How did South Carolina Revenue Ruling 15-8 explain the textile-mill rehabilitation income and property tax credits?

Plain-English summary

South Carolina Revenue Ruling 15-8 explains the Textiles Communities Revitalization Act credit for rehabilitating, renovating, or redeveloping an abandoned textile mill site.

A qualifying taxpayer chooses one of two tracks by filing a Notice of Intent to Rehabilitate:

• an income-tax-style credit against the taxes identified in the ruling; or
• a locally administered credit against real property taxes.

The choice, filing location, filing deadline, cost estimate, and party performing the rehabilitation all affect eligibility and the credit amount.

Qualifying site and expenses

A textile mill is abandoned when at least 80% has been continuously closed or nonoperational as a textile mill for at least one year immediately before the Notice of Intent. A county or municipality may certify that the property meets the textile-mill, abandonment, and site-boundary requirements. The taxpayer may conclusively rely on that certification if a copy accompanies the first return claiming the credit.

Qualifying rehabilitation expenses include renovation, demolition, environmental remediation, site improvements, new construction, and related real-property work. The site's acquisition price, acquisition-related professional fees, and personal property such as furniture and appliances do not qualify.

Income credit

The income-credit Notice of Intent must be filed with the Department before the building permits are received. If filed later, only rehabilitation expenses incurred after the notice qualify.

The credit generally equals 25% of actual qualifying expenses. If actual costs exceed 125% of the estimate in the Notice of Intent, the credit is capped at 25% of 125% of that estimate. Unlike the property credit, actual costs below 80% of the estimate do not eliminate the income credit. The ruling states there is no overall dollar cap.

The entire credit is earned when the site, phase, or portion is completed and ready for its intended use, but it is claimed in five equal annual installments. Each year's use is limited to 50% of the qualifying tax liability, and unused credit may carry forward for five years.

Property credit

The property-credit Notice of Intent must be filed with the municipality or county before the first rehabilitation expense. Earlier expenses do not qualify.

• Actual costs below 80% of the estimate produce no property credit.
• Costs from 80% through 125% produce a credit based on 25% of actual expenses multiplied by each consenting local taxing entity's ratio.
• Costs above 125% are capped using 25% of 125% of the estimate, multiplied by the applicable local ratio.

The credit may offset up to 75% of real property tax due on the site each year for up to eight years.

Notice, sale, and transfer traps

• The taxpayer incurring the rehabilitation expenses and placing the site in service must file the notice.
• A separate notice is required for each parcel treated as a separate textile mill site.
• The notice must state a specific estimated dollar amount, not a range.
• A protective notice cannot be filed simultaneously for both credit tracks.
• The ruling generally says the estimate and parcel count cannot be amended; its special amendment window ended October 15, 2015.
• Filing a notice does not itself approve eligibility, expenses, or the credit.

An income credit can transfer after it has been earned and the relevant site, phase, or portion has been placed in service. Remaining installments associated with the property may transfer to a new owner or lessee, but unused carryforwards cannot transfer and the credit cannot be sold by itself.

If a developer sells before completing the rehabilitation, no credit has yet been earned to transfer. The ruling's example also says the buyer may fail to qualify because it did not acquire an abandoned textile mill.

Common questions

Q: Does every old mill qualify?

A: No. The property must meet the ruling's textile-mill, abandonment, site, ownership, and rehabilitation requirements. A mill that previously received textile credits is ineligible.

Q: Does spending more than the notice estimate always increase the credit?

A: No. Once actual expenses exceed 125% of the estimate, both credit calculations use the ruling's 125% cap.

Q: Can acquisition costs or furniture count?

A: No. The ruling excludes acquisition costs and personal property from rehabilitation expenses.

Q: Can the credit transfer before the project is ready for use?

A: No. The ruling permits transfer only after the credit is earned by placing the site, phase, or portion in service.

Citations and references

• S.C. Code Ann. Chapter 65 of Title 12 (Textiles Communities Revitalization Act)
• S.C. Code Section 12-65-20 (definitions)
• S.C. Code Section 12-65-30 (election, calculation, installments, limits, and transfer)
• S.C. Code Sections 12-65-35, 12-65-50, and 12-65-60 (site boundaries, transitional rules, and local certification)

Subject

Textiles Communities Revitalization Act

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR15-8.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #15-8

SUBJECT:

Textiles Communities Revitalization Act
(Income and Property Taxes)

EFFECTIVE DATE: Applies to rehabilitation, renovation, and redevelopment of
abandoned textile mill sites placed in service on January 1, 2008,
and thereafter, except as otherwise provided.1
Note: A Notice of Intent may not be amended (see Part 2 of this
advisory opinion), however, for a taxpayer who has filed a Notice
of Intent with the Department and has not placed the qualifying
textile mill site in service, the Department will allow amendments
of the Notice of Intent until October 15, 2015.
SUPERSEDES:

All previous documents and all oral directives in conflict herewith.

REFERENCES:

Chapter 65 of Title 12 (2014)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public. It is an advisory opinion issued to apply principles of tax
law to a set of facts or a general category of taxpayers. It is the
Department’s position until superseded or modified by a change in
statute, regulation, court decision, or another Department advisory
opinion.

