South Carolina Corporate Income Tax provides comprehensive discussions on a wide range of issues dealing with the income taxation of corporations in South Carolina and considers important issues for all corporations doing business in the state. Written by Rick Handel and Deana West, both of the South Carolina Department of Revenue, and William C. West, III, Deloitte & Touche LLP, this Portfolio provides a discussion of South Carolina's interpretation of federal limitations imposed on South Carolina's corporate tax system, including a discussion of the due process and commerce clauses of the U.S. Constitution and Pub. L. No. 86-272, 15 U.S.C. §381. 

This Portfolio also explains South Carolina's modifications to federal gross and taxable income, apportionment and allocation issues, and the application of the unitary business doctrine in South Carolina.  In addition, the Portfolio discusses South Carolina tax credits, deferrals, and tax moratoriums. South Carolina Corporate Income Tax also covers required returns, payments, and certificates of compliance. 

This Portfolio concludes with a discussion of tax procedures and taxpayer remedies and provides insights on such issues as administrative challenges, appeals to the Administrative Law Judge Division, and refund claims.

The working papers in this Portfolio include notes on constitutional limitations, including limitations on local taxes; an information guide on requesting a PLR, and a chart summarizing tax credits. 

South Carolina Corporate Income Tax allows you to benefit from: 

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
• Invaluable practice documents including tables, charts and lists.
• Plain-English guidance from world-class experts.
• Real-world and in-depth analysis that lets you explore various options.
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
• Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

Detailed Analysis

2280.01. Introduction

2280.02. Jurisdiction to Tax

Introductory Material

A. Nexus

1. Miscellaneous Statutes

a. Certificate of Authority

b. Contracts With Printers

c. Interstate Motor Carriers

2. Geoffrey

a. Due Process

b. Commerce Clause

3. Implications of Geoffrey – Examples

a. Authors

b. Celebrities

c. Subsidiary

d. Bank Accounts

e. Debts

f. Sales of Tangible Personal Property, Including Internet Sales

g. Employee Activities

h. Printers

i. Personal Property

j. Seminars, Meetings, and Other Visits

B. Pub. L. No. 86–272

1. Wrigley

2. South Carolina's Interpretation of Pub. L. No. 86–272

a. Definitions

b. Activities by Independent Contractors

3. Heublein Inc. v. South Carolina Tax Comn.

2280.03. Taxable Entities

A. Corporations Subject to Income Tax and Rate

B. Corporations Exempt from Tax

C. Special Treatment of Certain Entities

1. S Corporations

2. Qualified Subchapter S Subsidiaries

3. Limited Liability Companies

a. General Provisions

b. Definitions

c. Issues Related to Single Member LLCs Disregarded as an Entity Separate from Their Owners

(1) Nexus

(2) A Member's Liability for a Single Member LLC's Taxes

d. Other South Carolina Taxes

(1) Corporate License Fees

(2) Deed Recording Fees

(a) Imposition and Determination of Value

(b) Affidavit of Value

(c) Liability

(d) Exemptions

(3) Withholding on Income of Nonresident Partners and S Corporation Shareholders

(4) Agricultural Use Property Tax Valuation

e. Conversions of One Type of Entity Into Another Involving LLCs

(1) Tax Consequences of the Conversion to Another Involving LLCs

(a) Definitions and Assumptions

(b) Income Tax

(c) Sales Tax

(d) Deed Recording Fees

(2) Tax Consequences of the Conversion of a Corporation to an LLC

(3) The Sale of Interests in an LLC Taxes as a Partnership Where a Single-Member LLC Results

(4) A Single-Member LLC Which is Disregarded as an Entity Separate from Its Owner Becomes an LLC with More than One Owner Taxed as a Partnership

