How did RR 95-16 direct admissions-tax revenue from major South Carolina tourism or recreation facilities?

Plain-English summary

South Carolina Revenue Ruling 95-16 explained how admissions-tax revenue from a qualifying major tourism or recreation facility was divided and used for infrastructure.

A facility generally needed at least $20 million of aggregate investment in land, new capital assets, refurbishment, or expansion within a consecutive five-year period. Qualifying uses included theme and amusement parks, museums, gardens, aquariums, cultural centers, theaters, production studios, convention centers, arenas, auditoriums, golf courses, and spectator or participatory sports facilities. Supporting hotels, food, and retail services within or immediately adjacent to the development area could count, but residential development and acquisition of an existing operation did not.

For a qualifying facility, one-fourth of the admissions license tax went to the county or municipality where it was located, and one-fourth went to a state tourism-infrastructure development fund. The distributions ran from opening to the public through the next 15 years and had to fund additional infrastructure improvements. Interest stayed with the fund that earned it and had the same restricted use.

Local governments could receive distributions before the investment threshold was completed if the facility was open and the business guaranteed completion within the required period. A later-approved application could correct earlier distributions only through adjustments within the same fiscal year, not a prior fiscal year.

A designated development area's boundaries had to be established by ordinance before the new or expanded facility opened. The area could cross a tax-increment-finance district, and its boundaries could be amended before opening.

Common questions

Q: What was the minimum investment? $20 million within a five-year period.

Q: Did buying an existing facility qualify? No. The ruling required land and new capital investment or refurbishment or expansion, though a qualifying facility's 15-year period continued after a purchase if operations continued substantially the same way.

Q: Could housing development count toward the threshold? No. Certain directly supporting hotel, food, and retail facilities could count.

Q: What could local governments do with the revenue? Use it directly or indirectly for additional infrastructure and share it with another local government or special-purpose district supporting the generating facility.

Q: What happened to unused money after 15 years? It remained in the appropriate fund for permitted infrastructure projects until depleted.

Citations and references

• S.C. Code Ann. § 12-21-2423 (major tourism or recreation facility admissions-tax distributions)

Subject

Use of Tax From Major Tourism Facilities

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR95-16.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING #95-16 (TAX)

SUBJECT:

Use of Tax From Major Tourism Facilities
(Admissions Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-21-2423 (Supp. 1994)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1994)
SC Revenue Procedure #94-1

SCOPE:

A Revenue Ruling is the Department of Revenue's official
advisory opinion of how laws administered by the Department are
to be applied to a specific issue or a specific set of facts, and is
provided as guidance for all persons or a particular group. It is
valid and remains in effect until superseded or modified by a
change in the statute or regulations or a subsequent court decision,
Revenue Ruling or Revenue Procedure.

Code Section 12-21-2423 provides requirements for the collection, distribution and use of the
license tax on admissions to major tourism or recreation facilities. Effective July 1, 1993, this
statute applies to any major tourism or recreation facility, as defined below, which opened to the
general public on or after January 1, 1993.
For major tourism and recreation facilities that meet the minimum investment requirement of the
statute, one-fourth of the license tax on admissions is paid to the county or municipality in which
the facility is located and one-fourth is paid to a special State fund. If the facility is located in an
unincorporated area of a county, the payment is made to the county governing body and, if
located within the corporate limits of a municipality, the payment must be made to the municipal
governing body. Funds transferred to a State fund are transferred to the State Treasurer to be
deposited in a special tourism infrastructure development fund and distributed as infrastructure
development grants by the Advisory Coordinating Council for Economic Development of the
Department of Commerce. These portions of the license tax are remitted to the counties or
municipalities, and the State Treasurer beginning when the facility is open to the general public
and ending fifteen years thereafter. These funds are to be used for additional infrastructure
improvements.

