The S.C. Coordinating Council for Economic Development, which often meets behind closed doors, would have greater discretion in doling out port tax credits for businesses that ship cargo, under a bill passed in the last week of the 2013 regular legislative session.
Port tax credits (H. 3557) and another bill (H. 3505) offering tax credits for angel investors are key incentives legislation awaiting Gov. Nikki Haley’s approval or veto. The General Assembly passed both bills on June 5.
Haley has until Monday at midnight to decide whether to veto the bills, based on the June 11 ratification date of both bills, said Sen. Larry Martin, R-Pickens and the former Senate Rules Committee chairman, when contacted Thursday by The Nerve. Haley also can sign the bills into law or let them become law without signing them.
The Legislature returns next week for a special session to act on vetoes and work on passing a state budget for next fiscal year, which starts July 1.
The Nerve has reported extensively on the Coordinating Council for Economic Development (CCED), made up of the heads of various state agencies involved with economic development and chaired by Department of Commerce Secretary Bobby Hitt. Commerce provides administrative support to the panel, which meets at Commerce’s headquarters on the 16th floor of a high-rise office building across from the State House.
Many of the projects eligible for incentives are labeled “confidential” on Coordinating Council meeting agendas. The panel typically meets in secret, executive sessions to discuss various incentives for businesses seeking to locate or expand in South Carolina.
Under H. 3557, sponsored by Rep. Gilda Cobb-Hunter, D-Orangeburg, the CCED would expand the types of businesses eligible for the port tax credit. The bill also would give the panel the discretion to consider factors that benefit the state’s economy, such as businesses that do not have a distribution facility, though the cargo volume it ships from the port could sustain a facility.
The CCED now awards port tax credits to businesses classified as manufacturing, warehousing or distribution facilities that utilize ports in the state and increase its cargo volume by at least five 5 percent in a calendar year. The state caps the port tax credit at $8 million a year.
H. 3557, sponsored by Rep. Gilda Cobb-Hunter, D-Orangeburg, would:
- Add freight forwarding, freight handling, goods processing, and wholesaling of goods to eligible tax-credit applicants;
- Allow the CCED to award $1 million of the $8 million to a new warehouse or distribution center if the business invests at least $40 million at one site and creates 100 new full-time jobs if the base cargo is not less than 5,000 TEUs, which is a measure of transportation containers. The business must make progress to meet those goals within three years;
- Allow a business that meets the port-volume mandate, but doesn’t have a distribution center in South Carolina, to be eligible for the tax credit if the cargo supports a future presence in the state. The business must employ at least 250 full-time equivalent state residents, and it must complete construction of a distribution facility in the state within five years; and
- Add a “claw back” rule that if a business fails to meet job and capital investment requirements, the business must repay a portion of the claimed credits.
The S.C. Board of Economic Advisors reported that 78 taxpayers have claimed a total of $6.67 million in credits since passage of the port tax credit in 2005. Despite the expanded tax-credit provisions under H. 3557, the bill is not expected to impact general fund revenues in fiscal 2013-14 and 2014-15, according to the BEA’s revenue-impact statement.
“While there is no particular target (manufacturer), we (in Orangeburg) think this is an opportunity for us to maybe land a really big whale in our little industrial park,” said Cobb-Hunter when H. 3557 was discussed in a House Ways and Means subcommittee, as The Nerve reported in April.
“In the next 15 to 20 years, I think that competition between ports is going to be critical, and some ports are going to lose out,” Sen. John Matthews, D-Orangeburg and a member of the Senate Finance Committee, said during a May 30 committee meeting. “We need to create all of the competitive edge for the Port of Charleston, and I think this bill helps that.”
Matthews sponsored a bill (S. 491) that would allow large distribution centers to be eligible for millions of dollars in taxpayer-funded bonds, The Nerve reported in March. The bill, which could boost the Port of Charleston, remains in the Senate Finance Committee.
Sen. Hugh Leatherman, R-Florence and chairman of the Senate Finance Committee, said the expanded port tax credit is a way to build more distribution facilities in the state.
“It’s something we desperately need,” he said during the May 30 Senate Finance Committee meeting.
Commerce spokeswoman Amy Love did not respond to a request this week from The Nerve seeking comment on H. 3557.
Meanwhile, H. 3505, sponsored by Rep. Dwight Loftis, R-Greenville, would create a ceiling of $5 million a year in state tax credits to angel investors.
Angel investors typically invest no more than $100,000 in a company at the early stages of development, as opposed to venture capitalists who often invest larger amounts later on, according to online investment-consulting sites. Angel investors generally expect a good return on their investment, though they might not want an ownership stake in the company.
As The Nerve reported in May, legislation would:
- Allow a qualifying investor to claim up to $100,000 in credits per year;
- Entitle the investor to a state income tax credit of 35 percent of the investment; and
- Allow investors to apply 50 percent of the allowed credits to their net tax liability in the year the investment is made, and spread the other half over a period not to exceed 10 years.
The Senate Finance Committee amended H. 3505 to require the secretary of state to annually report jobs and wages data generated from angel investors by Jan. 31 of each year to the Senate Finance and House Ways and Means committees and the governor.
The “Capital Market Study,” prepared in January by the University of South Carolina’s Faber Entrepreneurship Center and the Darla Moore School of Business, identified passing an angel-investing law as the top strategy to grow young, “high-growth” businesses.
“The passage of this legislation marks an important day for the economic future of South Carolina,” Matt Dunbar, managing director of the Upstate Carolina Angel Network in Greenville, said in a news release after H. 3505 passed the House June 5. “This legislation will encourage potential angel investors to provide our entrepreneurs with the capital they need to create jobs, grow companies and fuel the economic future of our state.”
Olson can be reached at (803) 254-4411 or curt@thenerve.org. Follow him on Twitter @thenerve_curt and @olson_curt. Follow The Nerve on Facebook and on Twitter @thenervesc.