Could a South Carolina county create a new tourism nonprofit despite an eligible existing bureau?

Plain-English summary

In May 2022, the South Carolina Attorney General said a municipality or county could not simply create a new nonprofit to manage tourism-promotion money from the local accommodations tax without checking for an eligible existing organization. The statute told the locality to select one or more existing organizations with an ongoing tourism program and allowed it to create an organization only if none existed. The office said whether a particular visitor and convention bureau met the eligibility criteria was a factual question it could not decide.

The opinion also said the Tourism Expenditure Review Committee had broad oversight over questionable uses of the tax revenue. It could act when it learned of noncompliant tourism spending, rather than being confined to the specific report and complaint routes mentioned in the statute.

What this means for you

City and county officials

The opinion treated an existing eligible tourism organization as the statutory first choice for promotion funds. A locality could create a new organization only after determining that none qualified; the office did not decide whether the incumbent bureau in the request was eligible.

Tourism bureaus and nonprofit organizations

The opinion described the statute's requirements for an ongoing or developable effective tourism-promotion program and nonprofit organization. It left any specific organization's eligibility to fact finding, not an AG opinion.

Tourism Expenditure Review Committee

The office read the committee's authority as covering questionable tourism expenditures generally. It said the committee had to act when aware of noncompliant spending, even if information came through a route other than the statute's annual-report or written-complaint procedures.

Common questions

Q: Could a county replace an existing tourism bureau by creating its own nonprofit? A: The AG said it first had to determine whether an eligible existing organization was available. Creation was authorized only if no such organization existed.

Q: Did the AG decide whether the current bureau was eligible? A: No. The office said eligibility depended on facts and had to be resolved by a court, not in its advisory opinion.

Q: Was the committee limited to annual reports and formal complaints? A: The opinion said no. It read the committee's oversight authority broadly enough to address questionable expenditures it otherwise learned about.

Background and statutory framework

The Tourism Expenditure Review Committee's chairman asked about a local government's plan to replace its visitor and convention bureau with a newly created nonprofit. The Attorney General read the local accommodations-tax allocation rules, including the direction to select an existing eligible organization before creating one, and the oversight provision in S.C. Code Ann. § 6-4-35(B). It separated the statutory order of preference from the unresolved factual question of an incumbent organization's eligibility.

Citations and references

• S.C. Code Ann. § 6-4-35(B): Tourism Expenditure Review Committee oversight quoted in the opinion.
• Section 6-4-10(3) of the South Carolina Code of Laws: selection and creation of tourism-promotion organizations.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-on-whether-a-municipality-or-county-can-create-a-nonprofit-organization-that-has-or-is-capable-of-developing-an-effective-tourism-promotion-program/
• Original PDF: https://www.scag.gov/media/5pbpqe2c/02993230.pdf

Original opinion text

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Alan Wilson
ATTORNEY GENERAL

May 31,2022

Edward W. Riggs, Sr.
Chairman

Tourism Expenditure Review Committee

986 Scotland Drive
Mount Pleasant, SC 29464
Dear Mr. Riggs:

You have requested an opinion from this Office regarding whether a municipality or county can create a nonprofit organization pursuant to section 6-4-10(3) of the South Carolina Code of Laws without determining if there is an existing organization that has, or is capable of developing, an effective tourism promotion program.

You inform us that a local government wants to replace

the visitor and convention bureau that has been managing and directing. the expenditure of its local accommodations taxes for tourism promotion. LAW/ANALYSIS

To provide some background:
Pursuant to S.C. Code Ann. § 12-36-920(A) (Revised 2000), a

sales

tax

of

seven

percent

is

imposed

by

the

state

on

accommodations provided to transients in South Carolina. One component of that tax is a two percent “local” accommodations tax which, pursuant to S.C. Code Ann. § 1 2-36-2630(3) (Supp. 2003), must be credited to cities and counties in accordance with S.C. Code Ann. §§ 6-4-5, et seq. (Revised 2004). Florence County v. Tourism Expenditure Review Committee, No. 04-ALJ-30-0086-CC, 2004 WL 3 1 54879 (June 25, 2004).

Municipalities and counties who have collected more than $50,000.00 in local accommodations taxes must allocate the tax revenue in the manner provided by section 6-4-10: The funds received by a municipality or a county in county areas more than fifty thousand dollars from the local

collecting

Lembert C. Dennis Building

•

post Office Box 11549

• Columbia, SC 2921 1-1549

• Telephone 803-734-3970

•

Facsimile 803-253-6283

Edward W. Riggs, Sr.
Page 2
May 31,2022

accommodations tax provided in Section 12-36-2630(3) must be allocated in the following manner:

(1) The first twenty -five thousand dollars must be allocated to the general fund of the municipality or county and is exempt from all other requirements of this chapter. (2) Five percent of the balance must be allocated to the general fund of the municipality or county and is exempt from all other

requirements of this chapter.
(3) Thirty percent of the balance must be allocated to a special fund and used only for advertising and promotion of tourism to develop and increase tourist attendance through the generation of publicity. To manage and direct the expenditure of these tourism promotion funds, the municipality or county shall select one or

more organizations, such as a chamber of commerce, visitor and convention bureau, or regional tourism commission, which has an existing, ongoing tourist promotion program. If no organization exists, the municipality or county shall create an organization with the same membership standard in Section 6-4-25. To be eligible for selection the organization must be organized as a nonprofit

organization and shall demonstrate to the municipality or county that it has an existing, ongoing tourism promotion program or that it

can

develop

an

effective

tourism

promotion

program.

