taxable year in which the first property for which the credit is claimed is placed in service. Notwithstanding any other provisions of this subsection, if the entire project is not completed by the end of the three taxable years, the credit may be claimed for all property placed in service within the time limitation set forth in the preceding sentence. The credit may not be claimed for personal property which is replacing personal property for which the credit can be claimed. The department may for good cause extend the time for incurring additional costs and for claiming the credit if the project is not completed within the time period allowed by this subsection. For purposes of this subsection the term "property" includes qualifying real property and qualifying personal property.

(b) for leased real property the credit must be claimed in the taxable year in which the first direct-lease costs are incurred.

(2) The taxpayer must meet the staffing requirements of subsection (B)(2) by the end of the second taxable year following the last taxable year for which the credit is claimed. The taxpayer must have documented plans to meet the initial staffing requirements at the time the credit is claimed. If the taxpayer fails to meet the staffing requirements within the time required by this subsection, the taxpayer must increase its tax liability for the current taxable year by an amount equal to the amount of credit, or any portion of the credit for which the taxpayer would not qualify, which was used to reduce tax in the earlier years.

(F) The credit provided in this section is nonrefundable, but an unused credit may be carried forward for ten years. In addition, a taxpayer may assign its rights to the unused credit to a succeeding taxpayer if the taxpayer transfers all or substantially all of the assets of the taxpayer or all or substantially all of the assets of a trade, business, or operating division of a taxpayer to the succeeding taxpayer, and the succeeding taxpayer maintains the headquarters facility. No credit may be claimed for a taxable year during which the taxpayer or succeeding taxpayer fails to meet the qualifying employment requirements provided in this section and the carry-forward period is not extended for any year in which the credit may not be claimed for failure to meet the employment requirements. The credit may be claimed for a taxable year in the unextended carry-forward period if the taxpayer or succeeding taxpayer requalifies for the credit by meeting the employment requirements during that taxable year.

(G) If a fee-in-lieu arrangement under Section 4-29-67 is entered into with respect to all or part of property involving a headquarters, and the taxpayer claiming the credit provided under this section is treated as the owner of the property for federal income tax purposes, then the taxpayer must be treated as the owner of the property for purposes of the credit provided by this section.

(H) To the extent that this credit applies to the cost of certain property, the basis of the property for South Carolina income tax purposes must be reduced by the amount of the credit claimed with respect to the property. This basis reduction does not reduce the basis or limit or disallow any depreciation allowable under the law of this State for other than income tax purposes, even if the depreciation is based upon or otherwise relates to income tax depreciation including, without limitation, basis or depreciation which is allowable under this title for property tax purposes. If the taxpayer fails to meet the staffing requirements of subsection (B)(2), the taxpayer may increase the basis of the property by the amount of the original basis reduction with regard to that property in the year in which the credit is recaptured.

(I) The amount of a credit allowed under this section must be reduced by the amount of any past-due debt owed this State by the taxpayer.

(J) As used in this section:

(1) "Headquarters" means the facility or portion of a facility where headquarters staff employees are employed, and where the taxpayer's or the taxpayer's business unit's financial, personnel, legal, planning, information technology, or other headquarters-related functions are handled either on a regional, national, or global basis. A headquarters must be a regional headquarters or a national corporate headquarters as defined below. A taxpayer or taxpayer's business unit doing business solely within South Carolina does not meet the definition of a headquarters.

(a) National headquarters must be the sole office or location in the nation or the world for the taxpayer or a business unit of the taxpayer with multistate operations and must handle headquarters-related functions on a national or global basis. The function and purpose of the national headquarters is to plan, direct, and control all aspects of the taxpayer or taxpayer's business unit's operations, and it has final authority over regional offices, operating facilities, or any other office of the taxpayer or business unit.

(b) Regional headquarters must be the sole office or location in the region for the taxpayer or a business unit of the taxpayer with multistate operations within the region and must handle headquarters-related functions on a regional basis. A regional headquarters performs a function that is separate from the management of operational facilities within the region. A regional headquarters performs functions similar to the national headquarters, but within a more limited area. For purposes of this section, "region" or "regional" means a geographic area comprised of either:

(i) at least five states, including this State; or

(ii) two or more states, including this State, if the entire business operations of the taxpayer or business unit of the taxpayer are performed within fewer than five states.

(c) A "business unit" is an organizational unit of a taxpayer that is defined by the particular product or category of products it sells.

(2) "New job" means a job created by an employer in this State at the time a new facility, or expansion is initially staffed, but does not include a job created when an employee is shifted from an existing location in this State to work in a new or expanded facility. An employee may be employed at a temporary location in this State pending completion of the new facility or expansion.

(3) "Full time" means a job requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of operations or a job requiring a minimum of thirty-five hours of an employee's time for a week for a year in which the employee was initially hired for or transferred to the headquarters in this State.

(4) "Headquarters-related functions and services" are those functions involving financial, personnel, administrative, legal, planning, information technology, or similar business functions.

(5) "Headquarters staff employees" means executive, administrative, or professional workers performing headquarters-related functions and services.

(a) An executive employee is a full-time employee in which at least eighty percent of his business functions involve the management of the enterprise and directing the work of at least two employees. An executive employee has the authority to hire and fire or has the authority to make recommendations related to hiring, firing, advancement, and promotion decisions, and an executive employee must customarily exercise discretionary powers.

(b) An administrative employee is a full-time employee who is not involved in manual work and whose work is directly related to management policies or general headquarters operations. An administrative employee must customarily exercise discretion and independent judgment.

