2017-2018 Bill 4035: High Growth Small Business Job Creation Act - South Carolina Legislature Online

1 South Carolina General Assembly 2 122nd Session, 2017-2018 3 4 H. 4035 5 6 STATUS INFORMATION 7 8 General Bill 9 Sponsors: Reps. Henderson, Loftis, G.R. Smith, Bedingfield, Willis, Elliott, Bannister, Finlay, Hamilton, 10 Burns, Allison, Fry, Ballentine, Cole, Delleney, Erickson, Forrester, Gagnon, Herbkersman, Lucas, Pope, 11 Sandifer, Simrill and Tallon 12 Document Path: l:\council\bills\agm\19149dg17.docx 13 Companion/Similar bill(s): 588 14 15 Introduced in the House on March 22, 2017 16 Currently residing in the House Committee on Ways and Means 17 18 Summary: High Growth Small Business Job Creation Act 19 20 21 HISTORY OF LEGISLATIVE ACTIONS 22 23 Date Body Action Description with journal page number 24 3/22/2017 House Introduced and read first time ( House Journalpage 57) 25 3/22/2017 House Referred to Committee on Ways and Means ( House Journalpage 57) 26 27 View the latest legislative information at the website 28 29 30 VERSIONS OF THIS BILL 31 32 3/22/2017 33 3/30/2017 34 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND SECTION 114430, CODE OF LAWS OF SOUTH 12 CAROLINA, 1976, RELATING TO DEFINITIONS 13 REGARDING THE HIGH GROWTH SMALL BUSINESS JOB 14 CREATION ACT, SO AS TO ALLOW INDIVIDUALS NOT 15 SUBJECT TO THE SOUTH CAROLINA INCOME TAX TO 16 CLAIM THE CREDIT, TO SPECIFY SERVICES FOR WHICH 17 CONTRIBUTIONS ARE NOT ELIGIBLE FOR THE CREDIT, 18 AND TO SUBSTITUTE “CONVERTIBLE” FOR 19 “SUBORDINATED” IN THE DEFINITION OF QUALIFIED 20 INVESTMENT; TO AMEND SECTIONS 114440 AND 114450, 21 BOTH RELATING TO THE CREDIT, SO AS TO INCREASE 22 THE ANNUAL AGGREGATE CREDIT FROM FIVE MILLION 23 DOLLARS TO TEN MILLION DOLLARS, AND TO MAKE A 24 CONFORMING CHANGE; TO AMEND SECTION 114460, 25 RELATING TO THE REGISTRATION OF A QUALIFIED 26 BUSINESS, SO AS TO ELIMINATE THE REQUIREMENT 27 THAT CERTAIN INFORMATION BE CONTAINED IN A 28 REPORT TO THE GENERAL ASSEMBLY AND GOVERNOR; 29 TO REPEAL SECTION 114465 RELATING TO THE TAX 30 TREATMENT OF CERTAIN CAPITAL GAINS OR LOSSES; 31 AND TO AMEND ACT 80 OF 2013, RELATING TO THE HIGH 32 GROWTH SMALL BUSINESS JOB CREATION ACT, SO AS 33 TO REAUTHORIZE THE ACT FOR SIX MORE YEARS. 34 35 Be it enacted by the General Assembly of the State of South 36 Carolina: 37 38 SECTION 1.A. Section 114430(1)(a) of the 1976 Code, as added 39 by Act 80 of 2013, is amended to read: 40

[4035] 2 1 “(a) an individual person who is a resident of this State or a 2 nonresident who is subject to taxes imposed by Chapter 6, Title 12 3 makes a qualifying investment in a qualified business; or” 4 5 B.Section 114430(5), (6), and (7) of the 1976 Code is amended to 6 read: 7 8 (5) ‘Qualified business’ means a registered business that: 9 (a) is either a corporation, limited liability company, or a 10 general or limited partnership located in this State and has its 11 headquarters located in this State at the time the investment was 12 made and has maintained these headquarters for the entire time the 13 qualified business benefitted from the tax credit provided for 14 pursuant to this section; 15 (b) was organized no more than five years before the 16 qualified investment was made; 17 (c) employs twentyfive or fewer people in this State at the 18 time it is registered as a qualified business; 19 (d) has had in any complete fiscal year before registration 20 gross income as determined in accordance with the Internal 21 Revenue Code of two million dollars or less on a consolidated 22 basis; 23 (e) is primarily engaged in manufacturing, processing, 24 warehousing, wholesaling, software development, information 25 technology services, research and development, or a business 26 providing services set forth in Section 1263360(M)(13), other than 27 those described in subitem (f); and 28 (f) does not engage substantially in: 29 (i) retail sales; 30 (ii) real estate or construction; 31 (iii) professional services; 32 (iv) gambling; 33 (v) natural resource extraction; 34 (vi) financial brokerage, debt offerings, investment 35 activities, or insurance; 36 (vii) entertainment, amusement, recreation, or athletic or 37 fitness activity for which an admission or fee is charged.; and 38 (g) a business is substantially engaged in one of the activities 39 defined in subitem (f) if: 40 (i) its gross revenue from an activity exceeds 41 twentyfive percent of its gross revenues in a fiscal year; 42 (ii) more than ten percent of the total value of its assets 43 consists of debt offered to other entities or real property which is

