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Frank Davis
Perry MacLennan
Aaron Scheuer
January 2019
HSB Insider's Perspective
By Will Johnson

Dear Friends,

Happy new year! I hope that you and your respective organizations had a successful 2018 and that 2019 is off to a good start.

All too often, in the process of balancing professional and personal commitments and completing work for clients in a timely manner, I fail to stop and think about the big picture.  Thankfully, over the last two weeks, I had a couple of opportunities to do just that.  In no particular order, I want to share some of my key take-aways from the last week on a variety of subjects.

1.  The impact of tariffs is real and significant. According to the Rhodium Group, Chinese foreign direct investment in the United States totaled over $46 billion in 2016. That number dropped to approximately $30 billion in 2017 and a mere $4.8 billion in 2018. 

These observations are not intended as a political statement.  Balancing the short-term consequences of a trade war with the perceived long-term benefits of fairer trade with China is tough business. I hope that the U.S. administration is carefully considering the short-term consequences and perceived long-term benefits in crafting policy, because South Carolina's tremendous success in attracting foreign direct investment puts the Palmetto State squarely in the cross-hairs of any fallout.

2.  The food industry will continue to play a huge role in the economic development arena. Companies in this industry will focus on three key points (which, to some extent, have broader application): an intense focus on profitability given the industry's tight profit margins; minimizing delivery and operational risk; and maximizing innovation. The war on plastics will have an outsized impact on this industry as food companies and their suppliers are forced to innovate quickly to produce packaging solutions that keep the global food supply safe and fresh while placating environmentalists and regulators worldwide.

3.   As Mike Randle of Southern Business & Development has rightly lamented, for decades, the United States economy depended on 200,000 workers per month entering the workforce, but within ten years, that number is projected to drop to 50,000 workers per month. We have a looming labor crisis, if it has not already arrived.  Minneapolis Federal Reserve Bank President Neel Kashkari has observed that  we have three choices as a country: subsidizing fertility, embracing a significantly expanded immigration policy, or accepting slower growth. Perhaps artificial intelligence will provide at least a partial solution. Be on the lookout for robots soon in a community near you.

4.  Leaders in the Virginia economic development community that landed half of the highly publicized Amazon HQ2 project were very concerned about losing their project to another location with a large population but significantly lower labor costs. More specifically, the labor costs associated with the alternative location were $1 billion (yes, billion with a B) cheaper on an annual basis. Nevertheless, Amazon chose Northern Virginia. Among a number of other key factors including a vast array of reliable public transportation, Virginia offered the promise of doubling the number of computer science/technology graduates of its colleges and universities in the short term. My takeaway is that bottom-line costs are important, but in most if not all cases, other concerns are a higher priority, and educating a talented, 21st century workforce is absolutely critical to our efforts to make South Carolina the best place in the world to do business.

My observations draw primarily from discussions at a recent investor luncheon sponsored by the Upstate Alliance as well as the Southern Economic Development Review, presented by Southern Business & Development.  Thanks to John Lummus and the Upstate Alliance as well as Mike and Stacy Randle and the Southern Business & Development staff for hosting two great events. As to the discussion points, I relied on insights from Mike Randle, Scott Kupperman of Kupperman Location Solutions, Jim Newsome of the South Carolina Ports Authority, Mac Holladay of Market Street Services, and Stephen Moret of the Virginia Economic Development Partnership, among others.

We at Haynsworth Sinkler Boyd would love to hear about your thoughts and experiences on these and other important issues. We appreciate our relationships with state and local leaders in the economic development community as well as our service-provider allies, and we look forward to seeing you and working with you in 2019.
Don't Miss the January 30, 2019 Deadline for Property Tax Reductions on Property Acquired in 2018

Taxpayers who purchased property in 2018 (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.
Per Capita Income Update