(c) A professional employee is an employee whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This knowledge is characterized by a prolonged course of specialized study. The work must be original and creative in nature, and the work cannot be standardized over a specific period of time. The work must require consistent exercise of discretion and the employee must spend at least eighty percent of the time performing headquarters-related functions and services.

(6) Reserved.

(7) Reserved.

(8) "Direct-lease costs" are cash lease payments. The term does not include any accrued, but unpaid, costs.

(9) "Remote employee" is a full-time employee of the taxpayer, including an employee who works for a business unit of the taxpayer, who works for the taxpayer performing headquarters-related functions or services either completely or partially from a home office or other residence within the State.

Qualified recycling facility credit

SECTION 2.    Section 12-6-3460(A)(3) and (4) of the S.C. Code is amended to read:

(3) "Qualified recycling facility" means a facility certified as a qualified recycling facility by a duly authorized representative of the department which includes all real and personal property incorporated into or associated with the facility located or to be located within this State that will be used by the taxpayer to manufacture or fabricate products for sale composed of at least fifty percent postconsumer waste material by weight or by volume. The minimum level of investment for a qualified recycling facility must be at least one hundred fifty million dollars incurred by the end of the fifth calendar year after the year in which the taxpayer begins construction or operation of the facility.

(4) "Postconsumer waste material" means any product generated by a business or consumer which has served its intended end use and which has been separated from the solid waste stream for the purpose of recycling and includes, but is not limited to, scrap metal and iron, and used plastics, paper, glass, batteries, solar panels, turbines and related structures, and rubber.

Job development credit

SECTION 3.    Sections 12-10-20 through 12-10-80 of the S.C. Code are amended to read:

Section 12-10-20.    The General Assembly finds:

(1) that the economic well-being of the citizens of the State is enhanced by the increased development and growth of industry within the State, and that it is in the best interests of the State to induce the location or expansion of manufacturing, processing, services, distribution, warehousing, research and development, corporate offices, technology intensive, and certain tourism projects within the State to promote the public purpose of creating new jobs within the State;

(2) that the inducement provided in this chapter will encourage the creation of jobs which would not otherwise exist and will create sources of tax revenues for the State and its political subdivisions;

(3) the powers to be granted to the Coordinating Council for Economic Development by this chapter and the purposes to be accomplished are proper governmental and public purposes and that the inducement of the location or expansion of manufacturing, processing, services, distribution, warehousing, research and development, corporate offices, and certain tourism facilities within the State is of paramount importance.

(4) The state's per capita income has not reached the United States average and certain rural, less developed counties have not experienced capital investment, per capita income, and job growth at a level equal to the state's average. The economic well-being of these areas will not be sustained without significant incentive to induce capital investment and job creation.

Section 12-10-30.    As used in this chapter:

(1) "Council" means the Coordinating Council for Economic Development.

(2) "Department" means the South Carolina Department of Revenue.

(3) "Employee" means an employee of the qualifying business who works full time in this State for the benefit of the project, including a remote employee as defined in item (20).

(4) "Gross wages" means wages subject to withholding.

(5) "Job development credit" means the amount a qualifying business may claim as a credit against employee withholding pursuant to Sections 12-10-80 and 12-10-81 and a revitalization agreement.

(6) "New job" means a job created or reinstated as defined in Section 12-6-3360(M)(3).

(7) "Qualifying business" means a business that meets the requirements of Section 12-10-50 and other applicable requirements of this chapter.

(8) "Project" means an investment for one or more purposes pursuant to this chapter needed for a qualifying business to locate, remain, or expand in this State and otherwise fulfill the requirements of this chapter.

(9) "Preliminary revitalization agreement" means the application by the qualifying business for benefits pursuant to Section 12-10-80 or 12-10-81 if the council approves the application and agrees in writing at the time of approval to allow the approved application to serve as the preliminary revitalization agreement. The date of the preliminary revitalization agreement is the date of the council approval.

(10) "Revitalization agreement" means an executed agreement entered into between the council and a qualifying business that describes the project and the negotiated terms and conditions for a business to qualify for a job development credit pursuant to Section 12-10-80 or 12-10-81.

(11) "Qualifying expenditures" means those expenditures that meet the requirements of Section 12-10-80(C) or 12-10-81(D).

(12) "Withholding" means employee withholding pursuant to Chapter 8 of this title.

(13) "Technology employee" means an employee at a technology-intensive facility as defined in Section 12-6-3360(M)(14) who is directly engaged in technology-intensive activities at that facility.

(14) "Production employee" means an employee directly engaged in manufacturing or processing at a manufacturing or processing facility as defined in Section 12-6-3360(M).

(15) "Retraining agreement" means an agreement entered into between a business and the council in which a qualifying business is entitled to retraining credit pursuant to Section 12-10-95.

(16) "Retraining credit" means the amount that a business may claim as a credit against withholding pursuant to Section 12-10-95 and the retraining agreement.

(17) "Technology-intensive activities" means the design, development, and introduction of new products or innovative manufacturing processes, or both, through the systematic application of scientific and technical knowledge at a technology intensive facility as defined in Section 12-6-3360(M).

(18) "Significant business" means a qualifying business making a significant capital investment as defined in Section 12-44-30(7).

(19) "Related person" includes any entity or person that bears a relationship to a business as provided in Internal Revenue Code Section 267 or 707(b). The related person must be a "qualifying business" as defined in item (7), except that the related person does not have to meet the requirements of Section 12-10-50(A)(1) or, in case the qualifying business qualifies for the credit against withholding for retraining pursuant to Section 12-10-95 of this chapter, the related person does not have to meet the requirements of Section 12-10-50(B)(1).

(20) "Remote employee" is a full-time employee who is a resident of thi