South Carolina Legislative Updates: SCEDA Bill and Tax Conformity Bill
On October 3, 2018, the South Carolina General Assembly overrode the gubernatorial veto of S.1043 , known as the “SCEDA Bill.” The SCEDA Bill is an exciting new piece of legislation for certain businesses looking to locate new operations or expand existing operations in South Carolina, as it increases the scope of businesses that may be eligible to apply for and obtain economic development incentives.
The SCEDA Bill was approved by the South Carolina House and Senate earlier this year, but was vetoed by the Governor. Advocates for South Carolina’s business and economic development communities, including those at SCEDA, worked with House and Senate leadership to secure the necessary votes to override the veto.
Highlights of the bill are outlined below:
Incentives for Professional Services / Office Jobs : The SCEDA Bill will allow South Carolina to excel in all areas of economic development, including professional services and office jobs. The SCEDA Bill:
Makes modifications to the State’s primary discretionary incentive, Job Development Credits (JDCs), for professional services jobs, including legal, accounting, banking or investment services;
Allows businesses engaged in legal, accounting, banking, or investment services to apply for JDCs, subject to the discretion of the Coordinating Council for Economic Development (CCED). Previously, these types of businesses were generally not eligible to apply for and claim Job Development Credits;
Reduces job and wage thresholds applicable to qualified service-related facilities (QSRF) for the highest three tiers;
Allows businesses engaged in retail sales to apply for JDCs, as long as retail sales are not actually conducted at the facility, subject to the discretion of the CCED; and
Suggests the CCED consider these factors in determining qualification for JDCs:
The percentage of the business’s annual gross receipts derived from outside of South Carolina for the previous 12 months (such percentage must not be less than 75%);
The nature and the wages of the new jobs created;
The capital investment of the project; and
The potential for expansion or growth of the business or industry.
Incentives for Agricultural Operations : The SCEDA Bill also provides a tax credit program for agribusinesses. The Program will allow an income tax credit or employee withholding credit of up to $100,000 for an agribusiness operation or agricultural packaging operation that increases purchases of goods that are certified as “South Carolina Grown” by a minimum of 15% in a year. Products must be approved by the SC Department of Agriculture as “Certified SC Grown”, and the CCED has sole discretion in allocating the credits.
Other provisions in the SCEDA Bill include abandoned buildings provisions to help offset costs associated with rehabilitation of abandoned buildings and clarification on how broadcast satellite companies report income for tax purposes.
Tax Conformity Bill
On October 3, 2018, the South Carolina House of Representatives also gave final approval to H.5341 , known as the “Tax Conformity Bill.” The Governor signed the bill Wednesday evening.
While tax conformity between South Carolina law and the Federal tax code is an issue addressed by the South Carolina General Assembly every year, the recent Federal tax overhaul (in the form of the Tax Cuts and Jobs Act passed in December 2017) sparked additional consideration of particular State deductions and exemptions that had to be balanced with the new Federal tax code in a way that was revenue-neutral.
One notable area of distinction between the South Carolina law and the Federal tax code may be of importance for certain businesses looking to locate new operations or expand existing operations in South Carolina. According to the Tax Cuts and Jobs Act, State- and local-level discretionary economic development grants awarded to business making new capital investment and creating new jobs in South Carolina are taxable under the Internal Revenue Code for income tax purposes. However, under the South Carolina Tax Conformity Bill, those grants will not be taxable for income tax purposes at the State-level.