Job Tax Credits Rise for Rural South Carolina Counties

Richard Breen

Tuesday, July 9th, 2019

The economic development incentives the Carolina Panthers were offered to move their offices and practice facilities to South Carolina received a great deal of attention, but the enabling legislation was not only about luring the NFL team.

The General Assembly included language in the bill that increased job tax credits for numerous rural counties.

“Job tax credits can make up a significant portion of the total dollar value of the incentives that may be available to companies,” said Stephanie Yarbrough, a partner in the Charleston office of Womble Bond Dickinson LLP.

To determine job tax credits, South Carolina divides its counties into four groups, based on unemployment rates and per-capita income:

Tier I (the state’s most prosperous counties): Anderson, Beaufort, Berkeley, Charleston, Dorchester, Greenville, Lexington, Richland, Spartanburg and York

Tier II: Aiken, Florence, Georgetown, Greenwood, Kershaw, Lancaster, Laurens, Newberry, Oconee, Pickens, Saluda and Sumter

Tier III: Abbeville Calhoun Cherokee Chesterfield Colleton, Darlington, Edgefield, Fairfield, Hampton, Horry, Jasper and McCormick

Tier IV: Allendale, Bamberg, Barnwell, Chester, Clarendon, Dillon, Lee, Marion, Marlboro, Orangeburg, Union and Williamsburg

Tier III and IV counties are primarily rural. Prior to the change, Tier I counties could offer $1,500 per new job created, Tier II $2,750, Tier III $4,000 and Tier IV $8,000. With the change, credits for Tiers I and II remain the same, but Tier III jumps to $20,250 and Tier IV to $25,000.

“It strengthens an existing tool that is already in our tool kit,” said Will Williams, president and chief executive of the Economic Development Partnership, which serves Aiken, Edgefield, McCormick and Saluda counties.

Generally, the credits are applied against South Carolina state income tax, but can also be applied against bank or insurance premium taxes. State law allows a number of different types of entities to claim the credits, provided they create qualifying jobs. These businesses range from manufacturing and logistics to corporate headquarters and R&D facilities. Generally, retail and service facilities are ineligible.

“It does help, but it’s very specific,” said Gregg Robinson, Orangeburg County’s economic development director.

In November 2018, Orangeburg attracted Gnotec Group, a Volvo supplier. The company pledged to invest $5.9 million and create 78 jobs.

“That will be a nice incentive for them,” Robinson said.

South Carolina’s 5% corporate income tax rate is one of the lowest in the country.

“Although the potential JTC can be very high on paper, most of time the company is unable to use this credit,” said George Kosinski, economic development director in Clarendon County.

Companies will simply run out of tax liability.

“Quite honestly, we’re going to give you more credits than you can use,” Robinson said.

Yarbrough, who assists numerous businesses with economic development incentive packages, agreed that companies will often max out their job tax credits.

“The credits can eliminate 50% of state income tax liability in a given year, with a 15-year carryforward,” she said.

Both Robinson and Kosinski said they’d also like to see an increased Job Development Credit. That credit returns employee income tax withholdings to reimburse companies for establishing or expanding a facility.

“That’s something that should be a priority,” Robinson said.

Rural economic development received increased attention during this year’s legislative session. The General Assembly also passed a $65 million Rural School District Economic Development Closing Fund. Championed by Gov. Henry McMaster, the fund would help pay for infrastructure associated with economic development projects in poor, rural school districts.

“The Rural School District Economic Development Closing Fund proposed in my executive budget and included in this budget will provide the ‘spark’ for recruiting jobs and investment into our state’s most impoverished school districts,” McMaster said in a May letter to the General Assembly. “This funding will enhance recruitment of companies in areas of the state which they might not otherwise consider.”