For textile mill sites placed in service on or before December 31, 2007, see Part 4 “Special Provisions
and Transitional Rules.”
1

1

GENERAL OVERVIEW OF ACT
The South Carolina Textiles Communities Revitalization Act (Act) was enacted in Title
12, Chapter 65 to create an incentive for the rehabilitation, renovation, and
redevelopment of abandoned textile mill sites located in South Carolina.2
The Act provides that restoration of textile mill sites into productive assets for the
communities in which they are located serves a public and corporate purpose and results
in job opportunities. To remove and alleviate adverse conditions, including
disproportionate expenditure of public funds, unmarketability of property, area crime,
and abnormal exodus of families and businesses in these communities, it is necessary to
encourage private investment and restore the tax base of the taxing districts in which
abandoned textile mills are located by the redevelopment of abandoned textile mill sites.
The Act provides that a taxpayer who rehabilitates an abandoned textile mill site and
meets the other Act requirements is eligible for either a credit against income taxes3 or
real property taxes. A taxpayer selects the credit type by filing a “Notice of Intent to
Rehabilitate” (Notice of Intent).
Certification of Site. A taxpayer may apply to the municipality or county in which the
textile mill site is located for a certification of the textile mill site made by ordinance or
binding resolution of the governing body of the municipality or county. The certification
shall include findings that the textile mill site was a “textile mill” as defined in Code
Section 12-65-20(3), that the textile mill site has been “abandoned” as defined in Code
Section 12-65-20(1), and that the geographic area of the site is consistent with Code
Section 12-65-20(4) (defining “textile mill site”). The taxpayer may conclusively rely
upon the certification in determining the credit allowed; provided, however, that if the
taxpayer is relying upon the certification, the taxpayer shall include a copy of the
certification on the first return for which the credit is claimed. Code Section 12-65-60.
Income Tax Credit. A taxpayer seeking an income tax credit must file a Notice of Intent
with the Department prior to receiving the building permits for the applicable
rehabilitation of the textile mill site or phase thereof. Failure to provide the Notice of
Intent prior to receiving the building permits results in qualification of only those
rehabilitation expenses incurred after the Notice of Intent is provided. The income tax
credit is equal to 25% of the actual rehabilitation expenses incurred for the textile mill
site (even if actual rehabilitation expenses are below 80% of the estimated rehabilitation
2

The original Act was enacted in 2004 in Title 6, Chapter 32. In 2008, the Act was amended and moved
to Title 12, Chapter 65. The original Act still applies to entire textile mill sites placed in service on or
before December 31, 2007. Code Section 12-65-50(A).
3
A credit is allowed against the income tax imposed under Chapter 6, bank franchise tax under Chapter
11, corporate license fee under Chapter 20, insurance premium taxes under Title 38, Chapter 7, or any
combination of these taxes. While all of these taxes are not income taxes, the credit allowed against all of
these taxes is referred to in this advisory opinion as the “income tax credit” for simplicity.

2

expense amount reported in the Notice of Intent). However, if the actual rehabilitation
expenses exceed 125% of the estimated rehabilitation expense reported in the Notice of
Intent, then the credit amount for the textile mill site is limited to 25% of 125% of the
estimated rehabilitation expense amount.4
The entire income tax credit is earned in the tax year the applicable phase or portion of
the textile mill site is placed in service. (There is no cap on the amount of credit that can
be earned.) It is taken, however, in equal installments over 5 years beginning with the tax
year the applicable phase or portion of the textile mill site is placed in service.
The income tax credit claimed is limited to 50% of the taxpayer’s income tax, bank tax,
corporate license fee, and/or insurance premium tax liability for the tax year. Any unused
credit can be carried forward for 5 years.
Property Tax Credit. For taxpayers seeking the property tax credit the approval process
and credit provisions differ.5 A taxpayer seeking a property tax credit must file a Notice
of Intent with the municipality or county where the textile mill site is located prior to
incurring any rehabilitation expenses at the site. Failure to provide the Notice of Intent
results in qualification of only those rehabilitation expenses incurred after the Notice of
Intent is provided. If the actual rehabilitation expenses are between 80% and 125% of the
estimated rehabilitation expense amount reported in the Notice of Intent, then the
property tax credit is based on 25% of the actual expenses for each site. If the actual
rehabilitation expenses exceed 125% of the estimated rehabilitation expense reported,
then the credit is based on 25% of 125% of the estimated rehabilitation expense amount.
If the actual rehabilitation expenses are below 80% of the estimated rehabilitation
expense amount, then no credit is allowed. There is no cap on the amount of credit that
can be earned.
The property tax credit may be claimed beginning with the property tax year in which the
applicable phase or portion of the textile mill site is placed in service. The credit may be
taken against up to 75% of the real property taxes due on the textile mill site each year for
up to 8 years.
Purpose of Advisory Opinion. The Act contains a number of requirements including
qualification of the textile mill site, qualification of the expenses incurred in the
rehabilitation, and information required in the Notice of Intent. The rules and
requirements can be complex. This advisory opinion is limited to the basic credit
principles. It provides guidance and examples regarding the provisions of the income tax
credit under the Act and only a general overview of the property tax credit.
4

For textile mill sites acquired before January 1, 2008, see Question 26 for special rules that include the
Notice of Intent requirement and the income tax credit amount.
5
See Part 6, “Property Tax Credit Overview” for a brief discussion of Act provisions applicable to
taxpayers seeking the property tax credit.

