The following issues are addressed in this edition of our newsletter:
New Job Tax Credits Available for Small Businesses: All businesses in 22 counties qualify
32.9% Increase in Workers Comp Rejected By Dept. of Insurance: Judge still to rule on matter
Workers Comp Advisory Board Appointed: Small businesses have good representation
Small businesses are, for the first time, being given a piece of the state’s economic incentive pie. In a September 1st meeting with The SC Small Business Chamber of Commerce, the S.C. Department of Revenue clarified its interpretation of the new Jobs Tax Credit law passed earlier this year. The news is particularly good for small businesses in the 22 counties of the state that are classified as “distressed” or “least developed”. However, certain types of businesses in the other counties are also qualified.
To see if your business qualifies for this economic incentive from the state, go to the summary of the Job Tax Credits at the end of this newsletter. This summary can also be found at http://www.scsbc.org/view_issue.asp?id=29.)
In the 22 counties designated as “distressed” or “least developed”, any business of fewer than 100 employees qualifies for Job Tax Credits for increasing their workforce by as little as two new net employees compared to the previous fiscal year. For each of these new employees the business can claim a tax credit between $2,500 and $8,000 depending on the county and how much the employees are paid.
The Small Business Chamber first proposed giving Job Tax Credits to all small businesses in rural counties to promote job growth. In a September 20, 2004, letter to the House Rural Ad Hoc Committee, the Small Business Chamber argued for lowering the number of new jobs created, in order to be eligible for Job Tax Credits, from 10 under the then current law to only one new job. The General Assembly officially reduced the number of new jobs needed to two in June of this year.
Small businesses should move quickly if they want to take advantage of Job Tax Credits because the incentive is tied average monthly employment during the entire fiscal year. The summary at the end of this newsletter gives contact information for questions. Consulting with a Certified Public Accountant is also recommended.
32.9% Increase in Workers Comp Rejected By Dept. of
Insurance
Judge still to rule on matter
Eleanor Kitzman, Director of the S.C. Department of Insurance, has disapproved the 32.9% average Workers’ Compensation rate increase proposed by the national Council on Compensation Insurance (NCCI). Kitzman found the proposed increase to be excessive and thus a violation of the law. If an Administrative Law Judge upholds her ruling, NCCI will either have to appeal to the court, file another rate hike request or do nothing.
The Small Business Chamber, which had formerly petitioned to intervene in the matter in order to fight against the rate hike, hailed decision as good news for the state’s small businesses. The Small Business Chamber was prepared to discredit the data used by NCCI to justify the large rate increase.
Workers Comp Advisory Board Appointed
Small businesses have good representation
The S.C. Department of Insurance has appointed 11 members to the Workers’ Compensation Advisory Board. The Board was created in this year’s state budget to provide oversight of the Workers’ Compensation Assigned Risk Plan Administrator (currently NCCI) and the Workers’ Compensation rating organization (currently NCCI). The Board is also charged with developing a report and recommendations by December 10, 2005, as to the tasks now performed by NCCI and if a new rating organization should be created to perform these tasks.
Appointed to this new Board are three small businessmen: Randy Pardee (Pardee’s Refrigeration & Air Conditioning), Jim Rabon (Collum Mechanical) and Keith Smith (Keith Smith Builders). These three men had previously served on the Small Business Chamber’s Workers’ Compensation Insurance Task Force. With only one exception, all the reform recommendations of this Task Force were adopted by the Legislature this past session including the formation of a Workers’ Compensation Advisory Board.
Job Tax Credit
Summary for Small Businesses
(This summary has been prepared by The SC Small Business Chamber of Commerce, www.scsbc.org, from both verbal and written information provided by the S.C. Dept. of Revenue. 9/8/05)
What is a Job Tax Credit?
A Job Tax Credit is an economic incentive of up to $8,000 per job given by the state to encourage job creation. It is a tax credit against South Carolina income tax or insurance premium tax for a business creating new jobs in the state.
Who Is Eligible?
1. All businesses with fewer than 100 employees in counties designated as “Distressed” or “Least Developed” are qualified.
Distressed Counties:
Chester, Chesterfield, Clarendon, Dillon, Fairfield, Hampton, Lee, Marion, Marlboro, McCormick, Orangeburg, Union, Williamsburg
Least Developed Counties:
Allendale, Bamberg, Barnwell, Cherokee, Georgetown, Greenwood, Jasper, Lancaster, Laurens
2. Only certain types of businesses with fewer than 100 employees in “Under Developed”, “Moderately Developed” and “Developed” counties are qualified.
