2003-2004 Bill 3306: Holding Company's Paid-In Capital Surplus - South Carolina Legislature

South Carolina General Assembly

115th Session, 2003-2004

H. 3306

STATUS INFORMATION

General Bill

Sponsors: Reps. Chellis, Young, Altman, Barfield, Cato, Harrell, Harrison, Limehouse, Scarborough, J.E.Smith, Townsend and Bailey

Document Path: l:\council\bills\ggs\22735htc03.doc

Introduced in the House on January 14, 2003

Introduced in the Senate on March 26, 2003

Last Amended on March 25, 2003

Currently residing in the Senate Committee on Finance

Summary: Holding company's paid-in capital surplus

HISTORY OF LEGISLATIVE ACTIONS

DateBodyAction Description with journal page number

1/14/2003HouseIntroduced and read first time HJ119

1/14/2003HouseReferred to Committee on Ways and MeansHJ119

1/28/2003HouseMember(s) request name added as sponsor: Bailey

3/19/2003HouseCommittee report: Favorable with amendment Ways and MeansHJ6

3/20/2003Scrivener's error corrected

3/25/2003HouseAmended HJ30

3/25/2003HouseRead second time HJ31

3/26/2003HouseRead third time and sent to Senate HJ12

3/26/2003SenateIntroduced and read first time SJ21

3/26/2003SenateReferred to Committee on FinanceSJ21

VERSIONS OF THIS BILL

1/14/2003

3/19/2003

3/20/2003

3/25/2003

AMENDED

March 25, 2003

H.3306

Introduced by Reps. Chellis, Young, Altman, Barfield, Cato, Harrell, Harrison, Limehouse, Scarborough, J.E.Smith, Townsend and Bailey

S. Printed 3/25/03--H.

Read the first time January 14, 2003.

STATEMENT OF ESTIMATED FISCAL IMPACT

REVENUE IMPACT 1/

This bill is expected to reduce general fund corporate income tax revenue by an estimated $200,000 in FY 2003-04.

Explanation

This bill would allow a holding company to reduce its paid-in capital surplus by the amount of capital investment received from its parent company. This investment must exceed $100 million and be used directly or indirectly to finance the holding company’s expansion in an Economic Impact Zone. Based on data provided by the Department of Revenue (DOR), approximately 5 companies currently claiming the Economic Impact Zone investment tax credit are reporting paid-in capital surplus in excess of $100 million. The DOR is unaware if these 5 companies paid-in capital surplus was provided by contributions from its parent corporation. Each company that would qualify for the proposed reduction in paid-in capital surplus for the $100 million investment will reduce general fund corporate license fees by $100,000. The company would derive this $100,000 benefit from the $100 million reduction in paid-in capital surplus times the corporate license fee rate of $1 for each $1,000 of paid-in capital surplus reported. This fiscal impact anticipates that one of the companies currently claiming the Economic Impact Zone investment tax credit is eligible for the proposed reduction in paid-in capital surplus and one additional company will become eligible due to the availability of the reduction. Therefore, this bill is expected to reduce general fund corporate income tax revenue by an estimated $200,000 in FY 2003-04.

Approved By:

William C. Gillespie

Board of Economic Advisors

1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by BEA, or Section 2-7-76 for a local revenue impact, or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.

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A BILL

TO AMEND SECTION 122050, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CORPORATE LICENSE TAX, SO AS TO ALLOW A HOLDING COMPANY TO REDUCE ITS PAIDIN CAPITAL SURPLUS BY THE PORTION OF CONTRIBUTIONS TO ITS CAPITAL RECEIVED FROM ITS PARENT CORPORATION THAT IS DIRECTLY OR INDIRECTLY USED TO FINANCE A SUBSIDIARY’S EXPANSION COSTING IN EXCESS OF ONE HUNDRED MILLION DOLLARS, WHICH ON THE DATE CONSTRUCTION BEGAN IS LOCATED IN AN ECONOMIC IMPACT ZONE.

Amend Title To Conform

Be it enacted by the General Assembly of the State of South Carolina:

SECTION1.Section 122050 of the 1976 Code is amended by adding a new subsection at the end to read:

“(C)In addition to the provisions of subsection (B) of this section, a holding company may reduce its paidin capital surplus by the portion of contributions to capital received from its parent corporation that is directly or indirectly used to finance a subsidiary’s expansion costing in excess of one hundred million dollars, which on the date construction started is located in an Economic Impact Zone as defined in Section 121430. A reduction is only allowed pursuant to this subsection for the paid-in capital surplus of the holding company attributable to this contribution to capital for expansion. Additionally, no reduction is allowed unless the expansion is completed within three years of the first contribution to capital received by the holding company, but this three-year limitation may be extended by the Department of Revenue upon written application and good cause shown. Amounts previously excluded in paid-in capital surplus pursuant to this subsection must be included in the first license tax year beginning after the period allowed for the expansion if the expansion is not timely completed.”

SECTION2.This act takes effect upon approval by the Governor and applies for contributions to capital for expansion made after August 2002.

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