Textile Revitalization Credits

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By Burnie Maybank

Text of Textile Revitalization Credits

  • 1. Nexsen Pruet Incentives for Real EstateDevelopersPresentation October 5, 2012Burnet R. Maybank, IIINexsen Pruet, LLC1230 Main Street, Suite 700Columbia, SC 29201803-771-8900bmaybank@nexsenpruet.com

2. TEXTILEREVITALIZATION CREDITS 3. TEXTILE REVITALIZATION CREDITS NOTE!The General Assembly has passed several versions ofthe Textile Revitalization Act (and has attempted toamend it on several more occasions.)This Power Point covers sites acquired after December31, 2007.Transitional Rules discussed at the end.B. Maybank 4 4. TEXTILE REVITALIZATION CREDITSGeneralThe South Carolina Textile Communities RevitalizationAct, contained in Title 12, Chapter 65 provides a creditfor the renovation, rehabilitation, and redevelopment ofabandoned textile mill sites in South Carolina.Textile mill a facility or facilities that was initially usedfor textile manufacturing, dying, or finishing operationsand for ancillary uses to those operations.B. Maybank5 5. TEXTILE REVITALIZATION CREDITSGeneralThe credit is not available to a taxpayer who owned thetextile mill site immediately prior to the abandonment ifthe site was operational at that time or if the site haspreviously received textile mill credits.B. Maybank6 6. TEXTILE REVITALIZATION CREDITSGeneralSouth Carolina Code 12-65-30 allows a taxpayer whorehabilitates an abandoned textile mill site to choose one of thefollowing tax credits:1.A credit against income, license, bank or insurance premiumtaxes equal to 25% of eligible rehabilitation expenses; or2.A credit against real property taxes equal to 25% of the eligiblerehabilitation expenses made to the site multiplied by the localtaxing entity ratio for each local taxing entity consenting to thecredit.B. Maybank 7 7. TEXTILE REVITALIZATION CREDITSNotice of Intent to RehabilitateA taxpayer acquiring the textile mill site after December 31,2007, must file a Notice of Intent to Rehabilitate (Notice) withthe Department of Revenue (income tax credit) or the county ormunicipality (property tax credit) before receiving the buildingpermits for rehabilitating the site, or the applicable phase of thesite. Transfers between affiliated taxpayers of any of thedevelopmental phases of the textile mill site are not consideredan acquisition that would subject the taxpayer to filing a Notice. Failure to provide the Notice results in only those rehabilitationexpenses incurred after the Notice is provided qualifying thecredit.B. Maybank 8 8. TEXTILE REVITALIZATION CREDITSNotice of Intent to RehabilitateThe Notice letter submitted by the taxpayer must providethat:1.The taxpayer intends to rehabilitate the site2.The location of the site3.The amount of acreage involved with the site4.The estimated expenses to be incurred5.Which buildings on the site are to be renovated ordemolished and6.Whether new construction is to be involved at the site.B. Maybank9 9. TEXTILE REVITALIZATION CREDITSIncome Tax CreditThe credit amount is based upon actual or estimated expensesas follows:1.The credit is 25% of the actual rehabilitation expenses unlessthe expenses exceed 125% of the estimated rehabilitationexpenses set forth in the Notice.2.The credit is 25% of 125% of the estimated rehabilitationexpenses set forth in the Notice (as opposed to the actualexpenses) if the actual rehabilitation expenses exceed 125% ofthe estimated expenses listed in the Notice.B. Maybank10 10. TEXTILE REVITALIZATION CREDITSRehabilitation expenses expenses or capitalexpenditures incurred in the rehabilitation, renovation, orredevelopment of the textile mill site, includingdemolition of existing buildings, environmentalremediation, site improvements and the construction ofnew buildings and other improvements on the site, butexcluding the cost of acquiring the site or the cost ofpersonal property located at the site. For expenses toqualify for the credit, the textile mill and buildings on thesite must be either renovated or demolished.B. Maybank 11 11. TEXTILE REVITALIZATION CREDITSTextile mill site the textile mill together with the landand other improvements on it which were used directlyfor textile manufacturing operations or ancillary uses.However, the area of the site is limited to the landlocated within the boundaries where the textilemanufacturing, dying or finishing facility structure islocated and does not include land located outside theboundaries of the structure or devoted to ancillary uses.Section 12-65-35.B. Maybank 12 12. TEXTILE REVITALIZATION CREDITSAncillary uses uses related to the textilemanufacturing, dying, or finishing operations on a textilemill site consisting of sales, distribution, storage, waterrunoff, wastewater treatment and detention, pollutioncontrol, landfill, personnel offices, security offices,employee parking, dining and recreation areas, andinternal roadways or driveways directly associated withsuch uses.B. Maybank13 13. TEXTILE