Indicates Matter Stricken

Indicates New Matter

COMMITTEE REPORT

March 31, 2022

H. 4252

Introduced by Reps. Bannister, West, Anderson, B. Cox, Elliott, Willis, W. Cox, B. Newton, Pendarvis, Ballentine, Crawford, Daning, Gagnon and Herbkersman

S. Printed 3/31/22--H.     [SEC 4/5/22 2:21 PM]

Read the first time April 22, 2021.

To whom was referred a Bill (H. 4252) to amend Section 12-10-20, Code of Laws of South Carolina, 1976, relating to the legislative intent of the Enterprise Zone Act of 1995, so as, etc., respectfully

That they have duly and carefully considered the same and recommend that the same do pass:

G. MURRELL SMITH, JR. for Committee.

Explanation of Fiscal Impact

State Expenditure

This bill makes several conforming changes to the Enterprise Zone Act of 1995, including changes to definitions, legislative intention, and updates to code references to reflect the current wage levels according to the statutory inflation adjustment. The Department of Commerce indicates that this bill will have no expenditure impact on the agency because it adopts current practices.

State Revenue

This bill makes several conforming changes to the Enterprise Zone Act of 1995, including changes to definitions, legislative intention, and updates to code references to reflect the current wage levels according to the statutory inflation adjustment. The Department of Commerce indicates that this bill will have no revenue impact on the general fund because it adopts current practices.

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

TO AMEND SECTION 12-10-20, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE LEGISLATIVE INTENT OF THE ENTERPRISE ZONE ACT OF 1995, SO AS TO MAKE CONFORMING CHANGES; TO AMEND SECTION 12-10-30, RELATING TO DEFINITIONS, SO AS TO ADD A DEFINITION OF "RELATED PERSON"; TO AMEND SECTION 12-10-50, RELATING TO QUALIFICATIONS FOR BENEFITS, SO AS TO PROVIDE THAT TO QUALIFY FOR BENEFITS A BUSINESS MUST ENTER INTO A RETAINING AGREEMENT WITH A CERTAIN TECHNICAL COLLEGE; TO AMEND SECTION 12-10-80, AS AMENDED, RELATING TO JOB DEVELOPMENT CREDITS, SO AS TO PROVIDE FOR CERTAIN DESIGNATIONS OF QUALIFYING BUSINESSES AND TO INCREASE THE AMOUNT OF CERTAIN GROSS WAGES AN EMPLOYEE MUST EARN; TO AMEND SECTION 12-10-81, RELATING TO THE JOB DEVELOPMENT TAX CREDITS, SO AS TO INCREASE THE AMOUNT OF CERTAIN GROSS WAGES AN EMPLOYEE MUST EARN; AND TO AMEND SECTION 12-10-100, RELATING TO THE CRITERIA FOR DETERMINATION AND SELECTION OF A QUALIFYING BUSINESS, SO AS TO MAKE A CONFORMING CHANGE.

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

SECTION     1.     Section 12-10-20 and Section 12-10-30 of the 1976 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 Advisory 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 at the project.

(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 qualifying business and a technical college under the jurisdiction of the State Board for Technical and Comprehensive Education in which a qualifying business is entitled to retraining credit pursuant to Section 12-10-95.

(16)     'Retraining credit' means the amount that a qualifying 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)."

SECTION     2.     Section 12-10-50(B) of the 1976 Code is amended to read:

"(B)     To qualify for benefits pursuant to Section 12-10-95, a business must:

(1)     be engaged in manufacturing or processing operations or technology intensive activities at a manufacturing, processing, or technology intensive facility as defined in Section 12-6-3360(M);

(2)     provide a benefits package, including health care, to employees being retrained; and

(3)     enter into a retraining agreement with the council a technical college under the jurisdiction of the State Board for Technical and Comprehensive Education."

SECTION     3.     Section 12-10-80 of the 1976 Code, as last amended by Act 265 of 2018, is further amended to read:

"Section 12-10-80.     (A)     A qualifying business that qualifies pursuant to Section 12-10-50(A) and has certified to the council that the business has met the minimum job requirement and minimum capital investment provided for in the revitalization agreement may claim job development credits as determined by this section.

(1)     A qualifying business may claim job development credits against its withholding on its quarterly state withholding tax return for the amount of job development credits allowable pursuant to this section.

(2)     A qualifying business that is current with respect to its withholding tax and other tax due and owing the State and that has maintained its minimum employment and investment levels identified in the revitalization agreement may claim the credit on a quarterly basis beginning with the first quarter after the council's certification to the department that the minimum employment and capital investment levels were met for the entire quarter. If a qualifying business is not current as to all taxes due and owing to the State as of the date of the return on which the credit would be claimed, without regard to extensions, the business may claim the credit only in an amount reduced by the amount of taxes due and owing to the State as of the date of the return on which the credit is claimed.

