Job Development Credits

This credit is a unique incentive that allows South Carolina to assist companies in significantly reducing, or in some cases completely offsetting, certain approved capital expenditures over a 10-year period. Unlike tax credits or exemptions, this incentive is credited quarterly as a direct cash contribution. Companies can only expect to collect Job Development Credits from employees earning an hourly wage equal to or more than that of the county’s average per capita income.

If approved, your company may be reimbursed for portions of the following types of expenditures (please note if approved, only those eligible expenditures that occur within 60 days of the application submittal will be considered for reimbursement by the Council):

• Land acquisition, building construction, site/building improvements including some tenant improvements to leased property, and most build-to-suit leases;
• Public and private utility system upgrades (water, wastewater, electricity, natural gas, and telecommunications);
• Transportation facilities;
• Purchase/acquisition of "pollution control equipment" (equipment required to meet federal and state environmental requirements); and
• Approved training costs, including training facilities, not covered by the Center for Accelerated Technology Training.

The total amount of Job Development Credits received depends on these criteria:

• The hourly wage rate paid to individual employees (shown in the table below) and
• The total value of eligible expenditures approved by the South Carolina Coordinating Council for Economic Development and stipulated in the Revitalization Agreement.

Corporate Income Taxes - The Lowest in the Southeast

South Carolina state corporate income tax is based primarily on federal gross and taxable income. Companies engaged in multi-state activities will only pay taxes on the income derived from business activity conducted in South Carolina.

As the graph below illustrates, South Carolina has the lowest corporate income tax in the Southeast.

Source: SC Department of Commerce

Income Tax Moratorium - No Corporate Income Taxes For Up To 15 Years

Companies creating net new jobs in South Carolina's most economically distressed counties will benefit from a corporate income tax moratorium for 10 to 15 years depending on the number of jobs created. For companies creating at least 100 net new jobs in a 5-year period, the moratorium will last 10 years while companies creating at least 200 net new jobs will be eligible for a 15-year moratorium. In order to qualify at least 90 percent of the company's total investment must be in Allendale County.

Jobs Tax Credits

By creating new jobs in the Southern Carolina area, your company is eligible for a tax credit against annual corporate income tax liability. The value of these credits is $8,000 per job annually for a five-year period. Should Southern Carolina officials agree to designate a site as a multi-county industrial park, the Jobs Tax Credit will be increased another $1,000 per net new job created - meaning, Jobs Tax Credits of $9,000 are available.

The credit is available for a five-year period beginning with Year 2 (Year 1 is used to establish the created job levels). Credits can be used to offset your annual state corporate income tax liability by up to 50 percent. Unused credits can be carried forward for up to 15 years - even when using the Corporate Income Tax Moratorium - meaning once the Moratorium ends, you have another 15 years of 50% reductions in corporate income taxes. To be eligible for Jobs Tax Credits, your company must create an average of 10 net new jobs at the facility in one year (companies other than manufacturers, distributors, or corp. office/r&d should contact the SouthernCarolina Alliance for further eligibility requirements).

Corporate Headquarters Credit

In an effort to offset the cost associated with relocating or expanding a corporate headquarters facility, South Carolina provides a generous 20 percent credit based on the value of the actual portion of the facility dedicated to the headquarters operation or direct lease costs for the first five years of operation. The credit can be applied against either corporate income tax or the license fee. These credits are not limited to 50 percent of the company's income tax liability and can potentially eliminate corporate income taxes for as long as 10 years from the year earned.

Eligibility for this credit is determined by meeting each of the following criteria:

• A minimum of 40 new full-time jobs must be created which are engaged in corporate headquarters or R&D activities 20 of these jobs must be classified as staff employees;
• Cost of new construction or addition must exceed $50,000 (i.e., costs incurred in the design, preparation, and development of either establishing or expanding a corporate headquarters; or direct construction or direct lease costs during the first five years of operation);
• The location should be where corporate staff members or employees are domiciled and where the majority of the company's financial, legal, personnel, planning, and/or other staff functions are handled on a regional or national basis; and
• The location should be the sole corporate headquarters within the region or nation (a region is defined as a geographical area comprised of either five states [including South Carolina]; or two or more states [including South Carolina] if the entire business operations of the company are performed in fewer than five states).

