07.8.2016 | Articles / Publications
10 Items of Note From the 2016 South Carolina Legislative Session
The South Carolina General Assembly completed its 2016 regular session on June 2. The following are highlights from that session.
1. Highway Funding and SCDOT Restructuring
Legislation (S.1258) addressing road funding and South Carolina Department of Transportation (SCDOT) restructuring was signed by the Governor on June 8, 2016 (Act No. 275). The legislation allows for an estimated total of up to $4.5 billion to be devoted to the state’s roads over the next ten years, including:
- $950 million to repair or replace all structurally-deficient bridges on Interstate and national highways;
- $2 billion in widenings and improvements to existing Interstates; and
- over $1.4 billion in pavement resurfacing.
The legislation transfers motor vehicle sales tax revenue and the revenue from various Department of Motor Vehicles fines and fees to the SCDOT’s State Highway Fund. Transferred funds may be used for the issuance of bonds through the South Carolina Transportation Infrastructure Bank. The Infrastructure Bank projects financed utilizing these transferred funds do not require a local match.
The legislation’s revenue revisions also allow for existing SCDOT funds to be redirected. Under the legislation, the SCDOT is charged with developing and implementing a needs-based weighting methodology to allocate funding within the state-funded road resurfacing program, which must include consideration on a county-by-county basis, to ensure that each county in the state is guaranteed funding.
The legislation includes a restructuring of the commission overseeing the SCDOT. While retaining the commission’s geographical representation, it allows all commissioners to be appointed by the Governor, upon the advice and consent of the Senate, instead of legislators electing commissioners.
The Governor’s transportation district appointees are submitted to the Senate and the House of Representatives for approval by the appropriate delegation of legislators residing in the corresponding congressional district. If approved, appointees are referred to the Joint Transportation Review Committee to ensure they meet the qualifications for the office. The Governor’s at-large appointee is submitted directly to the Joint Transportation Review Committee for screening. Commission members may be removed from office at the discretion of the Governor subject to the prior approval of the appropriate legislative delegation. Terms of service are limited to a maximum of twelve years.
Under restructuring, the SCDOT Commission assumes the responsibility of appointing the Secretary of Transportation, upon the advice and consent of the Senate. In order to afford the chief internal auditor of the SCDOT greater independence, the legislation provides for the department’s chief internal auditor to be appointed and overseen by the State Auditor rather than the DOT Commission.
The legislation also provides for revisions to the South Carolina Transportation Infrastructure Bank. Before providing a loan or other financial assistance, the Board of Directors that oversees the Infrastructure Bank must submit its decision to the SCDOT Commission for its consideration. The SCDOT Commission can, in turn, approve or reject the decision or request additional information.
The Infrastructure Bank’s policy of following the SCDOT’s project priority criteria is established as a statutory requirement. The General Assembly may, however, enact a joint resolution specifically allowing the bank to fund a project without using SCDOT’s prioritization criteria. The minimum project amount set in Transportation Infrastructure Bank requirements is lowered from $100 million to $25 million. This threshold is lowered to allow more areas to be able to afford local match requirements and take advantage of the bank’s bonding capabilities for financing their transportation projects. No hybrid fees were included in the legislation.
H.3186 provides for more expansive statements of economic interests for public officials and others who are required to make these filings under the Ethics, Government Accountability, and Campaign Reform Act.
Beginning January 1, 2017, a statement of economic interests will have to include a listing of the private source and type of any income received in the previous year by the filer or a member of the filer’s immediate family. “Income” is defined to include anything of value received which must be reported on a form used the IRS for the reporting or disclosure of income. Excluded from the defined of income is retirement type payments.
Act 282, H.3184 alters the process for the review, investigation and consideration of complaints and other enforcement actions, particularly as it relates to members of the General Assembly. The legislation retains roles for the respective ethics committees of the House and Senate but inserts a role for the State Ethics Commission to investigate and report to the respective legislative ethics committee. Act 282 is effective April 1, 2017.
3. South Carolina Individual Income Tax Deduction for Military Retirement Benefits
H.3147 was signed by the Governor on June 7, 2016 (Act No. 272). It provides a South Carolina individual income tax deduction for military retirement benefits in an amount of up to $30,000 each year for those who are at least sixty five years old and up to $17,500 each year for younger taxpayers. A surviving spouse receiving military retirement income is eligible for the deductions.