3

This question and answer document is divided into the following categories:

1. Definitions and Qualifications
2. Notice of Intent to Rehabilitate
3. Income Tax Credit
4. Special Provisions and Transitional Rules
5. Transfer of Credit and Notification to the Department
6. Property Tax Credit Overview
7. Examples and Additional Guidance

PART 1 - DEFINITIONS and QUALIFICATIONS

1. Q. What is a “textile mill”?
   A. Textile mill means a facility or facilities that were initially used for textile
   manufacturing, dyeing, or finishing operations and for ancillary uses to those
   operations. Code Section 12-65-20(3).
2. Q. When is a textile mill considered “abandoned”?
   A. A textile mill is considered abandoned when at least 80% of the textile mill has
   been closed continuously to business or otherwise nonoperational as a textile mill
   for a period of at least one year immediately preceding the date on which the
   taxpayer files a Notice of Intent. Code Section 12-65-20(1).6
   Note: A taxpayer may apply to the municipality or county in which the textile mill
   site is located for a certification of the textile mill site made by ordinance or
   binding resolution of the governing body of the municipality or county. The
   certification shall include findings that the textile mill site was a “textile mill” as
   defined in Code Section 12-65-20(3), that the textile mill site has been
   “abandoned” as defined in Code Section 12-65-20(1), and that the geographic area
   of the textile mill site is consistent with Code Section 12-65-20(4) (defining
   “textile mill site”). The taxpayer may conclusively rely upon the certification in
   determining the credit allowed; provided, however, that if the taxpayer is relying
   upon the certification, the taxpayer shall include a copy of the certification on the
   first return for which the credit is claimed. Code Section 12-65-60.

6

The 1 year time period of abandonment is a consecutive period based on calendar days; it is not simply 1
calendar year. For example, the 1 year time period for a textile mill abandoned on April 1, 2014 ends
March 31, 2015. The burden of proof of the abandonment time period is on the taxpayer. However, if the
taxpayer obtains a certification from the municipality or county in which the textile mill site is located,
the burden of proof has been met. See Code Section 12-65-60.

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3. Q. What is the definition of a “textile mill site”?
A. Textile mill site means the textile mill together with the land and other
improvements on it that were used directly for textile manufacturing, dyeing, or
finishing operations or ancillary uses. However, the area of the site is limited to
the land located within the boundaries where the textile manufacturing, dyeing, or
finishing facility structure is located and does not include land located outside the
boundaries of the structure or devoted to ancillary uses. Code Sections 12-6520(4) and 12-65-35.
Exception: For sites acquired before January 1, 2008, or a site located on the
Catawba River near Interstate 77, the textile mill site includes the textile mill
structure, together with all land and improvements which were used directly for
textile manufacturing operations or ancillary uses, or were located on the same
parcel within 1,000 feet of any textile mill structure or ancillary uses. Code
Section 12-65-20(4).

4. Q. What are “ancillary uses”?
   A. Ancillary uses are uses related to the textile manufacturing, dyeing, or finishing
   operations on a textile mill site consisting of sales, distribution, storage, water
   runoff, wastewater treatment and detention, pollution control, landfill, personnel
   offices, security offices, employee parking, dining and recreation areas, and
   internal roadways or driveways directly associated with such uses. Code Section
   12-65-20(2).
5. Q. Can a textile mill site be divided into separate parcels?
   A. Yes. A textile mill site that otherwise qualifies as abandoned may be subdivided
   into separate parcels, which parcels may be owned by the same taxpayer or
   different taxpayers, and each parcel is deemed to be a textile mill site for purposes
   of determining whether each subdivided parcel is considered to be abandoned.
   Code Section 12-65-20(1).
   Note: For any parcel on which there is a building, the building must be renovated
   or demolished. Code Section 12-65-20(8).
6. Q. That are “rehabilitation expenses”?
   A. Rehabilitation expenses are the expenses or capital expenditures incurred in the
   rehabilitation, renovation or redevelopment of the textile mill site, including the
   demolition of existing buildings, environmental remediation, site improvements
   and the construction of new buildings and other improvements on the textile mill
   5

site. Rehabilitation expenses do not include the cost of acquiring the textile mill
site or the cost of personal property located at the textile mill site. For expenses
associated with a textile mill site to qualify for the credit, the textile mill and
buildings on the textile mill site must be renovated or demolished. Code Section
12-65-20(8).
Below are examples of expenses that qualify and expenses that do not.
Rehabilitation Expenses Include:
Renovation costs of existing building (e.g.,
interior demolition, movement of walls,
replacing floors, ceilings, or roofs, wall to
wall carpet, permanent tiles and paneling,
central HVAC systems, plumbing, electrical
wiring, fixtures, sprinkler systems and
elevators)
Redevelopment costs of existing buildings

Demolition costs of an existing building,
(i.e., the complete destruction or removal of
the building) when a site is rehabilitated
Construction of new buildings
Environmental remediation (e.g., abatement
of lead paint, removal of asbestos or mold,
removal of underground oil tanks)
Site improvements (e.g., sidewalks, fences,
and docks)
Other improvements on the textile mill site
(e.g., landscaping, drainage, or paving)

Rehabilitation Expenses Do Not Include:
Cost of acquiring the textile mill, land and other
improvements, including the purchase price

Expenses incurred prior to filing the Notice of
Intent to Rehabilitate if the Notice is filed after
receiving the building permits for the textile mill
site. See Question 11.
Cost of personal property at the textile mill site
(e.g., furniture, appliances, window treatments).
See below for guidance on distinguishing real
property costs from personal property costs.
Professional fees associated with the purchase of
the site (e.g., title work, surveying, closing costs)
Interest costs to purchase the site

