What were the significant South Carolina tax-law changes from the 2011 legislative session, as summarized by the Department (per SC IL #11-13)?
Apply this to your situation
This page answers the general question as of 2011. Ezel answers yours, under current South Carolina tax law, with citations.
Plain-English summary
This Information Letter is the Department's plain-language roundup of the significant tax and regulatory law changes enacted in South Carolina's 2011 legislative session. It is organized by subject-matter category and is meant as a starting map, not the final word — the Department says it is "intended to be a summary of the main points of the legislation; it is not an interpretation by the Department," and directs readers to the full text of each act.
The summary is divided into five categories:
- Income Taxes, Withholding, and Corporate License Fees — including updated Internal Revenue Code conformity: South Carolina's income tax laws are conformed to the IRC of 1986, as amended through December 31, 2010.
- Property Taxes and Fees in Lieu of Property Taxes — including a property tax credit in Lexington County School Districts 1 and 4.
- Sales and Use Taxes — including provisions on durable medical equipment, a reenacted temporary proviso exempting certain private-school purchases from use tax, a reenacted proviso suspending tax on viscosupplementation therapy, and a Lexington County 1-cent special sales tax for property relief.
- Miscellaneous — administrative and procedural matters, miscellaneous tax legislation, other items (including local taxes), and regulatory legislation.
- Temporary Provisos – List — provisos enacted in the state budget that are effective only for the state fiscal year (July 1 – June 30) and expire June 30, 2012 unless re-enacted.
Because the letter is a high-level map, the practical use is to scan the category that affects you, note the relevant act or proviso, and then read the underlying legislation for the details.
What this means for you
If you are tracking how the 2011 session changed South Carolina tax law, use this letter to find the category that applies to you and the specific act involved. Two cautions from the Department carry weight: it is a summary, not an interpretation, so the controlling detail is in the act itself; and the temporary provisos are budget provisions that lapse at the end of the fiscal year (June 30, 2012) unless the General Assembly re-enacts them, so do not assume a proviso-based change is permanent.
Common questions
Q: What year of the Internal Revenue Code does South Carolina conform to under this update?
A: The IRC of 1986, as amended through December 31, 2010, for South Carolina income tax purposes.
Q: How is the update organized?
A: Into five categories — income taxes/withholding/corporate license fees; property taxes and fees in lieu; sales and use taxes; miscellaneous; and a list of temporary provisos.
Q: Are the temporary provisos permanent?
A: No. They are enacted in the state budget, are effective only for the state fiscal year (July 1 – June 30), and expire June 30, 2012 unless re-enacted.
Q: Can I rely on this summary as the Department's interpretation?
A: No. The Department states it is a summary of the main points, not an interpretation; you must refer to the full text of each act.
Subject
Tax Legislative Update for 2011
Source
- Landing page: https://dor.sc.gov/advisory-opinion-search
- Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL11-13.pdf
Original ruling text
State of South Carolina
Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org
SC INFORMATION LETTER #11-13
SUBJECT:
Tax Legislative Update for 2011
DATE:
August 19, 2011
AUTHORITY: S.C. Code Ann. Section 12-4-320 (2000)
S.C. Code Ann. Section 1-23-10(4) (Supp. 2010)
SC Revenue Procedure #09-3
SCOPE:
An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no
precedential value.
Attached is a brief summary of most of the significant changes in tax and regulatory laws
enacted during the past legislative session. The summary is divided into categories, by
subject matter, as indicated below.
CATEGORY OF LEGISLATION
PAGE #
- Income Taxes, Withholding, and Corporate License Fees
Legislation.......................................................................................
Reminder – Prior Legislation Effective July 1, 2010 or Thereafter
5
6
- Property Taxes and Fees in Lieu of Property Taxes
Legislation.......................................................................................
Reminder – Prior Legislation Effective July 1, 2010 or Thereafter
14
20
- Sales and Use Taxes
Legislation.......................................................................................
24
- Miscellaneous
Administrative and Procedural Matters ..........................................
Miscellaneous Tax Legislation .......................................................
Other Items (including local taxes) .................................................
Regulatory Legislation ....................................................................
Reminder – Prior Legislation Effective July 1, 2010 or Thereafter
29
31
31
32
36
- Temporary Provisos - List .................................................................
39
1
DISCLAIMER:
This is intended to be a summary of the main points of the legislation; it is not an
interpretation by the Department. Please refer to the full text of the legislation for specific
details and requirements.
There may be instances where some tax or incentive related legislation briefly
summarized is under the jurisdiction of another state agency or political subdivision, and
not the Department. In such cases, questions concerning these provisions should be made
directly to the agency or political subdivision having primary responsibility for the
administration of these acts. Legislation regarding distribution of funds is not
summarized.
TEXT OF LEGISLATION:
A complete copy of the legislation discussed in this publication can be obtained from the
South Carolina Legislative Council’s website at http://www.scstatehouse.net/htmlpages/legpage.html.
2
LIST OF BILLS BY SUBJECT CATEGORY
A list of significant changes in tax and regulatory laws (both permanent and temporary)
enacted during the 2011 legislative session is provided below. Temporary provisos are
enacted in the State budget and are only effective for the State fiscal year (July 1 – June
30); unless re-enacted they expire on June 30, 2012.
This list is divided by subject matter with the bills listed in numeric order. The list of bills
with a link to the full text of each act is on the Department’s website at:
http://www.sctax.org/Tax+Policy/Legislation+for+2010.htm.
INCOME TAXES, WITHHOLDING & CORPORATE LICENSE FEES
BILL #
ACT # SUBJECT
522
5
Income Tax Conformity
592 – Sec. 6
46
Military Corporation – Filing Requirement
3700 – Proviso 1A.16
73
Teacher Supplies – Reimbursement Not Taxable – Reenacted Temporary Proviso
3700 – Proviso 81.8
73
No Estimated Tax Penalty when following IRC 6654(d)(1)(D) – Reenacted Temporary
Proviso
PROPERTY TAXES and FEES IN LIEU OF PROPERTY TAXES
BILL #
ACT # SUBJECT
628
Dorchester County School Districts Millage
3700 – Proviso 1.99
73
DOR Computation of Index of Taxpaying Ability – New Temporary Proviso
3700 – Proviso 89.45
73
Personal Property Tax Relief Fund – Reenacted Temporary Proviso
3713 – Sec.1
57
Alternative Valuation for Assessable Transfer of Interest
– Sec. 2
Cap on Millage Increase Revised
– Sec. 3
Rollback Millage
3806
Property Tax Credit in Lexington County School Districts 1 and 4
SALES AND USE TAXES
BILL #
ACT # SUBJECT
36 – Sec. 1
32
Durable Medical Equipment
– Sec. 2
Warranty & Maintenance Contracts
– Sec. 3
Distribution Facility Nexus
3700 – Proviso 89.44
73
Private Schools – Use Tax Exemption – Reenacted Temporary Proviso
3700 – Proviso 89.67
73
Respiratory Syncytial Virus Medicine – Reenacted Temporary Proviso
3700 – Proviso 89.72
73
Viscosupplementation Therapy – Tax Suspended – Reenacted Temporary Proviso
3
MISCELLANEOUS
BILL #
ACT # SUBCATEGORY SUBJECT
Administrative &
Procedural
20
69
Immigration Reform – Suspension or Revocation of licenses
3700 – Proviso 72.17
73
2% Interest Rate Reduction on Refunds for Guardian Ad Litem –
Reenacted Temporary Proviso
3700 – Proviso 81.6
73
Political Candidate Tax Return Inquiry – Reenacted Temporary
Proviso
3700 – Proviso 89.116 73
1% Interest Rate Reduction on Refunds for Joint Citizens and
Legislative Committee on Children and the Department of
Juvenile Justice – Reenacted Temporary Proviso
3700 – Proviso 90.21
Interpretation of Tax Statutes – Report to General Assembly –
New Temporary Proviso
73
Miscellaneous
Taxes
584
Lexington County Property Relief – 1¢ Special Sales Tax
Extended
3700 – Proviso 1.17
73
Motor Fuel Tax Exemption for School Buses– Reenacted
Temporary Proviso
3700 – Proviso 21.16
73
Nursing Home Bed Franchise Fee Suspended – Reenacted
Temporary Proviso
3700 – Proviso 81.7
73
Athletic Booster Organizations Season Tickets – Admissions Tax
Exemption – Reenacted Temporary Proviso
3700 – Proviso 90.23
73
Motorsports Entertainment Complex Facility – New Temporary
Proviso
3178
66
Regulatory
3278
3295
Tastings at Liquor Store
Special Permits for Nonprofits
67
ABL Permits
4
INCOME TAXES, WITHHOLDING, and
CORPORATE LICENSE FEES
Senate Bill 522 (Act No. 5)
Internal Revenue Code Conformity
Code Section 12-6-40(A)(1)(a) has been amended, except as otherwise provided, to
update South Carolina’s income tax laws to conform to the Internal Revenue Code of
1986, as amended through December 31, 2010, and includes the effective date provisions
contained therein.