REVITALIZATION CREDITSIncome Tax CreditThis credit can be used against income taxes imposedunder Chapter 6 of Title 12 or license taxes imposed byChapter 20 of Title 12, or both, or bank taxes imposed underChapter 11 of Title 12 or insurance premium taxes imposedby Chapter 7, Title 28.B. Maybank 14 14. TEXTILE REVITALIZATION CREDITSIncome Tax CreditThe entire credit is earned in the taxable year in which thesite (or applicable phase or portion) is placed in service andis claimed in equal installments over a 5 year periodbeginning with the tax year the site (or applicable phase orportion) is placed in service. It is limited to 50% of thetaxpayers income tax, license or premium tax liability. Anyunused credit may be carried forward for 5 years.B. Maybank15 15. TEXTILE REVITALIZATION CREDITSPlaced in service the date the textile mill site iscompleted and ready for its intended use. If the site iscompleted and ready for use in phases or portions, eachphase or portion is considered placed in service when itis completed and ready for its intended use.B. Maybank16 16. TEXTILE REVITALIZATION CREDITSAssignability of the Credit(A) If the taxpayer leases the textile mill site, or part of the textile mill site, the taxpayer maytransfer any applicable remaining credit associated with the rehabilitation expenses incurredwith respect to that part of the site to the lessee of the site. The provisions of item (C) belowapply to a lessee that is an entity taxed as a partnership. If a taxpayer sells the textile millsite, or any phase or portion of the textile mill site, the taxpayer may transfer all, or part of theremaining credit, associated with the rehabilitation expenses incurred with respect to thatphase or portion of the site to the purchaser of the applicable portion of the textile mill site.(B) To the extent that the taxpayer transfers the credit, the taxpayer must notify thedepartment of the transfer in the manner the department prescribes.(C) To the extent that the taxpayer is a partnership or a limited liability company taxed as apartnership, the credit may be passed through to the partners or members and may beallocated by the taxpayer among any of its partners or members on an annual basisincluding, without limitation, an allocation of the entire credit to any partner or member whowas a member or partner at any time during the year in which the credit is allocated. Section12-65-30(C)(6)&(7).B. Maybank17 17. TEXTILE REVITALIZATION CREDITSProperty Tax CreditCertification ProceduresSouth Carolina Code 12-65-60 provides a procedurewhich allows a taxpayer to apply to the governing bodyof the municipality or county in which the textile mill siteis located for certification of the site. The certificationcan be done by either ordinance or binding resolutionand must include certain findings. A taxpayer whoreceives this certification is allowed to conclusively relyon the certification in determining the credit allowed.B. Maybank 18 18. TEXTILE REVITALIZATION CREDITSProperty Tax CreditCertification ProceduresTo obtain the property tax credit, the municipality or county mustfirst, by resolution, determine the eligibility of the textile mill site andthe proposed rehabilitation expenses. If the county or municipalitydetermines the site and the expenditures are eligible, there must bea public hearing and a positive majority vote of the local governingbody must approve the rehabilitation and the expenses. Finalapproval must be by ordinance.The county or municipality must also make a finding that the creditdoes not violate a covenant or representation found in any TIF orGO Bond issued by the county or municipality.B. Maybank 19 19. TEXTILE REVITALIZATION CREDITSProperty Tax CreditNegative Option NoticeAt least 45 days before holding the public hearing, the governingbody of the municipality or county must give notice to all affectedlocal taxing entities where the textile mill site is located of itsintention to grant the property tax credit and the amount ofestimated credit based on the amount of estimated rehabilitationexpenses. If the local taxing entity does not file an objection, it isdeemed to have consented to the credit.B. Maybank20 20. TEXTILE REVITALIZATION CREDITSProperty Tax CreditAmount of the CreditThis credit amount is based upon actual or estimated expensesas follows:1.The credit is 25% of the actual rehabilitation expenses if the actualexpenses incurred in rehabilitating the site are 80% - 125% of theestimated rehabilitation expenses listed in the Notice.2.The credit is 25% - 125% of the estimated rehabilitation expenses ifthe actual rehabilitation expenses exceed 125% of the estimatedexpenses listed in the Notice.3.No credit is allowed if the actual rehabilitation expenses are below80% of the estimated expenses.B. Maybank21 21. TEXTILE REVITALIZATION CREDITSProperty Tax CreditAmount of the CreditThe amount of allowable expenses is multiplied by the localtaxing entity ratio of each local taxing entity that has consented tothe credit to determine th