July 2012
Chamber Leading Effort to Pass Referred Law 14
Large Project Fund Essential to Quality Jobs, More Funding for Schools and Services
How does a state make its citizens more prosperous, provide increased funding for schools and public services AND maintain or even reduce tax rates?
Trick question? Obscure riddle? No.
It is, in fact, the history of South Dakota economic growth and a balanced approach to taxation featuring broad-based taxes with reasonable rates to provide an environment that encourages businesses to operate here, which includes hiring people and paying taxes.
Referred Law 14 will establish and continue to secure significant investments in South Dakota. These investments will result in high paying jobs (most offering benefits) and more tax money that can be used for schools and other necessary public services. When approved by the voters, this law will establish a "Large Project Fund" that will allow the Governor to recommend to the Board of Economic Development grants as incentives for projects that are $5 million and more
Will it work? This concept has a proven record and has been used for over 15 years. The concept used to be structured as a partial "refund" of taxes paid by large projects. Oddly enough, South Dakota's fame for moderate tax rates has a rather glaring exception. It is a combination of sales/use taxes PLUS 2% more as a contractors' excise tax. The total hit that results from these taxes can pile up when applied to large projects and make South Dakota less competitive for these investments - even when our local industries are looking to expand.
Looking for proof? These refunds have been key to several value-added agriculture expansions including Valley Queen Cheese in Milbank, Lake Norden Cheese in Lake Norden and most recently, the announcement of a new Bel Brands (think Happy Cow cheese) plant in Brookings. To be a bit glib, what more can anyone want of a tax policy that even makes for happy cows?
Other successes? The entire wind industry would not have been built here unless South Dakota matched incentives offered by neighboring states. Having a robust wind industry includes a new manufacturing facility in Aberdeen that makes those huge blades. This plant employs 400 people.
The expansion of existing manufacturers is a result of this policy. For example, the 3M plant in Brookings has been one of the best employers and taxpayers in that community for more than 30 years.
Bio-Fuel Industry. Anyone supporting bio-fuels also understands without a policy like the Large Project Fund, South Dakota would not have more than a dozen ethanol plants. Each employing approximately 35 people plus providing markets for corn from surrounding farm operations. One of the criticisms of incentives has been that they give money to "wealthy investors." People making that claim should sit down with the hundreds of local farmers who started the ethanol industry here with their own money.
Trickle Down Economics? Politics likes to use sound bites and labels to avoid debates of substance. South Dakota's past experience clearly demonstrates that economic growth does help people when they have jobs with good pay and benefits. History clearly shows that industries that have been expanded or established using these incentives have paid significant taxes, made contributions to many organizations and have become community leaders.
Listening to the public debate over funding for education or funding for other programs, it would be easy to conclude that economic expansion has failed to provide enough resources to warrant being continued. There is a difference between not providing "enough" resources and having a tax base that is shrinking. Only because of the recession has the state seen an actual decline in revenue. Over the past several decades, South Dakota's growing economy has delivered revenue to state government at a pace that exceeded inflation.
The process of determining how much money is needed for education or corrections or other public services is a very demanding and complicated debate. The Chamber offered a discussion about measuring the public funds as a part of the economy as a method of assessing whether there was enough public money. That idea was called "the price of government" and was either opposed or ignored by the special interests in the public service funding debate.
The Chamber's Advocacy is Clear. Expanded businesses expand the tax base and provide more funding. Economic growth that provides excellent jobs makes it easier for more people to be taxpayers. Businesses that make large investments have proven to offer those excellent jobs and pay higher taxes.
The Challenge
Secure enough votes to pass Referred Law 14. The South Dakota Chamber of Commerce and Industry is committed to working hard on the Votes YES on 14 Campaign. The leadership of the Chamber understands that incentives are needed for securing the kind of investments that change economies. Here is how Chamber members can help this effort:
- Make a contribution to the VOTE YES on 14 committee
- Submit an editorial (we can help with drafting) to a local newspaper
- Encourage employees to explore the issue and ask questions
- Be open in supporting a YES vote on Referred Law 14
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It's July - New Laws Are Now With Us
July is the month when the bills passed in each year's legislative session become law. In what should be considered good news for the business community, the new laws that became effective on the first of this month are, for the most part, not major and do not have a large impact on business operations.
Most of the laws that might have posed a threat to your business success were defeated during the session. This is one of the highest values for your membership investment and one that is easy to overlook during the ten months when the legislature is not in session.
Here is a quick summary of several laws that did pass and are now part of running a business in South Dakota.
Special Note to Manufacturers of Construction/Industrial Equipment
One of the most significant actions during last session was not a great victory but rather one of the times when compromise with growing political pressures was necessary and the victory is one expressed by the phrase "That could have been worse," which will never inspire an army to do anything but pack for home.
In some industries there is a tension between manufacturers and their own dealership network. This happens more in industries that are huge and multinational, such as the automobile/truck industry and implement dealers. The issues are most often focused on what needs to be done when a manufacturer wants to end the dealership contract and what type of demands the manufacturer can make for things like warranty repair payments, inventory and required computer programming.
In recent years, the dealers of construction equipment and industrial equipment have been seeking the same kind of protection. The problem is that many of the manufacturers of these items are smaller manufacturers that don't have hostile relationships with dealers. A number of these manufacturers are located within South Dakota so the laws will affect all of their dealership contracts, which is a much different issue than protecting "local" dealers against "them".
After defeating the dealership bill in the 2011 session, proponents brought forth a much more limited version in the form of HB 1227, which was passed.
