Did a $25 million South Carolina headquarters expansion qualify for a county property-tax exemption and corporate headquarters and new-jobs credits?

Plain-English summary

South Carolina Private Letter Ruling 89-7 approved three historical tax incentives for XYZ Corporation's proposed $25 million headquarters expansion: a five-year county property-tax exemption, a corporate-headquarters credit equal to 20% of the full investment, and a new-jobs credit.

XYZ planned an approximately 100,000-square-foot office building next to or near its existing South Carolina headquarters, plus furniture, fixtures, and equipment. It would add at least 75 full-time jobs of at least 35 hours per week, including at least 40 executive, administrative, or professional staff positions using the new building.

Five-year county property-tax exemption

The ruling treated the project as an addition to an existing corporate headquarters under historical Section 12-37-220(B)(32). The $25 million of property would be exempt from county property tax for the first five years it was subject to that tax.

The exemption was narrower than a complete property-tax exemption. The ruling expressly said “county ad valorem tax” did not include taxes imposed by school districts or special-purpose districts.

Twenty-percent headquarters credit

Historical Section 12-7-1245 allowed a credit for qualifying design, preparation, development, construction, and first-five-year lease costs of establishing or expanding a headquarters. The project exceeded the statute's stated minimums of $50,000 of construction or additions, 75 new full-time South Carolina jobs, and 40 staff employees.

The ruling allowed a credit equal to 20% of the full proposed $25 million investment. Office furniture, fixtures, and equipment—including computer equipment—qualified when they supported employees performing headquarters functions.

The use restriction mattered: personal property used by line employees to design and produce software did not qualify as property serving headquarters functions.

New-jobs credit

XYZ also projected a net increase of at least 50 full-time jobs in a developed county. The facts said the increase would be measured against the prior year's monthly average of employees subject to South Carolina withholding, would not arise from a merger, acquisition, or bankruptcy, and would remain at least 50 during the five-year credit period.

On those facts, the ruling concluded that XYZ was entitled to the historical new-jobs credit under Section 12-7-1220. The statute quoted in the ruling provided $300 annually for each new full-time job in a developed county for years two through six after the job was created, subject to maintaining the required net employment increase.

Common questions

Q: Did the ruling approve all three requested incentives? Yes. It approved the five-year county property-tax exemption, the 20% headquarters credit, and the new-jobs credit on the proposed facts.

Q: Did the county property-tax exemption include school taxes? No. The ruling said county ad valorem tax did not include school-district or special-purpose-district taxes.

Q: How much headquarters investment did the ruling approve for the 20% credit? The full proposed $25 million, subject to the stated use condition for personal property.

Q: Did computer equipment qualify? Yes, when used by staff serving typical headquarters functions. Equipment used by line personnel for software design and production did not qualify on the ruling's analysis.

Q: What job levels were proposed for the headquarters incentives? At least 75 additional full-time jobs, including at least 40 executive, administrative, or professional staff employees.

Q: What separate threshold applied to the new-jobs credit? XYZ projected a net increase of at least 50 full-time jobs in a developed county and stated that the increase would remain at least 50 during the five-year period.

Q: Can another company rely on PLR 89-7? No. The ruling says a PLR applies only to the specific facts or circumstances in the request and has no precedential value.

Citations and references

• S.C. Code Ann. § 12-37-220(B)(32) (historical headquarters county property-tax exemption)
• S.C. Code Ann. § 12-7-1245 (historical corporate-headquarters credit)
• S.C. Code Ann. § 12-7-1220 (historical new-jobs credit)
• S.C. Code Ann. §§ 12-7-230 and 12-19-70 (taxes against which the headquarters credit applied)
• S.C. Code § 12-3-170 and SC Revenue Procedure 87-3 (authority identified in the ruling)

Subject

Exemption from County Ad Valorem Taxes; Corporate Headquarters Credit; Jobs Tax Credit

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR89-7.pdf

Original ruling text

SC PRIVATE LETTER RULING #89-7

TO:

XYZ Corporation

SUBJECT:

Exemption from County Ad Valorem Taxes; Corporate
Headquarters Credit; Jobs Tax Credit

REFERENCE:

S.C. Code Ann. Section 12-7-1220 (Law.Co-op. Supp. 1988)
S.C. Code Ann. Section 12-7-1245 (Law.Co-op. Supp. 1988)
S.C. Code Ann Section 12-37-220 (B) (32) (Law. Co-op. Supp. 1988)

AUTHORITY:

S.C. Code Section 12-3-170
S.C. Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer, upon
request, and it applies only to the specific facts or circumstances related in
the request. Private Letter Rulings have no precedential value and are not
intended for general distribution.

