§ 12-6-3410 — Corporate income tax credit for corporate headquarters.

(A) A taxpayer or a business unit of a taxpayer establishing a headquarters facility in this State, or expanding or adding to an existing headquarters facility, is allowed a credit against any tax due pursuant to Section 12-6-510, Section 12-6-530, Section 12-11-20, or Section 12-20-50 or any combination thereof. (B) In order to qualify for this credit, each of the following criteria must be satisfied: (1) The qualifying real property costs of the headquarters facility or expansion must be at least fifty thousand dollars. Qualifying real property costs are: (a) costs incurred in the design, preparation, and development of establishing or expanding a headquarters facility; and (b)(i) direct construction costs; or (ii) with respect to leased facilities, direct-lease costs during the first five years of operations for the headquarters facility. (2) The headquarters establishment or expansion must result in the creation of at least forty new full-time jobs that are: (a) performing headquarters-related functions and services; (b) have gross wages equal to or greater than twice the per capita income of this State based on the most recent per capita income data available as of the end of the taxpayer's taxable year in which the jobs are filled and are subject to withholding pursuant to Chapter 8 of this title; and (c) are provided a benefits package, including health care. (C) The amount of the credit is equal to the sum of: (1) twenty percent of the qualifying real property costs listed in subsection (B)(1); and (2) twenty percent of the cost for tangible personal property if: (a) the personal property is: (i) capitalized as personal property for income tax purposes under the Internal Revenue Code; and (ii) purchased for the establishment or expansion of the taxpayer's or business unit's headquarters facility; and (iii) used for headquarters-related functions and services in South Carolina. (D) Reserved. (E)(1)(a) For headquarters facilities which are constructed, the credit can only be claimed for the taxable year when the facility is placed in service for federal income tax purposes. For facilities completed in phases and placed in service for federal income tax purposes in more than one taxable year, the credit can be claimed for the taxable year in which that phase of the headquarters facility is placed in service for federal income tax purposes. Credits cannot be obtained for costs incurred more than three taxable years after the taxable year in which the first property for which the credit is claimed is placed in service. Notwithstanding any other provisions of this subsection, if the entire project is not completed by the end of the three taxable years, the credit may be claimed for all property placed in service within the time limitation set forth in the preceding sentence. The credit may not be claimed for personal property which is replacing personal property for which the credit can be claimed. The department may for good cause extend the time for incurring additional costs and for claiming the credit if the project is not completed within the time period allowed by this subsection. For purposes of this subsection the term "property" includes qualifying real property and qualifying personal property. (b) for leased real property the credit must be claimed in the taxable year in which the first direct-lease costs are incurred. (2) The taxpayer must meet the staffing requirements of subsection (B)(2) by the end of the second taxable year following the last taxable year for which the credit is claimed. The taxpayer must have documented plans to meet the initial staffing requirements at the time the credit is claimed. If the taxpayer fails to meet the staffing requirements within the time required by this subsection, the taxpayer must increase its tax liability for the current taxable year by an amount equal to the amount of credit, or any portion of the credit for which the taxpayer would not qualify, which was used to reduce tax in the earlier years. (F) The credit provided in this section is nonrefundable, but an unused credit may be carried forward for ten years. In addition, a taxpayer may assign its rights to the unused credit to a succeeding taxpayer if the taxpayer transfers all or substantially all of the assets of the taxpayer or all or substantially all of the assets of a trade, business, or operating division of a taxpayer to the succeeding taxpayer, and the succeeding taxpayer maintains the headquarters facility. No credit may be claimed for a taxable year during which the taxpayer or succeeding taxpayer fails to meet the qualifying employment requirements provided in this section and the carry-forward period is not extended for any year in which the credit may not be claimed for failure to meet the employment requirements. The credit may be claimed for a taxable year in the unextended carry-forward period if the taxpayer or succeeding taxpayer requalifies for the credit by meeting the employment requirements during that taxable year. (G) If a fee-in-lieu arrangement under Section 4-29-67 is entered into with respect to all or part of property involving a headquarters, and the taxpayer claiming the credit provided under this section is treated as the owner of the property for federal income tax purposes, then the taxpayer must be treated as the owner of the property for purposes of the credit provided by this section. (H) To the extent that this credit applies to the cost of certain property, the basis of the property for South Carolina income tax purposes must be reduced by the amount of the credit claimed with respect to the property. This basis reduction does not reduce the basis or limit or disallow any depreciation allowable under the law of this State for other than income tax purposes, even if the depreciation is based upon or otherwise relates to income tax depreciation including, without limitation, basis or depreciation which is allowable under this title for property tax purposes. If the taxpayer fails to meet the staffing requirements of subsection (B)(2), the taxpayer may increase the basis of the property by the amount of the original basis reduction with regard to that property in the year in which the credit is recaptured. (I) The amount of a credit allowed under this section must be reduced by the amount of any past-due debt owed this State by the taxpayer. (J) As used in this section: (1) "Headquarters" means the facility or portion of a facility where headquarters staff employees are employed, and where the taxpayer's or the taxpayer's business unit's financial, personnel, legal, planning, information technology, or other headquarters-related functions are handled either on a regional, national, or global basis. A headquarters must be a regional headquarters or a national corporate headquarters as defined below. A taxpayer or taxpayer's business unit doing business solely within South Carolina does not meet the definition of a headquarters. (a) National headquarters must be the sole office or location in the nation or the world for the taxpayer or a business unit of the taxpayer with multistate operations and must handle headquarters-related functions on a national or global basis. The function and purpose of the national headquarters is to plan, direct, and control all aspects of the taxpayer or taxpayer's business unit's operations, and it has final authority over regional offices, operating facilities, or any other office of the taxpayer or business unit. (b) Regional headquarters must be the sole office or location in the region for the taxpayer or a business unit of the taxpayer with multistate operations within the region and must handle headquarters-related functions on a regional basis. A regional headquarters performs a function that is separate from the management of operational facilities within the region. A regional headquarters performs functions similar to the national headquarters, but within a more limited area. For purposes of this section, "region" or "regional" means a geographic area comprised of either: (i) at least five states, including this State; or (ii) two or more states, including this State, if the entire business operations of the taxpayer or business unit of the taxpayer are performed within fewer than five states. (c) A "business unit" is an organizational unit of a taxpayer that is defined by the particular product or category of products it sells. (2) "New job" means a job created by an employer in this State at the time a new facility, or expansion is initially staffed, but does not include a job created when an employee is shifted from an existing location in this State to work in a new or expanded facility. An employee may be employed at a temporary location in this State pending completion of the new facility or expansion. (3) "Full time" means a job requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of operations or a job requiring a minimum of thirty-five hours of an employee's time for a week for a year in which the employee was initially hired for or transferred to the headquarters in this State. (4) "Headquarters-related functions and services" are those functions involving financial, personnel, administrative, legal, planning, information technology, or similar business functions. (5) "Headquarters staff employees" means executive, administrative, or professional workers performing headquarters-related functions and services. (a) An executive employee is a full-time employee in which at least eighty percent of his business functions involve the management of the enterprise and directing the work of at least two employees. An executive employee has the authority to hire and fire or has the authority to make recommendations related to hiring, firing, advancement, and promotion decisions, and an executive employee must customarily exercise discretionary powers. (b) An administrative employee is a full-time employee who is not involved in manual work and whose work is directly related to management policies or general headquarters operations. An administrative employee must customarily exercise discretion and independent judgment. (c) A professional employee is an employee whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This knowledge is characterized by a prolonged course of specialized study. The work must be original and creative in nature, and the work cannot be standardized over a specific period of time. The work must require consistent exercise of discretion and the employee must spend at least eighty percent of the time performing headquarters-related functions and services. (6) Reserved. (7) Reserved. (8) "Direct-lease costs" are cash lease payments. The term does not include any accrued, but unpaid, costs. (9) "Remote employee" is a full-time employee of the taxpayer, including an employee who works for a business unit of the taxpayer, who works for the taxpayer performing headquarters-related functions or services either completely or partially from a home office or other residence within the State.