Effective Date: April 12, 2011
Senate Bill 592, Section 6 (Act No. 46)
Military Corporation Filing Requirements Clarified
Code Section 25-1-120, dealing with the incorporation of certain military organizations,
has been amended to add subsection (C) to exempt these military organizations from
filing returns with the Department to the same extent they are exempt from filing returns
with the Internal Revenue Service.
These military organizations may include: (1) enlisted, officer or all-ranks clubs,
(2) family support groups, (3) auxiliary organizations, (4) service branch organizations,
(5) battalion, brigade, or unit fund organizations, or (6) other such organizations that
provide support to personnel and their families. The incorporation of these organizations
must be approved by the Adjutant General and the State Judge Advocate. These
corporations cannot engage in business and are not required to pay the corporate license
fee.
Effective Date: June 7, 2011
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REMINDER
The following provisions were enacted in 2010, but are effective in 2011.
They are summarized below for informational purposes.
House Bill 4478, Section 23 (Act No. 290)
Manufacturers of Renewable Energy Systems and Components - New Credit
Code Section 12-6-3588 has been added to provide an income tax credit to companies in
the solar, wind, geothermal, and other renewable energy industries who are expanding or
locating in South Carolina. To qualify, a company must: (1) manufacture renewable
energy systems and components in South Carolina for solar, wind, geothermal, or other
renewable energy uses; (2) invest at least $500 million in new qualifying plant and
equipment in the year the tax credit is claimed; and (3) create one and one-half full time
jobs for every $500,000 of qualifying capital investment that each pays at least 125% of
the State’s average annual median wage as defined by the Department of Commerce. A
taxpayer may separately qualify for new facilities in separate locations or for separate
expansions at existing facilities in South Carolina.
Expenditures qualifying for this credit must be certified by the State Energy Office. To
obtain the amount of credit available to a taxpayer, each taxpayer must submit a request
for the credit to the State Energy Office by January 31st for qualifying expenditures
incurred in the previous calendar year. By March 1st, the State Energy Office must notify
the taxpayer of the qualifying expenditures and the allocated credit amount. The credit is
claimed for the tax year which contains December 31st of the previous calendar year.
The credit is equal to 10% of the cost of the company’s total qualifying investment in
plant and equipment in South Carolina for renewable energy operations. A taxpayer’s
total credit for all expenditures allowed must not exceed $500,000 for any year and $5
million total for all years. Unused credits can be carried forward 15 years after the tax
year in which a qualified expenditure was made. This credit is in lieu of any other
applicable income tax credits or abatements allowed by state law. In the event of an
overlap or conflict in available credits or abatements, the taxpayer may select the credit
or abatement desired in the manner prescribed by the Department.
Note Expiration: “The income tax credit program is for a five-year period beginning
January 1, 2010, and ending December 31, 2015.”
Effective Date: January 1, 2011
6
House Bill 4478, Sections 20, 21, and 38 (Act No. 290)
Capital Investment Tax Credit - Replacing Economic Impact Zone Investment Tax
Credit. Repeal of Certain Code Sections in Economic Impact Zone Act in Chapter
14 of Title 12 and Repeal of Credit for Hiring Displaced Workers in Code Section
12-6-3450
Chapter 14 of Title 12 contains the Economic Impact Zone Community Development Act
of 1995. Chapter 14 has been substantially amended. Among the changes are the
following:
- Code Section 12-14-20, containing the purpose of the Economic Impact Zone
Community Development Act of 1995, is amended to provide that the purpose of
Chapter 14 is to establish a program of providing tax incentives for the creation of
capital investment in order to revitalize capital investment in South Carolina,
primarily by encouraging the formation of new businesses and the retention and
expansion of existing businesses; and to promote meaningful employment.
Previously, the Act’s purpose was to provide for the establishment of economic
impact zones on or in the vicinity of closed or realigned military installations in
which various tax incentives may apply to businesses and individuals located in the
economic impact zone in order to economically revitalize the area. - Code Section 12-14-60, providing for the economic impact zone investment tax
credit, has been amended to delete all references to “economic impact zone” and to
provide for a capital investment tax credit as follows:
0.5% of total aggregate bases of all qualifying 3 year manufacturing and productive
equipment property;
1.0% of total aggregate bases of all qualifying 5 year manufacturing and productive
equipment property;
1.5% of total aggregate bases of all qualifying 7 year manufacturing and productive
equipment property;
2.0% of total aggregate bases of all qualifying 10 year manufacturing and productive
equipment property; and
2.5% of total aggregate bases of all qualifying 15 year or greater manufacturing and
productive equipment property.
The definition of qualified manufacturing and productive equipment property in Code
Section 12-14-60(B) was amended to replace references to “economic impact zone”
with “this State.”
7
3. To repeal the following code sections in Chapter 14 of Title 12:
a. Code Section 12-14-30. This section contained definitions of the terms “economic
impact zone,” “applicable federal military installation,” “applicable federal
facility,” and “internal revenue code.”
b. Code Section 12-14-40. This section provided for the designation and revocation
of an area as an economic impact zone.
c. Code Section 12-14-50. This section provided for an individual income tax
deduction for 20% of the purchase price of economic impact zone stock.
d. Code Section 12-14-70. This section contained definitions of the terms “economic
impact zone business,” “qualified business,” and “nonqualified financial
property” relating to the individual income tax deduction.
In a related amendment, Code Section 12-6-3450, providing a tax credit to employers
who hire persons who were employed in an economic impact region and whose job was
terminated as a result of the closing or realignment of an applicable federal military
installation or applicable federal facility, has been repealed.
Effective Date: January 1, 2011, except the repeal of Code Sections 12-14-30, 12-14-40,
12-14-50, 12-14-70, and 12-6-3450 are effective June 23, 2010.
House Bill 4478, Sections 16 and 38 (Act No. 290)
Job Tax Credit – Amended
Code Section 12-6-3360, dealing with the job tax credit, has been amended by this Act.
Among the changes are the following:
- The county rankings have been changed from five designations to four designations.
Counties will now be ranked as “Tier I,” “Tier II,” “Tier III,” and “Tier IV” counties.
“Tier I” counties are the 11 counties with a combination of the lowest unemployment
rate and highest per capita income. “Tier IV” counties are the 12 counties with a
combination of the highest unemployment rate and lowest per capita income.
Previously, counties were ranked as “developed,” “moderately developed,”
“underdeveloped,” “least developed,” and “distressed” counties. Code Section 12-63360(B). - The dollar amount of the basic job tax credit for each new job created based on the
new county designations of Tier I, II, III, and IV are:
$1,500 per year for each new full time job created in a Tier I county,
8
$2,750 per year for each new full time job created in a Tier II county,
$4,250 per year for each new full time job created in a Tier III county, and
$8,000 per year for each new full time job created in a Tier IV county.
Note: The credit is one-half of the dollar amount listed above for a taxpayer with 99
or fewer employees claiming the small business job tax credit under Section 12-63360(C)(2) for jobs with gross wages less than 120% of the county’s or state’s
average per capita income.
Previously, the annual basic credit amount for each new, full time job was $1,500 in a
developed county, $2,500 in a moderately developed county, $3,500 in an
underdeveloped county, $4,500 in a least developed county, and $8,000 in a
distressed county. Code Section 12-6-3360(C).
- Several types of businesses qualifying for the credit have been added or changed as
follows:
a. A taxpayer that operates an “agribusiness operation” can now qualify for the job
tax credit. Code Section 12-6-3360(A).
b. A taxpayer that operates a retail facility or service-related industry can qualify for
the job tax credit only in a Tier IV county. Previously, a retail facility or service
related industry in an underdeveloped county not traversed by an interstate
highway, least developed county, or distressed county could qualify for the job
tax credit. Code Section 12-6-3360(A).
c. The definition of “processing facility” has been expanded to include “meat,
poultry, and any other variety of food processing operations.” Processing facility
continues to mean an establishment that prepares, treats, or converts tangible
personal property into finished goods or another form of tangible personal
property. The term includes a business engaged in processing agricultural,
aquacultural, or maricultural products and specifically includes meat, poultry, and
any other variety of food processing operations. It does not include an
establishment in which retail sales of tangible personal property are made to retail
customers. Code Section 12-6-3360(M)(6). - Special provisions have been deleted that qualify certain areas and counties for an
increased credit designation. The restriction that a county’s designation cannot be
lowered in credit amount more than one tier in the following calendar year has also
been deleted. Previously, rankings were done with equal weight given to
unemployment rate and per capita income and then adjusted in accordance with
special rules in Code Sections 12-6-3360(B) and (L), as applicable. Code Section 126-3360(B) and former Code Section 12-6-3360(L).
