Sc Sch.tc-56a - Application For Angel Investor Credit (Page 3 of 4) in pdf

is primarily engaged in manufacturing, processing, warehousing, wholesaling, software development, information

technology services, or research and development, or is a qualifying service-related facility; and

does not engage substantially in retail sales; real estate or construction; professional services; gambling; natural resource

extraction; financial brokerage, investment activities, or insurance; or entertainment, amusement, recreation, or athletic or

fitness activity for which an admission or fee is charged. A business is substantially engaged in an activity if either its

gross revenue from the activity in a fiscal year exceeds 25% of its total gross revenues or if, according to its articles of

incorporation, articles of organization, operating agreement, or similar organizational documents, one of its primary

purposes when established was to engage in the activity.

A qualified business must apply with the Secretary of State for certification. “Registered” or “registration” means that a

business was certified by the Secretary of State as a qualified business at the time it applied. Registration is valid for 12

months after the date of certification. A business may renew its registration if it remains a qualified business at the time of

renewal.

The Secretary of State must revoke the registration if it finds that any information contained in the application is false. The

Secretary of State will not revoke the registration of a business that ceases business operations for an indefinite period of

time, as long as the business renews its registration.

A registration as a qualified business may not be sold or otherwise transferred except when a qualified business enters into

a merger, conversion, consolidation, or other similar transaction with another business. The surviving company may retain

the registration for the remainder of the 12-month period if it would otherwise meet the criteria for being a qualified

business. Instead of having to apply, the qualified business must provide written notice to the Secretary of State of the

merger, conversion, consolidation, or similar transaction and other information as required by the Secretary of State.

“Headquarters” means the facility or portion of a facility where corporate staff employees are physically employed and

where the majority of the company's or company business units financial, personnel, legal, planning, information

technology, or other headquarters-related functions are handled.

Applying for tentative approval from the Department of Revenue

The total amount of credits allowed for all taxpayers for any one calendar year is $5 million. An angel investor seeking to

claim a tax credit provided for under this chapter must submit an application to the Department of Revenue for tentative

approval for the tax credit in the year for which the tax credit is claimed or allowed. The Department of Revenue must

review the application and tentatively must approve the application upon determining that it meets the requirements of this

chapter.

The Department of Revenue will notify each applicant of the tax credits tentatively approved and allocated to the qualified

investor on or before January 31st of the year after the application was submitted. If the credits claimed exceed $5 million,

the Department will allocate credits on a pro rata basis among the angel investors who filed timely applications. The credit

must be tentatively approved and communicated to the angel investor before the angel investor can claim the credit on a

tax return.

Limitations

50% of the allowed credit may be applied to the angel investor's net income tax liability in the tax year during which the

qualified investment is made, and the remaining 50% may be applied to the angel investor's net income tax liability in the

tax years after the qualified investment is made.

“Net income tax liability” means South Carolina state income tax liability reduced by all other credits allowed under Titles 11,

12, and 48 of the S.C. Code of Laws.

The credit is nonrefundable. Unused credits can be carried forward for 10 years from the close of the tax year in which the

qualified investment was made.

Transfers of credit

Tax credits generated as a result of these investments are not considered securities under the laws of this State.

Unused credits may be transferred to the angel investor’s spouse, or incident to divorce, or, upon his or her death, to the

angel investor’s heirs and legatees.

Unused credits may be sold, exchanged or otherwise transferred, and may be carried forward for a period of 10 years from

the close of the tax year in which the qualified investment was made. A tax credit or part of a tax credit can be transferred

only once. The credit may be transferred to any taxpayer. A transferred credit may be used for the tax year in which the

transfer occurred, and unused amounts may be carried forward for 10 years from the close of the tax year in which the

qualified investment was made. The Department of Revenue may develop procedures for the transfer of the credits.

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Sc Sch.tc-56a - Application For Angel Investor Credit Page 3

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