By Julian Barton, Government Affairs Director
Home Builders Association of South Carolina
On Thursday, the General Assembly completed its two week mini-session (Sine Die II). For the second year in a row, the General Assembly has taken an extra month to complete its work, and for a second year in a row the state budget has not been completed until the last week of June. This year the General Assembly did not complete the state budget until June 28, so there was not enough time for Governor Haley to review the budget and issue her vetoes. As a result, the General Assembly will have to come back (Sine Die III) at some point after July 1 to consider the Governor’s vetoes. What has historically been a five-month legislative session is now turning into a six month plus session!
While the state budget (2012-13) of $6.7 billion was late in passing due to a Senate versus House fight over how to structure tax cuts, it did contain some important provisions for the home building industry:
- Tax Cut for Small Business – Income tax rates for small businesses (LLC, S corporations, & sole proprietorships) would be reduced from 5% to 3% resulting in a $20 million annual savings and $60 million over three years.
- Dredge Charleston Harbor – Allocated $300 million to cover federal funds that may not be appropriated by Congress and the state’s funding portion to deepen the Charleston port by 5 feet to accommodate larger ships. This sends a strong signal that South Carolina is serious about expanding it harbor’s capabilities!
- Funding for Public Schools – The new budget added $153 million to public school funding, which raised the per-student allocation by $132 to $2,012. Good schools are important to the home building industry.
- Economic Development – Add $25 million to the Department of Commerce budget to attract new businesses to South Carolina and in turn grow our economy. A growing economy is good for the home building industry!
Key Issues for Builders
Unemployment Insurance – Premium Relief Set: In 2010 and 2011 the General Assembly passed legislation to reform the state’s unemployment insurance law. The General Assembly did a number of things, like cutting the weeks on unemployment, to make the fund less expensive moving forward. In addition, the repayment of almost $1 billion in federal loans for the bankrupt Unemployed Insurance Fund began. Late in the session, the General Assembly decided to use state money to ease the sticker shock of higher UI premiums.
This year General Assembly also considered a request for the state to again subsidize the UI Fund with state appropriations. UI premiums will be lower in 2012, but the federal repayment will push them slightly higher. Both the SC House and the SC Senate inserted $77 million in their budgets to again subsidize unemployment insurance premiums.
Update: This week the General Assembly included $77 million for premium relief in the 2012-13 state’s budget. This will help hold unemployment insurance premiums near the level we paid last year.
State Immigration Law – Impacted by US Supreme Court Decision: Last week the U.S Supreme Court handed down its decision on the Arizona state immigration law. Much of the law, but not all, was struck down. Much of the South Carolina immigration law was based on the Arizona law. The South Carolina law is now before the U.S. Circuit Court. Many will remember that LLR last year had to suspend some provisions of the law because South Carolina’s current law (passed in 2009 & updated in 2011) had provisions in it that the U.S. Supreme Court had ruled unconstitutional. We would anticipate more suspensions of the SC law when the U.S. Circuit Court hands down its decision. However, it is best to continue to abide by state law until we get direction from the federal courts.
The state law now requires mandatory e-verify screening of new employees, but an employer who was inspected and didn’t have his employees e-verified would have 72 hours to bring them into compliance. LLR has assisted the employer in the e-verify process. Employers were required to implement the new rules on January 1, 2012. However, the 6 month phase in period ends this month. Going forward LLR will no longer be required by law to help business owners verify their new employees by e-verify. Copper Bill – Governor Signs: Thieves and drug addicts in search of quick cash have been causing millions of dollars worth of damage ripping out copper from plumbing and air-conditioning units at homes and businesses. Last year a bill (H. 3660) was passed to stop the scourge of copper and metal theft in the state. The bill set up a permit system for people who want to sell copper to recyclers. Permits were issued by the local sheriff’s office. The good news is that the new law has significantly reduced copper theft, the bad news is that it has caused some implementation issues. Late in the session compromise language was added to the auto recyclers bill (S. 1031).