Expenses paid from nontaxable grant money
Expenses paid under a “tenant improvement
allowance” for personal property costs (e.g.,
cubicles, office furniture, etc.) or moving costs

Professional fees associated with
redevelopment of the site, including
engineering and architectural fees
Interest costs on construction loan
Expenses paid from grant proceeds when
the grant money is taxable
Expenses paid by the taxpayer under a
“tenant improvement allowance” with the
lessee for improvements to the real property
to customize the space to fit a tenants needs
(e.g., costs incurred for adding permanent
walls, permanent paneling or tiling, lighting,
wiring, and cable)
6

Additional guidance concerning specific costs as qualifying expenses are
discussed below.
A. Distinguishing Real Property Costs from Personal Property Costs. Whether an
expense is for personal property depends on the facts and circumstances.
Generally, personal property is a movable item of property that is not
permanently affixed to, or part of, real estate. In making this determination,
the Department will consider (1) the mode of attachment; (2) the character of
the structure or the article; (3) the intent of the parties making the annexation;
and, (4) the relationship of the parties. City of North Charleston v. Claxton,
431 S.E.2d 610 (S.C. 1993). In addition, the Department may consider whether
the removal of the property in question would be costly, time consuming,
and/or destructive to the building.7 Note: This determination may be different
for other income tax purposes, such as Internal Revenue Code Section 1245
property.
B. Determination of When an Expense is Incurred. An expense is incurred by the
taxpayer on the date such expenditure would be considered incurred under the
accrual method of accounting, regardless of the method of accounting used by
the taxpayer with respect to other items of income and expense.

7. Q. Against which taxes may a taxpayer use the credit?
   A. A taxpayer who rehabilitates a textile mill site is eligible for either:
   a. Income Tax Credit.8 A credit against taxes imposed under Title 12, Chapter 6
   (income tax), Chapter 11 (bank tax), Chapter 20 (corporate license fees), Title
   38, Chapter 7 (insurance premium tax) or any combination of these taxes or
   b. Property Tax Credit. A credit against real property taxes levied by local taxing
   entities. Code Section 12-65-30(A).
   A taxpayer’s selection of the credit type is made when filing the Notice of Intent
   with the Department or with the county or municipality in which the textile mill
   site is located.
8. Q. What taxpayers are specifically disqualified from the credit?
   A. The following taxpayers may not claim the textile credit:
   7

The Department has used these guidelines in advisory opinions concerning sales and use taxes and
property taxes. See RR #98-2 (Banks), PLR #09-1 (Residential Water Heater Repair Program), PLR #073 (Equipment and Services for Enhancement of Wireless Communications) and PLR #07-4 (Signs).
8
For simplicity, this credit is referred to as an “income tax credit,” although the bank tax, corporate
license fee, and insurance premium tax are not income taxes.

7

a. A taxpayer seeking to rehabilitate an otherwise eligible textile mill site who
owned the site when it was operational and immediately prior to its
abandonment. Code Section 12-65-30(D).
b. A taxpayer that qualifies for the textile credit and the abandoned buildings
credit for the site who chooses to claim the abandoned buildings credit. Code
Section 12-67-140(B)(4).
Note: If the taxpayer qualifies for both the textile income tax credit and the
certified historic structure rehabilitation credit under Code Section 12-6-3535, the
taxpayer may claim both credits.

9. Q. Are there any textile mills specifically disqualified from the credit?
   A. Yes, if the textile mill has previously received textile mill credits, then it is not
   eligible for the credit. Code Section 12-65-30(D).

PART 2 - NOTICE OF INTENT TO REHABILITATE

10. Q. What is the “Notice of Intent to Rehabilitate”?
    A. The Notice of Intent to Rehabilitate a textile mill site, including a separate parcel,
    is a letter from the taxpayer to the Department or municipality or county indicating
    the following information. The Notice must contain:
    a. A statement of the taxpayer’s intent to rehabilitate the textile mill site;
    b. The location of the textile mill site;
    c. The amount of acreage involved in the textile mill site;
    d. Which building(s) the taxpayer intends to renovate;
    e. Which building(s) the taxpayer intends to demolish;
    f. Whether new construction is to be involved; and
    g. The estimated expenses to be incurred in connection with rehabilitation of
    textile mill site. Code Section 12-65-20(9).
    Note: See Question 17 for guidelines to consider when filing the Notice of Intent
    to avoid any credit reduction or ineligibility.
    8

11. Q. When should a taxpayer file a Notice of Intent?
A. This depends upon whether the taxpayer is seeking the income tax credit or the
property tax credit. The requirements are:
Income Tax Credit. The taxpayer must file a Notice of Intent with the Department
prior to receiving the building permits for the rehabilitation of the textile mill site
or phase thereof. Failure to provide the Notice of Intent prior to receiving the
building permits for the applicable rehabilitation at the textile mill site results in
qualification of only those rehabilitation expenses incurred after the Notice of
Intent is provided. Code Section 12-65-30(C)(2).
The written Notice of Intent for the income tax credit should be mailed to:
Textiles Credit Notice
Research and Forms Development
South Carolina Department of Revenue
Columbia, SC 29214-0019
Property Tax Credit. The taxpayer must file a Notice of Intent with the
municipality, or the county if the textile mill site is located in an unincorporated
area, where the textile mill site is located before incurring its first rehabilitation
expenses at the textile mill site. Rehabilitation expenses incurred before the Notice
of Intent is provided do not qualify. Code Section 12-65-30(B)(1).
Note: If the taxpayer later decides to choose the alternative credit, then a new
Notice of Intent should be filed with the other governmental agency and written
notification of withdrawal of the first Notice of Intent should be provided.
Expenses incurred prior to sending the second Notice of Intent may not be eligible
for the credit. A Notice of Intent for a textile mill site may not be sent
simultaneously to the Department and the county or municipality.

