South Carolina amends Vital Economic Development Incentives Act

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On June 22, 2022, Henry McMaster, Governor of South Carolina, signed into law South Carolina Bill 901 (the “Bill”). The bill amends the Employment Development Credits (JDC) section of the Enterprise Zone Act of 1995, one of South Carolina’s primary discretionary economic development incentives that allows entities to obtain a reimbursement of employee source deductions to reimburse the cost of certain eligible business expenses.

Before the bill was passed

Prior to the bill’s passage, to be eligible for JDCs, a qualifying business had to create at least ten new jobs and enter into a revitalization agreement with the South Carolina Economic Development Coordinating Council. The Revitalization Agreement sets out specific minimum employment and capital investment requirements that the qualifying business must meet, on its own, to claim the JDCs. This presented a significant challenge for large companies with complex corporate structures that had various subsidiaries that created the jobs and made the capital investment. Prior to the passage of the bill, these companies struggled to obtain JDCs because they could not meet the requirement that the same legal entity create the jobs. and make the capital investment.

Job Development Credits After Bill Passes

The changes to the JDC program contained in the bill significantly increase the eligibility of businesses to receive JDCs. Now, the qualifying business and up to two related individuals can work together to meet the minimum employment and capital investment requirements set out in the revitalization agreement. The bill uses the Internal Revenue Code definition of relationships to determine which persons or entities are considered related persons for the purposes of the JDC program. This addition allows companies within the same controlled group (i.e., parent-subsidiary and brother-sister relationships) to be considered related persons who can now jointly apply for JDCs. To adhere to the bill’s definition of related person, the qualifying business must include all related persons in the revitalization agreement with the South Carolina Coordinating Council for Economic Development.

The changes to the JDC program contained in the bill also include a stipulation regarding single-member limited liability companies and the maximum allowance for related persons. For the purposes of designations of related persons, single-member limited liability companies and qualifying sub-chapter S subsidiaries are treated as two separate entities. This means that when jointly researching JDCs, they can only have one other related person.

If you have questions about economic development, including questions about your entity’s eligibility for South Carolina incentives like JDCs, please contact the author of this alert or Womble Bond Dickinson’s attorney with who you normally work with.

This Client Alert features contributions from Taylor Conley, Summer Partner at Womble Bond Dickinson.

Copyright © 2022 Womble Bond Dickinson (US) LLP All rights reserved.National Law Review, Volume XII, Number 180


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