Questions:

1. Based upon the facts submitted, will the property representing the $25 million investment
   be exempt from county ad valorem taxes for the year in which the building is completed
   and in connection with which the 75 new jobs are filled, and for the four years thereafter,
   under Section 12-37-220(B)(32)?
2. Will the XYZ Corporation be entitled to the corporate income tax credit under Section
   12-7-1245, in an amount equal to 20% of the $25 million proposed investment?
3. Based on the facts submitted, will the Corporation be entitled to the corporate income tax
   credit for new jobs, under Section 12-7-1220?
   Facts:
   XYZ has requested a ruling on a proposed investment in this state and has submitted the
   following facts relating to the proposed investment.
   Corporate Headquaters
   XYZ (the "Corporation"), a South Carolina Business corporation, has acquired land on which it
   intends to construct an office building consisting of approximately 100,000 square feet of floor

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space, and purchase various furniture, fixtures and equipment, including but not limited to
computer equipment, to be housed in such building and used in the conduct of business, at a total
cost of approximately $25 million (the "Expansion"). The building will be located adjacent to or
in the immediate vicinity of the Corporation's existing corporate headquarters in South Carolina.
The Corporation will create at least 75 additional full-time (i.e., at least 35 hours each week) jobs
at its South Carolina headquarters in connection with the Expansion, and not less than 40 of
those jobs will be filled by "staff employees" who will occupy executive, administrative, or
professional positions for the Corporation and work in, or make direct use of, the proposed office
building.
For purposes of this letter, an "executive" means an employee who spends at least 80% of his or
her business function in the management of one or more of the Corporation's enterprises and
direction of the work of at least two employees, and who has the authority to hire and fire or has
the authority to make recommendations relating to hiring, firing, advancement and customarily
exercise discretion with respect to the authority given him or her in undertaking his or her job
function. An "administrative" employee is an employee who is not involved in manual work
(e.g., strenuous or substantial physical labor), and whose work is directly related to management
policies or general business operations; and each such administrative employee will customarily
exercise discretion and independent judgment in undertaking his or her job function. A
"professional" is an advance type in a field of science or learning (e.g., law, and the like) where
such knowledge is derived from a course exercise discretion pursuant to the undertakings
involved in his or her job function.
Jobs Tax Credit
During each of the Corporation's next few taxable years, the Corporation contemplates a net
increase in a developed county of at least fifty new full-time jobs. Each such increase will be
determined by comparing the monthly average number of full-time employees subject to South
Carolina income tax withholding for the taxable year of the increase with the number of full-time
employees subject to South Carolina income tax withholding for the prior taxable year. The
Corporation anticipates that during the five years after each year in which a net increase of at
least fifty new full-time jobs occurs in the developed county, no such net employment increase
shall fall below fifty. No such net employment increase in full-time jobs will result from a
merger, acquisition, or bankruptcy of any business enterprise in South Carolina which might be
acquired by the Corporation. Each such net increase in full-time jobs will occur in a developed
county in South Carolina.
Discussion:
1.

S.C. Code Section 12-37-220(B)(32) was enacted effective June 27, 1988 to allow a five
year exemption from county property tax for corporate headquarters, corporate office
facilities, and distribution facilities. The pertinent parts of the statute relating to corporate
headquarters are as follows:
All new corporate headquarters, corporate office facilities, distribution facilities, and all
additions to existing corporate headquarters, corporate office facilities, or distribution

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facilities located in South Carolina, established or constructed, or placed in service after
the effective date of this item, are exempt from county ad valorem taxes for a period of
five years from the time of establishment, construction, or being placed in service if the
cost of the new construction or additions is fifty thousand dollars or more and seventyfive or more new jobs which are full-time are created in South Carolina.
For the purpose of this exemption, the term:
1.

"new job" means any job created by an employer in South Carolina at the time a new
facility or an expansion is initially staffed, but does not include a job created when an
employee is shifted from an existing South Carolina location to work in a new or
expanded facility;

2.

"full-time" means a job requiring a minimum of thirty-five hours of an employee's
time a week for the entire normal year of company operations or a job requiring a
minimum of thirty-five hours of an employee's time for a week for a year in which
the employee was initially hired for or transferred to the South Carolina corporate
headquarters, corporate office facility, or distribution facility and worked at a rented
facility pending construction of a corporate headquarters, corporate office facility, or
distribution facility;

3.

