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Perry MacLennan
December 2020
HSB Insider's Perspective
By Gary Morris

Dear Friends,

COVID-19 has had a devastating impact on our nation and our state. Our population and certain segments of business have been hit hard. In particular, the retail and hospitality sectors have been hit very hard.
But what about manufacturing and distribution? Based upon information received from the S.C. Department of Commerce, the S.C. Department of Agriculture and a number of regional Alliances, the pipeline for projects remains reasonably strong. We have had several significant announcements around the State including the Agriculture Technology Campus in Hampton County, Mark Anthony Brewing in Richland County, and the expansion of Nephron Pharmaceuticals in Lexington County. A few large distribution projects and expansions have also been announced.
We note that certain sectors are faring better than others. The automotive sector remains strong. The agribusiness sector is strong and growing. On the other hand, the aerospace sector is down, which has an adverse impact on suppliers in this State. On the positive side, it does appear that Boeing is consolidating certain operations and South Carolina will be the beneficiary.
As you know, South Carolina has been strong in attracting foreign corporations to this State. As a result of COVID-19, there have been stringent travel restrictions and therefore very little direct contact with foreign company officials. Despite this, reports indicate that South Carolina seems to be on track to improve over last year's numbers pertaining to the establishment and/or expansion of manufacturing and distribution projects. Foreign direct investment is down, but not as much as one would expect.
So why is this?  First, interest rates remain low, encouraging borrowing to facilitate expansion and investment. PPP loans have also assisted some manufacturing companies. From an employment perspective, more people are moving into the State. The loss of jobs in the retail and hospitality markets has created a hiring opportunity for manufacturers. In addition, manufacturers are focused on long term goals. COVID-19 represents an obstacle but not a complete deterrent for new projects.
Some factors, however, continue to hurt the recruitment of industry to this state. Travel restrictions and quarantine requirements remain a major impediment to landing new projects. Although virtual meetings can be helpful, face-to-face recruitment still works better. The impact of COVID-19 on schools has also created challenges. If children are not attending school, parents may need to stay home, thereby creating employment and product delivery issues for manufacturers. And, of course, the downturn in certain industry segments will impact certain manufacturers.
One interesting note is that historically, there is less new investment and project activity during a Presidential election year. This year has been different. Activity has increased, and more companies have committed to move forward.
In summary, the State is holding its own in attracting and landing manufacturing and distribution projects. Hopefully, as the vaccines are distributed and conditions improve, the activity will continue to increase.
Housing Tax Credit

On December 14, 2020, the S.C. Department of Revenue issued a draft revenue ruling summarizing the new South Carolina low-income housing tax credits. The draft revenue ruling provides a general overview of the credits and addresses a few key issues. The credit is equal to the federal low-income housing credit allowed under IRC Section 42 and may be claimed against South Carolina income taxes, bank franchise taxes, corporate license fees, and insurance premium and retaliatory taxes.
To be eligible, a building must be placed in service between January 2, 2020 and December 30, 2020. Qualification for the credit will be determined by the South Carolina Housing Authority based on whether the project is a qualified low-income building as defined in IRS Section 42. Investors must obtain a credit "eligibility statement" from the SC Housing Authority after May 14, 2020.
The draft ruling provides a number of FAQ's on the mechanics of claiming the credit and the allowable amount of the credit, among other things. Comments to the draft ruling are due by December 31, 2020, after which the Ruling will be finalized.
Agribusiness in South Carolina

Will Johnson and Gary Morris spoke on legal issues affecting agribusiness companies during a recent webinar hosted by the South Carolina Department of Commerce.

Will and Gary discussed key concerns that foreign investors should consider when establishing a U.S. operation. In addition, they explained the state and local tax landscape in South Carolina and incentives that investors can utilize to lower their costs of doing business.

The S.C. Department of Agriculture established the Certified South Carolina Program to serve as a resource throughout the state to help people find and buy locally sourced food from over 24,000 SC farmers.
Haynsworth Sinkler Boyd is proud to announce that Frank Davis was recently recognized by Best Lawyers as the 2021 "Lawyer of the Year" for Economic Development Law in Greenville.

Only a single lawyer in each practice area and designated metropolitan area is honored as the "Lawyer of the Year." Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, their professionalism and their integrity.

In addition to the "Lawyer of the Year" award, Frank was also listed in the 2021 Edition of The Best Lawyers in America in four additional practice areas: Commercial Litigation, Corporate Law, Mergers and Acquisitions Law and Tax Law. 