12. Q. Who must file the Notice of Intent?
    A. The taxpayer actually rehabilitating the textile mill site and placing the site in
    service for its intended use must file the Notice of Intent. In some instances, this
    may be the developer, the owner of the textile mill, one or more lessees of the site,
    or a pass through entity (not the individual partners, members or shareholders of
    the pass through entity).

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13. Q. Why is the estimated rehabilitation expense amount reported in the Notice of
Intent important?
A. The estimated rehabilitation expense amount reported in the Notice of Intent is
important because it affects the amount of credit a taxpayer is eligible for
depending on whether the taxpayer is seeking to take the income tax credit or
property tax credit. (See Question 11 regarding the timing of the filing of the
Notice of Intent and its effect on expenses eligible for the credit.)
Income Tax Credit. The income tax credit amount is equal to 25% of the actual
rehabilitation expenses incurred for the rehabilitation of the textile mill site (even
if actual rehabilitation expenses are below 80% of the estimated rehabilitation
expense amount reported in the Notice of Intent.) However, if the actual
rehabilitation expenses exceed 125% of the estimated rehabilitation expenses
reported in the Notice of Intent, then the credit is capped at 25% of 125% of the
estimated rehabilitation expense amount.
Property Tax Credit. The property tax credit is equal to 25% of the actual
rehabilitation expenses incurred for the rehabilitation of the textile mill site times
the local taxing entity ratio of each local taxing entity that has consented to the
credit if the actual rehabilitation expenses are between 80% and 125% of the
estimated rehabilitation expense amount reported in the Notice of Intent. If the
actual rehabilitation expenses exceed 125% of the estimated rehabilitation
expenses reported, then the credit is based on 25% of 125% of the estimated
rehabilitation expense amount. If the actual rehabilitation expenses are below 80%
of the estimated rehabilitation expense amount, then no credit is allowed. (See Part
6, “Property Tax Overview.”)

14. Q. Can the Notice of Intent be amended to restate estimated expenses?
    A. No. A Notice of Intent cannot be amended to revise the estimated rehabilitation
    expense amount to be incurred in connection with the rehabilitation of the textile
    mill site once submitted to the Department. Accordingly, the accuracy of the
    estimated expense amount listed in the Notice of Intent is important since the
    credit calculation is based on the amount of actual expenses compared to the
    estimated expense amount reported in the Notice of Intent (even if a taxpayer
    inadvertently includes other expenses in the Notice of Intent, such as personal
    property costs or acquisition costs). Note: For a taxpayer who has filed a Notice of
    Intent with the Department and has not placed the site in service, the Department
    will allow amendments of the Notice of Intent until October 15, 2015.

10

15. Q. Does a Notice of Intent have to be filed for each parcel if a textile mill site is
divided into separate parcels?
A. Yes. If a taxpayer chooses to subdivide a textile mill site into separate parcels,
then each parcel is deemed a textile mill site and a separate Notice of Intent must
be filed for each parcel.

16. Q. Can the Notice of Intent be amended to restate the number of parcels?
    A. No. A Notice of Intent cannot be amended to revise the number of parcels being
    rehabilitated. Note: For a taxpayer who has filed a Notice of Intent with the
    Department and has not placed the site in service, the Department will allow
    amendments of the Notice of Intent until October 15, 2015.
17. Q. What are some guidelines to consider when filing the Notice of Intent to avoid any
    credit reduction or ineligibility?
    A. Guidelines to consider when filing the Notice of Intent include:
    a. The Notice of Intent must contain a specific dollar amount of estimated
    rehabilitation expense for the textile mill site. A range of expenses, such as “$1
    million to $5 million,” is not acceptable.
    b. The specific amount of estimated rehabilitation expenses reported in the Notice
    of Intent should include only those expenses that qualify as rehabilitation
    expenses under the Act (see Question 6 above).
    c. Carefully consider and designate whether the textile mill site is to be renovated
    or demolished by the taxpayer as one or more parcels (i.e. sites).
    d. File a separate Notice of Intent for each parcel of a textile mill site. The
    separate Notices of Intent for the income tax credit may be mailed together. In
    multiple parcel rehabilitations, it is possible for the taxpayer to select the
    income tax credit for one or more parcels and the property tax credit for other
    parcel(s). In such cases, taxpayers selecting the property tax credit should
    notify the Department that a Notice of Intent has been submitted to the county
    or municipality.
    e. File one Notice of Intent for a textile mill site that is anticipated to be
    completed in phases. The one Notice of Intent should report a total of expenses
    for the entire rehabilitation; it should not report estimated costs by phases. The
    answer is different for a site divided into parcels.

11

f. A taxpayer may not file a “protective” Notice of Intent with both the
Department and the county or municipality while deciding whether to take the
income tax credit or the property tax credit.
g. A Notice of Intent provided to the Department does not represent approval of
the taxpayer’s eligibility for the credit, approval of the estimated rehabilitation
expenses, or approval of the credit amount.
h. The appropriate taxpayer(s) should file the Notice of Intent. The person who
will be incurring the rehabilitation expenses and placing the site in service is
the person who should file the Notice of Intent. For example, the taxpayer may
be the developer, the building owner, the tenant with a ground lease, or the
pass through entity (not the individual partners, shareholders or members)
incurring the rehabilitation expenses.
i. The Notice of Intent cannot be amended to restate estimated expenses to be
incurred in connection with the rehabilitation of the textile mill site or to
change the number of sites or parcels to be rehabilitated. Note: For a taxpayer
who has filed a Notice of Intent with the Department and has not placed the
qualifying building site in service, the Department will allow amendments of
the Notice of Intent until October 15, 2015.

