Indicates Matter Stricken

Indicates New Matter

 

Committee Report

May 4, 2023

H. 3811

Introduced by Rep. Elliott

 

S. Printed 05/04/23--H.

Read the first time January 25, 2023

 

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The committee on House Ways and Means

To who was referred a Bill (H. 3811) to amend the South Carolina Code of Laws by amending Section 12-6-3585, relating to the Industry Partnership Fund tax credit, so as to provide for an increase in, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass:

 

BRUCE BANNISTER for Committee.

 

statement of estimated fiscal impact

Explanation of Fiscal Impact

 

State Expenditure

This bill increases the total amount of Industry Partnership Fund tax credits that may be issued for tax years after 2022 from $9,000,000 to $12,000,000.  We anticipate that DOR will implement the necessary changes to the tax credit forms in the annual updates to forms and instructions. Therefore, the bill is not expected to impact expenditures for the agency.

 

State Revenue

This bill increases the total amount of Industry Partnership Fund tax credits that may be issued for tax years after 2022 from $9,000,000 to $12,000,000.  Taxpayers who contribute to the Industry Partnership Fund at the SC Research Authority (SCRA) or an SCRA designated affiliate, or both, are allowed a tax credit against individual or corporate income tax, corporate license fees, bank tax, or insurance tax. Currently, the tax credit is limited to an aggregate of $9,000,000 and may be carried forward for ten tax years. The bill increases the aggregate limit to $12,000,000 per tax year beginning in 2023.

 

From 2019 to 2021, contributions did not reach the limit due to changes in federal tax law regulations that made contributions less favorable. However, Act 172 of 2022 increased the allowable credit amount for individual taxpayers from $250,000 to $500,000. Further, if the aggregate limit is not met within 60 days of the annual opening date for applications, the Act increased the maximum credit per taxpayer to $1,000,000, subject to the aggregate limit. This change resulted in total contributions reaching the $9,000,000 limit in 2022. The table below provides the contributions to the fund in recent years as reported by SCRA.

 

Contributions to the Industry Partnership Fund

Year                     Amount                   Contributors                     Average Per Contributor

2018                     $6,000,000              111                                   $54,054

2019                     $3,066,317              68                                     $45,093

2020                     $3,755,740              93                                     $40,384

2021                     $6,706,800              154                                   $43,550

2022                     $9,000,000               177                                   $50,847

Source: S.C. Research Authority

 

Based upon available data from DOR, we believe that these contributions have been taken as tax credits against individual and corporate income taxes in recent years, although the credits may also be taken against bank or insurance taxes.  Based on the changes in Act 172, we anticipate that total tax credits may reach the new annual limit beginning in tax year 2023. Therefore, the bill may reduce General Fund revenue from individual or corporate income tax, corporate license fees, bank tax, or insurance tax, or some combination thereof, by $3,000,000 in FY 2023-24. The timing of the impact may shift if taxpayers do not have sufficient tax liability to utilize the credits and carry forward unused credits to future tax years.

 

 

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

 

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A bill

 

to amend the South Carolina Code of Laws by amending Section 12-6-3585, relating to THE Industry Partnership Fund tax credit, so as to provide for an increase in the aggregate credit from nine million to twelve million dollars for tax years after 2022.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Section 12-6-3585(A) of the S.C. Code is amended to read:

 

    (A) For each tax year beginning after 2020 2022, a taxpayer may claim as a credit against state income tax imposed by Chapter 6, Title 12, bank tax imposed by Chapter 11, Title 12, license fees imposed by Chapter 20, Title 12, or insurance premiums imposed by Chapter 7, Title 38, or any combination of them, one hundred percent of an amount contributed to the Industry Partnership Fund at the South Carolina Research Authority (SCRA), or an SCRA designated affiliate, or both, pursuant to Section 13-17-88(E), up to a maximum credit of five hundred thousand dollars for a single taxpayer, not to exceed an aggregate credit of nine twelve million dollars for all taxpayers.  If the aggregate credit of nine twelve million dollars for all taxpayers is not met within sixty days of the annual opening date for the application for the credit, the single taxpayer maximum credit is automatically increased to one million dollars for the remainder of that year until the maximum aggregate credit of nine twelve million dollars is met.  For purposes of determining a taxpayer's entitlement to the credit for qualified contributions for a given tax year in which more than the applicable aggregate annual limit on the credit is contributed by taxpayers for that year, taxpayers who have made contributions that are intended to be qualified contributions earlier in the applicable tax year than other taxpayers must be given priority entitlement to the credit.  The SCRA shall certify to taxpayers who express a bona fide intention of making one or more qualified contributions as to whether the taxpayer is entitled to that priority.

 

SECTION 2.  This act takes effect upon approval by the Governor.

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