COLUMBIA, S.C. — On Tuesday, Aug. 13, the South Carolina Legislative Audit Council (LAC) released an update on its June 2020 review of Incentive Programs offered by the state’s Department of Commerce (DOC) to attract new manufacturing opportunities.
For the initial June 2020 report, members of the General Assembly asked LAC to evaluate the effectiveness and transparency of the DOC program during the audit period from January 2009 to September 2019. LAC was to determine whether the economic results of those programs had been achieved and whether there were any processes in place for monitoring companies' compliance with incentive requirements.
Billions of dollars in tax credits, called Job Development Credits (JDCs), are available for companies wanting to locate or expand operations in South Carolina. JDCs were created as part of the Enterprise Zone Act of 1995, are administrated by the staff at DOC, and vary in dollar amount depending on the eligible company's location within South Carolina, the wages paid for new jobs created by the company, and the scope of the eligible company’s project. According to DOC, companies have five years to complete their investment and job creation requirements. Once a company completes its investment and job creation requirements and submits documentation confirming the attainment of these requirements to the Coordinating Council, the Coordinating Council certifies that the company may begin receiving its JDC reimbursement every quarter. Companies usually receive reimbursements over 10 years, though some larger projects may involve reimbursements up to 15 years.
The LAC 2020 report found that of the 415 JDC projects approved during the audit period of January 2009 to September 2019:
- 31 of the projects were closed
- 174 projects were open and certified as having met the job and investment requirements
- the remaining 210 projects had yet to be certified
- a total of 34,562 new jobs were created
- around $8.4 billion had been invested by the certified JDC projects
However, at the time, LAC found that DOC did not record the number of actual jobs created in excess of the project’s minimum requirements.
As a result of its June 2020 audit, LAC developed a list of 39 recommendations for DOC, Coordinating Council for Economic Development, General Assembly, and Department of Revenue (DOR) to implement. The audit uncovered instances where Commerce did not meet standards for transparency, oversight and evaluation of its corporate incentive programs.
LAC's main concerns were that DOC should “improve transparency of the discretionary incentives, conduct additional verification of a project’s reported job figures, and update the cost-benefit model used to evaluate proposed incentives for projects.”
The updated report from August 2024 notes that 17 of the 39 LAC recommendations for DOC have been implemented. These recommendations include:
- Recording actual job creation figures for all job development credit projects
- Recording and publication of actual capital investments made for all Job Development Credit projects
- Require organizations petitioning for grant projects to report wage levels of new jobs created from the project
- Report instances where projects were approved for incentives but were canceled either due to the company withdrawing or failing to meet the requirements of the incentives
- Continuation of site visits to all gran projects where fraud risk is greatest
- Report the dollar amounts of clawbacks that have been issued, received and balances due, and grants that have been written off annually
- Hire an outside firm to assist in updating the economic impact analysis of the incentive programs
- DOC and DOR should have better communication to ensure that all job development credit recipients are complying with state law and revitalization agreements
The entire initial audit, recommendations and 2024 update can be found here.
