View From the Dome: Senate Bills Make Progress for Conformity, Business Personal Property and Business License Tax Reform (March 13)

Friday, March 13, 2020

We are now at the halfway point in the legislative session with nine weeks completed and nine weeks remaining.

The House of Representatives passed its version of the FY20-21 state budget and will be off next week on furlough. The Senate continued hearings relating to the future of Santee Cooper.

CORONAVIRUS

At this writing, there are six presumptive positive cases and six confirmed Coronavirus cases by the CDC in South Carolina.

Gov. Henry McMaster on Thursday called on the General Assembly to appropriate $45 million from the Contingency Reserve Fund to the Department of Health and Environmental Control for the coordination of the state’s public health response to the COVID-19 virus. To read the governor’s letter, click here.

The Medical University of South Carolina (MUSC) is offering free Telehealth consultations and screenings to anyone located in South Carolina experiencing COVID-19-like symptoms. New and existing patients must use the promo code COVID19.

The DHEC Care Line is available to provide general information about COVID-19 by calling 1-855-472-3432 from 8 a.m.-6 p.m. seven days a week.

More DHEC information on the virus in South Carolina can be found on the department’s page here.

TAX AND CONFORMITY

A subcommittee of the Senate Finance Committee favorably approved S.1152 (Senators Leatherman, Setzler and Alexander) on Thursday, relating to the application of the Internal Revenue Code to state income tax laws (Conformity). The bill now goes to the full Senate Finance Committee for approval.

The House introduced its version of Conformity with H.5365 (G.M. Smith). It has been referred to the Committee on Ways and Means.

On Tuesday, the Senate gave third and final approval to S.545 (Senator Alexander). The bill relates to business personal property and requires filing through the DOR. The bill requires all counties to use the DOR approved PT-100 form for filing business personal property assessments. The bill now goes to the House for consideration.

BUSINESS LICENSE TAX REFORM

A subcommittee of the Senate Finance Committee on Thursday favorably approved H.4431 (Reps. Jordan, Fry, Rose, Atkinson and others), the “South Carolina Business License Tax Standardization Act.”

The bill now goes to the full committee for consideration.

The business community has long argued that South Carolina’s current system is complex, costly and lacks transparency. In South Carolina, 231 municipalities and nine counties have a business license tax, which creates confusion and adds costs to small businesses trying to comply. While most states assess flat license fees, South Carolina business tax laws allow cities to assess the tax based on a business’ gross receipts instead of net income. Filing in multiple jurisdictions has also created problems.

After five years of discussions, stakeholders are finalizing a compromise agreement. Businesses will still pay based on gross receipts. However, businesses operating in multiple jurisdictions will pay the tax based on the gross income within that jurisdiction, but the tax must be reduced by the amount of the gross income tax in other counties or municipalities. Each taxing jurisdiction must accept a standard business license application as established by the state Revenue and Fiscal Affairs Office (RFA).

The South Carolina Municipal Association will transfer the business license portal it has developed to the state RFA Office, which will oversee the standardized portal through a contract with the vendor. Businesses will renew their license annually by May 1 through the portal based on the gross income for the calendar year. Businesses not wanting to utilize the portal may file in person, by telephone or by mail. The portal offering will be subject to the availability of funding to the RFA.

Private third-party entities are prohibited from assessing or collecting taxes and are restricted from accessing business financial information. The bill also provides a mechanism for appeals, and the taxpayer may request a hearing before the Administrative Law Court. Charitable organizations would be exempt from the business license tax on its gross income unless it is deemed a business subject to a business license tax on all or part of its gross income as provided by the bill.

The bill would take effect Jan. 1, 2021.

BUDGET

The House of Representatives passed its version of the FY20-21 state budget H.5201 (Ways and Means Committee) and H.5202 (Ways and Means Committee) to appropriate monies from the Capital Reserve Fund. The four themes in this year’s budget were raising teacher salaries, reducing taxes, funding reserves and local road funding.