Update: The copper bill (S. 1031) was signed into law early in June by Governor Haley. The bill cleans up a number of implementation issues. Under the bill passed, the ability to pay cash for aluminum cans was maintained, and the home builder’s new exemption was added to the law.
State Housing Authority – Receives New Member: On the last day of the session to consider appointments, the Governor’s latest appointee to the State Housing Authority Board, Mary Sieck was approved by the SC Senate. Her confirmation was unanimously approved, and she was appointed to a fill an unexpired term. Mary is from Lake Wylie, has a realtor’s license, works with an employee search company, and is married to Curtis Sieck – a builder in York County. She is an excellent addition to the SC State Housing Authority board.
Community Land Trust – Governor Signs Bill: A community land trust (CLT) is a non-profit community housing development organization that acquires and holds land in trust primarily for the use of affordable housing. This is done under long term real estate leases that allow it to ensure that improvements located on the property remain affordable to low income families. CLT’s help develop public– private collaborations to create opportunities for communities with limited resources to develop workforce housing. They support facilities and preserve land while promoting homeownership, historic preservation, local control and neighborhood revitalization.
Update: The bill (H. 3676) that was introduced to create community land trust enabling legislation passed the General Assembly in late May. The bill was signed into law by Governor Haley in early June.
by Julian Barton, Director of Government Affairs
Home Builders Association of South Carolina
Late last summer the SC Supreme Court handed down a decision that sent shock waves through the development community in the SC League of Women Voters vs. Smith Land Company case. Under the Supreme Court’s Smith Land Company opinion many citizens may be in violation of the Pollution Control Act (PCA) and now every other citizen has the right to sue them, even though the case does not directly impact them.
The decision nullified sixty years of case law with two liberal interpretations of the law:
1. Zero Tolerance: The Court ruled that any discharge into the environment must have a permit – this case involved filling in .19 acre of wetlands on a .33 acre lot that was not required by state or federal law to have a permit. Based on this decision, any emission into the environment must have a permit. To meet the courts new direction, DHEC alone will need to double or triple their permitting departments!
2. Encourages Lawsuits: The Court also ruled that anyone could have “standing” in a case, and they did not have to be directly impacted by the case. In the past the individual filing the lawsuit had to be directly impacted to file suit. This now opens the door for a flood of litigation from every activist group in the state. Don’t like a Walmart in your city, don’t like electric generation plant, don’t like a business that is building on the water, then the new strategy is to bury them in lawsuits! The SC Supreme Court has set back economic development in our state by ten years!
If this case is allowed to stand, economic development in this state could come to a grinding halt as anti-economic development groups sue every business that wants to come to the state. Companies will locate in less litigious states! The court has given a big advantage to our competitors, Georgia and North Carolina, with this decision!
Senator Harvey Peeler and Representative Nelson Hardwick are expected to introduce legislation next week to reverse the onerous and dangerous SC Supreme Court decision. Passage of this bill will be a top priority for the business community this session!
by Julian Barton, Government Affairs Director
Home Builders Association of South Carolina
Although a federal judge has blocked parts of South Carolina’s new immigration law, sections affecting businesses will still go into effect Jan. 1, 2012. U.S. District Judge Richard Gergel left intact a provision requiring employers to use the federal electronic database E-Verify to check workers’ eligibility.
Gergel’s ruling, though, barred the state from enforcing key parts of the law, including: having police check the immigration status of person stopped for even minor traffic offenses if they have “reasonable suspicion” the person is in the country illegally; arresting people on charges of harboring or transporting illegal immigrants; and requiring people to carry immigration documents.
Gergel also let stand provisions authorizing the Department of Public Safety to form a 10-officer immigration enforcement unit, and making it a crime for illegal immigrants to sell fake IDs.
Under the new law, businesses are required to enroll in the U.S. Department of Homeland Security’s E-Verify system “and to verify the legal status of all new employees through E-Verify within three business days.”
Failure to enroll in and use E-Verify to check out new hires will result in probation for the employer, either with suspension or revocation of the firm’s business licenses, according to the state Department of Labor, Licensing and Regulation. However, LLR has promised to work with employers the first six months of the year to help them in the transition to e-verify without fines.
