HSB Insider's Perspective
by Perry MacLennan
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Dear Friends:
The new year always brings renewed optimism. We are hopeful that 2022 brings prosperity to your business and industry. Success in 2022 may depend largely on overcoming two critical challenges facing the American economy – labor market volatility and inflation. Of course, COVID-19 remains an ever-present obstacle to business activity and will continue to impact staffing, logistics, and the overall health of the economy.
Inflation climbed to its highest level in 40 years at the end of 2021. The post-lockdown economic recovery is being threatened by higher prices. The Federal Reserve has signaled that interest rates will rise, increasing borrowing costs at all levels. Public markets have started the year with a negative reaction. Much of the political discourse this year is likely to focus on inflation and the correct policy to keep it in check.
As a dual economic development and employment lawyer, I am more interested in this peculiar labor market. Currently, companies are experiencing unprecedented levels of turnover and staff shortage. Labor economists have dubbed the phenomenon “The Great Resignation,” due to the record number of employees quitting their job. In addition to the usual costs associated with high turnover, many companies have incentives tied to employment levels. Fluctuation in headcount can negatively impact the value of those incentives.
Many believed enhanced unemployment assistance was contributing to the worker shortage. However, those benefits have ended and the shortage has continued, suggesting something more fundamental is happening. Essentially, the pandemic has forced workers to reconsider their jobs and future careers. Many are leaving in search of a job that more closely aligns with their particular priority – whether that be health and safety, flexibility, or simply compensation. Inflation alone is requiring companies to consider raising wages. In 2021, wages increased by 4.7%, the highest increase in decades.
If hiring and retention were not difficult enough, the battle over vaccine mandates rages on. As this letter goes to press, the U.S. Supreme Court is set to decide whether the federal government can require some private employers to mandate vaccinations or weekly testing as a condition of employment. Some states have done the opposite and prohibited companies from making vaccination status a hiring condition. Neither approach is good for the labor market.
Economic development practitioners understand acutely the implications here. Workforce is routinely named as a top issue for site selection consideration. Consumer demand is high in most industries, but staff is crucial to supply the goods to meet that demand. Any plans for growth hinge on a healthy workforce supply.
We enjoyed working on a wide variety of exciting economic development projects in 2021 and appreciate the confidence and trust of our valued clients and allies. We look forward to continuing that work in 2022 and wish you all the best for an outstanding year.
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2022 County Tiers Set for JTCs, Fee in Lieu and Tax Moratorium |
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Each year, South Carolina's 46 counties are designated as being within one of four "tiers" for job tax credit and job development credit purposes based on a county's unemployment rate and per capita income. The SC Department of Revenue has published the 2022 designations. The chart to the right shows the counties with a new tier designation.
Below is a complete list of counties and their respective tiers for 2022:
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There was no change in the income tax moratorium counties (Chesterfield, Dillon, and Jasper), and for 2022, no counties qualify for the reduced $1 million investment threshold for FILOT agreements. |
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2022 JDC Wage Update Released |
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On January 13, 2022, the South Carolina Coordinating Council for Economic Development issued an updated hourly wage memorandum for companies participating in the job development credit (JDC) program. The updated wage levels and associated JDC percentages are as follows:
2% - $10.84 - $14.44 / hour
3% - $14.45 - $18.05 / hour
4% - $18.06 - $27.09 / hour
5% - $27.10 and over
Job development credits are always subject to the terms of a company’s “Final Revitalization Agreement” with the Coordinating Council. Credits are the product of wages paid to eligible employees, a percentage ranging from 2% to 5% (as set forth above), and a percentage based on the county’s tier ranking, ranging from 55% for projects in Tier I counties to 100% for projects in Tier IV counties. Most Final Revitalization Agreements also contain a contractual minimum wage level, and agreements in recent years provide for that wage level to be reset every five years based on an inflationary adjustment. Companies claiming JDCs should pay close attention to these issues.
