Thursday, September 8, 2011

HBASC: 2011 Legislative Report (Julian Barton Reports)

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


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.


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.

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