A Pro-Business Environment
The Palmetto State has created a pro-business environment by offering an attractive corporate income tax structure, creative credits and discounts, and property tax incentives. It has become home to such manufacturing giants as BMW and Boeing, and it is also the North American headquarters of Michelin North America.
By being a right-to-work state, South Carolina offers companies a low cost of doing business. Today, almost 16% of the non-governmental workforce in South Carolina is in manufacturing.
Tax Incentives and Discounts
In addition to having one of the lowest corporate income taxes in the Southeast (5 percent), South Carolina only taxes businesses on the portion of their income derived from in-state operations. The state is known for making pro-business tax calculations.
In addition to widely available Job Tax Credits (JTCs) (see below) there are numerous other tax credits to significantly reduce or eliminate a company’s corporate income tax liability, including Economic Impact Zone Investment, Corporate Headquarters, Research & Development, Child Care Program, and Community Development Tax Credits.
Discretionary Incentive Programs
South Carolina uses discretionary incentives at the state and local level on a case-by-case basis. Counties may negotiate what is known as a Fee-in-Lieu of Property Tax (FILOT) with companies that are investing capital of $2.5 million for expansion or establishment of new operations. A FILOT agreement can effectively reduce the taxes on manufacturing property and business property by up to more than 40 percent (or even 60 percent for mega-projects).
In addition to entering into a FILOT agreement, counties can grant further tax reductions, usually 30 to 40 percent, for up to ten or fifteen years to reimburse a business for building, improvement costs, and other infrastructure costs by giving an infrastructure tax credit or issuing special source revenue bonds.
The S.C. Job Development Credit, subject to approval by the S.C. Coordinating Council for Economic Development, is intended to offset the cost of relocating or expanding a facility in the state. If approved, a business may escrow up to 5/7 of withholding taxes on new jobs created and use the money to reimburse itself for certain eligible expenses it has incurred in expanding its facility or training employees. For significant projects, the Department of Commerce may make direct cash grants under its Economic Development Set-Aside program.
Ready SC is a division of theS.C.Technical College System that helps organizations start-up quickly and efficiently. Ready SC provides workforce recruiting and testing, training and experienced project management throughout the entire process at little to no cost to companies.
Under the Workforce Investment Act, businesses may be eligible to be reimbursed for up to 75 percent of wages paid to new hires in the first three months for on the job training.
S.C. Department of Commerce 2011 Job Tax Credit Rankings
Job Tax Credits (JTCs) may be provided to companies that create just 10 new jobs in a manufacturing, distribution, processing, warehousing, R&D facility, or tourism operation. The JTC is available each year for five years for each new job created, is a credit against state income tax liability, and can be used to reduce a business’s income tax liability by up to 50 percent. Credits can be carried forward for up to 15 years, and the amount of each credit is based on the economic well-being of the county in which the jobs are created:
South Carolina’s prime east coast location provides easy access to materials and markets via five interstate highways, nine commercial airports and two national rail carriers. The Port of Charleston is the gateway to supplies and distribution to more than 150 countries.
The Ports of Charleston and Georgetown are a vital part of the U.S. international trade infrastructure. Charleston serves more than 40 steamship lines and offers deep channels to accomodate big ships. Their $1.3-billion capital plan includes a new terminal.
Click here to view the full digital version of the The Economic Development edition of SML Perspectives.