The deductions are gradually phased in under a five-year schedule so that maximum deductions for military retirement benefits are provided by 2020.
The legislation also includes provisions for unused textile mill site rehabilitation tax credits to be carried forward.
4. Certificate of Need
The legislature adjourned for the year without passing the certificate of need (CON) reform bill, H.3250. Elements of the reform legislation included:
- allowing bed expansion at existing facilities;
- allowing health service expansion at facilities where there was already a CON for the service to be expanded;
- increasing the capital and equipment thresholds; and
- adding features that streamline the application and appeals process.
Several times during the session, the competing interests attempted to find a consensus on the various elements contained in the legislation, however, that consensus was never found and the reform legislation died on the Senate Calendar.
5. Real Property Tax Revisions
H.3313 involves taxes on real property changed from agricultural use to residential or commercial development. If 10% or more of a parcel is designated on the recorded development plat as “green space for conservation” or “open space,” it will be valued according to its new “green space for conservation” or “open space” use for purposes of calculating roll-back tax due on the parcel.
The legislation provides that, after a parcel of real property has been sold or undergone another assessable transfer of interest, delinquent property tax and penalties assessed because the property was improperly classified as owner-occupied residential property while owned by the transferor are solely a personal liability of the transferor. The tax and penalties assessed do not constitute a lien on the property and are not enforceable against the property after the assessable transfer of interest, if the transferee is a bona fide purchaser for value without notice.
Under the legislation, these provisions that taxes and penalties assessed because of misclassification of real property remain the obligation of the property owner at the time of the misclassification, rather than the responsibility of the buyer of the property, would apply not only to property sales but also to trust distributions and property settlements in divorces.
The legislation provides that roll-back taxes must not be applied solely because the owner of the property fails to make written application for an agricultural assessment so long as the actual use of the property remains agricultural.
If the property assessment is changed from agricultural or the property is assessed roll-back taxes, the owner may appeal. If an appeal is made, the property must continue to be assessed as agricultural and the roll-back taxes may not be applied until the final appeal date.
The legislation also establishes a protocol authorizing a county to allow a taxpayer the option of receiving certain property tax bills and receipts in electronic form.
The Governor signed the legislation on June 7, 2016 (Act No. 251).
6. Tax Incentives
- job tax credits for commercial aviation sector services relating to the repair, maintenance, and refurbishment of aircraft;
- job tax credit eligibility provisions for agricultural packaging operations and for seasonal workers at agricultural packaging and agribusiness operations; and
- a sales tax exemption for machines used in agricultural packaging operations.
The legislation provides that, in awarding benefits for economic development projects, including awards from the Governor’s Closing Fund, the Department of Commerce and the coordinating council must consider agricultural businesses.
The Department of Commerce and the coordinating council must consider the number of jobs created, including full-time, part-time, and seasonal jobs, and the total investment made, including the cost of the real property.
S.427 was signed by the Governor on June 8, 2016 (Act No. 256).
7. “Bad Faith Assertion of Patent Infringement Act”
H.3682 responds to the activities of “patent trolls” who make abusive assertions relating to intellectual property, such as false accusations of patent rights infringement.
Even when claims of infringement on intellectual property lack merit, those accused of patent infringement may be inclined to pay a demanded license fee rather than face the expense and uncertainty of defending the ownership of their intellectual property through litigation.
The legislation makes it unlawful to bring a bad faith assertion of patent infringement, establishing criteria for determining which demands for payment of license fees or threats of litigation constitute bad faith assertions of patent infringement, and providing legal remedies for those targeted by such practices.
The Attorney General is authorized to act upon violations.
A sunset provision is included so that the legislation is set to expire as of July 1, 2021, unless reauthorized by the General Assembly.
The bill was signed by the Governor on June 9, 2016 (Act No. 261). The effective date was July 1, 2016.
8. “SC Overdose Prevention Act”
H.5193 makes provisions for more expansive dispensation of opioid antidotes to individuals who may be at risk of an opioid drug overdose. The bill was signed by the Governor on June 5, 2016 (Act No. 247).