Congratulations, Frank!

For some time now, questions have hovered over a certain kind of incentive deal. Where most agree that it's fine to use incentives for manufacturers, distribution centers or corporate headquarters, what about large-scale mixed-use real estate developments? In particular, what if part of the project rents apartments?
In July, the South Carolina Court of Appeals weighed in, providing a welcome opinion that validates the broad consensus in the economic development community.

First, a little about the law surrounding that case might help. Local governments can place property into a multi-county business/industrial park, sometimes called an MCBP or MCIP, subject to detailed legal requirements. When property goes into a MCBP, the local governments levy fees - instead of taxes - against property in the MCBP. Levying fees gives the local governments the flexibility to offer special source revenue credits or SSRCs, which effectively reduce property taxes. The incentive can be quite lucrative, and in exchange, the local governments often require a project to meet criteria that serve a beneficial public or negotiated purpose, such as maintaining investment, affordable housing, paying for a public plaza or parking garage or other infrastructure, or generally encouraging investment into a desperate region, where, without the incentive, the developer's pro forma just wouldn't work.

It's important to note that property cannot go into an MCBP unless it involves a business that is a commercial enterprise. The industry generally agrees that a development consisting of only owner-occupied residential property does not qualify, but what about rentals? That's the issue the Court of Appeals addressed.

Click here to continue reading. 
2021 County Tiers Set for JTCs and JDCs

Each year, South Carolina's 46 counties are designated as being within one of four "tiers" for job tax credit and job development credit purposes based on a county's unemployment rate and per capita income. The S.C. Department of Revenue has published the new "tier" designations for South Carolina counties for 2021. 

The following counties changed tiers for 2021:

Below are the 2021 tier designations:

S.C. Department of Revenue Extends Relief Period for Workers Temporarily Working Remotely Due to COVID-19 

The S.C. Department of Revenue (DOR) announced an extension to SC Information Letter #20-11 regarding temporary nexus and tax withholding requirements for employees working remotely due to COVID-19. Specifically, Information Letter #20-11 provided that a South Carolina business's withholding requirements are not affected by the shift of employees working remotely outside of South Carolina during the COVID-19 relief period.
Accordingly, the wages of nonresident employees temporarily working remotely in another state instead of their South Carolina business location are still subject to South Carolina withholding. Likewise, the wages of a South Carolina resident employee temporarily working remotely from South Carolina instead of their normal out-of-state business location are not subject to South Carolina withholding if the employer is withholding income taxes on behalf of the other state.
Finally, DOR will not use changes solely in an employee's temporary work location due to the remote work requirements arising from, or during, the COVID-19 relief period as a basis for establishing nexus or altering apportionment of income. The original relief period was from March 13, 2020 to September 30, 2020. DOR has now further extended that period through June 30, 2021.
2020 Tax Legislative Update Recap
The S.C. Department of Revenue issued its 2020 legislative update on December 15, 2020. The update addresses 2020 legislation impacting South Carolina's tax laws. Key legislation from the limited legislative session included federal income tax conformity (including provisions addressing the Paycheck Protection Program), the new low-income housing property tax exemption, the South Carolina Business License Tax Standardization Act, and the reinstatement of the South Carolina Retail Facilities Revitalization Act for fiscal year 2020-2021. Click here to access the full update. 
Doing Business in the U.S. and South Carolina 

Frank Davis and BinBin Wu addressed legal aspects affecting Chinese investors doing business in the U.S. and South Carolina on a recent webinar with the S.C. Department of Commerce.  We are cautiously optimistic that improved trade relations will facilitate a return to significant foreign direct investment in South Carolina from China. 
Don't Miss the January 30, 2021 Deadline for Property Tax Reductions on Property Acquired in 2020

Taxpayers who purchased property in 2020 (or who own property which underwent an "assessable transfer of interest" as defined in the South Carolina Real Property Valuation Reform Act) should consider taking advantage of statutory limitations on property tax increases for property taxed at a 6% assessment ratio. In order to benefit from this limitation, the property owner must provide written notice to the applicable county assessor before January 30 of the year following the transfer.

If you think you may qualify and wish to take advantage of this provision, please contact a member of the ED team.
Happy Holidays!

From all of us at Haynsworth Sinkler Boyd, we hope you and your family have a safe and happy holiday season! We look forward to working with you in 2021. | Charleston | Columbia | Florence | Greenville

William R. Johnson, Economic Development Group Leader
1201 Main Street, 22nd Floor, Columbia, SC 29201