Tax Law Insights

Businesses seeking to locate or expand operations in South Carolina may be eligible for one or more types of grant funding through the State of South Carolina. Grants are designed to be a reimbursement mechanism, where the state will reimburse the business for certain project-related costs (e.g. land, buildings, roads, and infrastructure).  The state often funds the grant to the local county government in which the project is located, and the applicable county government then administers the grant for the business.

Grant funding is discretionary, and may be in addition to, or in lieu of, certain other state-based economic development incentives.  Businesses must first negotiate with the state for grant funding for a project, then apply for the grant funds, and if the application is granted the business must enter into a formal grant agreement with the state (e.g. a “Performance Agreement”) where the business will commit to meet certain project requirements, such as investment and job creation thresholds within a stated period of time.  The state will fund the grant “up-front” at the beginning of the project, but if the business does not meet the project requirements stated in the grant agreement, some or all of the grant proceeds must be paid back.

The State of South Carolina has a number of specific grant programs available for projects in the state, and which include:

Set-Aside Fund

The Coordinating Council for Economic Development authorizes the expenditure of funds (“Set-Aside Funds”) in an account for economic development purposes based on project priorities established by the Council.  S.C. Code Ann. § 12-28-2910 provides that the first $18,000,000 generated from 3 cents of the user fee levied on the use of gasoline in the State of South Carolina shall be deposited in this account.  However, legislation has directed that funding of this account gradually be shifted away from the gasoline fee and replaced with the taxes collected pursuant to S.C. Code Ann. § 12-23-10 et. seq. (the license fee imposed on providers of electric power within the State).

CDBG

Community Development Block Grant Development (“CDBG”) funds are provided by the federal government to the states and may be utilized for infrastructure needs of qualifying projects.  The grants are awarded on a project-by-project basis.

Community Development Block Grant Entitlement Communities Grants provide annual grants on a formula basis to entitled cities and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons.  The program is authorized under Title 1 of the Housing and Community Development Act of 1974, Public Law 93-383, as amended; 42 U.S.C. § 5301 et. seq.

Under Title I, all units of general local government are eligible to apply for CDBG financial assistance with the exception of the following communities: the cities of Aiken, Anderson, Charleston, Columbia, Conway, Florence, Greenville, Myrtle Beach, Rock Hill, Spartanburg and Sumter. In addition to these cities, the following are also not eligible to apply: Charleston County and all municipalities within the County, Greenville County and all municipalities within Greenville County, and the unincorporated areas of Richland, Lexington and Spartanburg Counties (all municipalities except as previously listed within Richland, Lexington and Spartanburg Counties are eligible). These communities participate in the CDBG Entitlement program and receive CDBG funds directly from HUD.

HUD awards grants to entitlement community grantees to carry out a wide range of community development activities directed toward revitalizing neighborhoods, economic development, and providing improved community facilities and services.

Entitlement communities develop their own programs and funding priorities. However, grantees must give maximum feasible priority to activities which benefit low- and moderate-income persons. A grantee may also carry out activities which aid in the prevention or elimination of slums or blight. Additionally, grantees may fund activities when the grantee certifies that the activities meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs. CDBG funds may not be used for activities which do not meet these broad national objectives.

CDBG funds may be used for the acquisition of real property; relocation and demolition; rehabilitation of residential and non-residential structures; construction of public facilities and improvements, such as water and sewer facilities, streets, neighborhood centers, and the conversion of school buildings for eligible purposes; activities relating to energy conservation and renewable energy resources; and provision of assistance to profit-motivated businesses to carry out economic development and job creation/retention activities.

Rural Infrastructure Fund

Grant funds for projects in rural areas of the state may be available under the Rural Infrastructure Fund.  Legislation transferred RIF funds collected from $12 million to $17 million to the Rural Infrastructure Bank Trust.  Funds in excess will continue to go to RIF.

Governor’s Closing Fund

Additional discretionary funds may be available to fund certain project needs under the Governor’s Closing fund.