Highlights of the committee plan include:

$213 million to provide a $3,000 across-the-board pay raise for all of South Carolina’s 52,733 teachers
$128 million for a one-time, $100 non-refundable income tax credit
$120 million to reduce the state income tax from 7% to 6.8%
$629 million to the Property Tax Relief Fund
$122 million to the General Reserve Fund
$42 million recurring for recruitment and retention — equivalent to 2% state employee pay increase
$100 million for paving rural farm to market roads
$53 million to expand full-day 4K offerings statewide
$26.1 million for tuition mitigation at institutions of higher education
$10 million for additional Circuit and Family Court Judges
$7.8 million for the Department of Health and Human Services for provider rate increases

For Technical Colleges:

$10 million for instructional program support (recurring base funding)
$51 million for Lottery Tuition Assistance
$10.2 million nonrecurring for ReadySC Direct Training
$12.5 million nonrecurring for equipment for high demand job skill training
$17 million for SC WINS scholarships
$11 million for workforce scholarships
$43 million from the Capital Reserve Fund for Maintenance and Care of State-Owned building assets at the 16 technical colleges

The Senate Finance Committee continued subcommittee meetings this week to hear agency budget requests. Among those that appeared were the State Board for Technical and Comprehensive Education, the Commission on Higher Education, the University of South Carolina System and Clemson University.

With the state’s economy seeing record-level unemployment combined with rising wages and new residents, the state’s General Fund budget now tops $10 billion with a budget surplus projected of over $1.1 billion.

The Ways and Means Committee budget briefing can be found here.

Ways and Means Subcommittee budget spreadsheets can be found here.

The governor’s Executive Budget can be found here.

Individual state agency budget requests can be found here.

EDUCATION REFORM

After eight weeks of debate, the Senate this week voted 41-4 to approve S.419 (Sens. Hembree, Malloy, Turner, Setzler, Sheheen and Alexander), known as “The South Carolina Career Opportunity and Access for All Act.”

The bill:

Eliminates three state-mandated tests: social studies in fifth and seventh grades and science in eighth grade. The only remaining state-required tests would be an end of course test for U.S.History/Constitution for high school juniors and a literacy assessment for third grade students
Allows high school graduates who have earned Palmetto Fellows or LIFE scholarships to use those scholarship funds at technical colleges. Currently, those funds are limited to use at universities
Provides additional scholarship funds to education majors through Palmetto Fellows and LIFE scholarships. The new scholarships would offer prospective teachers up to an additional $2,500 per year
Requires school board members to follow a uniform code of ethics and receive training for their service on the school board
Establishes a framework for turning around failing schools and allows for the removal of elected school boards in chronically failing districts
Provides summer reading camps for students after kindergarten, first and second grades
Guarantees a 30-minute, duty-free lunch period for elementary school teachers
Pays for certification costs for all new public school teachers. This provision will save new teachers about $500 each
Doubles the reimbursement amount teachers receive for classroom supplies they pay for out-of-pocket. Teachers are currently allowed $275 per year. They would now receive $550
Reduces the paperwork teachers have to complete for student learning objectives (SLO’s). The excessive paperwork and time required to complete these SLO’s has been a frequent criticism from teachers
Expands the state-funded 4K program to every district in the state. Students with family income less than 185% of poverty would be eligible for the 4K program
Includes language that establishes the SC Workforce Industry Needs (SC WINS) scholarship for technical college students

The bill received third reading Thursday and now goes to the House for consideration.

Both Gov. McMaster and legislative leadership had said the 2019 legislative session would produce long-overdue reforms in K-12 education. The House passed its version of education reform H.3759 (Reps. Lucas, Allison, Felder, Pope, Simrill, Rutherford and others) last March. However, after hearing complaints from teachers and others about the legislation, the Senate did not pass its version last year and spent the summer and fall hearing from stakeholders and revising their bill.

More than 200 amendments were placed on the Senate desk during the past seven weeks of debate and several dozen were adopted.

ENERGY

With both the House and Senate last week rejecting the Department of Administration’s recommendations on the future of state-owned utility Santee Cooper, two Senate subcommittees began debate on reform this past week. On Tuesday morning, the Senate Finance Special Subcommittee on Santee Cooper Reform met and adopted, in concept, a reform plan that would include a new governance structure, transparency in the ratemaking process, Public Service Commission (PSC) review and legislative oversight. The plan was adopted by the full Senate Finance Committee later that day and was sent to the Senate Judiciary Committee for consideration.