9
5. Section 38 of the Act repealed Code Section 12-6-3450 concerning a tax credit for
persons terminated as a result of closing or realignment of federal military
installations. Code Section 12-6-3450(A)(1)(b) was referenced in Code Section 12-63360(F)(2)(d) and Code Section 12-6-3360(M)(3). The general definition of “new
job” in Code Section 12-6-3360(M)(3) continues to provide that “this exclusion of a
new job created by an employee shifting does not extend to a job created at a new or
expanded facility located in a county in which is located an ‘applicable federal
facility’ as defined in Section 12-6-3450(A)(1)(b).”
Effective Date: January 1, 2011, except the repeal of Code Section 12-6-3450 is
effective June 23, 2010.
House Bill 4478, Section 17 (Act No. 290)
Port Cargo Volume Increase Credit - Amended
Code Section 12-6-3375 provides a tax credit to a taxpayer engaged in manufacturing,
warehousing, or distribution that uses a South Carolina port facility and that increases its
port cargo volume at these facilities by at least 5% in a calendar year over its base year
port cargo volume. The amount of the credit is determined by the Coordinating Council
for Economic Development (“Council”) upon application by the taxpayer. The changes
to the credit include:
- The credit has been expanded to allow it to be used against employee withholding
taxes. The total amount of credit available for all taxpayers continues to be $8
million a calendar year. Only $4 million of the $8 million may be used against
withholding. Previously, the credit could only be used against income taxes. - The time for the taxpayer to submit an application to the Council for certification of
the credit amount has changed. The taxpayer may now submit the application after
the calendar year in which the increase occurs. Prior to amendment, a taxpayer had to
submit the application by March 1st of the calendar year following the year of the
increase. - The Council continues to have the sole discretion in allocating the credit and may
now make allocations on a monthly, quarterly, or yearly basis. Previously, credits
were allocated on a yearly basis. - The provisions in subitems (A)(2) and (B)(2) that provided that a taxpayer could not
receive more than $1 million in credit a year unless the total $8 million credit had not
been allocated have been deleted. - The Council may annually award up to $1 million in credit to a new warehouse or
distribution facility which commits to spending at least $40 million at a single site
and creating 100 new full-time jobs, without regard to base year cargo requirements.
10
The Council can award the credit in the year the facility is announced, but cannot
tender the credit certificate until the taxpayer has provided proof that the capital
investment and job requirements have been, or will be, satisfied. Any credit
certificate expires 3 years after issuance if satisfactory proof has not been received.
Effective Date: January 1, 2011
House Bill 4478, Section 22 (Act No. 290)
Alternative Fuels Research and Development Credit - Extended to Waste Grease
Derived Biodiesel
Code Section 12-6-3631, providing an income tax credit for qualified expenditures a
taxpayer incurs for research and development of certain alternative energy sources, has
been amended to include certain expenditures to develop feedstocks and processes for
waste grease derived biodiesel in the definition of “qualified expenditures for research
and development.” The amendment also provides that the credit for research and
development for waste grease derived biodiesel is 10% of the qualified expenditures.
Effective Date: January 1, 2011
House Bill 4478, Section 19 (Act No. 290)
Job Development Credit Amended
Code Section 12-10-80 provides a credit against employee withholding taxes to new or
expanding businesses making qualifying investments and creating a minimum number of
new jobs in South Carolina and entering into a revitalization agreement with the
Coordinating Council for Economic Development (“Council”). Code Section 12-10-80
has been amended as follows:
- A provision has been added to provide that a company’s job development credits are
suspended during any quarter the company fails to maintain 100% of the minimum
job requirement set forth in the revitalization agreement. A company can only claim
credits on jobs, including a range of jobs approved by the Council, as set forth in the
company’s final revitalization agreement. This codifies an existing guideline of the
Council. Code Section 12-10-80(A)(6). - A provision has been added to clarify that credits may be claimed beginning with the
withholding quarter after the Council’s approval of the company’s documentation that
the minimum job and capital investment requirements have been met. This codifies
an existing guideline of the Council. Code Section 12-10-80(A)(7).
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3. Subsection (C)(3), which provides for the eligible expenditures that can be
reimbursed from job development credits has been amended: (a) to clarify that real
property acquired by capital or operating lease with at least a 5 year term, may qualify
as an eligible expenditures if approved by the Council and (b) to provide only
employee relocation expenses for those employees to whom the company is paying
gross wages of at least twice the lower of the per capita income of the state or the
county in which the project is located, qualify as eligible expenditures.
Effective Date: January 1, 2011
House Bill 4478, Section 18 (Act No. 290)
Credit against License Fee on Utilities and Electric Cooperatives for Eligible
Infrastructure Projects - Amended
Code Section 12-20-105, which provides a credit for amounts paid in cash for qualifying
infrastructure for an eligible project against the license fee imposed on utilities and
electric cooperatives in Code Section 12-20-100, has been amended as follows:
- Subsection (B)(2), which formerly allowed an office, business, commercial, or
industrial park or combination of these parks to be considered an eligible project for
purposes of the credit, has been amended to allow a project located in an office,
business, commercial, or industrial park or combination of these parks to be
considered an eligible project. The amendment also expands who can own or
construct a project to include agencies of the State. - Subsection (C)(4) has been amended to allow incubator buildings owned by the
county, political subdivision, or agency of the State to qualify as eligible
infrastructure. - Section (H) was added to provided that by March 1 of each year the Department will
issue a report to the Chairman of the Senate Finance Committee, the Chairman of the
House Ways and Means Committee, and the Secretary of the Department of
Commerce outlining the history of the credit including the amount of credit allowed
and the types of infrastructure provided to eligible projects.
Effective Date: January 1, 2011
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The following provision was enacted in 2006, but is effective for tax
years beginning after 2010. It is summarized below for informational
purposes.
Senate Bill 91, Sections 50 through 55 (Act No. 110)
(See also House Bill 3749, Sections 55 through 60 (Act No. 116))
Single Factor Apportionment - Related Amendments Effective Upon Final Phase In
of Single Sales Factor Apportionment Method
Effective for tax years beginning after 2006, Act No. 384 of 2006 amended Code Section
12-6-2250 to enact a single factor apportionment factor for businesses dealing in tangible
personal property using the 3 factor (with double weighted sales) apportionment method.
The single factor apportionment factor is being phased in and will replace the 3 factor
(with double weighted sales) apportionment method for tax years beginning in 2011.
The following amendments, effective for tax years beginning after 2010, update cross
references from Code Section 12-6-2250 (the 3 factor apportionment method with double
weighted sales and phase in provisions of the single sales factor) to Code Section 12-62252 (the single sales factor apportionment method) for the following code sections:
- Code Section 12-6-1130(6) dealing with computation of the depletion deduction;
- Code Section 12-6-2240 dealing with apportionment of income; and
- Code Section 12-6-2290 dealing with gross receipts factor.
The following code sections will be repealed once the single sales factor is fully phased
in effective for tax years beginning after 2010: - Code Section 12-6-2250 (the 3 factor apportionment method with double weighted
sales and phase in provisions of the single sales factor); - Code Section 12-6-2260 (3 factor apportionment method property factor definition); and
- Code Section 12-6-2270 (3 factor apportionment method payroll factor definition).
Effective Date: Tax years beginning after 2010.
13
PROPERTY TAXES and
FEES IN LIEU OF PROPERTY TAXES
House Bill 3713, Section 1 (Act No. 57)
Valuation of 6% Real Property When an Assessable Transfer of Interest Occurs
Background. The South Carolina Real Property Valuation Reform Act, Article 25,
Chapter 37, Title 12 was enacted in 2006. Code Section 12-37-3140 of the Act provides
for valuation of real property at fair market value as of December 31st of the year in
which an assessable transfer of interest (ATI) has occurred. This new valuation becomes
the basis for property tax assessment in the property tax year following the year in which
the ATI occurred. During that property tax year, the new valuation is not subject to the
15% cap imposed on valuation increases attributable to the periodic countywide appraisal
and equalization program implemented pursuant to Code Section 12-43-217.
New Law. Code Section 12-37-3135 has been enacted to exempt a portion of the value of
certain property that undergoes an ATI after 2010. If eligibility requirements are met, the
alternate valuation derived using the exemption will become the basis for property tax
assessment.
Eligibility Requirements - Assessment Ratio and Notice. When property subject to the
6% assessment ratio provided pursuant to Code Section 12-43-220(e) and which is
currently subject to property tax undergoes an ATI after 2010, such property may be
eligible for the exemption. The property owner or his agent must notify the assessor that
the property will be subject to the 6% assessment ratio before January 31st of the property
tax year for which the owner first claims eligibility. No further notifications are
necessary from the current owner while the property remains subject to the 6%
assessment ratio.
Eligibility Requirement - ATI Valuation. Even if the assessment ratio and notice
requirements are met, the exemption and alternate valuation allowed under Code Section
12-37-3135 will not apply if the “ATI fair market value” of the parcel is less than
“current fair market value.” (See definitions below.) If the ATI fair market value is less
than current fair market value, valuation will be determined as provided in Code Section
12-37-3140.