Each company participating in the JDC program should receive an updated wage memorandum and contact sheet that must be signed and returned to the Coordinating Council by April 30.
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South Carolina Code § 12-6-3375 provides a tax credit to a taxpayer engaged in manufacturing, warehousing, or distribution that uses South Carolina port facilities and increases its port cargo volume at these facilities by at least 15% in a calendar year over its base year port cargo volume. Form TC-30, "Port Cargo Volume Increase," is used to claim the credit.
It is important to note that tax credit applications should be submitted early in the year as the maximum amount that all taxpayers may claim pursuant to this section is subject to an annual cap. Please contact a member of the HSB ED team if you have questions.
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In 2018, South Carolina introduced a new program that provides a tax credit to agribusiness or agricultural packaging operations increasing their purchases of South Carolina agricultural products. If the "base year" of a company's purchases exceeded $100,000, and the company increased such purchases by at least 15%, the company can submit an application for credits against either income or withholding taxes. The amount of the credits is determined by the South Carolina Coordinating Council, based on the information provided in the application. The credit may not exceed $100,000 per taxpayer in any one year. As with port cargo volume credits, these credits are also subject to an annual, statewide cap, so qualifying taxpayers should apply for credits as early in the year as possible. |
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Per Capita Income Figures |
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On December 10, 2021, the South Carolina Department of Revenue released SC Information Letter #21-27, setting forth the updated per capita income level for the state at $48,021. Please access the link to view the county per capita income levels. The state per capita income is relevant for the small business job tax credit, in which a taxpayer with 99 or fewer employees in an eligible industry increases employment by two or more new, full-time jobs. If the average wages of those jobs do not exceed 120% of the lower of the county or state average per capita income, the credits are cut in half. Notably, if the small business creates ten or more new, full-time jobs, the business qualifies for the full amount of job tax credits without regard to wages.
In addition, the state per capita income is relevant for purposes of defining a "qualifying service-related facility," which is applicable for both job tax credits and job development credits and which has become an increasingly important avenue for non-manufacturing businesses to qualify for key South Carolina incentives. Further, the figure is relevant to technology-intensive facilities for determining eligibility for the sales and use tax exemption for computer equipment, as well as for the state income tax credit on personal property expenditures associated with corporate headquarters projects.
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HSB Expands into North Carolina |
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We are excited to announce that we have opened an office in Raleigh. The firm has seen steady growth in client demand from North Carolina. William McKinney, who rejoined the firm last summer after serving as general counsel to the Governor of North Carolina, will serve as lead office partner in Raleigh. William focuses his practice in the areas of state and local government, economic development, and business litigation.
The firm’s Raleigh office is in The Dillon at 223 South West Street, the first mixed-use development of its kind in downtown Raleigh’s rapidly expanding, vibrant Warehouse District.
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HSB is proud to support the Palmetto Partners program. Gary Morris participated in the recent Site Consultant lunch in Atlanta and Philip Land traveled to Cologne, Germany for Anuga, the food and beverage industry's global trade fair.
Will Johnson attended the SEDC Meet the Consultants conference held in Atlanta. We look forward to seeing you at an industry event in 2022!
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Our Economic Development Team recently had the opportunity to welcome Secretary of Commerce Harry Lightsey back to South Carolina. We look forward to working with Secretary Lightsey and the great team at DOC. |
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William R. Johnson, Economic Development Group Leader
1201 Main Street, 22nd Floor, Columbia, SC 29201
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Haynsworth Sinkler Boyd newsletters are intended to provide general information on the topics covered. The contents are not intended and should not be construed as legal advice or legal opinions. Readers should consult with legal counsel to obtain legal advice regarding particular situations. Any result the law firm and/or its attorneys may have achieved on behalf of clients in other matters does not necessarily indicate similar results can be obtained for other clients. © 2022 Haynsworth Sinkler Boyd, P.A. |
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