Then on Wednesday, a subcommittee of the Senate Judiciary Committee met to discuss S.1129 (Senators Rankin, Grooms, Hutto and others) regarding the reform. The subcommittee heard testimony from the Public Service Commission regarding their oversight of investor-owned utilities and from a representative of Public Finance Management, which is currently under contract with Santee Cooper to advise the utility on bond-related issues. The subcommittee did not take any action on the bill.

The House of Representatives will take up a hybrid plan that calls for legislation that would include reform of Santee Cooper in the event it remains a state-owned asset. At the same time, their plan proposes a House/Senate committee to continue negotiations with NextEra Energy on the potential sale. The full House is expected to debate the plan after the House returns from furlough. The new plan can be found here.

Lawmakers have been debating whether to sell Santee Cooper since 2017, when the utility and its partner, SCE&G, announced it was pulling the plug on a $9 billion plan to build two nuclear reactors at the V.C. Summer nuclear plant in Fairfield County. After the Department of Administration report was released, Gov. McMaster stated that he believes the state must act quickly to sell Santee Cooper.

The report can be found here.

HEALTHCARE

A Senate Medical Affairs Subcommittee again held an informational meeting relating to three bills dealing with the Certificate of Need (CON) program. Subcommittee Chairman Tom Davis (R-Beaufort) noted the meeting would be informational only and an opportunity for the members to become better informed on the CON issue by allowing public testimony. Several speakers testified for and against repeal of the CON program. The three bills include:

S.990 (Senator Climer) repeals the Certificate of Need statute and renames it to the “State Health Facility Licensure Act”;

S.1093 (Senators Talley, Hutto, Gambrell, Shealy and Climer) reforms the current Certificate of Need program; and

S.1077 (Senators Bennett, McElveen, Martin, Sheheen and others) exempts a subspecialty perinatal center with a neonatal intensive care unit from the certificate of need process.

Due to the complex nature of the legislation, Chairman Davis reported he will send the bills to the full Medical Affairs Committee for continued debate.

HIGHER EDUCATION

The Senate gave third and final reading approval to S.954 (Senators Scott and Setzler) relating to the disposal of surplus property by the Midlands Technical College Enterprise Campus. The bill now goes to the House for consideration.

CHILD CARE

The Senate gave third and final reading approval to S.865 (Senators Jackson, Hutto and Shealy), which reauthorizes the Joint Citizens and Legislative Committee on Children through Dec. 31, 2030. The bill now goes to the House for consideration.

ALCOHOL

The Senate Judiciary Committee favorably approved S.1099 (Senators Talley, Shealy, Turner, Hutto and others) relating to agreements between alcohol manufacturers and wholesalers. The bill, known as the “Tier Independence Act,” now goes to the full Senate for consideration.

INTRODUCTIONS OF INTEREST

HOUSE

H.5362 (Reps. McCoy, Murphy, Bernstein and others). Prevents beer manufactures, importers and brewers from requesting certain information or undertaking certain actions in relation to a wholesaler. Referred to Committee on Judiciary.

H.5390 (Reps. Simrill, B. Newton, Clemmons and others). Relating to the approval of permanent improvement projects at public institutions of higher learning. Referred to Committee on Ways and Means.

SENATE

S.1155 (Senator Campbell) Relating to tax increment financing projects. Referred to the Committee on Labor, Commerce and Industry.

S.1157 (Senator Loftis). Relating to exemptions from the state sales tax, as to exempt items sold to school districts, schools and institutions of higher learning to improve school safety. Referred to the Committee on Finance.

S.1160 (Senators Harpootlian and Climer). Provides that the Department of Commerce shall keep a record of all economic development incentive clawbacks and requires the department to report on all clawbacks that have been triggered. Referred to the Committee on Finance.

S.1163 (Finance Committee). Relating to reform of the Public Service Authority. Referred to the Committee on Judiciary.

S.1167 (Judiciary Committee). A Joint Resolution to approve regulations of the Public Service Commission. Read the first time and ordered placed on the Calendar without reference.

S.1173 (Senators McElveen, Malloy, Sheheen, and others). Requires DHEC to add a surcharge on electric utilities for coal combustion transferred to landfills. Referred to the Committee on Judiciary.