Revenue Agency Changes Mind, Grants Tax Breaks

It’s not every day that a member of the S.C. General Assembly asks his fellow legislators to uphold a veto of a bill the legislator introduced and labored long and hard to get passed.

But that’s exactly what Democratic Sen. Creighton Coleman of Fairfield County did toward the end of this year’s regular legislative session.

In fact, Coleman was so determined to get the legislation passed that he reintroduced it after it already had become law.

(You know the cliché – we don’t make this stuff up.)

Indeed, this is the story of a bill that Coleman sponsored twice, got passed twice, was vetoed twice and made it into law once, but did not become law on the second go-round – because the senator did not want it to – all over the course of two years and two different legislative sessions.

What gives?

Following the bouncing bills, they appear to lead to an unexplained change of heart at the S.C. Department of Revenue in approving a special tax favor in a very long list of special tax favors on the state’s books.

Coleman’s legislation was designed to award state sales-tax exemptions to the Institute for Business and Home Safety, a nonprofit, nonpolitical property insurance industry research organization based in Tampa, Fla.

The sales-tax breaks would apply to a facility the Institute for Business and Home Safety finished building in Chester County in the Upstate region of South Carolina in September.

Specifically, the exemptions would be for “machinery and equipment, building and other raw materials, and electricity used in the operation” of the site.

The institute uses the facility to test the effects of natural disasters, such as wildfires and hurricane-force winds, on homes and other structures. The goal of its research, the institute says: to improve the design and construction of houses and buildings.

The results of the organization’s work will be made publicly available, institute president and CEO Julie Rochman told The Nerve for an earlier story.

The institute invested $40 million in the testing center and it employs 18 people, according to Chester County economic development director Karlisa Parker. “That is the only one of its kind in the world,” Parker says of the facility.

Initially, Parker says, she worked with institute officials to try to gain approval of property- and sales-tax breaks from the Department of Revenue because the institute is a nonprofit research and development group.

But Revenue said the institute did not qualify for the exemptions, Parker says.

So, Coleman, who represents part of Chester County, undertook his legislative effort.

In the meantime, the county granted the institute a break on its local property taxes: 98 percent for the first two years and 80 percent for the next eight turns of the calendar. “Because we felt like we wanted to give them an opportunity to get that (legislation) taken care of,” Parker says.

Through its local attorney, Burnie Maybank of the Nexsen Pruet law firm headquartered in Columbia, the institute declined to comment for this story.

The Coleman-sponsored measure that became law (Act 280, Senate bill 717) passed at the end of the 2010 legislative session when lawmakers overrode former Gov. Mark Sanford’s veto of it.

However, the timeframe for the institute to claim sales-tax exemptions as set forth in the law conflicted with when the organization began and completed the testing facility.

So, Coleman sponsored legislation during this year’s session to change that timeframe so that the institute could claim the tax breaks, essentially making the exemptions retroactive.

Efforts to reach Coleman on Wednesday were unsuccessful. He did not respond to phone and email messages for a previous story by The Nerve on this issue.

Once more, the Legislature passed Coleman’s bill, S. 533; and once more, it was vetoed.

When the Senate took up the veto this time, however, Coleman made a rather unusual request of his colleagues in the chamber. It happened on May 5.

“This particular S. 533 was passed because of an interpretation by the Department of Revenue that we felt erroneous,” Coleman said. “Since that time the Department of Revenue has reconsidered their position on the bill we passed last year, and we have the tax credit. As a result, the passing of this 533 is not necessary. Therefore I request that the veto be sustained.”

Senators kindly obliged, voting 35-0 to uphold the veto.

The question, of course, is what prompted the Department of Revenue’s change of heart on the matter, and why?

The agency isn’t saying.

In a phone call Wednesday morning, Revenue spokeswoman Samantha Cheek said she would get back to The Nerve about it. But that did not happen.

Parker says she was unaware of the DOR’s turnabout, but she greets it as good news. “That’s what we had hoped is that DOR would reconsider when we first went down to see them, is that they are a research and development organization,” she says.

As to the impact of Revenue’s switcheroo on state coffers, a Board of Economic Advisors projection on the 2010 legislation said it would reduce tax revenue by an estimated $960,000.

But a Feb. 15 Board of Economic Advisors review of this year’s bill said it was expected to have no fiscal impact because the board already had deducted sales tax revenue in an estimate it had prepared on the legislation earlier that month.

All’s well that ends well, right?

Reach Ward at (803) 254-4411 or eric@thenerve.org.