The state’s innovation economy was helped by the South Carolina Research Authority’s impact of nearly $695 million in 2019. Learn how businesses and individuals can make a contribution in a way where they can direct their tax dollars and improve cash flow
By John E. Sircy, CPA, CMA, CFM, CSCA | SCACPA Member Since 2012
John E. Sircy is the Director of Finance and Administration at the South Carolina Research Authority. He has served as a senior financial executive in banking, industry and higher education.
The South Carolina legislature created the Industry Partnership Fund in 2006 as a tax-advantaged funding source for the South Carolina Research Authority to fulfill its mission of fueling the innovation economy in the state. As the Director of Finance and Administration for SCRA, I have enjoyed a front-row seat in witnessing the positive impact of IPF funds on the state’s economy.
What follows is a discussion of SCRA’s economic impact in fiscal year 2019 and why it makes sense for any South Carolina company or individual with a state income tax, license fee or insurance premium tax obligation to contribute to the Industry Partnership Fund.
SCRA’s FY19 Economic Impact on South Carolina’s Economy
The creation and maintenance of high-paying jobs is a critical metric for any economic development organization. SCRA supported 4,140 jobs in FY19 with an average salary of over $71,000, which is 67% higher than the state’s average. More than 6,200 additional jobs were created, evidence of an impressive multiplier effect.
The innovation economy, defined as the eco-system that facilitates the production of ideas, knowledge and information, recorded annual employment growth in South Carolina of 2.9%, which is 81% higher than the annual South Carolina employment growth as a whole. The total FY19 positive impact of SCRA on the state’s economy was nearly $695 million.
When considered in the context of $5 million in grants and investments made during the fiscal year, the work of fueling South Carolina’s innovation economy is paying huge dividends for the state. This would not have been possible without the funding provided by the IPF.
Attracting capital to South Carolina is another important economic development measure. Since the IPF launched in 2006, firms that have received grants and investments funded by the IPF have raised over $1.1 billion in follow-on funding. This remarkable performance speaks to the quality of these South Carolina-based firms and the prudence with which SCRA deploys IPF funds.
You can view the SCRA 2019 annual report by clicking here.
Benefits of Contributing to the Industry Partnership Fund
It is easy to see that grants and investments made possible by the IPF have significantly added to the economic vibrancy of South Carolina – and did it in the innovation sector, a key to the state’s future growth and prosperity. None of this was possible without IPF contributions. Here are some compelling reasons companies and individuals should contribute to the IPF:
It allows the contributor to direct their tax dollars. A check written to the Department of Revenue goes into the state’s general fund. A check written to the IPF, which creates a dollar-for-dollar South Carolina tax credit, is directed to fuel our innovation economy. A contribution to the IPF is a no-cost way to boost the South Carolina economy!
It can improve cash flow. A check to the IPF can be submitted today but dated later in the year, preserving working capital. As an example, assume a firm anticipates a $300,000 SC tax obligation for 2020. Rather than making four estimated payments of $75,000 during the year, it can submit one check today for $250,000 (the annual IPF cap contribution per entity) and date the check Dec. 1, 2020. The check will be safekept by SCRA until Dec. 1, providing the contributor use of those funds during the year. The quarterly estimated payments would be reduced to $12,500 per quarter to cover the $50,000 in tax not covered by the IPF contribution.
It is deductible as a business expense for federal tax purposes. SCRA provides numerous marketing and business development benefits to companies that contribute to the IPF (e.g., recognition on the SCRA website and in the SCRA annual report, sponsorship designation at SCRA events), which support the treatment of IPF contributions as business expenses for federal tax purposes.
It is simple to do. Make a check payable to “IPF” and send it to SCRA, P.O. Box 95, Columbia, SC 29202. Upon receipt, contributors receive a letter that acknowledges their contribution. When the 2020 tax return is filed, submit SC Form TC36 with the return. It is that easy!
Directing tax dollars and improving cash flow applies to individuals, too! Although most individuals would not receive a federal tax benefit from an IPF contribution, they can direct their tax dollars in a no-cost manner and avail themselves of the cash flow benefits of contributing the IPF in the manner described above.
The IPF Has an Annual Cap, So Time Is of The Essence
For 2020, the annual cap for the IPF is $8 million. Once the cap is reached, the opportunity for 2020 will be closed. The way to assure your contribution or that of someone you are advising is made before the cap is reached is to send in contribution checks as soon as possible. If a contributor is unsure about their 2020 tax liability, we encourage the submission of a “safety check” to assure a base level of contribution. If the 2020 state tax obligation is revised upward, an additional check can be sent in – subject to the maximum annual contribution of $250,000 per entity and the overall annual cap of $8 million.
A contribution to the IPF is a no-cost, highly beneficial means to fuel South Carolina’s innovation economy. It is an easy way to make a big impact on the future of South Carolina!