In addition to completing and maintaining the federal employment eligibility verification form — commonly known as the Form I-9 — all employers must within three business days after hiring a new employee verify the individual’s work authorization through the E-Verify, a free Internet-based system maintained by the federal government. Employers may no longer confirm a new employee’s employment authorization with a driver’s license or state identification card!
The database generally provides results in three to five seconds, officials say. If the information matches, the employee is eligible to work in the United States. If there’s a mismatch, E-Verify will alert the employer and the employee will be allowed to work while he or she resolves the problem. If no resolution results, the employer must rescind the job offer.
By: Julian Barton, Government Affairs Director, HBA of South Carolina
We are sometimes asked by members, “What did the Home Builders Association do for home builders at the General Assembly this year?” Well, this year there is no doubt that the HBA Government Relations Program generated a high rate of return for the home builders of our state – $225 million – that was a return of $4,500 annually per builder (a 9 to 1 return on the dues investment). The following bills will have a positive impact on the home building industry, reduce legal/regulatory barriers for home builders and put more money in home builders’ pockets:
Construction General Liability Insurance Case: Early in the year the SC Supreme Court passed down a decision (Crossmann vs. Harleysville Mutual) that reversed the interpretation of contractor’s general liability insurance policy. The decision put contractors across the state a great financial risk!
In record time a bill was introduced (S.431) and passed into law. The bill returns the construction industry essentially to where it was prior to the Crossmann court decision. First, it makes it crystal clear what an “occurrence” (the trigger for insurance coverage) is. Secondly, it applies these insurance coverage decisions retroactively to address our statute of repose (8 year) concerns. Builders in litigation now will not have to fear that their insurance company will walk out the door leaving them fully exposed to faulty construction claims. After the General Assembly adjourned, the SC Supreme Court reversed its decision on the Crossmann case!
Annual Benefit: $100 million
Tort Reform II: The last week of the session Governor Nikki Haley signed the tort reform bill (H. 3375). The bill builds on the 2005 tort reform bill. The bill’s key provisions include:
1. A cap on punitive damages modeled after Florida’s tiered financial cap.
2. A cap on the amount a defendant has to put up for an appeal bond.
3. A tightening of the statute of repose for construction cases.
4. Requires the attorney general to approve civil actions by circuit solicitors.
5. Requires disclosure of insurance policy limits on auto policies in accident cases.
The new law makes it easier to do business in South Carolina and strengthens the construction statute of repose. Plaintiff lawyers were successfully arguing that one or more building codes violations equated to gross negligence, and therefore the case was exempt from the construction statute of repose (8 year) protection. This bill closes that loophole in the law!
Annual Benefit: $30 million
Unemployment Insurance Premiums: Due to the severe recession South Carolina’s unemployment insurance fund went broke and had to borrow almost $1 billion from the federal government in recent years. When the bills to pay back the federal loans went out in January most employers saw significantly higher unemployment insurance premiums. To address the “sticker shock” the General Assembly passed an unemployment insurance reform bill (H. 3762) late in the session.
The legislation includes a reduction in state benefit weeks from 26 to 20 and restrictions of benefits for seasonal workers, and includes $146 million in the state budget to subsidize unemployment insurance. These two measures combined will provide approximately 25% insurance premium relief to all employers in the state for this year.
Annual Benefit: $15 million
Copper Theft Bill: Thieves and drug addicts in search of quick cash have been causing millions of dollars worth of damage ripping out copper from plumbing and air-conditioning units at homes and businesses. A bill (H. 3660) that should stop the scourge of copper and metal theft in the state received final approval in the General Assembly this session.
The bill sets up a permit system for people who want to sell copper to recyclers. Individuals selling less than 10 pounds of the metal would be allowed to obtain a free, 48-hour permit up to twice a year by calling their local sheriff’s office.
Those wanting to sell more than 10 pounds of copper would be required to apply in person at a sheriff’s office for a free, long-term permit. The bill covers copper products, catalytic converters and stainless steel beer kegs to the list of permit-required items.
