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Table of Contents
Policy
Available Incentives
Qualification
Description of Incentives
Questions
Examples of Incentives Available under the Act
Policy
The Enterprise Zone Act (the "Act") was enacted on April 4, 1995. Prior to this date, available economic recruitment incentives were primarily designed for large companies that were willing to invest millions of dollars in our state. The exact incentive package offered to each of these companies often varied on a project-by-project basis. Incentive packages were custom designed to lure large, "marquee" employers to the state, with the expectation that smaller spin-off jobs would inevitably follow these corporate behemoths.
The Act represents a major change in corporate recruiting philosophy by our legislature. The Act substantially lowered the threshold for obtaining employer incentives. It expanded availability of these incentives to smaller businesses primarily by de-emphasizing the importance of large capital investments and focusing instead on the number of jobs created in this state. The major policy impetus behind this change is a recognition that small to medium sized businesses are worth recruiting for their own sake. A local economy with a large array of small to medium sized employers is better able to withstand a national or regional recession, or the decay of a particular industry.
Available Incentives
The most useful incentives available to small and medium sized businesses under the Act are:
- Job Development Fees ("JDF") which can be used to offset the cost of constructing or acquiring real property to be used by the business.
- Job Tax Credits ("JTC") which reduce the company's state income tax liability.
There are numerous other incentives available in this state, including various forms of real and personal property tax relief, incentives for employing recipients of Aid to Families with Dependent Children, favorable financing alternatives, employee retraining assistance, etc. However, practical experience has proved that the JDF and JTC incentives are the most accessible incentives available to small and medium sized companies.
Qualification
To qualify for incentives under the Act, an applicant must meet the following criteria:
- The business must open a new facility, or expand an existing facility, within an Enterprise Zone. Enterprise Zones are defined in the Act. In general, they include both rural areas and economically depressed urban areas. Due to the recent closure of the Charleston Naval Base, almost all of Berkeley, Charleston and Dorchester Counties qualify as Enterprise Zones.
- Applicants must be primarily engaged in one of the following types of business:
- Manufacturing
- Tourism facilities (amusement parks, museums, theaters, arenas, auditoriums, arenas, etc. New hotels also qualify, but they must create 20 new jobs instead of 10.)
- Processing (This includes communications- related or transportation related services, as well processing of agricultural and other products.
- Warehousing
- Distribution
- Research and Development
- Corporate office facility
Enterprises engaged in the retail sale of services or property do not qualify.
- To receive JDF benefits, the company must create at least 10 new full time jobs which pay on average at least $6.00 per hour.
- The business must provide its full-time employees with a benefits package which includes health care.
- The business must submit a proposed business plan, along with hiring and investment projections and a $2,000 application fee to the South Carolina Coordinating Council for Economic Development ("CCED").
If the application is approved, the company must also enter into a binding contract with the CCED, called a Revitalization Agreement, in which the company agrees to meet certain job creation and investment goals in exchange for receiving JDF or JTC incentives. The CCED may ask the company to increase its level of capital investment or hiring requirements to insure that the benefit to the state is sufficient to justify the level of incentives to be received by the company. However, the applicant has up to 5 years to meet the minimum investment and job creation requirements stipulated in the Revitalization Agreement.
Description of Incentives
- Job Tax Credits.
The Act gives employers a $1,000 credit against their state income tax liability for each new full time position created. Employers get this annual credit for five years beginning in their second year of operations. Total cumulative JTCs over the first six years for each new job created are $5,000. However, the company can only use the credits to reduce its annual state income tax bill by up to 50 percent. If the company does not have enough state income tax liability to use the credits in the year accrued, they can be carried forward and used against future state income tax liability for up to fifteen years.
- Job Development Fees.
This program allows the company to retain funds that would otherwise be paid to the South Carolina Department of Revenue ("DOR") as employee withholding for their individual state income tax liability. For the first fifteen years after the employer meets the requirements under its Revitalization Agreement, the employer can retain between 2% and 5% of its employees' wages based on this sliding scale:
Employee wage rate
$6 - $7.99 per hour
$8 - $9.99 per hour
$10 - $14.99 per hour
$15 or more per hour
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Withholding Factor
2%
3%
4%
5%
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These retained withholdings, or JDFs, can be used to reduce the company's cost of constructing, acquiring or renovating real property for use by the employer or for costs associated with training new employees.
Questions
If you have questions about these, or any other economic incentives which might be available to your company, please contact Susan M. Smythe or Shawn M. Flanagan or Cynthia Spieth Morton at 843-722-3400.
Example of Incentives Available under the Act to a business which creates 16 new jobs at a warehouse/distribution facility within an Enterprise Zone.
Enhanced Jobs Tax Credit
| Year |
New Jobs Created |
Tax Credit Per Job |
Total Credit |
1995
1996
1997
1998
1999
2000
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12
16
16
16
16
16 |
$1,000
$1,000
$1,000
$1,000
$1,000 |
$16,000
$16,000
$16,000
$16,000
$16,000 |
| Total Tax Credits $80,000 |
| Employee Categories | Number of Employees | Average Hourly Wage | Estimated Annual Payroll | Percent of Wages Eligable for Credit | Amount of Annual Credit |
| Machine Operators | 8 | $6 | $100,000 | 2% | $2,000 |
| Production Supervisors | 2 | $8 | $33,200 | 3% | $996 |
| Plant Manager | 1 | $15 | $36,000 | 5% | $1,800 |
| Headquarter's Staff | 5 | $50 | $500,000 | | |
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