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Definitions. Definitions are provided for the following terms used in Code Section 1237-3135.
▪
“ATI fair market value” means the fair market value of a parcel of real property and
any improvements thereon as determined by appraisal at the time the parcel last
underwent an assessable transfer of interest.
▪
“Current fair market value” means the fair market value of a parcel of real property as
reflected on the books of the property tax assessor for the current property tax year.
▪
“Exemption value” means the ATI fair market value when reduced by the exemption
allowed by this section.
▪
“Fair market value” means the fair market value of a parcel of real property and any
improvements thereon as determined by the property tax assessor by an initial
appraisal, by an appraisal at the time the parcel undergoes an assessable transfer of
interest, and as periodically reappraised in a countywide reassessment program
pursuant to Code Section 12-43-217.
▪
“Property tax value” means the fair market value as it may be adjusted downward to
reflect the limit, imposed pursuant to Code Section 12-37-3140(B), on increases in
value resulting from a periodic reappraisal pursuant to Code Section 12-43-217.
Applicability of the Exemption. If all eligibility requirements are met, a parcel of real
property undergoing an ATI after 2010 will be subject to an exemption equal to 25% of
ATI fair market value. The resulting exemption value must not be less than current fair
market value. Calculation of property tax value for such parcels is based on exemption
value. The exemption allowed by this section applies at the time the ATI fair market
value first applies.
Effective Date: Applies to assessable transfers of interest after 2010.
House Bill 3713, Section 2.A (Act No. 57)
Millage Increase Limit – Revised
Code Section 6-1-320(A) authorizes a local governing body, in years in which no
reassessment program is implemented, to increase the millage it imposes for general
operating purposes only to the extent of the increase in the average consumer price index
for the most recent 12 month period and the percentage increase in the previous year in
the local entity’s population. Code Section 6-1-320(A) has been amended to authorize
the local governing body to further increase its operating millage by any such increase
15
allowed but not previously imposed for the three property tax years preceding the year to
which the current limit applies.
Effective Date: June 14, 2011
House Bill 3713, Sections 3.A and C (Act No. 57)
Rollback Millage Calculation - Revised
Code Section 12-37-251(E) provides a formula for calculating rollback millage.
Rollback millage is the millage imposed in the year a county implements a reassessment
program, as provided in Code Sections 6-1-320 and 12-43-217. The rollback millage
formula consists of a numerator and a denominator. Code Section 12-37-251(E) has been
amended to provide the following:
- The numerator is the amount of property taxes levied in the prior year as adjusted by
abatements and additions. Previously, the numerator was an amount equivalent to the
prior year property tax revenues. - With respect to the denominator, which is derived from the total assessed value
applicable in the reassessment year adjusted by certain deductions, there is a new
deduction for assessments attributable to increases in value due to an assessable
transfer of interest (ATI).
Effective Date: June 14, 2011
House Bill 3713, Section 2.B (Act No. 57)
Millage Increase Limit and Special Tax Districts - Clarified
Code Section 6-1-320, which limits increases in millage imposed for general operating
purposes, has been amended. New subsection (F) clarifies that the restrictions contained
in Code Section 6-1-320 do not apply to millage imposed to pay bonded indebtedness or
operating expenses of a special tax district established pursuant to Code Section 4-930(5), but the special tax district is subject to the millage rate limitations set forth in Code
Section 4-9-30(5).
Effective Date: June 14, 2011
16
House Bill 3713, Sections 3.B and C (Act No. 57)
Uniform Millage Imposition for Municipalities Extending into Multiple Counties
that Implement Reassessment Programs in Different Years
Code Section 12-37-251, which provides a formula for calculating rollback millage, has
been amended. New subsection (G) applies to a municipality with boundaries extending
into multiple counties that implement reassessment programs in different years. Such a
municipality’s governing body must set an equivalent millage to be used to compute
municipal property taxes. This equivalent millage must be determined by methodology
established by the respective county auditors which must be consistent with the
methodology for calculating equivalent millage to be established by the Department for
use in these situations for the purpose of equalizing the municipal property tax on real
property situated in different counties.
Effective Date: June 14, 2011
Senate Bill 628 (Act No. Unassigned)
Dorchester County School Districts Millage and Cash Reserves
For the school year 1992-1993 and for all school years thereafter, the annual millage for
the operating budgets for Dorchester School Districts 2 and 4 must not, without the
approval of the Dorchester County Council, be increased beyond the millage cap imposed
by Section 6-1-320 for the reasons stated in that section notwithstanding the
supermajority vote requirement contained therein, plus a limited cash reserve.
Pursuant to Senate Bill 628, the cash reserve may not exceed 15% of the total operating
budget for that school district for the year in which the cash reserve is maintained and
must be funded only by an accumulation of revenue in excess of budgeted amounts and
not by the levy of additional taxes as part of the budget. Monies in the cash reserve may
not be used to fund any expenditure for which any general obligation bond may be
issued.
This provision amends Act 593 of 1992, which in turn, amended Act 267 of 1987, both of
which originally imposed limits on the millage imposed by these school districts. Act
593 originally allowed a 5% cash reserve for these school districts.
Effective Date: March 16, 2011
17
House Bill 3700, Part IB, Section 1, Proviso 1.99 (Act No. 73)
Index of Taxpaying Ability – Imputed Value for Owner-Occupied Residential
Property
The index of taxpaying ability is used to determine state funding for education under the
Education Finance Act of 1977, Chapter 20, Title 59. This index, prepared by the
Department, shows a local school district’s relative fiscal capacity in relation to that of all
other districts in the state based on the full market value of all taxable property of the
district assessed for ad valorem taxes for the second completed property tax year
preceding the fiscal year in which the index is used.
For property tax years beginning after 2006, Code Section 12-37-220(B)(47) exempts
100% of the fair market value of owner-occupied residential property receiving a 4%
assessment ratio from all property taxes imposed for school operating purposes. School
districts are reimbursed for lost revenue based on a 3 tier formula set forth in Code
Section 11-11-156.
This temporary proviso clarifies that, for fiscal year 2011-2012, an index value for the
exempt owner-occupied residential property must be imputed by adding the second
preceding taxable year total school district reimbursements for Tiers 1, 2 and 3(A) of the
3 tier formula and not to include the supplement distribution. The Department shall not
include sales ratio data in its calculation of the index of taxpaying ability. The
methodology for the calculation of value for classes of property other than exempt
owner-occupied residential property is not affected by this temporary proviso.
Effective Date: This temporary proviso is effective for State fiscal year July 1, 2011
thorugh June 30, 2012. It will expire June 30, 2012, unless reenacted by
the General Assembly in the next legislative session.
House Bill 3806 (Act No. Unassigned)
Property Tax Credit – Lexington County School Districts 1 and 4
This joint resolution provides a credit for property tax millage imposed in 2007 and 2008
on owner-occupied residential property in Lexington County School District Numbers 1
and 4 to repay construction lease-purchase obligations (the debt service millage). Code
Section 12-37-220(B)(47) exempts 100% of the fair market value of owner-occupied
residential property receiving a 4% assessment ratio from all property taxes imposed for
school operating purposes. In July 2009, the South Carolina Supreme Court clarified that
the debt service millage was millage imposed for a school operating purpose and thus
subject to the exemption. See Berkeley County School District v South Carolina
Department of Revenue 383 S.C. 334, 679 S.E. 2d 913 (2009).
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The joint resolution specifies the method by which the debt service millage is to be
calculated and applied as a credit against property taxes on affected parcels for tax year
2011. The credit is the sole remedy with respect to property taxes attributable to the debt
service millage. The credit is refundable to the extent it exceeds actual property tax
liability for tax year 2011. Ownership of affected parcels is determined as of July 1,
2011.
Effective Date: April 12, 2011
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REMINDER
The following provisions were enacted in 2010, but are effective in 2011.
They are summarized below for informational purposes.
House Bill 4478, Section 13 (Act No. 290)
Manufacturers’ Real Property Used for Warehousing and Wholesale Distribution Changes to Requirements for Alternative Classification
Code Section 12-43-220(a) concerns the classification of real and personal property
owned by, or leased to, manufacturers and utilities and generally provides for an
assessment ratio of 10.5% on property used in the conduct of the business. Item (4) has
been amended to provide that real property owned by or leased to a manufacturer and
used primarily for warehousing and wholesale distribution is not considered used in the
conduct of the manufacturing business. Previously, this exception was available only for
property used exclusively for warehousing and wholesale distribution. Real property that
falls outside the manufacturers and utilities classification is generally taxed based on a
6% assessment ratio.
The amendment further clarifies that real property subject to this exclusion must not be
physically attached to the manufacturing plant unless the warehousing and wholesale
distribution area is separated by a permanent wall.