The bill would also require the metal recyclers to apply for a purchasing permit at their local sheriff’s office at a cost of up to $200. Also, most importantly instead of giving out cash, recyclers would only be allowed to pay customers with checks for their copper and metal purchases.
Annual Benefit: $5 million
Amazon Sales Tax Exemption: The final chapter in the Amazon vs. Walmart saga ended on a happy note. An agreement was finally reached granting Amazon the five year sales tax exemption it had sought. However, the bill (S.36) requires Amazon to also provide a link to the Department of Revenue website where the online South Carolina purchaser can obtain information to calculate the state taxes owed on internet purchases.
In addition, the purchaser will receive by email an annual summary of their aggregated internet purchases from Amazon. This will allow the purchaser to calculate the sales tax owed so they can pay the tax on their state income tax return. However, there are no provisions to force sales tax payment by SC residents.
The construction industry will reap a large part of the initial $125 million investment. In addition, the 2,000 new jobs created will increase the demand for housing in the Midlands of South Carolina initially and spread to other parts of the state in coming years. SC was able to secure a 21st century growing company that should continue to expand and grow our state’s economy in the future!
Annual Benefit: $10 million
SC Building Code: After legislative delay of the IRC 2009 last year, the building code started moving through the regulatory process this year. However, it didn’t move forward very far. The House LLR Committee asked SC Building Code Council to withdraw their regulations to implement the IRC 2009, and requested that the Council move forward in implementing the IRC 2012. The adoption process for the IRC 2012 is beginning with the target date for implementation is January 2014. The onerous residential sprinkler provision of the IRC 2009 was not implemented this year.
Annual Benefit: $50 million
Point of Sale – Second Homes Sales: One of the last bills to pass the General Assembly this year was the “point of sale” bill (H. 3713). The bill addressed the problem in the commercial real estate market where significantly higher “point of sale” property tax valuations were discouraging investment in SC commercial and second home properties. The point of sale legislation is applicable only to non-primary residential properties, which are assessed at the six percent (6%) property tax rate.
With this new tax relief, it will make it easier to sell the existing backlog of second homes that are depressing the residential market, encourage the construction of new second homes, and make SC a more attractive location to locate businesses.
Annual Benefit: $15 million
TOTAL ANNUAL RETURN ON INVESTMENT: $225 MILLION
As a result of the pro-active initiatives of the Home Builders Association with the SC General Assembly, the home building industry received over $225 million in benefits! In addition, to the bills outlined above, the HBA Government Relations Department reviewed over 800 bills and closely monitored over 150 bills during the 2011 legislative session.
RELATED BILLS OF INTEREST
Illegal Immigration Bill: As expected the Arizona-style illegal immigration bill (S.20) passed the General Assembly and was signed by the Governor. However, a coalition of several immigrant advocates is now threatening to challenge the new law in court. In addition, LLR has suspended LLR’s employer audit program until January 2012 because South Carolina’s current immigration law (passed in 2009) is unconstitutional. The new state law does not go into effect until January 2012.
The new law deals primarily with law enforcement, but does contain provisions to tweak South Carolina’s existing employer immigration law. The new state law will require mandatory e-verify screening of new employees, but an employer who was inspected and doesn’t have his employees e-verified would have 72 hours to bring them into compliance. LLR would assist the employer in the e-verify process.
If the employees can’t be e-verified within three days of employment they must be terminated. If the employer refuses to e-verify his new employees, or becomes a habitual offender LLR ultimately has the power to cancel his business licenses. Under the new law e-verify is the only way to go – employers are held harmless, if they e-verify their new employees!
Multiple-lot Property Tax Discount: Because of the current housing recession, it is taking longer to build out subdivisions. The current law gives residential developers a multiple-lot discount on property taxes for up to five years on vacant subdivision lots. Unfortunately, it is now taking more than five years to complete lot sales and developers are ill suited to pay dramatically higher property taxes.
A bill was introduced and passed in the House that would temporarily extend the discount for an additional three years. However, the SC Senate version of the bill (S. 447) remains on the Senate contested calendar. As a result, the bill will be carried over to the 2012 legislative session.