Tax Law Insights

South Carolina provides a tax credit to corporations against the state corporate income, or state corporate license fees, equal to 20% of the qualifying costs of establishing a corporate headquarters in South Carolina, or expanding or adding to an existing corporate headquarters. The credit is made up of two parts, the real property costs and the personal property costs. Key Features of the credit are:

• A corporation may qualify for only the real property portion of the credit, or may qualify for both the real and personal property portions of the credit.

• Any unused credit may be carried forward for up to 10 years, or if the 75 new job and per capita income requirements are met (discussed below), the credit can be carried forward for up to 15 years. No credit may be claimed for a tax year during which the corporation fails to meet these qualifying employment requirements.

• 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, but the remaining eligible carry forward may be claimed in the year that the corporation requalifies for the credit by meeting the employment requirements.

• If a corporation claims the headquarters credit, for South Carolina income tax purposes, the basis of any property used to calculate the credit must be reduced by the amount of the credit claimed.

• The real property portion of the headquarters credit is equal to 20% of qualifying real property costs incurred in the design, preparation, and development of establishing, expanding, or adding to a corporate headquarters, and direct construction costs.

• For leased buildings or property, direct lease costs for the first 5 years of operations for the corporate headquarters may qualify. Direct lease costs are cash lease payments and do not include any accrued, but unpaid costs.

• Qualifying real property costs must equal or exceed $50,000. In addition, the headquarters establishment, addition, or expansion must create at least 40 new, full time, permanent jobs in South Carolina performing headquarters related functions and services or research and development related functions and services and at least 20 of these jobs must be headquarters staff employees performing headquarters related functions and services. For these purposes, "headquarters related functions and services" are those functions involving financial, personnel, administrative, legal, planning, information technology, or similar business functions, and "headquarters staff employees" means executive, administrative, or professional workers performing headquarters related functions and services.

• If the requirements for the real property portion of the headquarters credit is met, then the corporation is eligible to receive the personal property portion of the headquarters credit equal to 20% of the cost of tangible personal property. Similar to the real property portion of the headquarters credit, the personal property portion of the headquarters credit has both a property requirement as well as a jobs creation requirement.

• The personal property must be (1) purchased for the establishment, expansion, or addition of a corporate headquarters or research and development facility which is part of the same corporate project as the headquarters establishment or expansion; (2) used for corporate headquarters or research and development related functions and services in South Carolina; and (3) capitalized for income tax purposes under the Internal Revenue Code.

• The headquarters or research and development establishment or addition must create at least 75 new, full time jobs performing headquarters related or research and development related functions and services and at least 20 of these jobs must be headquarters staff employees. The jobs created must have an average cash compensation level of more than 1.5 times the South Carolina per capita income based on the most recent per capita income data available as of the end of the corporation's tax year in which the jobs are filled. The average South Carolina employee cash compensation level for all employees in South Carolina must be more than 2 times the South Carolina per capita income based on the most recent per capita income data available as of the end of the corporation's tax year in which the jobs are filled.