Effective Date: January 1, 2011
House Bill 4478, Sections 2 - 5 (Act No. 290)
Little Fee - Revised for Time Limits, Valuation, and Qualifications
- Code Section 4-12-30(B)(4)(b) has been amended to provide that if a project consists
of a manufacturing, research and development, corporate office, or distribution
facility, each sponsor or sponsor affiliate is not required to invest $2.5 million, if the
total investment in the project exceeds $5 million. Previously, the total investment
had to exceed $10 million.
Effective Date: Agreements executed after January 1, 2011. However, a taxpayer and a
county may amend an existing agreement at any time prior to the
expiration of the fee to incorporate this change into the agreement. - Code Section 4-12-30(C)(4) has been amended to provide that a single piece of
property may be subject to the fee for no more than 30 years. Previously, the statute
provided that a single piece of property could be subject to the fee for up to 20 years.
By resolution on a finding of substantial public benefit, the county may agree to
20
extend this period for another 10 years. Corresponding amendments provide that if a
county allows the additional 10 year extension, a single piece of property can be
subject to the fee for up to 40 years, and the project itself can be subject to the fee for
up to 50 years. For the super fee, a single piece of property can be subject to the fee
for up to 40 years (with the extension) and the project itself can be subject to the fee
for up to 53 or 55 years depending on the specifics of the project. Previously, the
super fee time limits were 30 years and 43 or 45 years, respectively.
Effective Date: Effective for agreements executed after January 1, 2011. However, a
taxpayer and a county may amend an existing agreement at any time
prior to the expiration of the fee to incorporate this change into the
existing agreement.
- Code Section 4-12-30(D)(2)(a)(i), which provides that real property is generally
valued at original cost for the life of the fee, has been amended to provide that a
county and a sponsor or sponsor affiliate may agree (initially or by amendment) that
the value of real property subject to the fee will be determined by an appraisal
completed by the Department. If the county and the sponsor or sponsor affiliate agree
to appraisal by the Department, the property will be subject to reappraisal no more
than once every 5 years.
Effective Date: Effective in each county in the first property tax year in which a county
reassessment program is implemented after December 31, 2010. - Code Section 4-12-30(J)(1)(b) has been amended to provide that property that has
been subject to South Carolina property taxes is eligible for the fee if it was placed in
service in the State pursuant to an inducement agreement or other preliminary county
approval before the execution of a lease agreement. Before this amendment,
previously taxed property would qualify only if it had not been placed in service.
Effective Date: January 1, 2011
House Bill 4478, Section 6 (Act No. 290)
(See also Senate Bill 1131 (Act No. 161))
Big Fee - Extended Time Periods and Valuation
- Code Section 4-29-67(C)(3) has been amended to provide that a single piece of
property may be subject to the fee for no more than 30 years. Previously, the statute
provided that a single piece of property could be subject to the fee for up to 20 years.
By resolution on a finding of substantial public benefit, the county can agree to
extend this period for another 10 years. Corresponding amendments provide that if a
county allows the additional 10 year extension provided for in the statute, a single
piece of property can be subject to the fee for up 40 years, and the project itself can
be subject to the fee for up to 50 years. For the super fee, a single piece of property
21
can be subject to the fee for up to 40 years (with the extension) and the project itself
can be subject to the fee for up to 53 or 55 years depending on the specifics of the
project. Previously, the super fee time limits were 30 years and 43 or 45 years,
respectively.
Effective Date: January 1, 2011. However, a county may amend an existing agreement
at any time prior to the expiration of the fee to incorporate this change
into the agreement.
- Code Section 4-29-67(D)(2)(a)(iii)(A) which provides that real property is generally
valued at original cost for the life of the fee, has been amended to provide that a
county and a sponsor or sponsor affiliate may agree (initially or by amendment) that
the value of real property subject to the fee will be determined by an appraisal
completed by the Department. If the county and the sponsor or sponsor affiliate agree
to appraisal by the Department, the property will be subject to reappraisal no more
than once every 5 years.
Effective Date: Effective in each county in the first property tax year in which a county
reassessment program is implemented after December 31, 2010.
House Bill 4478, Sections 8 - 12 (Act No. 290)
(See also Senate Bill 1131, Sections 1 - 2 (Act No. 161))
Simplified Fee - Extended Time Period, Valuation and Qualification
- Code Section 12-44-30(21) has been amended to provide that the “termination date”
is the last day of the property tax year that is the 29th year following the first property
tax year in which an applicable piece of economic development property is placed in
service. By resolution or a finding of substantial public benefit, the county may agree
to extend this period for another 10 years. Previously, the termination date was the
19th year after the economic development property is placed in service or the 29th year
for property subject to an enhanced investment fee, and a single piece of property
could be subject to the fee for a total of 30 years.
Effective Date: January 1, 2011. However, a county and a sponsor may amend an
existing fee agreement any time before the expiration of the fee to
incorporate this change. - Section 12-44-50(A)(1)(c)(i) which provides that real property is generally valued at
original cost for the life of the fee, has been amended to provide that a county and a
sponsor or sponsor affiliate may agree (either initially or by amendment) that real
property subject to the fee will be determined by an appraisal completed by the
Department. If the county and the sponsor or sponsor affiliate agree to appraisal by
the Department, the property will be subject to reappraisal no more than once every 5
years.
22
Effective Date: Effective in each county in the first property tax year in which a
countywide reassessment program is implemented after December 31,
2010.
- Code Section 12-44-110(2) has been amended to provide that property that has been
subject to South Carolina property taxes, is eligible for the fee if it was placed in
service in the State pursuant to an inducement agreement or other preliminary county
approval before the execution of a lease agreement. Before this amendment,
previously taxed property would qualify only if it had not been placed in service.
Effective Date: January 1, 2011
House Bill 4478, Section 7 (Act No. 290)
Special Source Revenue Bonds or Credits - Eligible Uses Expanded
Code Section 4-29-68 allows a county to issue special source revenue bonds to pay for,
among other things, improved or unimproved real property associated with a
manufacturing or commercial project. Code Section 4-29-68(A)(2) has been amended to
provide that bonds may be issued, or a credit against the fee may be given, to pay for the
cost of personal property including machinery and equipment used in the operation of
such a project.
If the bonds, or monies from a credit allowed against the fee due on the property, are used
to pay for personal property, and the personal property is removed from the project
during the time the fee is in effect and the removed property is not replaced with
qualifying replacement property, the amount of the fee due for that property must be paid
for the year it is removed and for the 2 years following its removal from the project. If
any bond funds or credit funds are used to pay for both real and personal property, or
infrastructure and personal property, all of the funds will be presumed to have first been
used to pay for personal property. The fee amounts described above will be remitted to
the county in which the project is located.
Effective Date: January 1, 2011
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SALES AND USE TAXES
Senate Bill 36, Section 1 (Act No. 32)
Durable Medical Equipment - Phase Out of Sales and Use Tax
History of Exemption. Code Section 12-36-2120(74) was added by Act No. 99 of 2007 to
exempt from sales and use tax durable medical equipment and related supplies as defined
under federal and state Medicaid and Medicare laws that met the following conditions:
- The purchase must be paid directly by funds of South Carolina or the United States
under the Medicaid or Medicare programs - State or federal law or regulation authorizing the payment must prohibit the payment
of the sales or use tax and - The durable medical equipment and related supplies must be sold by a provider who
holds a South Carolina retail sales license and whose principal place of business is
located in South Carolina.
In addition, the 2007 legislation contained an uncodified provision providing for a phasein of the exemption. For sales on or after July 1, 2007, the rate of tax was 5.5%.
Reductions of the tax rate would be made if the Board of Economic Advisors forecast
showed an annual general fund growth rate of at least 5% for the next fiscal year. Since
the annual growth condition was not met, the sales tax rate on durable medical equipment
and related supplies remained at 5.5%.
New Law. Act No. 32 of 2011 provides for a new phased-out sales and use tax rate on
the sale of durable medical equipment and related supplies meeting the above
requirements. The rate imposed on the gross proceeds of sales for durable medical
equipment and related supplies are as follows:
▪
For sales occurring from July 1, 2011 to June 30, 2012. The sales and use tax rate is
3.5 % (plus any applicable local sales and use tax).
▪
For sales occurring from July 1, 2012 to December 31, 2012. The sales and use tax
rate is 1.75% (plus any applicable local sales and use tax).
▪
For sales occurring on or after January 1, 2013. There is no state or local sales and
use tax. The exemption under Code Section 12-36-2120(74) is fully implemented.
24
In addition, this amendment repealed the requirement of the 5% annual general fund
growth rate contained in Act No. 99 of 2007.