[4035] 3 1 not used in the active conduct of a qualified trade or business. 2 However, the ownership of, purchasing title to, dealing in, or 3 renting of real property must not be treated as the active conduct of 4 a qualified trade or business; or 5 (iii) it is established pursuant to its articles of 6 incorporation, articles of organization, operating agreement, or 7 similar organizational documents to engage as one of its primary 8 purposes such activity. 9 (6) ‘Qualified investment’ means an investment by an angel 10 investor of cash in a qualified business for common or preferred 11 stock or an equity interest or a purchase for cash of subordinated 12 convertible debt in a qualified business. Investment of common or 13 preferred stock or an equity interest or purchase of subordinated 14 convertible debt does not qualify as a qualified investment if a 15 broker fee or commission or a similar remuneration is paid or 16 given directly or indirectly for soliciting an investment or a 17 purchase. 18 (7) ‘Registered’ or ‘registration’ means that a business has 19 been certified by the Secretary as a qualified business at the time 20 of application to the Secretary.” 21 22 SECTION 2. Section 114440(C) of the 1976 Code, as added by 23 Act 80 of 2013, is amended to read: 24 25 “(C) For any passthrough entity making a qualified investment 26 directly in a qualified business, each individual who or 27 passthrough entity that is a shareholder, partner, or member of the 28 entity must be allocated the credit allowed the passthrough entity 29 in an amount determined in the same manner as the proportionate 30 shares of income or loss of such passthrough entity would be 31 determined. The passthrough entity must make an irrevocable 32 election with the Department of Revenue as to the manner in 33 which the credit is allocated. If an individual’s share of the 34 passthrough entity’s credit is limited due to the maximum 35 allowable credit under this chapter for a taxable year, the 36 passthrough entity and its owners may not reallocate the unused 37 credit among the other owners.” 38 39 SECTION 3. Section 114450(1) of the 1976 Code, as added by 40 Act 80 of 2013, is amended to read: 41

[4035] 4 1 “(1) the total amount of credits allowed pursuant to this chapter 2 may not exceed in the aggregate five ten million dollars for all 3 taxpayers for any one calendar year;” 4 5 SECTION 4. Section 114460(D) of the 1976 Code, as added by 6 Act 80 of 2013, is amended to read: 7 8 “(D) By January thirtyfirst each year, the Secretary shall report 9 to the House Ways and Means Committee, the Senate Finance 10 Committee, and the Governor, a list of the businesses that have 11 registered with the Secretary as a qualified business. The report 12 must include, by county, the name and address of each business, 13 the location of its headquarters, a description of the type of 14 business in which it engages, the amount of capital it has raised 15 including the amount of qualified investment as defined by this 16 chapter, the number of fulltime, parttime, and temporary jobs 17 created by the business during the period covered by the report, 18 and the average wages paid by these jobs. An aggregated statewide 19 report containing the number of businesses, the amount of capital 20 raised by the businesses including the amount of qualified 21 investment as defined by this chapter, the number of fulltime, 22 parttime and temporary jobs created by the businesses, and the 23 average wages paid by these jobs also must be made available in a 24 conspicuous place on the Secretary’s website. The report must be 25 updated annually.” 26 27 SECTION 5. Section 114465 of the 1976 Code is repealed. 28 29 SECTION 6. SECTION 1.B. of Act 80 of 2013 is amended to 30 read: 31 32 “B. The provisions of Chapter 44, Title 11, contained in this act 33 are repealed on December 31, 2019 2025. Any carry forward 34 credits shall continue to be allowed until the ten year time period 35 in Section 114440(B) is completed.” 36 37 SECTION 7. This act takes effect upon approval by the Governor 38 and first applies to tax years beginning after 2016. 39 XX 40

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