Legislative History

HISTORY: 1995 Act No. 76, SECTION 1; 1999 Act No. 114, SECTION 3; 2001 Act No. 89, SECTION 3, eff July 20, 2001, applicable to taxable years beginning after December 31, 2000; 2001 Act No. 89, SECTION 10, eff July 1, 2001; 2006 Act No. 335, SECTIONS 2.A, 2.B, 2.C, eff June 6, 2006; 2006 Act No. 384, SECTION 7, eff June 14, 2006; 2006 Act No. 386, SECTION 54, eff June 14, 2006; 2008 Act No. 313, SECTIONS 2.B.1, 2.B.2, eff June 12, 2008; 2008 Act No. 352, SECTION 2.B.1, eff June 12, 2008; 2024 Act No. 222 (H.4087), SECTION 1, eff July 2, 2024. Editor's Note 2001 Act No. 89, SECTION 70, provides in pertinent part as follows: ". . . the corporate income tax credit taken against the cost of tangible personal property pursuant to Section 12-6-3410(D) of the 1976 Code authorized to be taken by those corporations or companies referred to in Section 12-6-3410(J)(9) of the 1976 Code may be taken for taxable years beginning after December 31, 2002." 2024 Act No. 222, SECTION 6, provides as follows: "SECTION 6. This act takes effect upon approval by the Governor and first applies to income tax years beginning after 2023, except that SECTION 3 first applies to income tax years beginning after 2020." Effect of Amendment 2024 Act No. 222, SECTION 1, rewrote the section.