Enhanced Corporate Headquarters Credit

In addition to the standard headquarters credit, there is an enhanced corporate headquarters credit to offset personal property costs. This credit is for 20 percent of the tangible personal property costs of establishing the headquarters (15-year carry-forward). Like the standard credit, these credits are not limited to 50 percent of the company's income tax liability and can potentially eliminate corporate income taxes.
To qualify for this credit, the company must meet the criteria for the standard HQ credit, and the tangible personal property must meet the following requirements:

• The property must be capitalized as personal property for income tax purposes under the federal Internal Revenue Code;
• The property must be purchased for the headquarters facility or research and development facility which is a part of the same project;
• The property must be used for headquarters or research and development related functions and services; and
• The property must be used to create a minimum of 75 permanent new full-time jobs performing headquarters or research and development related functions and services. The new jobs must each earn a cash compensation level of more than one and one-half times the per capita income in South Carolina at the time the newly created jobs are filled. At the same time, the average cash compensation level for all the company's employees within the state must be greater than twice the per capita income in South Carolina.

Child Care Tax Credits

South Carolina was one of the first states to recognize the changing demographics in the labor market. This state has taken a national leadership role in offering businesses a credit for childcare expenses that can be applied to state corporate income tax.

Companies may claim credits for capital costs and operating costs associated with establishing and/or operating a child care program or facility. The maximum credit claimed might equal the following:

• 50 percent of the incurred capital expenditures (not to exceed $100,000); and/or
• 50 percent of the child-care payments incurred by the employer (not to exceed $3,000 per participating employee).

These credits are limited to 50 percent of the company's income tax liability and have a carry-forward period of 10 years. When used in combination with other credits, such as the Jobs Tax Credit, the child-care credit can lower your company's effective corporate income tax rate to 1.25 percent.

Research and Development Credits

In order to reward companies for increasing research and development activities in a taxable year, South Carolina offers a credit equal to 5 percent of the taxpayer's qualified expenditures for research and development made in the state.

The credit taken in any one taxable year may not exceed 50 percent of the company's remaining tax liability after all other credits have been applied. Any unused portion of the credit can be carried forward for 10 years from the date of the qualified expenditure.

 

Property Tax Abatement

South Carolina law mandates a five-year abatement of the county's operating portion of the millage rate. Generally, this portion makes up about 25 percent to 35 percent of the local millage rate. A manufacturing company investing more than $50,000 is eligible for this abatement. Distributors and corporate headquarters must invest $50,000 and create 75 jobs.

The advantage of this incentive is that for the first five years - the crucial time for a new operation - your company can substantially reduce local tax liability.

Fee-in-lieu of Property Taxes

South Carolina law allows the SouthernCarolina Alliance to enter into a negotiated agreement for a Fee-in-Lieu of local property taxes with a company if total capital investment is $1 million or greater. The long-term savings of the Fee-in-Lieu is based on the actual investment (both real and personal property), and is dependent on both the assessment and millage rates negotiated with the County.

This incentive may result in substantial benefits for the company:

• Savings: Payments to local government are significantly reduced through the negotiation of a lower assessment rate (from 10.5 percent to as low as 6 percent) and the negotiation of a locked-in millage rate for 20 years or a five-year adjustable rate.
• Planning: Payments to local government are stabilized for the term of the agreement. This ultimately allows your company greater flexibility in financial planning for as long as 20 years.
• Scheduling: If your company is investing more than $45 million, the payment stream can be negotiated to meet financing needs. Ultimately, your company can gain control of long-term cash flows. The most common schedule is an equalized or flat annual payment.

Sales Tax Exemptions

South Carolina's corporate citizens pay one of the lowest sales and use tax rates at 5 percent. Some counties assess an additional 1 percent local option sales tax. Proceeds go toward infrastructure improvements or rollback of property taxes.

In addition to maintaining a low sales tax rate, South Carolina offers a number of exemptions that reduce both upfront costs and recurring costs on equipment. The following sales tax exemptions are comprehensive and generous:

• Manufacturing production machinery and applicable repair parts;
• Manufacturing materials that become an integral part of the finished product;
• Industrial electricity and other fuels used in manufacturing tangible personal property;
• Research and development equipment;
• Manufacturers' air, water and noise pollution control equipment;
• Material handling equipment for manufacturing projects investing $35 million or more;
• Packaging materials; and
• Long distance telecommunication services, including 800 services.

Sales Tax Caps

In addition to the sales tax exemptions, South Carolina further reduces your company's tax burden by providing valuable sales tax caps on specific items: a maximum sales tax of $300 on the sale or lease of automobiles, trucks, boats, and aircraft.