It is a new law that is specific to manufacturers of construction and industrial equipment. It includes these manufacturers in the dealership protections already in law for implement and off-road equipment dealers.
There are three noteworthy changes:
- Allows attorney fees to be awarded to dealers (South Dakota dealers only) that prove their business or property has been damaged by a violation of the provisions of South Dakota Code (chapter 37-5).
- Assure South Dakota Venue - A new paragraph was added to law making it clear that dealership agreements cannot force dealers to be prohibited from using South Dakota courts. Since this only applies to dealerships in South Dakota, the impact is limited.
- Section Three sets the limits of the new law as "manufacturer authorized facilities in this state" and excludes those dealers (persons) that sell more than $100 million dollars per year.
The South Dakota Chamber of Commerce and Industry hired an extensive legal review to make sure the impact of this change in law was limited so it applies ONLY to dealerships in South Dakota. The past versions would have had an impact on all dealership agreements based on South Dakota law. Also removed from previous attempts was language with harsh penalties against manufacturers for even attempting to end dealership arrangements.
Single Member Limited Liability Corporation (LLC) and Creditor Judgements
Changes were made in the laws guiding how creditors' judgements can be satisfied when claims are made against an LLC. The law has limited recovery of each member of an LLC to the income that would be derived from the LLC and has made it clear that each member cannot be liable for the value of the entire LLC. One question was not clear.
What if the LLC is a single member LLC? HB 1192 makes it clear that the limits placed on creditor recover that apply to all other LLCs also apply to single member LLCs.
More Records Being Filed Online
SB 41 helps retailers that sell pseudoephedrine and subsequently need to keep records of who made the purchases. These records must be sent to Pierre for collection and comparison. Now the law allows those records to be sent electronically (motivated by a conclusion that computers are not a fad or a marked decline in the number of carrier pigeons available). In similar fashion (and perhaps for the same reasons), SB 66 is now law that allows the Secretary of State to accept records using electronic filing.
Military Spouses Get UI Benefits if Relocated
SB 87 will expand Unemployment Insurance (UI) benefits by allowing the spouses of military personnel to receive UI benefits even if they have quit their job. Under ordinary circumstances, UI benefits are only paid to people who become unemployed through no fault of their own, which does not include quitting. Under the new law if a spouse of someone serving in the armed forces quits a job to move when the military orders relocation, they will continue to receive UI benefits from South Dakota. Records indicate this will affect about a dozen people a year and the cost of the claims will not be applied to the affected employers but rather be applied against the general pool of all employers.
911 Emergency Surcharge
Sellers of prepaid wireless services and telecommunication providers were recently notified about changes to the collection and remittance of the 911 Emergency Surcharge and the new Prepaid Wireless 911 Emergency Surcharge.
This is another new law that applies to a number of our members and was best explained by the Department of Revenue.
Beginning July 1, 2012, any seller and wireless service provider that sells prepaid wireless service, which includes prepaid wireless airtime cards and prepaid wireless minutes and plans, is responsible for collecting and remitting the 2 percent Prepaid Wireless 911 Emergency Surcharge.
The 911 Emergency Surcharge collected and remitted by all telecommunications service providers, wireless service providers, or Interconnected Voice over Internet Protocol Service providers will increase to $1.25 per service-user-line, per month, effective July 1.
All sellers of prepaid wireless services and all providers that collect and remit the 911 Emergency Surcharges are required to register with the South Dakota Department of Revenue, even if the seller already has a sales tax license. To register, sellers can complete the registration form included in the direct mail materials, register online in the Business Tax section of the Department's website, www.state.sd.us/drr or call the Department at (800) 829-9188.
All surcharges will be remitted directly to the Department of Revenue on a monthly basis using SD EPath, an electronic filing system.
Sellers or wireless service providers may seek more information about registration and reporting of the 911 Emergency Surcharges by contacting the South Dakota Department of Revenue at bustax@state.sd.us or by calling (800) 829-9188.
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Youth Business Adventure Hosts Annual Sessions
The South Dakota Chamber's Youth Business Adventure (YBA) program recently completed its 34th anniversary sessions, hosting 197 high school seniors, along with educators and business executives from across the state of South Dakota during two week-long sessions. The first session was held at Black Hills State University in Spearfish while the second session was held at the University of South Dakota in Vermillion.
At YBA, the students and educators gained vital information about the business world from those who work and live in that world, the business executives or "Company Advisors" and volunteer speakers. They also had the opportunity to gain college credits for their participation in the YBA sessions. In addition, the schedules included a tour of area businesses, Spearfish Forest Products in Spearfish and Masaba in Vermillion.
Student companies competed in a business management simulation, a business Quiz Bowl, produced a one minute TV commercial, designed a company logo, participated in a problem solving activity, and presented business plans before a panel of volunteer judges. Students were also entertained with evening activities of bowling, swimming, and a dance.
Students competing in the Business Bowl at Black Hills State University. The companies of students compete to see which company has learned the most business terms during the week.
Students present and explain their logos to judges.
Since its inception in 1980, Youth Business Adventure has been sponsored by the South Dakota Chamber of Commerce & Industry. The program is completely funded through contributions from generous South Dakota business, corporate, and individual sponsors.
Next year's sessions will be held June 2-7, 2013 at Black Hills State University and June 16-21 at the University of South Dakota.
Check out the events calendar link for information on this year's October 4 SME Auction benefiting Youth Business Adventure.
Thank you for your support of the South Dakota Chamber of Commerce and Industry! |