The State's per capita income level is important for certain small business job tax credits. Job tax credits are available for both large and small businesses creating ten or more new jobs, but for small businesses creating two to nine jobs, wage levels are critical. The gross wages of new jobs must be at least 120% of the lower of the applicable county's or state's average per capita income. The most recent county wage levels were reported in SC Information Letter 19-1 .
The amount of the credit is $8,000 per job for projects located in Tier IV counties, $4,250 in Tier III counties, $2,750 in Tier II counties, and $1,500 in Tier I.   SC Information Letter 19-2 shows 2019 County Tier designations.  Note that these credits can be increased by $1,000 per job per year for projects included in multi-county industrial parks.
County Tiers Set for 2019 for Job Tax Credits and Job Development Credits

South Carolina's 46 counties are annually 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 SC Department of Revenue has published the new "tier" designations for South Carolina counties for 2019. The following counties received a new tier designation:     
The following is a complete list of counties and their respective tiers for 2019: 
For more information on how job development credits and job tax credits work generally, please see our overviews below:

Port Volume Cargo Applications

South Carolina Code § 12-6-3375 provides a tax credit to a taxpayer engaged in manufacturing, warehousing or distribution that uses South Carolina port facilities and increases its port cargo volume at these facilities by at least 5% in a calendar year over its base year port cargo volume. Form TC-30, "Port Cargo Volume Increase," is used to claim the credit. It is important to note that tax credit applications should be submitted early in the year as the maximum amount that all taxpayers may claim pursuant to this section is subject to an annual cap. Please contact a member of the ED team if you have questions.
Big Changes in Conservation Easements

A recent Tax Court ruling may have a significant impact on conservation easements. Conservation easements often reserve to landowners future rights to construct, within the conserved area, buildings and facilities appurtenant to those structures such as roads. Easements generally do not specify the exact location of these future build zones within the conserved areas. In Pine Mountain Preserve, LLP v. Commissioner of Internal Revenue, 151 T.C. 14 (2018), the Tax Court held that this common practice (reserving the right to build anywhere within a conserved area) will invalidate an otherwise legitimate conservation easement. Taxpayers should now be careful to specify which portions of a conserved area they wish to designate for future development, which would include buildings and infrastructure such as roads and utility apparatus. Read the full blog post here
Opportunity Zones

HSB was pleased to host four seminars across South Carolina addressing opportunities and challenges associated with the new federal Opportunity Zone incentives. Please click here to view our most recent Opportunity Zones brochure. We are anxiously awaiting anti-abuse regulations that the Treasury Department should be releasing in the near future. Please contact a member of the HSB economic development or tax teams with any questions. 

Will Johnson and Aaron Scheuer presented in Greenville.

HSB News & Events

Philip Land recently attended the   Southern Economic Development Council's Capital Connections conference in Washington DC, which included topics related to Opportunity Zones, Workforce Development Initiatives, and National Funding Sources.

Haynsworth Sinkler Boyd was pleased to sponsor the Upstate Alliance luncheon featuring site selection consultant Scott Kupperman on January 7, 2019 in Greenville. Kupperman spoke about key issues driving site location decisions for companies in the food industry.  Pictured below are Upstate Alliance CEO John Lummus, Gary Morris (HSB), Scott Kupperman and Will Johnson (HSB).

Frank Davis recently attended the Geneva Group International's Asia-Pacific Regional Conference in Thailand. HSB is the South Carolina member firm for GGI a worldwide alliance of well-established and experienced accounting, consulting and law firms that are committed to providing clients with specialist solutions for their international business requirements.

Will Johnson attended Southern Business & Development's Southern Economic Development Roundtable in Santa Rosa Beach, Florida. The event featured 65 leading economic development professionals from the Southeastern United States. South Carolina attendees included Peggy McLean (Kershaw County), Jay Schwedler (Sumter County), George Kosinski (Clarendon County), Clark Gillespy (Duke Energy), Will Williams (Economic Development Partnership), Marvin Moss (City of Clinton), Deepal Eliatamby (Alliance Consulting Engineers), Chuck Whipple (Midlands Technical College), Jim Newsome (SC Ports Authority), Jeff McKay (NESA), and Hal Johnson (NAI Earle Furman). | Charleston | Columbia | Florence | Greenville | Myrtle Beach

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