PART 3 - INCOME TAX CREDIT

18. Q. When is the income tax credit earned?
    A. The entire credit is earned in the taxable year the applicable phase or portion of the
    textile mill site is placed in service. The credit, however, is taken in equal
    installments over 5 years beginning with the tax year the applicable phase or
    portion of the textile mill site is placed in service. Code Section 12-65-30(C)(3).
19. Q. What is the definition of “placed in service”?
    A. Placed in service means the date upon which the textile mill site is completed and
    ready for its intended use. If the textile mill site is completed and ready for use in
    phases or portions, each phase or portion is considered to be placed in service
    when it is completed and ready for its intended use. Code Section 12-65-20(7).
20. Q. What form is used to compute and claim the income tax credit?
    A. Form TC-23, “Credit for Textiles Rehabilitation,” is used to compute and claim
    the credit. A separate Form TC-23 must be used for each textile mill site or each
    parcel deemed to be a textile mill site.
    12

21. Q. What is the credit amount?
A. The credit amount is equal to 25% of actual rehabilitation expenses incurred at the
textile mill site (even if actual rehabilitation expenses are below 80% of the
estimated rehabilitation expense amount reported in the Notice of Intent).
However, if the actual expenses are more than 125% of the estimated expenses
reported in the Notice of Intent, then the credit amount is equal to 25% of 125% of
the estimated expenses incurred at the textile mill site. Code Section 12-6530(C)(1) and (2).
Rehabilitation Expenses
Actual rehabilitation expenses are 125% or
less of the estimated expenses in the Notice
of Intent
Actual rehabilitation expenses are more than
125% of the estimated expenses in the Notice
of Intent

Income Tax Credit Amount9
25% of actual rehabilitation expenses
incurred at the textile mill site
25% of 125% of the estimated expenses
incurred at the textile mill site

22. Q. Is the use of each annual credit installment limited?
    A. Yes. The annual available credit installment is limited to 50% of the taxpayer’s
    income tax, bank tax, corporate license fee, and/or insurance premium tax liability
    for the tax year. Code Section 12-65-30(C)(5).
    For example, a corporation earns a $500,000 credit in Year 1. The credit
    installment for Year 1 is $100,000, and can be used to offset 50% of the
    corporation’s income tax liability and 50% of the corporation’s license fee
    liability. If the corporation has a $140,000 income tax liability and a $40,000
    corporate license fee liability, the corporation may offset $90,000 of its liability
    ($70,000 income tax and $20,000 corporate license fee). The unused $10,000
    credit is carried forward for 5 years.
23. Q. What are the provisions for the allocation of the credit if the taxpayer is a
    partnership or limited liability company taxed as a partnership?
    A. If the taxpayer is a partnership or limited liability company taxed as a partnership,
    the credit may be passed through to the partners or members and may be allocated
    by the taxpayer among any of its partners or members on an annual basis,
    including, without limitation, an allocation of the entire credit to any partner or
    member who was a partner or member at any time during the year in which the
    credit is allocated. Code Section 12-65-30(C)(7).
    Note: A partnership cannot allocate more than its current year credit installment
    amount to any partner in a single tax year.
    9

For textile mill sites acquired before January 1, 2008, see Question 26 for the income tax credit amount.

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24. Q. What is the carry forward period?
A. Any unused credit may be carried forward for 5 years. Code Section 12-6530(C)(3).
The credit installment and the carry forward years are illustrated below.
Credit
Year 1
Installment
Amount
20%
Carry forward Years 2-6
of Installment

Year 2

Year 3

Year 4

Year 5

20%
Years 3-7

20%
Years 4-8

20%
Years 5-9

20%
Years 6-10

PART 4 - SPECIAL PROVISIONS and TRANSITIONAL RULES

25. Q. What credit statute governs a textile mill site placed in service before January 1,
    2008 and a textile mill site placed in service on or after January 1, 2008?
    A. The date a textile mill site is placed in service controls whether Title 12, Chapter
    65 or the original provisions of Title 6, Chapter 32 apply. Code Section 12-65-50.
    a. For a textile mill site or portion thereof placed in service after December 31,
26. The provisions of Title 12, Chapter 65 apply.
    b. For an entire textile mill site placed in service on or before December 31,
27. The former provisions of Title 6, Chapter 32, in effect as of December
    31, 2007, apply.
    c. For a textile mill site in which a portion, but not the entire textile mill site, was
    placed in service on or before December 31, 2007. The taxpayer may elect to:
    i. have the portion be governed by the former provisions of Title 6, Chapter
    32, in effect as of December 31, 2007, as if the portion were an entire
    textile mill site; or
    ii. have the portion be governed by Title 12, Chapter 65 such that the portion
    must be deemed to be a phase of the textile mill site placed in service on a
    date subsequent to December 31, 2007, identified by the taxpayer.
28. Q. What statutory differences exist in the definition of textile mill site and the Notice
    of Intent requirement, and the credit amount, for a textile mill site acquired
    before January 1, 2008 and a textile mill site acquired on or after January 1,
    2008?
    14

