On October 3, 2018, the South Carolina General Assembly voted to override Governor Henry McMaster's veto of The Department of Agriculture/SCEDA Bill (S.1043 or the bill), which now becomes law. S.1043 provides both new and modified South Carolina tax incentives. The bill also provides some important administrative updates. Unless otherwise noted, these provisions took effect October 3, 2018.

Highlights of the bill are described below.

Change in credits for professional services / office jobs

The bill extends the South Carolina Job Development Credit (JDC) to include professional services/office jobs, allowing businesses engaged in legal, accounting, banking, investment services and certain other professional and services businesses to apply for JDCs. The bill also allows businesses engaged in retail sales to apply for JDCs as long as the retail sales are not actually conducted at the facility for which the JDCs are claimed.

The bill further lowers the job and wage JDC eligibility thresholds for qualified service-related facilities (QSRF) for the highest three tiers, as follows:

• 125 jobs (down from 175) at a single location
• 100 jobs (down from 150) at a single location comprised of a building that has been vacant for at least 12 consecutive months
• 75 jobs (down from 100) at a single location that pay more than 1.5 times the lower of the state per capita income or per capita income in the county in which the facility is located

Additionally, when determining a business's qualification for JDCs, the Coordinating Council may consider the following factors:

• 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 of, and the wages of, the new jobs created
• The capital investment of the project
• The potential for expansion or growth of the business or industry

These changes apply to tax years beginning after 2017.

Key takeaway. South Carolina JDCs may now be available to businesses engaged in professional services and retail sales.

New Incentives for agriculture operations

S.1043 establishes a tax credit program for agribusinesses, which is mirrored after South Carolina's Port Tax Credit Program. This new credit program allows an agribusiness operation or agricultural packaging operation that increases purchases, which the South Carolina Department of Agriculture has approved as certified South Carolina grown, by a minimum of 15% in a year, to claim an income tax credit or employee withholding credit in an amount determined by the Coordinating Council. The Coordinating Council has sole discretion in allocating the credits, and the maximum tax credit a taxpayer may be awarded under this program is $100,000 in any given tax year. The base year total dollar purchases of Certified South Carolina grown products must exceed $100,000 for the taxpayer to be eligible for the credit. The maximum tax credit available to all taxpayers phases in over four years as follows:

• 2017 - $ 500,000
• 2018 - $1 million
• 2019 - $1.5 million
• 2020 - $2 million

The new incentives for agriculture operations are available for tax years 2018 through 2027.

Changes to other incentive programs

The Abandoned Building Act was scheduled to sunset in 2019, but the bill extended the sunset provision to December 31, 2021. In addition, a redeveloped multi-floor structure that is listed on the National Register of Historic Places is eligible for up to seven credits, if the structure is redeveloped exclusively for residential apartments. This change applies to eligible building sites placed in service after June 30, 2018.

The bill updates the Textile Revitalization Credit so that a textile site included in a distressed area now includes contiguous parcels. The 200% sq. foot limitation rule contained in the Abandoned Building Act has also been added to the Textile Act, and the cost of improvements in the area beyond the 200% square footage of the original building are not included in the tax credit base. These changes first apply to tax years beginning after 2017.

Redevelopment Authorities may use fees for administrative and operating costs.

Unused carryforwards of the credits under South Carolina Code Section 12-67-140(B)(6) of the Abandoned Building Act and under the Section 12-6-3535(C) credit for rehabilitation expenses for certified historic structures may now be passed through to the members or partners of a limited liability company or partnership. Any such credit may be allocated to any partner or member that was a partner or member at any time during the year in which the credit or carryforward is allocated. These changes first apply to buildings placed in service after June 30, 2018.

Apportionment for direct broadcast satellite service

S.1043 changes the sales factor for receipts of direct broadcast satellite service for corporate income tax purposes from a Market Share to a Pro-Rata-Costs-of-Performance method. This legislative enactment effectively and prospectively overrides the recent decisions of the South Carolina Administrative Law Court (ALC) and South Carolina Court of Appeals decisions in DirectTV. This change applies to all open tax periods excluding assessments under judicial review on October 3, 2018.

Administrative updates

The current nine-months-deemed-denied provision whereby the taxpayer may appeal to the ALC if the South Carolina Department of Revenue (SCDOR, or the Department) fails to issue a Department Determination in response to a taxpayer's filing of a Protest to a Proposed Assessment is extended to one year. The bill, however, also provides that the SCDOR may request a six-month extension from the ALC.

For property under the SCDOR's jurisdiction (i.e., manufacturers, utilities, and exempt property), the Department must now notify the counties of: (1) protests of Proposed Assessments, (2) Department Determinations, and (3) claims for refund. Approved refunds are limited to three years.

S.1043 requires the SCDOR to rule on Refund Claims within six months. The SCDOR's failure to act within six months is considered a written denial of the claim for refund, which triggers the requirement for a taxpayer to file an appeal with the ALC within 30 days of the expiration of the six-month period.

The bill explicitly gives counties the ability to file an appeal when a refund claim is granted.

South Carolina Code Section 12-60-2140(C) is amended to provide that, following a final determination of a property tax protest, if the assessment is less than the adjusted property tax assessment, a corrected property tax assessment must be made and entered, provided that a refund is not due for any tax year before the three tax years immediately preceding the final determination unless the ALC approves the refund.

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