Immediately upon an allocation to the special fund, a municipality or county shall distribute the tourism promotion funds to the

organizations selected or created to receive them. Before the beginning of each fiscal year, an organization receiving funds from the accommodations tax from a municipality or county shall

submit for approval a budget of planned expenditures. At the end of each fiscal year, an organization receiving funds shall render an accounting of the expenditure to the municipality or county which distributed them. Fees allocated pursuant to this subsection must not be used to pledge as security for bonds and to retire bonds. Also, fees allocated pursuant to this subsection must be allocated to a special fund and used only for advertising and promotion of tourism to develop and increase tourist attendance through the generation of publicity, and not used to pledge as security for bonds and to retire bonds.

(4)(a) The remaining balance plus earned interest received by a municipality or county must be allocated to a special fund and used

Edward W. Riggs, Sr.
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May 31,2022

for tourism-related expenditures. This section does not prohibit a

municipality or county from using accommodations tax general fund revenues for tourism-related expenditures . . . S.C. Code Ann. § 6-4-10 (1976 Code, as amended). We must rely on the rules of statutory construction in order to construe section 6-4-10(3). The most important rule is to determine legislative intent: The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature. Charleston County Sch. Dist. v. State Budget and Control Bd., 313 S.C. 1, 437 S.E.2d 6

(1993). Under the plain meaning rule, it is not the court's place to change the meaning of a clear and unambiguous statute. In re Vincent J., 333

S.C. 233, 509 S.E.2d 261 (1998) (citations
omitted). Where the statute's language is plain and unambiguous,

and conveys a clear and definite meaning, the rules of statutory interpretation are not needed and the court has no right to impose another meaning. Id. at 233, 509 S.E.2d at 262 (citing Paschal v. State Election Comm'n,317 S.C. 434, 454 S.E.2d 890 (1995)). “What a legislature says in the text of a statute is considered the

best evidence of the legislative intent or will. Therefore, the courts are bound to give effect to the expressed intent of the legislature.” Norman J. Singer, Sutherland Statutory Construction § 46.03 at 94

(5th ed. 1992).
Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000).

The portion of section 6-4-10(3) that is pertinent to your question provides: To manage and direct the expenditure of these tourism promotion

funds, the municipality or county shall select one or more organizations, such as a chamber of commerce, visitor and convention bureau, or regional tourism commission, which has an existing, ongoing tourist promotion program. If no organization exists, the municipality or county shall create an organization with the same membership standard in Section 6-4-25. To be eligible for selection the organization must be organized as a nonprofit organization and shall demonstrate to the municipality or county

that it has an existing, ongoing tourism promotion program or that it can develop an effective tourism promotion program. Immediately upon an allocation to the special fund, a municipality

Edward W. Riggs, Sr.
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May 31,2022

or county shall distribute the tourism promotion funds to the organizations selected or created to receive them. S.C. Code Ann. § 6-4-10(3) (emphasis added). Section 6-4-10(3) expressly states that a municipality or county “shall select” one or more tourism promotion organizations. “Under general principles of statutory construction, the word ‘shall’ is interpreted as mandatory rather than permissive.” Op. S.C. Atty. Gen.. 1980 WL 120615 (Jan. 21, 1980) (citing 2A Sutherland Statutory Construction § 57.03 (1973)). The word

“select” means “to choose in preference to another or others; pick out” and “chosen from a number or group by fitness or preference.” See Merriam-Webster at www.merriamwebster.com/dictionary/select; Dictionary.Com at www.dictionary.com/browse/select; Collins Dictionary at www.collinsdictionary.com/us/dictionary/english/select.

and

Section 6-4-10(3) provides for the selection of an organization that has an “existing, ongoing

tourist promotion program.” It also plainly states that “if no organization exists, the municipality or county shall create an organization.” Id. Based on this language, it is clear that the Legislature intended for a municipality or county to

choose an existing organization that meets the eligibility requirements of the statute to manage and direct the expenditure of its tourism promotion funds. A local government is only authorized to create an organization when one does not already exist. Therefore, a municipality or county

must determine whether an eligible1 organization exists before creating a new one. Section

6-4-10(3)

does not expressly provide for replacement of a tourism promotion However, “the power to remove one so employed or appointed is generally incidental to the power to appoint.” Qp. S.C. Atty. Gen., 1984 WL 159941 (Nov. 26, 1984). The same procedure applies when replacing a tourism promotion organization. organization.