A. The statutory differences are summarized below.
a. Textile Mill Site Qualification – Based on Date of Acquisition
Textile Mill Site Acquired on or after January 1, 2008. Textile mill site is
defined as the textile mill together with the land and other improvements on it
which were used directly for textile manufacturing operations or ancillary uses.
However, the area of the site is limited to the land located within the
boundaries where the textile manufacturing, dying, or finishing facility
structure is located and does not include land located outside the boundaries of
the structure or devoted to ancillary uses. Code Sections 12-65-20(4) and 1265-35.
Textile Mill Site Acquired before January 1, 2008. Textile mill site includes
the textile mill structure, together with all land and improvements which were
used directly for textile manufacturing operations or ancillary uses, or were
located on the same parcel within 1000 feet of any textile mill structure or
ancillary uses. Code Section 12-65-20(4).
b. Notice of Intent to Rehabilitate Requirement – Based on Date of Acquisition
Textile Mill Site Acquired on or after January 1, 2008. The taxpayer
rehabilitating the textile mill site and placing it in service is required to file a
Notice of Intent with the Department for the income tax credit. Code Sections
12-65-20(9) and 12-65-30(C)(2).
Textile Mill Site Acquired before January 1, 2008. A Notice of Intent is not
required to be filed with the Department for the income tax credit. Code
Sections 12-65-20(9) and 12-65-30(C)(2).
c. Income Tax Credit Amount – Based on Date of Acquisition
Textile Mill Site Acquired on or after January 1, 2008. See Question 21.
Textile Mill Site Acquired before January 1, 2008. The credit amount is 25%
of actual rehabilitation expenses incurred for that site. Since the taxpayer is not
required to file a Notice of Intent with the Department for that site, the credit is
not maximized at 25% of 125% of the estimated expenses. Code Section 1265-30(C)(2).
Note: Transfers between affiliated taxpayers of phases of any textile mill site are
not considered acquisitions for purposes of the above transitional rules regarding
the Notice of Intent requirement and the income tax credit amount (items b. and c.
above). Code Section 12-65-30(C)(2).
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27. Q. Does the Act contain a repeal date of the credit?
A. No.

28. Q. Does Title 6, Chapter 31 apply to the credit?
    A. The provisions of Title 6, Chapter 31 (“South Carolina Local Government
    Development Agreement Act”) apply to this credit, however, Code Section 6-3140, (“Developed Property must Contain Certain Number of Acres of Highland”),
    does not apply. Code Section 12-65-40.

PART 5- TRANSFER of CREDIT and NOTIFICATION to the DEPARTMENT

29. Q. Can a taxpayer transfer the credit earned if he sells the textile mill site, or any
    phase or portion of the textile mill site that has been placed in service?
    A. Yes. If a taxpayer has earned the credit and sells the textile mill site, or any phase
    or portion of the textile mill site, the taxpayer may transfer all or part of the
    remaining credit associated with the rehabilitation expenses incurred with respect
    to that phase or portion of the site to the purchaser of the applicable portion of the
    textile mill site. Code Section 12-65-30(C)(6). Note: The answer is different if the
    textile mill site is sold prior to the site being placed in service. In such instance, no
    credit has been earned and no future credit can be earned on the site. See Question
    18 for a discussion of when the income tax credit is earned.
30. Q. Can a taxpayer that leases the textile mill site, or part of the site, transfer any
    remaining credit to the lessee of the site?
    A. Yes. If the taxpayer that leases the textile mill site, or part of the site, has earned
    the credit, then the taxpayer may transfer any applicable remaining credit
    associated with the rehabilitation expenses incurred with respect to that part of the
    site to the lessee of the site. Code Section 12-65-30(C)(6).
31. Q. Can an earned credit be transferred more than one time?
    A. Yes, provided the transfer of the earned credit is to a new owner or lessee of the
    textile mill site, or part thereof. Unused credit carryforwards may not be
    transferred. The Act does not contain any other transfer provision. The credit by
    itself cannot be bought or sold. Note: If the textile mill site, or phase or portion of
    the site, has not been placed in service, a credit has not been earned. See Questions
    18 and 19 for a discussion of when the income tax credit is earned.

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32. Q. When and how does a transferor notify the Department of a credit transfer?
A. The transferor must notify the Department in writing within 30 days after the
transfer.

33. Q. What form is used to claim a transferred credit?
    A. The transferee claims a transferred credit on Form TC-23, “Credit for Textiles
    Rehabilitation,” by completing applicable portions of the form.
34. Q. When can a credit be transferred?
    A. A credit can be transferred once the taxpayer rehabilitating the textile mill site has
    earned the credit (i.e., after placing the site or phase in service.) A transfer may
    take place prior to the time the South Carolina income tax return is filed for the
    year in which the credit is earned.
35. Q. What credit amount may the transferee claim?
    A. The original credit is earned in the year the textile mill site is placed in service, but
    is claimed over a 5 year period in equal installments. As such, the transfer may be
    for any applicable remaining credit associated with the rehabilitation expenses for
    the site. For example, if the original taxpayer sells the site in Year 3, the taxpayer
    may transfer the credit installments for Years 3, 4 and 5.
    Any credit carry forward resulting from the installments for Years 1 and 2 remain
    with the original taxpayer and may not be transferred. Code Sections 12-6530(C)(3) and (6).
36. Q. Can the transferee claim the entire credit in the year of transfer?
    A. A taxpayer to whom a credit has been transferred may only claim that year’s credit
    installment. Furthermore, that installment is limited in use to 50% of the
    transferee’s income tax liability (e.g., the entity’s, partner’s, shareholder’s, or
    member’s income tax liability or married couple’s income tax liability.) Code
    Section 12-65-30(C)(5).
37. Q. What is the credit carry forward period for a transferred credit?
    A. Each annual installment of the credit transferred may be carried forward for 5
    years. A transfer does not extend the time period a credit can be used. Code
    Section 12-65-30(C)(3).