Effective Date: June 8, 2011
Senate Bill 36, Section 2 (Act No. 32)
Warranty, Service and Maintenance Contracts - Amended
Act No. 32 amends the application of the sales and use tax to warranty or maintenance
contracts effective September 1, 2011. The changes that are effective September 1, 2011,
amend the sales and use tax law so that the application of the tax to warranty or
maintenance contracts, and to the withdrawals of parts to fix a defective product under
these contracts, will be the same as it was prior to October 1, 2005. See SC Revenue
Ruling #93-6 and SC Revenue Ruling #03-5, Questions #19 through #22, for an
explanation of the application of the tax to a warranty or maintenance contract prior to
October 1, 2005 as well as on and after September 1, 2011.
The statute continues to tax the sale of a warranty or maintenance contract purchased at
the same time the tangible personal property is purchased, unless the sale of the tangible
personal property is exempt from the tax. However, with limited exceptions, the sales and
use tax will no longer apply to a warranty or maintenance contract purchased after the
tangible personal property is purchased.
Effective Date: September 1, 2011
Senate Bill 36, Sections 3 and 4 (Act No. 32)
Nexus – Distribution Facility
Distribution Facility Requirements. Code Section 12-36-2691 has been added to provide
that, subject to the requirements discussed below, owning, leasing, or utilizing a
distribution facility in South Carolina, including a distribution facility of a third party or
an affiliate, is not considered in determining whether the person has a physical presence
in South Carolina sufficient to establish nexus with South Carolina for sales and use tax
purposes.
25
A “distribution facility” is “an establishment where shipments of tangible personal
property are stored and processed for delivery to customers and no retail sales of the
property are made.” The provisions of Code Section 12-6-3360(M)(8), the job tax credit
statute definition of “distribution facility” that allows for limited retail sales, is
inapplicable to this definition. An “affiliate” is “a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common
control with another person.” For this purpose, a person controls another person if that
person holds a 50% ownership interest in the other person.
Code Section 12-36-2691(C) provides that this section applies only if the person or its
affiliate:
- places a distribution facility in service after December 31, 2010, and before January
1, 2013, - makes, or causes to be made through a third party, a capital investment of at least
$125 million after December 31, 2010, and before December 31, 2013 and, - creates at least 2,000 full-time jobs with a comprehensive health plan for those
employees after December 31, 2010, and before December 31, 2013. “Full-time” and
“new job” have the same meaning as provided in Code Section 12-6-3360 for
purposes of this item.
After meeting the above requirement for creating 2,000 full-time jobs with a
comprehensive health plan for those employees, the person, or its affiliate, must maintain
at least 1,500 full-time jobs with a comprehensive health plan for those employees until
January 1, 2016 for Code Section 12-36-2691 to remain applicable.
Code Section 12-6-2691(D) provides that this section no longer applies on the earlier of: - January 1, 2016,
- when the person fails to meet the requirements of Code Section 12-36-2961(C) listed
above, or - the effective date of any law enacted by the United States Congress that allows a state
to require that its sales tax be collected and remitted even if the taxpayer does not
have substantial nexus with that state.
26
Email Notification to Purchasers - Use Tax. Code Section 12-36-2691(E) provides that a
person to whom this section applies who makes a sale through the person’s Internet
website shall notify a purchaser in a confirmation email that the purchaser may owe
South Carolina use tax on the total sales price of the transaction and include in the email
an Internet link to the Department’s website that allows the purchaser to pay the use tax.
The notice must include language that is substantially similar to the following:
YOU MAY OWE SOUTH CAROLINA USE TAX ON THIS
PURCHASE BASED ON THE TOTAL SALES PRICE OF THE
PURCHASE. YOU MAY VISIT WWW.SCTAX.ORG TO PAY THE
USE TAX OR YOU MAY REPORT AND PAY THE TAX ON YOUR
SOUTH CAROLINA INCOME TAX FORM.
Department’s Use Tax Webpage. The Department is required to provide the means that
allows a person to whom this section applies to link to the Department’s website and that
allows the purchaser to pay any required tax through the Department webpage. The
Department must include on the webpage a table of the various sales tax rates of the State
by location that permits the person to calculate the tax based on the total sales price and
delivery location.
Retailer’s Annual Statement to Purchasers. By February 1st of each year, the person to
whom Code Section 12-36-2691 applies shall provide to each purchaser to whom
tangible personal property was delivered in South Carolina, a statement of the total sales
made to the purchaser during the previous calendar year. The statement must contain
language substantially similar to the following:
YOU MAY OWE SOUTH CAROLINA USE TAX ON PURCHASES
YOU MADE FROM US DURING THE PREVIOUS TAX YEAR. THE
AMOUNT OF TAX YOU MAY OWE IS BASED ON THE TOTAL
SALES PRICE OF [INSERT TOTAL SALES PRICE] THAT MUST BE
REPORTED AND PAID WHEN YOU FILE YOUR SOUTH
CAROLINA INCOME TAX RETURN UNLESS YOU HAVE
ALREADY PAID THE TAX.
The statement must not contain any other information that would indicate, imply, or
identify the class, type, description, or name of the products purchased. Any information
that would indicate, imply, or identify the class, type, description, or name of the
products purchased is considered strictly confidential. The statement may be provided by
first class mail or email.
27
Retailer’s Invoice or Other Documentation Requirements. Code Section 12-36-2692 has
been added requiring that each person to whom Code Section 12-36-2691 applies provide
to its customers readily visible notification on invoices, or other similar documentation
that the customer must pay the South Carolina use tax on the purchase unless the sale of
the tangible personal property to the customer is otherwise exempt. The person complies
with this notice requirement if it provides a prominent linking notice on invoices or other
similar documentation that directs its customers to information regarding the customer’s
use tax responsibilities. A linking notice complies with the provisions if the notice reads
as follows:
See important sales tax information regarding the tax that you may owe
directly to your state of residence.
A person required to provide a linking notice must also provide this notification on its
Internet website and catalog.
Effective Date: June 8, 2011
28
MISCELLANEOUS
(Summarized by Subject Matter)
ADMINISTRATIVE and PROCEDURAL MATTERS
House Bill 3700, Part IB, Section 90, Proviso 90.21 (Act No. 73)
Revenue Laws – Interpretations and Report to General Assembly Committee Chairmen
During the current fiscal year, the Department’s interpretation of South Carolina’s
revenue statutes must be based solely on the plain meaning of the statute’s text and the
legislative intent giving rise to the enactment of the statute. Terms in tax statutes may not
be given broader meaning beyond the meaning of the statute. At least twice during the
fiscal year, the Department shall submit a report to the Chairman of the Senate Finance
Committee and the Chairman of the House Ways and Means Committee regarding any
discovered ambiguity in the meaning of a revenue statute. The reports must be submitted
no later than November 1 and May 1.
Effective Date: This temporary proviso is effective for State fiscal year July 1, 2011
thorugh June 30, 2012. It will expire June 30, 2012, unless reenacted by
the General Assembly in the next legislative session.
Senate Bill 20, Sections 8 through 14 (Act No. 69)
Unauthorized Aliens and Private Employer Licenses
Chapter 8 of Tile 41, concerning unauthorized aliens and private employment and
Chapter 14 of Title 8, concerning unauthorized aliens and public employment, have been
amended. This legislation contains various law enforcement provisions related to
unauthorized aliens and requirements for employers to verify the work authorization of
all new hires through E-Verify. These provisions are not applicable to the Department
and are not discussed in this summary. However, provisions affecting licenses
administered by the Department are discussed below.
Under Code Section 41-8-20, all private employers in South Carolina are imputed a
South Carolina employment license which permits a private employer to employ a person
in the state. A private employer may not employ a person unless the private employer’s
South Carolina employment license and any other applicable licenses as defined in Code
Section 41-8-10 are in effect and are not suspended or revoked.
A “license,” as defined in Code Section 41-8-10(C), means an agency permit, certificate,
approval, registration, charter, or similar form of authorization that is required by law and
that is issued by any agency or political subdivision of the state for the purpose of
29
operating a business in the state. Professional licenses are excluded, but “license”
includes employment licenses, articles of organization, articles of incorporation, a
certificate of partnership, a partnership registration, a certificate to transact business, or
similar forms of authorization issued by the South Carolina Secretary of State, and any
transaction privilege tax license.
The imputed employment license and all other licenses meeting the above definition can
be suspended or revoked for violation of state law concerning unauthorized aliens and
private employment (Chapter 8 of Title 41). This determination is made by the
Department of Labor, Licensing and Regulation.
However, under Code Section 41-8-50(J), if the director of the Department of Labor,
Licensing and Regulation determines that a private employer’s license must be suspended
or revoked for violation of state law concerning unauthorized aliens and private
employment (Chapter 8 of Title 41), the director must immediately notify the applicable
licensing agency or political subdivision, such as the Department of Revenue, and that
agency or political subdivision must suspend or revoke the private employer’s license or
licenses.
Code Section 41-8-50(K) states that a license suspension or revocation (1) does not
constitute a dissolution, liquidation, or a winding down process; or a transfer, or other
taxable event for tax purposes, including, but not limited to, taxes imposed or authorized
by Title 12 and (2) does not affect protections against personal liability provided in Title
33.
