The General Assembly returned to session this week to tie up some loose ends — and put the cherry on top of the sundae for the Upstate Chamber Coalition’s 2018 priorities.
This week, the House and Senate overrode the governor’s veto on S. 1043, which extended valuable tax credits used to rehabilitate abandoned buildings across the Upstate. The bill also included new incentives that economic developers can use to lure high-wage, white-collar companies to the Upstate.
Legislators and Senators also put the final touches on the “tax conformity” law that brought South Carolina’s income tax code in line with the federal tax reform package passed late last year.
The 12 members of the Upstate Chamber Coalition had a successful session with several major initiatives becoming law — record expungement, automatic stay, nuisance lawsuit protections, the Superintendent of Education constitutional amendment, and more. Thank you for your advocacy this year in helping us get these critical pieces of legislation across the line.
If the Tax Conformity bill was not passed, South Carolina residents and businesses would have seen up to $253 million in higher taxes in 2019. This provides certainty to tax filers and allows everyone to get a better handle on what their taxes may look like heading into the final quarter of the year. If this hadn’t passed until next session, it would have required our state Department of Revenue to print entirely new tax forms and could have prevented online tax-filing software from being updated in time. In short, it would have been very disruptive. So, what’s in the tax reform package?
- The bill adds a $4,110 state tax deduction for dependents, starting with the current tax year. It adds an additional $4,110 deduction for children under 6 years old, bringing the tax deduction to $8,220 total. While this isn’t a panacea for working parents, we believe this will help defray more of the cost for childcare — which is a major barrier to the workforce for some families.
- Increases standard deductions to mirror federal law.
- Indexes state tax brackets to inflation beginning in 2019.
For businesses, there were several major items that are better termed “non-conformity”:
- The bill preserves South Carolina’s more generous pass-through income tax. In this case, state income taxes would have gone up if we had conformed with the federal tax code.
- The same “non-conformity” applies to deductions for interest expenses and foreign taxes paid — a major item for the Upstate’s global businesses. Businesses won’t have to worry about federal caps for interest expenses and foreign taxes when preparing their state income taxes.
All of our Upstate Senators and House members voted this week for the Tax Conformity legislation (Senator Corbin had an excused absence). The House approved the tax conformity bill back in the spring and voted 117-0 to concur with the Senate Wednesday.
Abandoned Buildings Veto
This bill became a Christmas tree of tax credits in the final week of session and drew the governor’s ire. However, the two key provisions of this bill are pro-business tax credits that we’ve been working on for two years. The first was the extension of a critical tax credit to rehabilitate abandoned buildings. This is used extensively by cities and counties for redevelopment and to prevent sprawl. Tacked on to this legislation was the old Senate Bill 404, which allows economic developers to give the highly demanded job development tax credits to professional services and office jobs. Currently, economic development incentives are used for manufacturing, but these would allow Upstate economic developers to attract more office and headquarter-type jobs to the area.
Thanks to the entire Upstate House Delegation that voted to override the veto. In the Senate, Senators Alexander, Allen, Cash, Gambrell, Nicholson, Reese, Talley, Timmons, and Turner voted to override. Senators Martin, Peeler, Rice, and Verdin voted to sustain the veto. (Senator Corbin was absent.)
Thank you to all of the Upstate legislators who worked on both of these agenda items for us in 2017 and 2018. This finally puts a wrap on the 2017-2018 session as we are now only a month out from Election Day!