(A)(1) There is allowed an investment tax credit against the tax imposed pursuant to Chapter 6 of this title for any taxable year in which the taxpayer places in service qualified manufacturing and productive equipment property.
(2) The amount of the credit allowed by this section is equal to the aggregate of:
three-year property one-half percent of total aggregate bases for all three-year property that qualifies; five-year property one percent of total aggregate bases for all five-year property that qualifies; seven-year property one and one-half percent of total aggregate bases for all seven-year property that qualifies; ten-year property two percent of total aggregate bases for all ten-year property that qualifies; fifteen-year property two and one-half percent of total aggregate bases for all or greater fifteen-year or greater property that qualifies.
For purposes of this section, whether property is three-year property, five-year property, seven-year property, ten-year property, or fifteen-year property is determined based on the applicable recovery period for such property under Section 168(e) of the Internal Revenue Code.
(B) For purposes of this section:
(1) "qualified manufacturing and productive equipment property" means any property:
(a) which is used as an integral part of manufacturing or production, or used as an integral part of extraction of or furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services in the economic impact zone;
(b) which is tangible property to which Section 168 of the Internal Revenue Code applies;
(c) which is Section 1245 property (as defined in Section 1245(a)(3)of the Internal Revenue Code); and
(d)(i) the construction, reconstruction, or erection of which is completed by the taxpayer in this State; or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer inside this State.
(2) In the case of any computer software which is used to control or monitor a manufacturing or production process inside this State and with respect to which depreciation (or amortization in lieu of depreciation) is allowable, the software must be treated as qualified manufacturing and productive equipment property.
(C) This section does not apply to any property to which the other tax credits would apply unless the taxpayer elects to waive the application of the other credits to the property.
(D)(1) Unused credit allowed pursuant to this section may be carried forward for ten years from the close of the tax year in which the credit was earned.
(2) In the case of credit unused within the initial ten-year period, a taxpayer may continue to carry forward unused credits for use in any subsequent tax years if the taxpayer:
(a) is engaged in this State in an activity or activities listed under the North American Industry Classification System Manual (NAICS) Section 31, 32, or 33;
(b)(i) is employing one thousand or more full-time workers in this State and having a total capital investment in this State of not less than five hundred million dollars; or
(ii) is employing eight hundred fifty or more full-time workers in this State and having a total capital investment in this State of not less than seven hundred fifty million dollars; and
(c) made a total capital investment of not less than fifty million dollars in the previous five years.
Credits carried forward beyond the initial ten-year period may not reduce a taxpayer's state income tax liability in any subsequent tax year by more than twenty-five percent.
(E) If during any taxable year and before the end of applicable recovery period for such property as determined under Section 168(e) of the Internal Revenue Code, the taxpayer disposes of or removes from this State qualified manufacturing and productive equipment property, then the tax due under Chapter 6 by the taxpayer for the current taxable year must be increased by an amount of any credit claimed in prior years with respect to such property determined by assuming the credit is earned ratably over the useful life of the property and recapturing pro rata the unearned portion of the credit.
(F) For South Carolina income tax purposes, the basis of the qualified manufacturing and productive equipment property must be reduced by the amount of any credit claimed with respect to the property. If a taxpayer is required to recapture the investment tax credit in accordance with subsection (E), the taxpayer may increase the basis of the property by the amount of any basis reduction attributable with claiming the investment tax credit in prior years. The basis must be increased in the year in which the credit is recaptured.
(G) The credit allowed by this section for investments made after June 30, 1998, is limited to no more than five million dollars for an entity subject to the license tax as provided in Section 12-20-100.
HISTORY: 1995 Act No. 25, Section 2; 1997 Act No. 151, Section 8; 1998 Act No. 419, Part II, Section 49 IIB; 1998 Act No. 442, Section 14B; 2005 Act No. 113, Section 1, eff June 1, 2005; 2010 Act No. 290, Section 21, eff January 1, 2011.
Editor's Note
2005 Act No. 113, Section 2, provides as follows:
"This act takes effect upon approval by the Governor and the provisions of Section 12-14-60(D)(2) of the 1976 Code, as amended by this act, apply for credits earned in taxable years beginning after 1996."