Code Section 41-8-60 provides that a private employer may seek review of any
disciplinary action of the director of the Department of Labor, Licensing and Regulation
taken pursuant to Code Section 41-8-50 with the Administrative Law Court, and the
action must be brought in accordance with the provisions of Chapter 23, Title 1.
Effective Date: January 1, 2012
30
MISCELLANEOUS TAX LEGISLATIONS
House Bill 3700, Part IB, Section 90, Proviso 90.23 (Act No. 73)
Admissions Tax Rebate – Motorsports Entertainment Complex Facility
This temporary proviso provides that up to $114,000 in admissions tax revenue collected
annually from all events held at a motorsports entertainment complex facility with at least
60,000 permanent seats must be rebated to the motorsports entertainment complex
facility in the current fiscal year to keep a NASCAR race at the facility.
Effective Date: This temporary proviso is effective for State fiscal year July 1, 2011
thorugh June 30, 2012. It will expire June 30, 2012, unless reenacted by
the General Assembly in the next legislative session.
OTHER ITEMS (Including Local Taxes)
Senate Bill 584 (Act No. Unassigned)
Lexington County School District Sales and Use Tax
In the 2004 general election, the qualified electors residing in Lexington County
approved a referendum imposing a 1% sales and use tax within Lexington County. The
tax was originally authorized under Act 378 of 2004, the Lexington County School
District Property Tax Relief Act (the Act), and became effective on March 1, 2005.
Section 3(A) of the Act provides that the tax is imposed for 7 years, but it may be
reimposed or extended by the General Assembly. Senate Bill 584 extends the tax for an
additional 7 years beginning March 1, 2012, the day after the original 7 year period
expires.
The tax is administered and collected by the Department in the same manner that other
sales and use taxes are collected. It is in addition to all other local sales and use taxes and
applies to the gross proceeds of sales in Lexington County that are subject to the tax
imposed by Chapter 36, Title 12, and the collection and enforcement provisions of
Chapter 54, Title 12. The gross proceeds of the sale of unprepared food that may
lawfully be purchased with food stamps and items subject to a maximum tax are exempt
from this tax.
Effective Date: May 9, 2011
31
REGULATORY LEGISLATION
House Bill 3178 (Act No. 66)
Liquor and Wine Tastings – Retail Liquor Stores
Code Section 61-6-1035, which allows the sampling of wines containing over 16% by
volume of alcohol, cordials, and other distilled spirits sold in a retail alcoholic liquor
store, has been amended to add the following new conditions:
- The sample is limited to products from no more than one wholesaler at one time.
- The tastings must be conducted by a manufacturer or a retailer, or its agent, and must
not be conducted by a wholesaler or its agent. Previously, only manufacturers were
permitted to conduct tastings. - All costs for the tasting must be paid for by the party conducting the tasting, whether
a manufacturer or a retailer, or its agent. - As with products it offers for sale, the retailer must purchase all product samples used
for the tastings it conducts from a licensed wholesaler. - A copy of a certificate of liability insurance for the party conducting the tasting must
accompany notification to the South Carolina Law Enforcement Division.
Effective Date: June 17, 2011
House Bill 3295, Sections 1 and 2 (Act No. 67)
Homeowners Associations May Apply for License to Sell Alcoholic Liquor by the
Drink
Code Section 61-6-1820, which provides criteria for applications for a license to sell
alcoholic liquor by the drink, has been amended to allow a homeowners association
chartered as a nonprofit organization by the Secretary of State to obtain a license.
Code Section 61-6-20, which provides definitions for terms used in Chapter 6 of Title 61,
has been amended to add a definition for the term “homeowners association chartered as
a nonprofit by the Secretary of State.” Under this definition, the following requirements
apply:
- The organization must have been recognized as a nonprofit by the Secretary of State.
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2. The organization’s membership must be limited to individuals who own property in
the residential community.
- The organization’s affairs must be governed by a board of directors elected by the
membership. - No member, officer, agent, or employee of the association may be paid a salary or
other form of compensation from any of the profit of the sale of alcoholic beverages,
except as may be voted on at a meeting of the governing body. - Any compensation paid must be reasonable compensation for the services actually
performed. - The organization must abide by all alcoholic liquor regulations that apply to any
nonprofit organization eligible for a license, except that upon dissolution of the
“homeowners association chartered as a nonprofit by the Secretary of State,” the
remaining assets, if any, may be distributed to its members. - A license must be issued only for facilities located within the boundaries of the
homeowners association.
Effective Date: June 17, 2011
House Bill 3295, Section 4 (Act No. 67)
Local Option Permits – Establishments Located at International Airports
Code Section 61-6-2010, which authorizes Sunday sales of beer, wine and liquor under
temporary permits, known as local option permits, in counties and municipalities that
approve Sunday sales by referendum, has been amended. Subsection (G) was added to
authorize a local option permit if the following requirements are met:
- The applicant must be a business establishment located within a building on the
grounds of an international airport. - The applicant must hold a license for possession, sale and consumption of alcoholic
liquors by the drink on its licensed premises. - A referendum approving local option permits has passed in any county within the
territory of the airport district that operates the international airport or in any
municipality located within the territory of the district.
Effective Date: June 17, 2011
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House Bill 3295, Section 5.B (Act No. 67)
Temporary License to Sell Alcoholic Liquor by the Drink at Special Functions –
Revised
Code Section 61-6-2000 authorizes the Department to issue a license, on payment of a
$35 fee, allowing a nonprofit organization to sell alcoholic liquor by the drink for a
period not exceeding 24 hours at a single function, for which tickets may be sold to
nonmembers. This section has been amended as follows:
- The term “nonprofit organization” is now defined by reference to Code Section 61-620, which provides that the term means an organization not open to the general
public, but with a limited membership and established for social, benevolent,
patriotic, recreational, or fraternal purposes. - A provision that allowed the Department to deny an application if it was not
submitted at least 15 days before the special function has been omitted. - Reference to the penalty provisions for violations of Article 13, Chapter 6, Title 61
has been omitted. - The requirement for a criminal records check in Subsection (B) has been revised.
The applicant must obtain a criminal records check conducted by the State Law
Enforcement Division within 90 days prior to an application and submit it with the
application. Failure to comply will result in denial of the application. An exception
in the case of a subsequent application has been omitted. - The requirement for notification of law enforcement in Subsection (C) has been
substantially revised. The applicant must complete the law enforcement notification
provision contained in the application form and submit it with the application, thereby
informing the Department that either the chief of police, if the event is located within
the city limits, or the county sheriff has been notified of the temporary permit
application and given an opportunity to object.
Effective Date: July 1, 2011
House Bill 3295, Section 6 (Act No. 67)
Sunday Beer and Wine Sales and Consumption Authorized in Certain Counties and
Municipalities
Code Section 61-4-630 has been added to authorize certain establishments to sell,
possess, and permit the consumption of beer and wine on the premises for a period not to
exceed 24 hours on Sunday. To qualify, the establishment must (1) possess a beer and
wine permit and (2) be located in a county or municipality that has conducted a favorable
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referendum allowing the sale and consumption of alcoholic liquor by the drink on Sunday
under Code Section 61-6-2010.
Effective Date: June 17, 2011
House Bill 3295, Section 3 (Act No. 67)
Separate Food Service Establishment – New Permit
Code Section 61-6-2015 has been added to authorize a temporary permit to sell beer and
wine for on-premises consumption for a period not to exceed 24 hours without regard to
the days or hours of these sales. This permit shall be considered a biennial temporary
permit, and may be issued to those holders of a permit to sell beer and wine for
off-premises consumption during periods other than Sunday who have within the licensed
premises a separate food service establishment serving prepared food for on-premises
consumption. The permit to sell beer and wine for on-premises consumption during the
24 hour period shall apply only to this separate food-service establishment. The
Department may require such proof of qualifications for the issuance of these permits as
it considers necessary. The application fee and permit fee amounts are the same as for a
biennel retail beer and wine permit. These permits may be issued only to qualified
applicants located in a county or municipality which pursuant to Code Section 61-6-2010
has successfully held a referendum allowing the possession, sale, and consumption of
alcoholic liquors by the drink for a period not to exceed 24 hours.
Effective Date: June 17, 2011
House Bill 3295, Section 5.A (Act No. 67)
House Bill 3278 (Act No. Unassigned)
Temporary Beer and Wine Permits for Special Events – Revised
Code Section 61-4-550, which authorizes the Department to issue one-day beer and wine
permits running for a period not exceeding 15 days, for a fee of $10 per day, for locations
at fairs and special functions, has been amended to permanently remove a previous
requirement that permits be issued to qualified nonprofit organizations only. This
previous requirement, added by Act No. 259 of 2010, was temporarily removed by joint
resolution in House Bill 3278 of 2011, effective from January 27, 2011 to June 30, 2011.
(For a further explanation of House Bill 3278, see SC Information Letter 11-2.)
