New Incentives Offered for Corporate HQs

March 10, 2011

Investigative Reports

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The NerveNational corporate headquarters that locate or expand in South Carolina would be exempt from paying state corporate income taxes for 10 years if they created at least 50 full-time jobs, under a bill by the S.C. House’s chief budget writer.

The bill (H. 3720), introduced Feb. 22 by Rep. Dan Cooper, R-Anderson and chairman of the House Ways and Means Committee, also would:

  • Make certain computer-related businesses eligible for state job tax credits. Under state law, those credits generally are good for five years, and are tied to the number of new jobs created and the unemployment rate and per-capita income level of the county where the business is located.
  • Exempt the purchase of computers, computer equipment and software by qualified data processing centers from state sales tax. The section of state law that would be amended with the bill already offers sales tax exemptions on computer equipment purchased by certain types of other businesses, including the new Boeing aircraft assembly plant under construction in North Charleston.
  • Lower the job-creation thresholds for job tax credits claimed by certain “qualifying service-related” businesses.
  • Increase the total amount of annual credits claimed by utilities and electric cooperatives against their corporate business license fees.

Cooper did not respond to written or phone messages from The Nerve.

The bill passed out of a House Ways and Means subcommittee last week and was scheduled to be debated by the full committee on Wednesday. Rep. Gilda Cobb-Hunter, D-Orangeburg, the subcommittee chairwoman, told The Nerve last week that she was “not aware of any company that this bill is for.”

A number of corporations have headquarters in the Palmetto State, including Michelin Tire North America, Sunoco packaging, Denny’s Restaurants, Advance America Cash Advance, SCANA Corp., and Blackbaud, which provides software and other support to nonprofit organizations.

Contacted recently by The Nerve, Rep. Phyllis Henderson, R-Greenville and one of the bill’s two co-sponsors, said she didn’t know if the bill was drafted with any particular company in mind. But she said she believes that the proposed incentives are necessary to help attract national headquarters and high-tech firms.

“This was all created to make us more competitive with our neighboring states,” said Henderson, a former board member of the Greenville Area Development Corporation who was first elected to the House last year. “We’ve got to keep our statutes up to date with cutting-edge technology.”

Henderson, a former Greenville County Council chairwoman, said she was informed that South Carolina recently lost bids for data processing centers to North Carolina.

The bill’s other co-sponsor, Rep. Andy Patrick, R-Beaufort, told The Nerve that he plans to be “careful about incentives,” adding that he supports tax breaks for corporate national headquarters “as long as we thoroughly vet the recipient to know to what extent possible that the return on investment is something that’s extremely positive for South Carolina.”

“I’m not one for handing out incentives like they’re candy,” said Patrick, who, like Henderson, is a freshman legislator.

Patrick also said he did not know if any particular company would be benefit under the bill.

Henderson said the bill was drafted by the South Carolina Economic Developers’ Association, a not-for-profit professional organization that, according to its website (www.sceda.org), aims at the “influencing of critical economic development policy leading to sustainable statewide prosperity.”

“This is their major piece of legislation,” Henderson said.

Contacted last week by The Nerve, association spokeswoman Keely Yates said she would refer questions to April Allen, the board president, though Allen did not contact The Nerve before publication of this story.

The bill would allow qualifying corporations with national headquarters in South Carolina to take either the 10-year corporate income tax exemption or existing corporate income tax credits, but not both.

The tax credit under existing law for a corporation establishing or expanding national headquarters is equal to 20 percent of qualifying real property costs, which must be at least $50,000. At least 40 new full-time jobs must be created to qualify for the credit, compared to the creation of 50 jobs to qualify for the full exemption under Cooper’s bill.

In addition, qualified corporations can claim credits equal to 20 percent of certain personal property costs, provided they create at least 75 full-time jobs.

In fiscal year 2009, for example, nearly $9.3 million in corporate headquarter tax credits were claimed, according to state Department of Revenue records.

Cooper’s bill does not contain any provisions to verify that a corporation has met the job-creation thresholds for the corporate income tax exemption, or any “clawback,” or penalty, provisions should a company fail to meet the thresholds. It does allow county auditors to request any “financial books and records” from industries seeking “fee-in-lieu-of-taxes” agreements with counties.

Cooper’s bill also would lower the job-creation thresholds for a “qualifying service-related facility” eligible for job tax credits. Those thresholds would be changed from:

  • 200 to 150 jobs at a single location;
  • 125 to 75 jobs at a single location and which have an average “cash compensation level” of 1.5 times more than the state per-capita income or county per-capita income where the jobs are located, whichever is lower; and
  • 75 to 40 jobs at a single location and which have an average “cash compensation level” of more than two times the state per-capita income or county per-capita income where the jobs are located, whichever is lower.

The section of state law that would be amended under the bill deals with service-related businesses other than those in the health care field, which are covered in a separate section. It excludes businesses “engaged in legal, accounting, banking, or investment services or retail sales.”

The bill also would increase the annual amount of allowable credits against a utility company’s corporate business license tax liability to $400,000 from $300,000 per company.

In addition, the bill would add data processing, “computer facilities management services” and “other computer-related services” to the definition of a “technology intensive facility” eligible for state job tax credits, besides offering sales tax exemptions to data processing centers for the purchase of computer equipment.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org