Vol. 7, No. 2, Pg. 24. ENTERPRISE ZONE ACT OF 1995.

• Author: By Barnet R. Maybank III and William H. Moore Jr.

South Carolina Lawyer

1995.

Vol. 7, No. 2, Pg. 24.

ENTERPRISE ZONE ACT OF 1995

24ENTERPRISE ZONE ACT OF 1995By Barnet R. Maybank III and William H. Moore Jr.On April 4, 1995, the Enterprise Zone Act of 1995 (Act) became law. This Act, which has been hailed as one of the most significant pieces of economic development legislation in South Carolina history, is designed to accomplish the goal of encouraging economic development in rural areas and pockets of depression in metropolitan areas, as well as in areas where significant job losses are threatened or have occurred.

The Act, which incorporates existing tax incentives under South Carolina law as well as an employee tax investment plan used successfully in several southern states, contains three sections: Section 1 enacts the Enterprise Zone Act of 1995; Section 2 enacts the Economic Impact Zone Community Development Act of 1995; and Section 3 enacts amendments pertaining to South Carolina Code § 12-7-1200, which relates to the allocation and apportionment of income of multi-state taxpayers.

The purpose of this article is to discuss the key provisions of each section. In doing so, the article aims to provide practitioners with a concise guide to the Act so that they may better assist their clients in obtaining its benefits.

SECTION 1:

ENTERPRISE ZONE ACT OF 1995

Section 1 amends Title 12 of the South Carolina Code by adding a new Chapter 10. This new Chapter 10 provides for state income and property tax, as well as financial incentives for "qualifying businesses" that locate in an "enterprise zone." In general, Chapter 10 provides for the establishment of enterprise zones, provides criteria for areas to qualify as enterprise zones and provides that businesses may qualify for enterprise zone incentives by entering into a revitalization agreement with the Advisory Coordinating Council for Economic Development (Council).

Enterprise Zone Designation. On April 11, 1995, the South Carolina State Budget and Control Board (Budget and Control Board) designated the enterprise zones for 1995. Although the definition of the enterprise zones are complicated, over 75% of the state is included (county maps of the zones may be obtained from the Department of Commerce). Each year the Budget and Control Board will continue to designate enterprise zones.

The Enterprise Zone Act provides significant income tax, fee-in-lieu of property tax and other financial incentives to qualifying businesses locating or expanding within an enterprise zone.

Qualification for Benefits. To qualify for the benefits provided under the new Chapter 10, a business must be located within a designated enterprise zone, as defined and discussed above, and satisfy the following four criteria. First, the business must qualify for the Jobs Tax Credit Act by engaging primarily in manufacturing, tourism, processing, warehousing, distribution, research and development, corporate office facilities or providing medical, surgical and other health services to persons.

Second, the business must provide a benefits package to full-time employees that includes health care. The Act does not specify any minimum benefit level. Third, the business must enter into a "revitalization agreement," which must be approved by the Council. No revitalization agreement is required, however, for a qualifying business to obtain the benefits of g 12-10-70(2), 12-10-70(3) and 12-10-80(D), which relate to fee-in-lieu requirements, special source revenue bonds and job development fees retained from withholding for the retraining of production employees, respectively. Initial revitalization agreements may be entered into if the Council deems it appropriate. This is significant since no expenditures count towards the negotiated minimum investment level until a revitalization agreement has been executed.

If a qualified business fails to achieve the level of capital investment or employment set forth in the revitalization agreement, the South Carolina Department of Revenue (Department of Revenue) may terminate the revitalization agreement and reduce or suspend all or any part of the incentives granted by Chapter 10 until the time the anticipated investment and employment levels are met. Fortunately, however, these incentives may not be suspended retroactively.

The fourth and final criterion is that the Council must determine that the available incentives, as provided by Chapter 10, are appropriate for the...