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The statute defines a "major tourism or recreation facility" as an "establishment or predetermined
'designated development area' to which an aggregate investment in land and new capital assets or
in refurbishing or expanding an existing facility of at least twenty million dollars is made within
a five-year period and which is used for a theme park, an amusement park, an historical,
educational, or trade museum, a botanical or zoological garden, an aquarium, a cultural center, a
theater, a motion picture production studio, a convention center, an arena, a coliseum, an
auditorium, a golf course, or a spectator or participatory sports facility and similar
establishments." The statute also provides a designated development area "includes, but is not
limited to, a downtown or waterfront redevelopment area, a local historic district, redevelopment
of a closed military facility, or a newly-designated economic development site that includes
tourism or recreation facilities as described in this section."
Numerous questions have arisen concerning the administration of the funds pursuant to this
statute. The following addresses these questions.
Q1. What is the minimum investment that must be made for an establishment to qualify as a
"major tourism or recreation facility"?
A1. An aggregate investment in land and new capital assets or in refurbishing or expanding an
existing facility of at least $20,000,000 within a five year period must be made to a major
tourism or recreation facility.
Q2. How long does a business have to meet the $20,000,000 investment requirement?
A2. The statute provides that the minimum investment must be made within a five-year period.
Any investments made after the five-year period may be applied to another investment.
Q3. How is the five-year investment period determined?
A3. The five-year investment period can be any consecutive five year period, provided the
facilities are opened to the public after December 31, 1992.
Q4. Who certifies that the minimum investment level has been met?
A4. The Department of Revenue, with the assistance of local assessors.
Q5. Does an investment in residential property development that directly supports a recreational
facility apply towards the minimum investment?
A5. No, this is not permitted by the statute. However, secondary support facilities such as hotels,
food, and retail services located within the establishment or the designated development area or
immediately adjacent to and which directly support the primary tourism or recreation facility are
included as part of the minimum investment.

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Q6. Does the purchase of an existing operation qualify as a "major tourism or recreation facility"
eligible for the infrastructure incentives?
A6. No, acquisitions do not qualify. The statute provides for a required investment in land and
new capital assets or in refurbishing or expanding an existing facility. However, the fifteen year
period continues to run when a business purchases a qualifying business and continues to operate
it in substantially the same manner.
Q7. Are there any restrictions on a county's or municipality's use of the admission taxes from
major tourism or recreation facilities paid to them in accordance with Code Section 12-21-2423?

A7. These funds must be used directly or indirectly for additional infrastructure improvements.
In addition, the county or municipality may share funds received from these payments with
another county, special purpose district, or municipal governing body to provide additional
infrastructure facilities or services in support of the tourism or recreation facility that generates
the admission tax revenues responsible for the payments.
Q8. What happens to revenue collected but unused after the 15 year period?
A8. The revenue will remain in the appropriate fund and continue to be used for permitted
infrastructure projects until depleted.
Q9. Where will interest or other earnings on the revenue deposited in the local county or
municipal fund and revenue deposited in the State fund be credited?
A9. Interest or other earnings on the funds will be credited to the local fund or State fund which
earns the interest. A separate accounting should be maintained to insure proper distribution of
the interest. The funds and interest earned must be used for permitted infrastructure projects
until depleted.
Q10. May local governments receive fund distributions before the business meets the minimum
investment requirement?
A10. Yes, if the facility is opened to the general public and the business guarantees the minimum
investment will be made within the required period, funds may be distributed to local
governments for approved infrastructure improvements even if a business has not met the
minimum investment.
Q11. May local governments receive funds for prior periods if the application for "Certificate of
Eligibility for Portion of Admissions Tax for Infrastructure Improvements" is not approved by
the Department before the facility opens?
A11. Local governments may receive funds for prior periods when the application for
"Certificate of Eligibility for Portion of Admissions Tax for Infrastructure Improvements" is
approved after the facility opens to the extent that admissions taxes collected after the approval

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and during the same fiscal year can be allocated to correct the prior distribution. However,
admissions taxes cannot be reallocated to correct distributions for prior fiscal years. It has been
the longstanding policy of the State Treasurer and the Department to correct misallocations by
adjusting subsequent allocations, providing these adjustments may be made only in allocations
made in the same fiscal year as the misallocation.
Q12. May the boundaries of a Designated Development Area cross over the boundaries of a tax
increment finance district?
A12. Yes.
Q13. When should the ordinance establishing the Designated Development Area be adopted?
A13. The statute provides that a designated development area and its boundaries must be
determined in advance of the opening of the new or expanded facilities by municipal ordinance,
if located in a municipality, and otherwise by county ordinance, if located in an unincorporated
county area, or by more than one ordinance by municipal or county governments, or both, if it
embraces areas within two or more governmental jurisdictions.
Q14. May the property boundaries of a Designated Development Area be amended?
A14. The ordinance may be amended prior to the opening of the new or expanded facility.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank, III, Director

Columbia, South Carolina
, 1995
November 7

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