For the second time this year, North Charleston plans to reduce the business tax paid by one of the city’s largest companies.
On Thursday City Council is set to vote on a change to the business license rate schedule that will reduce the tax rate for Select Health of South Carolina, a managed-care organization that administers Medicaid programs in the state, and is one of North Charleston’s four largest sources of business license fees.
Two smaller companies with the same business classification, which the city did not identify, also will benefit from the change in the rate for HMO-classified companies.
According to Mayor Keith Summey, the reduction targeted for Select Health is needed because the business license fee is based on gross revenues, but a large amount of the company’s revenues are passed through to pay claims, putting an unfair burden on the company.
“We feel like this is a fair and reasonable way to look at it,” Summey told council members at a recent committee meeting. “It’s about putting them in the correct category.”
The immediate effect of the proposed rate class change, from a fee of $2.80 per $1,000 of revenue to $1.50, would reduce the city’s business license collections by about $100,000, according to city spokesman Ryan Johnson.
Some council members have questioned whether the change is fair to other businesses, or even legal.
“We’ve already done a business license reduction for four big entities,” Councilman Todd Olds said at the committee meeting in October. “Now, one of them is coming back for another reduction.”
Officials with Select Health of South Carolina, an affiliate of Philadelphia-based AmeriHealth Caritas, did not respond to requests for comment Friday.
In July, North Charleston cut in half the top business license tax rate for those with gross earnings of $250 million or more — Select Health is among the four North Charleston companies in that category — and created a new top tier tailored for Boeing Co. with a rate 99 percent lower than the current levy.
Those changes to the business license fee structure were meant to cap Boeing’s business license fees at $1 million yearly, as the company ramps up aircraft production. Select Health, Trident Regional Medical Center, and Daimler Vans Manufacturing benefited to a smaller extent due to the reduction in the rate for earnings above $250 million.
Those changes reduced city revenues by about $150,000 in the short term, but as Boeing increases production the decrease savings could exceed $700,000 for that company alone. Speaking about that change in July, Summey said it was only fair to adjust the rates for future years to account for Boeing, because the aircraft manufacturer will account for 10 percent of the city’s business license fees even after the rate reduction.
City Council members have chafed at any mention of the fact that the tax cuts for the city’s largest businesses followed approval of a city budget in May that raised the city’s property tax slightly.
Summey and members of council have said there’s no connection between the tax increase for property owners and the tax decrease for some businesses. The mayor has pledged that property tax rates won’t rise again for at least four years.
Reach David Slade at 937-5552