Thursday, April 29, 2021

What Is Business License Rebalancing?

Act 176, the SC Business License Tax Standardization Act, requires every local government with a business license tax to administer the tax in the same way across the state starting January 1, 2022. It also seeks to prevent cities and towns from receiving a revenue windfall or creating an unexpected revenue loss in the first year of implementation as a result of the required changes. 

To comply with Act 176, many cities and towns need to immediately begin making several adjustments to their current business license ordinances, schedules and practices. 

Before rebalancing 
First, each city and town should adjust its current business license year to the new license year, May 1 through April 30. In some cases, this will require shortening or lengthening the jurisdiction’s current license year. Changing the license year requires action by city or town council. Once the license year is changed, cities and towns should alert their businesses of the change before and during the license renewal process.

Next, city and town staff must assign each of their business license records a correct 2017 North American Industry Classification System code, or NAICS code. Once city and town staff has assigned each of their license records a NAICS code, they should ensure each business is assigned to the correct, state-mandated rate class using the 2021 Class Schedule. 

Cities and towns must also rebalance their business license tax rates to ensure revenue neutrality during the 2022 business license cycle. The Municipal Association suggests a specific format for the order of the business license data, which will help during this rebalancing process. Municipal staff should check the records to determine that the data is accurate. 

Once the data is deemed accurate, staff should begin reviewing the license tax rate for each class and suggest changes to the rates, if necessary to achieve a revenue-neutral result. The purpose of this “rebalancing” is to ensure the city or town does not collect more business license tax revenue in 2022 than it did in the 2020 license year. However, if a city or town projects it might lose revenue as a result of rebalancing, it may adjust its rates to ensure that does not happen. 

For cities and towns that haven’t regularly updated their class schedules, changes in rates for some individual businesses could be significant. Municipal Association staff are available to all cities and towns for assistance in rebalancing, which can pose challenges for those with outdated class schedules. To learn more about rebalancing, check out this podcast featuring Municipal Association Field Services Managers Charlie Barrineau and Jeff Shacker discussing the issue. 

Next steps 
After rebalancing, cities and towns should repeal their existing business license ordinances and adopt new ordinances that comply with Act 176. The Municipal Association strongly suggests adopting its 2022 model business license ordinance that fully complies with the law. 

Finally, by the end of 2021, cities and towns must set up an account with the state-mandated Local Business License Renewal Center, which allows businesses to renew their business licenses online with any city or town in the state. The SC Revenue and Fiscal Affairs Office hosts the Renewal Center, with the Municipal Association of SC providing support. 

More resources 

Thursday, April 8, 2021

Delayed Census Data and Fall 2021 Elections

by Eric Shytle, General Counsel, Municipal Association of SC 

The Equal Protection Clause of the United States Constitution and the Voting Rights Act both require that municipalities redistrict their wards to reflect population and demographic information contained in the most recently released decennial census. 

Ordinarily, the 2020 census data would already be released. This year’s data, however, has been delayed. On February 12, the Census Bureau announced that it would release redistricting data with tables by September 30. Later, the Census Bureau announced that it will release the data in a legacy format and without tables approximately a month earlier in August

Many municipalities in South Carolina have elections scheduled for this fall, and filing periods for those elections will close before the release of the census data. In any event, it will be virtually impossible for municipalities to complete the redistricting process before the November election dates. 

The federal courts have held repeatedly that no violation of federal law occurs when an outdated legislative map is used for an election, so long as the government complies with a reasonably conceived plan for periodic reapportionment

In other words, municipalities may hold their fall elections as scheduled and using the existing ward maps. Municipalities should diligently work to complete the redistricting process as quickly as practical, but they need not cancel or delay the fall elections if the new maps are not prepared in time. 

On the other hand, SC Code Section 5-15-50 allows municipalities to establish by ordinance “the time for general and special elections within the municipality.” This provision has been interpreted by courts and the Attorney General to allow reasonable extensions of the terms of incumbent councilmembers to set new election dates. It seems likely that a court would find it reasonable to extend the terms of incumbent councilmembers to allow time for redistricting. Therefore, municipalities may choose to delay the fall election until the new maps are available. 

In short, under federal and state law, municipalities may either proceed with their fall elections as planned, or they may delay these elections until redistricting is complete. The decision is ultimately one for the council, taking account of local politics, demographics and population trends. 

This recent Uptown article describes the legal background of redistricting, including the 2013 U.S. Supreme Court decision which affected the application of the Voting Rights Act.