Additional amendments to Code Section 61-4-550 are:
- The requirement for a criminal records check in Subsection (B) has been revised.
The applicant must obtain a criminal records check conducted by the State Law
Enforcement Division within 90 days prior to an application and submit it with the
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application. Failure to comply will result in denial of the application. An exception
in the case of a subsequent application has been omitted.
- The requirement for notification of law enforcement in Subsection (C) has been
substantially revised. The applicant must complete the law enforcement notification
provision contained in the application form and submit it with the application, thereby
informing the Department that either the chief of police, if the event is located within
the city limits, or the county sheriff has been notified of the temporary permit
application and given an opportunity to object.
3.
Subsection (D) has been revised to provide that the Department may issue up to 25
temporary permits on a single application if the applicant is also applying for up to 25
temporary licenses to sell alcoholic liquor by the drink under Code Section 61-62000. This does not prohibit the applicant from applying for additional special
permits within the same 12-month period. Reference to the penalty provisions for
violations of Article 1, Chapter 4, Title 61 has been omitted.
Effective Date: July 1, 2011
REMINDER
The following provisions were enacted in 2010, but are effective in 2011.
They are summarized below for informational purposes.
MISCELLANEOUS TAX LEGISLATION
House Bill 4478, Section 14 (Act No. 290)
Rural Infrastructure Funds - Eligible Expenditures Expanded
Code Section 12-10-85, establishing the Rural Infrastructure Fund to provide funds to
local governments for infrastructure and economic development, has been amended to
expand the eligible expenditures. Funds can now be used for: (1) site preparation, (2)
acquiring or improving real property, and (3) relocation expenses of an employee if the
company pays wages to the employee that are at least twice the State average or the
county average for the county in which the project is located, whichever is lower.
Effective Date: January 1, 2011
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OTHER ITEMS (Including Local Taxes)
House Bill 4551 (Act No. 135)
911 Communications Systems - New Charge for Prepaid Wireless and Voice over
Internet Protocol
Chapter 47 of Title 23 governs local emergency telephone systems (i.e., 911 systems). It
provides, in part, that fees (“911 charges”) may be imposed to fund an emergency
telephone system with respect to the public telephone system and commercial mobile
radio service. While 911 charges imposed with respect to the public telephone system are
paid directly to the local government imposing the 911 charge, 911 charges imposed with
respect to commercial mobile radio service are paid to the Department. The Department
is required to deposit these 911 charges with the State Treasurer for distribution pursuant
to Code Section 23-47-65.
Chapter 47 has been amended to include new provisions that allow 911 charges to be
imposed on prepaid wireless telecommunications services and “Voice over Internet
Protocol” (“VoIP”).
Prepaid Wireless 911 Charge: Code Section 23-47-68 has been added with respect to the
new prepaid wireless 911 charge to provide the following:
- A prepaid wireless 911 charge is levied on each prepaid wireless retail transaction
occurring in South Carolina. This prepaid wireless 911 charge will be an amount
equal to the average commercial mobile radio service 911 charge. - A prepaid wireless seller must collect the prepaid wireless 911 charge from a prepaid
wireless consumer. The amount of the prepaid wireless 911 charge shall be either
separately stated on an invoice, receipt, or other similar document that is provided to
the prepaid wireless consumer by the prepaid wireless seller or otherwise disclosed to
the prepaid wireless consumer. - The prepaid wireless retail transaction must be sourced the same as provided in Code
Section 12-36-910(B)(5)(b). - The prepaid wireless 911 charge is the liability of the prepaid wireless consumer and
not the prepaid wireless seller or any prepaid wireless provider. However, the prepaid
wireless seller is liable to remit to the Department all prepaid wireless 911 charges
that the prepaid wireless seller collects from prepaid wireless consumers. - The amount of the prepaid wireless 911 charge collected by a prepaid wireless seller
is not includable in the base for measuring any tax, fee, prepaid wireless 911 charge,
or other charge that is imposed by this State, any of its political subdivisions, or any
intergovernmental agency. The prepaid wireless 911 charge is not considered revenue
of the prepaid wireless seller.
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6. The Department must establish procedures by which a prepaid wireless seller may
document that a sale is not a prepaid wireless retail transaction, which procedures
shall substantially coincide with the procedures for documenting sale for resale
transactions under Code Section 12-36-950.
- The prepaid wireless seller must remit the prepaid wireless 911 charge to the
Department on a monthly, quarterly or annual basis; however, the prepaid wireless
seller is entitled to retain 3% of the gross prepaid wireless 911 charges remitted to the
Department as an administrative fee.
“Voice over Internet Protocol” 911 Charge: Code Section 23-47-67 has been added to
impose a “Voice over Internet Protocol” (“VoIP”) 911 charge in an amount identical to
the amount of the 911 charge imposed on each local exchange access facility pursuant to
Code Sections 23-47-40(A) and 23-47-50(A). VoIP 911 charges are remitted to the local
government to which they are sourced.
Prohibition on Other 911 Charges: Code Section 23-47-69 was added to prohibit the
State, any of its political subdivisions, or an intergovernmental agency from requiring any
service provider to impose, collect, or remit a tax, fee, surcharge, or other charge for 911
funding purposes other than the 911 charges set forth in Chapter 47 of Title 23.
Advisory Committee: Code Section 23-47-65 was amended to change the name of the
“CMRS Emergency Telephone Service Advisory Committee” to the “South Carolina 911
Advisory Committee.”
Definitions: Code Section 23-47-10 was amended to add various definitions for terms
related to prepaid wireless and VoIP 911 charges.
Effective Date: July 1, 2011, except that the addition of, or amendments to, Code
Sections 23-47-55 (not summarized), 23-47-69, and 23-47-70 (not
summarized) are effective March 30, 2010.
House Bill 4478, Section 34 (Act No. 290)
Redevelopment Authority Fees Extended for 2 Years
Code Section 12-10-88 provides that federal employers located on a closed or realigned
military installation are to remit a portion of their employees’ South Carolina withholding
to the redevelopment authority overseeing that facility if the redevelopment authority
complies with reporting requirements. These redevelopment fees may be remitted to the
redevelopment authority beginning with the date the redevelopment authority first
submitted the required information to the Department and for 15 years thereafter or until
January 1, 2015, whichever occurs last. This provision has been amended to provide for
the collection and remittance of the redevelopment fees for the 15 year period or through
January 1, 2017, whichever occurs last.
Effective Date: January 1, 2011
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LIST OF TEMPORARY PROVISOS
Temporary provisos are enacted as part of the annual budget bill, 2011 House Bill 3700,
Part IB (Act No. 73). They are effective only for the current State fiscal year (July 1,
2011 – June 30, 2012). They expire on June 30th, unless reenacted by the General
Assembly.
The following is a list of new provisos enacted during this legislative session and a list of
provisos that were enacted in prior fiscal years and reenacted during this legislative
session. A brief summary of the new provisos can be found in this publication under the
applicable subject matter categories. A summary of the reenacted provisos can be found
in SC Information Letters #09-14 and #10-9.
NEW PROVISOS
Miscellaneous (Administrative, Miscellaneous Taxes, Other, and Regulatory)
Proviso 90.21 - Revenue Laws Interpretations and Report to General Assembly
Committee Chairmen
Proviso 90.23 - Admissions Tax Rebate – Motorsports Entertainment Complex Facility
Property Taxes
Proviso 1.99 - Index of Taxpaying Ability – Imputed Value for Owner-Occupied
Residential Property
REENACTED PROVISOS
Income Taxes
Proviso 1A.16 - Teacher Supplies - Reimbursement Amount Not Taxable
Proviso 81.8 - Penalty and Interest Waiver for Qualified Individuals for 2009 Estimated
Tax Payments
Property Taxes
Proviso 89.45 - Personal Property Tax Relief Fund Not Funded
Sales and Use Taxes
Proviso 89.72 - Viscosupplementation Therapies - Sales and Use Tax Suspended
Proviso 89.67 - Respiratory Syncytial Virus Medicines Exemption – Effective Date
Proviso 89.44 - Private Schools - Use Tax Exemption
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REENACTED PROVISOS (continued)
Miscellaneous (Administrative, Miscellaneous Taxes, Other, and Regulatory)
Administrative:
Proviso 72.17 - 2% Reduction on Interest Rate on Tax Refunds
Proviso 89.116 - Additional 1% Reduction on Interest Rate on Tax Refunds
Proviso 81.6 - Website Posting of Tax Return Information for Candidates and
Gubernatorial Appointees – Voluntary Program
Miscellaneous:
Proviso 81.7 -
Admissions Tax Exemption for Payment to Nonprofit Athletic Booster
Organizations for Right to Purchase Athletic Event Season Tickets
Proviso 1.17 - Local Government School Buses - Motor Fuel Tax Exemption
Proviso 21.16 - Nursing Home Bed Franchise Fees - Suspension
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