2021 South Carolina Code of Laws
Title 12 - Taxation
Chapter 6 - South Carolina Income Tax Act
Section 12-6-3410. Corporate income tax credit for corporate headquarters.
(A) A corporation establishing a corporate headquarters in this State, or expanding or adding to an existing corporate headquarters, is allowed a credit against any tax due pursuant to Section 12-6-530, Section 12-11-20, or Section 12-20-50 as set forth in this section.
(B) In order to qualify for this credit, each of the following criteria must be satisfied:
(1) The qualifying real property costs of the corporate headquarters establishment, expansion, or addition must be at least fifty thousand dollars. Qualifying real property costs are:
(a) costs incurred in the design, preparation, and development of establishing, expanding, or adding to a corporate headquarters; 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 corporate headquarters.
(2) The headquarters establishment, expansion, or addition must result in the creation of:
(a) at least forty new jobs performing headquarters related functions and services or research and development related functions and services. These jobs must be permanent, full-time positions located in this State; and
(b) at least twenty of the above-referenced new jobs must be classified as headquarters staff employees.
(C) The amount of the credit is equal to twenty percent of the qualifying real property costs listed in subsection (B)(1).
(D) A headquarters establishment, expansion, or addition which meets the criteria of subsection (B) of this section is entitled to an additional credit equal to twenty percent of cost for tangible personal property if the following conditions are met:
(1) the personal property is:
(a) capitalized as personal property for income tax purposes under the Internal Revenue Code; and
(b) purchased for the establishment, expansion, or addition of a corporate headquarters, or for the establishment, expansion, or addition of a research and development facility which is part of the same corporate project as the headquarters establishment, addition, or expansion; and
(c) used for corporate headquarters related functions and services or research and development related functions and services in South Carolina.
(2) The establishment, expansion, or addition of a corporate headquarters or research and development facility must result in the creation of at least seventy-five new full-time jobs performing either:
(a) headquarters related functions and services; or
(b) research and development related functions and services.
The seventy-five required jobs must have an average cash compensation level of more 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.
(E)(1)(a) For facilities which are constructed, the credit can only be claimed for the taxable year when the headquarters establishment, expansion, or addition, and the research and development facility establishment, expansion, or addition, in the case of corporations qualifying under subsection (D), is placed in service for federal income tax purposes. For construction projects completed in phases and placed in service for federal income tax purposes in more than one taxable year, the corporation can claim the credit on the South Carolina income tax return for the taxable year in which property, which qualifies for the credit, is placed in service. 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 corporation may claim the credit 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, where the conditions of subsection (D) are met, 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 corporation must meet the staffing requirements of subsections (B)(2) and, if applicable, (D)(2), by the end of the second taxable year following the last taxable year for which the credit is claimed. The corporation must have documented plans to meet the initial staffing requirements at the time the credit is claimed. If the corporation fails to meet the staffing requirements within the time required by this subsection, the corporation 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 corporation 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. An unused credit may be carried forward fifteen years if the criteria set forth in subsection (D)(2) are met. 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 corporate headquarters of the taxpayer. 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 corporate headquarters, and the corporation claiming the credit provided under this section is treated as the owner of the property for federal income tax purposes, then the corporation 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 corporation fails to meet the staffing requirements of subsection (E)(2), the corporation 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) "Corporate headquarters" means the facility or portion of a facility where corporate staff employees are physically employed, and where the majority of the company's or company 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 corporate headquarters must be a regional corporate headquarters, a national corporate headquarters, or global corporate headquarters as defined below; provided, however, for taxpayers which are subject to tax under Chapter 11 of Title 12, a corporate headquarters must be a regional corporate headquarters:
(a) National corporate headquarters must be the sole corporate headquarters in the nation and handle headquarters-related functions at least on a national basis. A national headquarters is considered to handle headquarters-related functions on a national basis from this State if the corporation has a facility in this State from which the corporation engages in interstate commerce by providing goods or services for customers outside of this State in return for compensation.
(b) Regional corporate headquarters must be the sole corporate headquarters within the region and must handle headquarters-related functions on a regional basis. 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 corporation are performed within fewer than five states; provided, however, that with respect to taxpayers which are subject to tax under Chapter 11 of Title 12, the requirement that "the entire business operations of the corporation are performed within fewer than five states", is replaced with "if all branches of the taxpayer, as defined below, are physically located in fewer than five states". For taxpayers which are subject to tax under Chapter 11 of Title 12, such taxpayer must have two or more branches, as that term is defined in Section 34-25-10(8), in each state within its region.
(c) A "company business unit" is an organizational unit of a corporation or bank and 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, expansion, or addition 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, expansion, or addition.
(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 corporate 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 corporate headquarters or research and development facility 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) "Research and development" means laboratory, scientific, or experimental testing and development related to new products, new uses for existing products, or improving existing products, but "research and development" does not include efficiency surveys, management studies, consumer surveys, economic surveys, advertising, promotion, banking, or research in connection with literary, historical, or similar projects.
(7) "Research and development facility" means the building or buildings or portion of a building where research and development functions and services are physically located.
(8) "Direct lease costs" are cash lease payments. The term does not include any accrued, but unpaid, costs.
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.
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."