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38. Q. How does a transferor notify the Department of a transfer of all or a portion of the
credit?
A. The transferor must send a written “notice of transfer” to the Department
containing the following information:
a. The complete name, address, telephone number and the last 5 digits of the
taxpayer identification number of the transferor of the credit;
b. The complete name, address, telephone number and last 5 digits of the
taxpayer identification number of each transferee of the credit;
c. The complete address and tax map number of the textile mill site;
d. The total amount of credit currently available to the transferor (i.e. the total
amount of credit less any credits used or carried forward by the transferor in
the current or prior tax years);
e. The date the original credit was earned (the date the site was placed in service)
and the amount of each credit installment;
f. The date the credit was transferred;
g. The amount of the credit transferred;
h. The transferor must provide a waiver of the right to claim that portion of the
credit that was transferred;
i. The transferor’s remaining credit balance after the transfer;
j. The consideration paid by the transferee, if any; and
k. Any other information requested by the Department.
The written notice should be mailed to:
Textiles Credit Transfer Notice
Research and Forms Development
South Carolina Department of Revenue
Columbia, SC 29214-0019
Code Section 12-65-30(C)(6)(b).

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PART 6 - PROPERTY TAX CREDIT OVERVIEW

39. Q. What are the requirements to file a Notice of Intent with the municipality or
    county?
    A. The taxpayer must file a Notice of Intent with the municipality, or the county if the
    textile mill site is located in an unincorporated area, where the textile mill site is
    located before incurring its first rehabilitation expenses at the building site.
    Rehabilitation expenses incurred before the Notice of Intent is provided do not
    qualify. Code Section 12-65-30(B)(1).
40. Q. What is the property tax credit amount?
    A. The amount of the property tax credit depends upon the amount of actual
    rehabilitation expenses compared to the estimated rehabilitation expenses reported
    in the Notice of Intent and is summarized below. Code Section 12-65-30(3).
    Rehabilitation Expenses
    If the actual expenses incurred in
    rehabilitating the textile mill site are
    between 80% and 125% of the estimated
    expenses in the Notice of Intent
    If the actual expenses are more than
    125% of the estimated expenses in the
    Notice of Intent
    Actual expenses under 80% of estimated
    rehabilitation expenses

Credit Amount
25% of the actual rehabilitation expenses
incurred at the textile mill site x the local
taxing entity ratio10 of each local taxing entity
that has consented to the credit
25% of 125% of the estimated expenses
incurred at the building site x the local taxing
entity ratio of each local taxing entity that has
consented to the credit
No credit

The credit may be taken against up to 75% of the real property taxes due on the textile
mill site each year for up to 8 years. Code Section 12-65-30(B)(3)(a).

PART 7 - EXAMPLES and ADDITIONAL GUIDANCE
Additional Guidance. The following scenarios provide additional guidance on the
general rules discussed in this advisory opinion regarding credit requirements.
A. Demolish Textile Mill and New Construction by Same Taxpayer. A taxpayer
demolishes (completely destroys) an abandoned textile mill and constructs a new
building meeting all the Act requirements. The taxpayer is eligible for the credit.

10

The local taxing entity ratio is set as of the time the Notice of Intent is filed and remains set for the
entire period the credit may be claimed by the taxpayer. Code Section 12-65-30(B)(3)(b).

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B. Demolish Textile Mill and New Construction by Different Owners. A developer
purchases an abandoned textile mill and demolishes it. The developer sells the land to a
business owner who will construct a new building on the land. The developer has not
rehabilitated the site and is not eligible for the credit. The business owner purchased
vacant land and not an abandoned textile mill and also is not eligible for the credit.
C. Textile Mill Site – Condition of Site. An abandoned textile mill that has fallen in but
remains on the ground meets the definition of textile mill. In contrast, an abandoned
textile mill that has been cleared except for the concrete foundation at the time of
purchase does not meet the definition of textile mill.
D. Property Sold After Being Completed. A developer rehabilitates an abandoned textile
mill and meets all the Act requirements. The rehabilitated building is recorded as
“inventory” on his books (i.e., the developer has completed rehabilitating the building
and it is ready to be held for sale or lease.) He sells the building to a retailer. Pursuant to
Code Section 12-65-20(7), the developer is deemed to have placed the textile mill site in
service as defined in the Act, and is eligible for the income tax credit; he also may
transfer the credit to the retail purchaser.
E. Property Sold Before Being Completed. A limited liability company purchases and
rehabilitates a textile mill and meets all the Act requirements. The textile mill is sold to
another investor during the rehabilitation. The limited liability company did not
complete the rehabilitation. Accordingly, no credit has been earned and the limited
liability company does not have any credit to transfer to the new owners. When the new
owners complete the rehabilitation and place the textile mill site in service, they are not
eligible for a credit since the textile mill they purchased was not an abandoned textile
mill under the Act.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
July 8
, 2015
Columbia, South Carolina

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