Investment Tax Credit
South Carolina allows manufacturers locating or expanding in South Carolina a one-time credit against
a company’s corporate income tax of up to 2.5% of a company’s investment in new production equipment.
The actual value of the credit depends on the applicable recovery period for property under the Internal Revenue Code. The following table illustrates the credit value for the various years outlined in the code.
Period Yrs. Credit Amt.
15 or more 2.5%
The credit may be used to offset up to 100% of corporate income tax liability, and unused credits may be carried forward for up to 10 years.
South Carolina Tax Credits
Corporate Income Tax Moratorium
South Carolina provides incentives for companies creating net new jobs in certain economically distressed counties. They do this in the form of a corporate income tax moratorium. Qualifying companies will be able to entirely eliminate their state corporate income tax liability for a period of either 10 or 15 years. In order to qualify, at least 90% of the company’s total investment in South Carolina must be in a county where the unemployment rate is twice the state average. The number of net new full-time jobs created determines the length of the moratorium. Companies creating at least 100 net new full-time jobs in a five year period qualify for a 10 year moratorium, and companies creating at least 200 net new full-time jobs in a five year period qualify for a 15 year moratorium. The moratorium period begins once the respective job targets are met.
A company desiring the moratorium must obtain certification through an application process through the Coordinating Council certifying that the project will have a significant beneficial effect on the region for which it is planned, and they must certify that the benefits of the project to the public exceed its costs. If approved for the moratorium, the company must enter into a contract with the South Carolina Department of Revenue.
For 2015, only Chesterfield, Dillon and Marlboro counties have been designated as moratorium counties based on their unemployment statistics.
Corporate Headquarters Tax Credit
In an effort to reduce the cost of corporate relocation or expansion of a corporate headquarters facility, South carolina provides a 20% tax 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 in their ability to eliminate corporate income taxes and can potentially eliminate corporate income taxes for as long as 10 years from the year earned.
In order to benefit from these tax credits companies must meet each of the following criteria:
Enhanced Corporate Headquarters Tax Credit
In addition to the standard Corporate Headquarters Tax Credit discussed previously, South Carolina offers an additional credit equal to 20% of the tangible personal property costs of establishing the headquarters. Requirements for this credit are as follows:
This credit may be used to eliminate both a company’s franchise tax and the corporate income tax. Unused credits may be carried forward for 15 years.
Other Tax Incentives
South Carolina is rich in tax incentives for business and sales tax incentives. Some of the other industries that receive these benefits are:
South Carolina technical colleges will design customized training for companies at no cost to the companies as part of incentive to locate in their state.
We are able and ready to help clients navigate and maximize benefits in South Carolina.
Jobs Tax Credits
The Jobs Tax Credit in South Carolina is designed to benefit new and expanding businesses in the state. To qualify, companies must create and maintain a certain number of net new jobs in a taxable year. This number of new jobs is calculated as the increase in the average monthly employment from one year to the next.
The following types of business activities qualify for this Jobs Tax Credit:
The amount of the credit depends on the county’s development tier as follows:
Tier Per Job Amt.
County rankings are published every year based on unemployment rates and per capita income, and the ranking of a county may change from year to year.
A county may also join with another county or other counties to form a “multi-county industrial park.” Under this arrangement, a county agrees to share the property taxes with a “partner” county. These partnerships raise the value of the credits by $1,000 per job, which increases credits to $2,500 to $9,000 per job for qualifying companies.
If the company is a manufacturing, processing, warehousing and distribution, research and development, agribusiness, or qualified technology intensive facility or a corporate office that has fewer than 99 employees worldwide, the company could qualify for the Small Business Jobs Tax Credit by creating a monthly average
of 2 net new jobs, instead of 10. Under the Small Business Jobs Tax Credit, the company may only get the full credit amount when the jobs pay 120% of the county’s average hourly rate. For jobs that pay less than 120% of the county’s average hourly wage rate, credits from $750 to $4,000 per job (or $1,750 to $5,000 in a multi-county industrial park) may be available for qualifying companies.
For both the Jobs Tax credit and the Small Business Jobs Tax Credit, the credit is available for a five-year period beginning with Year 2 (Year 1 is used to establish the created job levels.) The credit can be applied against corporate income tax or premium tax, but cannot exceed 50% of the year’s tax liability. Unused credits may be carried forward for 15 years from the year earned.
Assume that the amount of Jobs Tax Credits for a qualified company assuming the creation of 100 net new jobs in a county designated as Tier III and at a site designated as a multi-county industrial park. The company would benefit at a $5,250 per employee credit at 100 employees or $525,000 per year for 5 years for a total of $2,625,000 tax credits. The number of new jobs is increase in average monthly employment from one year to the next. The annual benefit would vary should the average employment differ from year to year. In addition, the company remains in a Tier III for all years.