Under Developed Counties:
Abbeville, Calhoun, Colleton, Edgefield, Newberry, Pickens, Saluda, Sumter
Moderately Developed Counties:
Beaufort, Charleston, Darlington, Florence, Horry, Kershaw, Oconee, Spartanburg, York
Developed Counties:
Aiken, Anderson, Berkeley, Dorchester, Greenville, Lexington, Richland
What are the types of qualifying businesses in “Under Developed”, “Moderately Developed” and “Developed” counties?
a. Manufacturing
b. Processing
c. Tourism
d. Warehousing
e. Distribution
f. Research & Development
g. Corporate Office Facilities
h. Technology Intensive Facilities
Requests for informal advice as to meeting the “type” of business eligibility or further questions regarding “type” of business should be directed to Mr. Burnie Maybank, Director of the S.C. Dept. of Revenue, maybankb@sctax.org.
How many new jobs need to be created to qualify for Job Tax Credits?
A qualified business only needs to create two new, full time jobs and maintain these new jobs for the year to receive Job Tax Credits. “A ‘full time’ job is one requiring a minimum of 35 hours of an employee’s time each week for the entire normal year of company operations. Two half time jobs requiring a minimum of 20 hours of each employee’s time a week qualify as one ‘full time’ job.” (S.C. Dept. of Revenue)
These two new or more jobs must be a net increase of two or more jobs during the business’s fiscal year compared with the previous baseline fiscal year. It is extremely important for businesses wanting to receive Job Tax Credits by creating only two or three new jobs that they do so at the beginning of their fiscal year since all 12 months of the fiscal year will be used to determine the average increase in full time employees.
The S.C. Dept. of revenue has a table (TC4) that is used to calculate net new jobs. For planning purposes and to see how net new jobs are calculated, this form can be found at http://www.sctax.org/NR/rdonlyres/1D59EC88-089D-4C4C-A6F4-33A7D02D706B/0/schtc4.pdf.
There is only one exception for the number of new employees needed to qualify for Job Tax Credits—hotels must create 20 new jobs to be eligible.
How much will the Job Tax Credit be for a qualified business?
The Job Tax Credit amount is determined by the county in which the business is located and the pay for the new jobs. The more economically disadvantaged the county, the higher the amount of the Job Tax Credit. Jobs that either pay 120% or more than the county’s average per capita income or the state’s average per capita income (which ever is less), receive a higher amount of Job Tax Credit.
What is the state’s average per capita income?
$27,172
What is the average per capita income of each county?
Abbeville – $20,289 Aiken – $27,350 Allendale – $17,221
Anderson – $25,946 Bamberg – $19,051 Barnwell – $19,296
Beaufort – $34,814 Berkeley – $23,441 Calhoun – $24,831
Charleston – $30,951 Cherokee – $21,492 Chester – $22,139
Chesterfield – $20,981 Clarendon – $19,630 Colleton – $20,416
Darlington – $23,797 Dillon – $19,378 Dorchester – $24,226
Edgefield – $20,345 Fairfield – $21,645 Florence – $26,088
Georgetown – $26,614 Greenville – $30,037 Greenwood – $23,922
Hampton – $19,855 Horry – $25,266 Jasper – $19,338
Kershaw – $26,159 Lancaster – $21,269 Laurens – $21,422
Lee – $18,643 Lexington – $30,048 Marion – $20,048
Marlboro – $18,676 McCormick – $18,338 Newberry – $21,933
Oconee – $26,201 Orangeburg – $22,325 Pickens – $23,593
Richland – $28,966 Saluda – $22,910 Spartanburg – $25,733
Sumter – $22,390 Union – $22,644 Williamsburg – $18,298
York – $27,407
How do I calculate 120% of the average per capital income of the county and state?
To calculate 120% of the per capita income of a county or the state, multiply the average per capita income by 1.2. This will give you the annual pay that would be 120% of the per capita income.
What are the Job Tax Credit amounts?
Now that you know how your county is designated and you know if the new jobs you will create are 120% or more of the average per capita income for the county or state (which ever is less), the table below shows exactly how much of a Job Tax Credit a qualified business will receive per new job.
120% or More of Per Capita
Income of County or
County Designation State (which ever is less) Job Tax Credit
Distressed Yes $8000
Distressed No $4000
Least Developed Yes $4500
Least Developed No $2500
Under Developed Yes $3500
Under Developed No $1750
Moderately Developed Yes $2500
Moderately Developed No $1250
Developed Yes $1500
Developed No $750
When do I apply for Job Tax Credits?
Job Tax Credits are claimed on your tax returns the year after the jobs are created. The form TC4 should be completed and attached to each year’s tax return even if there is no South Carolina taxable income owed since any unused credit can be carried forward 15 years.
How long is the Job Tax Credit good?
The Job Tax Credits are good for 5 years if the new jobs are maintained.
Where can I find more information on Job Tax Credits?
It is advisable to contact a Certified Public Accountant when making plans to hire new employees to take advantage of Job Tax Credits. While the S.C. Department of Revenue has not yet updated its document “South Carolina Tax Incentive for Economic Development” to include the new provisions for small businesses and new per capita income data, general information on Job Tax Credits can be found at http://www.scbos.com/NR/rdonlyres/8828B3BA-9019-48EC-A7D4-280D4350174F/0/TaxIncentive2005.pdf pages 14-23.