While South Carolina businesses pay higher property taxes than their contemporaries in North Carolina and Georgia, the tax incentive programs offered to new businesses in the Palmetto State could be used to offset the operating and startup costs of establishing a new facility.
Data compiled by Parker Poe Consulting shows property tax rates for businesses in South Carolina are two to three times higher than those in North Carolina and Georgia. Currently, the property tax rate for S.C. businesses ranges from $21 to $47.25 per $1,000 in fair market value, for an average of $28.35 per 1,000 in Greenville County. That compares to an average of $14.10 per $1,000 in FMV in Georgia and $6.125 per $1,000 in FMV in North Carolina.
“South Carolina’s property tax burden shifted from residential to business and industrial following Act 388 passing in 2006,” said John Lummus, president and CEO of the Upstate SC Alliance.
The legislation was designed to ease the annual property tax for homeowners by moving school funding from residential property tax revenues to sales taxes.
Lummus said despite the property tax shift created by Act 388 and the 10.5 percent industrial rate, South Carolina remains very competitive in recruiting and retaining industry, as highlighted by the $3.6 billion in capital investment garnered by the Upstate in 2014.
Depending on the capital investment, state law allows qualifying manufacturing projects to reduce their property tax rates from 10.5 percent to 6 percent or 4 percent, which helps to reduce property tax rates by 40 percent or more on those industries, he said.
State offers statutory, discretionary incentives
To offset the disparity between business property taxes in neighboring states, Allison Skipper, spokeswoman for the South Carolina Department of Commerce, said the state offers two types of incentives to potential businesses: statutory incentives (in law) and discretionary incentives (meaning the Coordinating Council for Economic Development must approve the grant or other incentive).
Each grant application is considered on its own merits, and not all projects will request or receive grants from the state, she said. If state funds are committed to a project, the company must certify that it has created the number of jobs and amount of investment agreed upon.
Skipper said state incentive decisions are evaluated on the individual project’s impact to the area and the state.
Factors include the amount of capital investment, job creation, and where the company is planning to locate, and what “we might need to make that site more competitive,” she said. State grants can assist with infrastructure, such as water and sewer, roadways or building upfits, while other incentives, like job development credits, provide tax rebates to employers once they reach their committed job targets.
Tax abatements, FILOT agreements on local menu
Tax incentives are also offered at a local level, and the Greenville Area Development Corporation (GADC) utilizes two significant local incentives, combined with regional infrastructure and target strategy, to lure potential businesses to the Upstate.
County incentives include property tax abatement and fee-in-lieu of property tax incentives, said Kevin Landmesser, interim president and CEO of GADC.
“With the state’s property tax in mind, it is essential for us to compensate in other areas to present as attractive a package as we can to ensure business expansion or relocation,” he said. “A key part of a company’s decision to come here is the property tax relief.”
Landmesser said larger projects with significant capital investments are receiving the fee-in-lieu of property tax incentive, and if they are creating a lot of jobs, they are receiving state incentives. Since 1997, Landmesser said there have been only two companies that could not fulfill their original job announcement or capital investment to receive the complete array of incentives.
“We adjusted both agreements to ensure these businesses continued their investment once things turned around,” he said.
Companies tend to go through three steps before relocating: information gathering (site research), a visit to validate (ensuring the research is accurate), and negotiating incentives, which could make or break the deal.
On top of state and local tax incentives, Landmesser said the Upstate offers a unique blend of infrastructure and in-house development strategies to attract potential business.
The Upstate offers access to the Inland Port; a consolidated workforce development effort by local educational venues such as universities, community colleges, and county schools; and a strong target and adaptable strategy to appease the demands of varying industry, he said.