The legislation also provides for a South Carolina Department of Health and Environmental Control (DHEC) study of the use of marijuana in the treatment of post-traumatic stress disorder in veterans. DHEC is directed to study:
- the possibility that a person experiencing an opioid related overdose would be decreased if access to cannabis was legally permitted; and
- the extent to which states have latitude by federal law for a Veterans Affairs’ physician licensed in the State of South Carolina to provide a written certification that a veteran would benefit from the use of marijuana for medicinal purposes rather than being prescribed opioids.
DHEC shall provide the General Assembly a report on the findings by January 1, 2017.
9. Coordinating Council of Workforce Development
H.4145 creates a Coordinating Council of Workforce Development to develop and implement procedures for sharing information and coordinating efforts among stakeholders to prepare the state’s current and emerging workforce to meet the needs of the state’s economy and to make recommendations on policy changes to the General Assembly.
The coordinating council is required to submit an annual progress report to the Governor and the General Assembly.
H.4145 was signed by the Governor on June 8, 2016 (Act No. 252).
10. Shortening the Legislative Session
S.267, a bill shortening the legislative session, was signed into law by the Governor on June 3, 2016 (Act No. 199). The legislation provides for the regular annual session of the General Assembly to adjourn for the year by the second Thursday in May rather than the current deadline of the first Thursday in June.
In addition to the current provisions for extending a legislative session, the legislation provides that if a forecast reduction is submitted by the Board of Economic Advisors after April tenth for the next fiscal year, the adjournment date for the General Assembly may be extended up to two weeks with the agreement of the Speaker of the House and the President Pro Tempore of the Senate.
11. FY2016-2017 General Appropriations Bill and Capital Reserve Fund
The $7.5 million budget bill went into effect on July 1 and included the expenses noted below.
Flood Disaster Response
- $72 million in nonrecurring funds is allocated to the Adjutant General’s Emergency Management Division as the full state and local match for Federal Emergency Management Agency (FEMA) funds for the 2015 catastrophic flood response.
- $40 million appropriation from the 2014-2015 Contingency Reserve Fund for the “South Carolina Farm Aid Fund” that is created to assist farmers who suffered extensive damage in the October 2015 floods.
- $30 million is provided for coastal beach re-nourishment.
K-12 Public Education
- $218 million is used to increase the base student cost to $130 to arrive at an estimated $2,350 per pupil.
- 2% teacher salary increase and a one-year step increase for teacher salaries and an increase in the state salary schedule to 23 years.
- $29.3M in Lottery Funds for K-12 Technology Initiative.
- $18M in Lottery Funds for Instructional Materials.
- Buses: $23 million, including $2 million in nonrecurring funds, is provided for new school buses.
Higher Education & Tech
- $28 million in recurring increases for the state’s colleges and universities
- $10 million is for the Children’s Hospital at MUSC.
- $13.5 million in nonrecurring funds is devoted to worker training through the Ready SC Program at the state’s technical colleges.
State Employee Pay Increase
- $53.4M in recurring funds for a 3.25% state employee pay increase.
- $26 million to cover the increased costs of operating the state’s health and dental insurance plans with no increases in the premiums paid by employees and no reductions in coverage.
- $12.5 million in recurring dollars
- $10.6 million in nonrecurring dollars.
RURAL HEALTH INITIATIVE (DHHS/USC)
- $5 million is provided for a Rural Health Initiative partnership between DHHS and the USC School of Medicine to enhance the recruitment of physicians to practice in underserved areas and to improve access to life-saving emergency room care in the wake of rural hospital closures.
- $10M for Telemedicine through the Healthy Outcomes provisions
- $2 million in recurring funds
RURAL INFRASTRUCTURE FUND
- $2.8 million is allocated to the Rural Infrastructure Fund used to provide grants for water and sewer projects that facilitate economic development in rural areas.
- $8 million is included for a new Statewide Water and Sewer Fund that allows areas that do not meet the criteria for being considered rural to obtain grants for sewer and water projects that are needed to support economic development.
- $17 million is provided for the Deal Closing Fund that the Department of Commerce uses to recruit new business to the state.
- $6 million for the Locate SC Site Inventory for potential business relocation prospects.
- $2 million for the Office of Innovation to support high-tech and high-growth industries.