"corporate headquarters" means the location where corporate staff members or
employees are domiciled and employed, and where the majority of the company's
financial, personnel, legal, planning, or other business functions are handled either on
a regional or national basis and must be the sole such corporate headquarters within
the region or nation;

4.

"staff employee" or "staff member" means executive, administrative, or professional
worker. At least eighty percent of an executive employee's business functions must
involve the management of the enterprise and directing the work of at least two
employees. An executive employee has the authority to hire and fire or has the
authority to make recommendations related to hiring, firing, advancement, and
promotion decisions, and an executive employee must customarily exercise
discretionary powers. An administrative employee is an employee who is not
involved in manual work and whose work is directly related to management policies
or general exercise discretion and independent judgment. A professional employee is
an employee whose primary duty is work requiring knowledge of an advanced type in
a field of science or learning. This knowledge is characterized by a prolonged course
of specialized study. The work must be original and creative in nature, and the work
cannot be standardized over a specific period of time. The work must require
consistent exercise of discretion.

The planned expansion by XYZ would qualify as an addition to an existing corporate
headquarters therefore exempting it from county ad valorem tax for a period of 5 years. The term
"county ad valorem tax" does not include school districts or special purpose districts.

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2.

S.C. Code Section 12-7-1245 was enacted to allow a credit for addition to existing
corporate headquarters as follows:
A corporation establishing a corporate headquarters in this State, or adding to existing
corporate headquarters, is allowed a credit against any tax due pursuant to Section 127-230 or Section 12-19-70 of the 1976 Code in an amount equal to twenty percent of
the (1) costs incurred in the design, preparation, and development of either
establishing or expanding a corporate headquarters, and (2) direct construction or the
direct lease costs during the first five years of operations for the corporate
headquarters. This credit applies to all qualifying costs incurred to establish or expand
a corporate headquarters which add at least seventy-five new jobs which are full-time
in South Carolina with at least forty of the new jobs classified as staff employees, and
the cost of the new construction or additions is fifty thousand dollars or more. This
credit only applies to facilities established for the direct use of the headquarters staff
employees. This credit is nonrefundable but an unused credit may be carried forward
for ten taxable years.
For purposes of this section, the terms "corporate headquarters", "new jobs", and
"full-time" are defined as provided in Section 12-37-220(B).
The amount of any credit allowed under this section must be reduced by the amount
of any past-due debt owed to the State of South Carolina by the taxpayer.

It appears from the language of this statute that the office building, furniture, fixtures, and
equipment (including but not limited to computer equipment) would be qualified for the credit
provided that this personal property serves to support those employees performing functions for
the corporate headquarters as defined in Section 12-37-220(B). This result is founded upon
subsection 1 of the above stated statute. Computer equipment would be deemed necessary to the
design, preparation, and development of this corporation's planned expansion provided that it is
used by staff employed to serve functions of a typical corporate headquarters; not those of line
personnel employed to design and produce software.
3.

S.C. Code Section 12-7-1220 allows a credit for new jobs. The Corporation's expansion is
in a county which has been designated a developed county. Section 12-7-1220(D) relating
to the job tax credit states:
Permanent business enterprises engaged in manufacturing, processing, warehousing,
wholesaling, research and development, and service-related industries in counties
designated by the commission as developed areas are allowed a job tax credit for
taxes imposed by Section 12-7-230 equal to three hundred dollars annually for each
new full-time employee job for five years beginning with years two through six after
the creation of the job. The number of new full-time jobs must be determined be
comparing the monthly average number of full-time employees subject to South
Carolina income tax withholding for the taxable year with the corresponding period
of the prior taxable year. Only those permanent businesses that increase employment
by fifty or more in developed areas are eligible for the credit. The credit is not
allowed during any of the five years if the net employment increase falls below fifty.

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The commission shall adjust the credit allowed each year for net new employment
fluctuations above the minimum level of fifty.
Conclusion:
1.

Based upon the facts submitted, the property representing the $25 million investment will
be exempt from county property taxes for the first five years that it is subject to county
property taxes.

2.

Based upon the facts submitted, the Corporation will be entitled to the corporate income tax
credit under Section 12-7-1245, in an amount equal to 20% of the full $25 million proposed
investment provided that the personal property is used to serve the functions of the
corporate headquarters and not those of software design and production.

3.

Based upon the facts submitted, the corporation will be entitled to the corporate income tax
credit for new jobs, under Section 12-7-1220.

SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard, Jr.
S. Hunter Howard, Jr., Chairman

s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Commissioner

s/T. R. McConnell
T. R. McConnell, Commissioner
Columbia, South Carolina
1989
December 12

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