Your letter states that TERC’s [Tourism Expenditure Review Committee’s] authority is limited

to acting upon the annual reports and complaints provided for in section 6-4-35(B)(l) and (2) and that it cannot employ other methods to ascertain whether an expenditure of local accommodations taxes complies with the Accommodations Tax statutes. See Conclusion, footnote 2. You cite Tourism Expenditure Rev. Comm, v. City of Myrtle Beach. 403 S.C. 76, 742 S.E.2d 371 (2013) for this proposition. We must therefore address TERC’s authority. Section 6-4-3 5(B) provides:

(B)(1)(a) The Tourism Expenditure Review Committee shall serve as the oversight authority on all questionable tourism-related 1 Whether an organization is eligible is a fact-specific issue that must be answered by a court and not by this Office. See Op, S.C. Atty. Gen., 1989 WL 406130 (April 3, 1989) (“[bl ecause this Office does not have the authority of a court or other fact-finding body, we are not able, in a legal opinion, to adjudicate or investigate factual questions.”)

Edward W. Riggs, Sr.
Page 5

May 31,2022

expenditures and to that end, all reports filed pursuant to Section 6-

4-25(D)(3) must be forwarded to the committee for review to determine if they are in compliance with this chapter. The municipality or county must be notified if an expenditure is questioned, and the committee may consider any further supporting information the municipality or county may provide. If

the committee finds an expenditure to be in noncompliance, it shall certify the noncompliance to the State Treasurer, who shall withhold the amount of the expenditure found in noncompliance from subsequent distributions in accommodations tax revenue otherwise due the municipality or county. An appeal from an action of the committee under this Administrative Law Judge Division.

subitem

lies

with

the

(b) If the committee determines that a municipality or county has failed to file the reports required pursuant to Section 6-4-25(D)(3),

it may impose a fee of five hundred dollars a month or part of a month for each month the report is not filed, but not more than five thousand dollars. The committee shall certify the penalty to the State Treasurer, who shall withhold the amount of the penalty from

subsequent distributions otherwise due the municipality or county. An appeal from an action of the committee under this subitem lies with the Administrative Law Judge Division. (c) Allocations withheld must be reallocated proportionately to all other recipients.

(2) The committee has jurisdiction to investigate and research facts on written complaints submitted to it with regard to the appropriate tourism-related

expenditures

and resolve these

complaints

as

provided in item (1) of this subsection.
(3) The committee shall forward copies of information submitted by the local governments and regional tourism agencies pursuant to Section 6-4-25 arising under the tourism provisions of this chapter to the Department of Parks, Recreation and Tourism, which shall publish an annual report on the information submitted.

S.C. Code Ann. § 6-4-35(B) (1976 Code, as amended) (emphasis added).

Because of the provision in section 6-4-35(B) stating that TERC “shall serve as the oversight authority on all questionable tourism-related expenditures,” TERC is granted broad authority to

Edward W. Riggs, Sr.
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May 31,2022

prevent

unauthorized expenditures.

Section

6-4-35(B)

provides two methods for finding

unauthorized expenditures, reviewing annual expenditure reports and investigating complaints.2 While the Legislature gave TERC the specific authority to review annual reports and investigate complaints, we do not believe this specific authority limits TERC’s general authority to oversee any

questionable tourism-related expenditures.

In our opinion,

TERC

is required to

act

whenever it becomes aware of expenditures that are not compliant with the Accommodations Tax statutes, S.C. Code Ann. § 6-4-5 et seq (1976 Code, as amended). CONCLUSION In our opinion, the Legislature intended by section 6-4-10(3) for a municipality or county to

choose an existing organization that meets the statutory eligibility requirements to manage and direct the expenditure of its tourism promotion funds.

A local government is only authorized to

create an organization when one docs not already exist.

Therefore, a municipality or county

must determine whether an eligible organization exists before creating a new one pursuant to

section 6-4-10(3).

We recognize that whether an organization is eligible is a fact-specific issue

that must be answered by a court and not by this Office.

Sec Op. S.C. Atty. Gen., 1989 WL

406130 (April 3, 1989) (“[b] ecause this Office does not have the authority of a court or other fact-finding body, we are not able, in a legal opinion, to adjudicate or investigate factual

questions.”)
We also believe that the Tourism Expenditure Review Committee has broad authority to act

whenever it becomes aware of expenditures that are not compliant with the Accommodations Tax statutes, S.C. Code Ann. § 6-4-5 et seq (1976 Code, as amended).

It is not limited to acting

upon the annual expenditure reports and the complaints provided for in section 6-4-35(B)(l) and

(2).
Sincerely,

Elinor V. Lister
Assistant Attorney General

2 The court, in Tourism Expenditure Rev. Comm, v. City of Myrtle Beach, 403 S.C. 76, 742 S.E.2d 371, explained that the Legislature also established an exclusive procedure for TERC to challenge expenditures of local accommodations taxes in section 6-4-35.

Edward W. Riggs, Sr.
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May 31,2022

REVIEWED AND APPROVED BY:

Robert D. Cook
Solicitor General