(3) A qualifying business may claim its initial job development credit only after the council has certified to the department that the qualifying business has met the required minimum employment and capital investment levels.

(4) To be eligible to apply to the council to claim a job development credit, a qualifying business shall create at least ten new, full-time jobs, as defined in Section 12-6-3360(M), at the project described in the revitalization agreement within five years of the effective date of the agreement.

(5) A qualifying business is eligible to claim a job development credit pursuant to the revitalization agreement for not more than fifteen years.

(6) A company's qualifying business' job development credits shall be suspended during any quarter in which the company business fails to maintain one hundred percent of the minimum job requirement set forth in the company's business's revitalization agreement. A company qualifying business only may claim credits on jobs, including a range of jobs approved by the council, as set forth in the company's business's final revitalization agreement.

(7) Credits may be claimed beginning the quarter subsequent to the council's approval of the company's qualifying business's documentation that the minimum jobs and capital investment requirements have been met.

(8) To the extent any return of an overpayment of withholding that results from claiming job development credits is not used as permitted by subsection (C) or by Section 12-10-95, it must be treated as misappropriated employee withholding.

(9) Job development credits may not be claimed for purposes of this section with regard to an employee whose job was created in this State before the taxable year of the qualifying business in which it enters into a preliminary revitalization agreement.

(10) If a qualifying business claims job development credits pursuant to this section, it shall make its payroll books and records available for inspection by the council and the department at the times the council and the department request. Each qualifying business claiming job development credits pursuant to this section shall file with the council and the department the information and documentation requested by the council or department respecting employee withholding, the job development credit, and the use of any overpayment of withholding resulting from the claiming of a job development credit according to the revitalization agreement.

(11) Each qualifying business claiming in excess of ten thousand dollars in a calendar year must furnish to the council and to the department a report that itemizes the sources and uses of the funds. The report must be filed with the council and the department no later than June thirtieth following the calendar year in which the job development credits are claimed, except when a qualifying business obtains the written approval by the council for an extension of that date. Extensions may be granted only for good cause shown. The department shall impose a penalty pursuant to Section 12-54-210 for all reports filed after June thirtieth or the approved extension date, whichever is later. The department shall audit each qualifying business with claims in excess of ten thousand dollars in a calendar year at least once every three years to verify proper sources and uses of the funds.

(12) Each qualifying business claiming ten thousand dollars or less in any calendar year must furnish a report prepared by the company business that itemizes the sources and uses of the funds. This report must be filed with the council and the department no later than June thirtieth following the calendar year in which the job development credits are claimed, except when a qualifying business obtains the written approval by the council for an extension of that date. Extensions may be granted only for good cause shown. The department shall impose a penalty pursuant to Section 12-54-210 for all reports filed after June thirtieth or the approved extension date, whichever is later.

(13) An employer may not claim an amount that results in an employee's receiving a smaller amount of wages on either a weekly or on an annual basis than the employee would receive otherwise in the absence of this chapter.

(14)(a)     For purposes of this chapter, a qualifying business may designate up to two related persons whose jobs and investments located at the project may be included to determine whether the qualifying business has met and maintained the minimum job requirement and minimum capital investment requirement. Qualified expenditures described in subsection(C) incurred by a related person may be treated as though such qualifying expenditures were incurred by the qualifying business for purposes of claiming the job development credit and each related person may claim the job development credit for the jobs created by such related person and include any qualifying expenditures of the qualifying business or another related person for purposes of claiming the job development credit as if created and made by the related person.

(b)     A single-member limited-liability company that is not regarded as an entity separate from its owner and is a qualified subchapter 'S' subsidiary as defined in Section 1361(b)(3)(B) of the Internal Revenue Code that is not regarded as a separate entity from the 'S' corporation that owns its stock, is treated as the qualifying business for all purposes under this chapter, including for purposes of claiming the job development credit against withholding but is counts as a related person for purposes of the limit described in subitem (a).

(B)(1)     The maximum job development credit a qualifying business may claim for new employees is limited to the lesser of withholding tax paid to the State on a quarterly basis or the sum of the following amounts:

(a)     two percent of the gross wages of each new employee who earns $8.74 $10.53 or more an hour but less than $11.64 $14.02 an hour;

(b)     three percent of the gross wages of each new employee who earns $11.65 $14.03 or more an hour but less th