4. Insurance Companies

5. Financial Institutions

a. Banks

b. Savings and Loan Associations

c. Other Financial Institutions

6. DISCs, FSCs, and Extraterritorial Income Exclusion

7. Regulated Investment Companies and Real Estate Investment Trusts

2280.04. Taxable Income Computation

A. Federal Income Tax Conformity

1. Internal Revenue Code Sections Not Adopted

2. Elections, Tax Year, and Accounting Method

B. Gross Income Modifications

C. Taxable Income Modifications

D. Modifications Initiated by the Department or Taxpayer

1. I.R.C. 482 and 7872

2. Allocation and Apportionment and Matching

E. 1985 Transition Provisions

2280.05. Allocation and Apportionment

Introductory Material

A. Allocation

B. Business v. Nonbusiness Income

C. Matching Deductions to Income

D. Apportionment

1. Single Factor Apportionment Method for Businesses Dealing in Tangible Personal Property - Tax Years Beginning 2011

2. Businesses Dealing in Tangible Personal Property – Three-Factor (Double Weighted Sales) Formula - Tax Years 2007 Through 2010

a. The Property Factor

b. The Payroll Factor

c. The Sales Factor

3. Businesses Dealing in Tangible Personal Property – Three-Factor (Double Weighted Sales) Formula - Tax Years Before 2007

a. The Property Factor

b. The Payroll Factor

c. The Sales Factor

4. Businesses Not Dealing in Tangible Personal Property – Single Factor (Gross Receipts) Formula

5. Special Apportionment Formulas for Particular Industries

a. Fairness Based Apportionment

b. Economic Development Incentive Based Apportionment

(1) New Facility or Expansion: 5-Year Formula

(2) New Facility or Expansion: 10-Year Formula

(3) Special Economic Development Incentive Based Apportionment for Certain Recycling Facilities

E. Unitary Business Doctrine

1. South Carolina Approach

2. Unitary Business Issues

3. South Carolina Cases

a. Exxon

b. Lowenstein

(1) Gain from Repurchase of Bonds

(2) Interest Income

(3) Unitary Business Doctrine

(4) Similar Department Decisions

c. Kodak

d. Factor Representation – The NCR Case

(1) NCR I

(2) NCR II

(3) Comment: Arguments the Department Might Use in Future Cases

4. Comment: Conclusions

2280.06. Tax Credits and Incentives

A. Income Tax Moratorium

1. Substantial Investment and New Job Creation

2. Prior Moratoria

a. Taxpayers Qualifying for Job Development Benefits

b. Manufacturing and Other Eligible Facilities

B. General Credit Provisions

1. Ordering

2. Credits of ‘Consolidated’ (Combined) Corporations

C. Job or Employee Credits and Incentives

1. Job Tax Credit

a. General Provisions

b. Types of Qualifying Businesses

c. Qualifying Jobs

d. County Rankings

e. Credit Amount

f. Calculating the Credit

g. Frequently Asked Questions and Helpful Tips

h. Example

2. Job Development and Job Retraining Credits

a. Job Development Credit

b. Job Retraining Credit

3. Credit for Hiring Family Independence Recipient

4. Credit for Hiring Displaced Workers

5. Apprenticeship Income Tax Credit

6. Employee Child Care Programs Credit

D. Investment Credits and Incentives

1. Community Development Corporation Investment Credit

2. Venture Capital Investment Incentive

3. Palmetto Seed Capital Credit

4. Industry Partnership Fund Credit

5. Qualified Contribution to Hydrogen Fund Credit

6. Credit for Investing in an Economic Impact Zone

E. Energy Credits

1. Solar Energy Heating or Cooling System Installation Credit

2. Alternative Motor Vehicle Credit

3. Plug-in Hybrid Vehicle Credit

4. Ethanol or Biodiesel Production Credits

a. Credit for Production

b. Credit for Qualified New Production Beginning January 1, 2017

5. Ethanol or Biodiesel Research and Development Credit

6. Biomass Resources Credit

7. Credits for Renewable Fuels

Content

a. Credit for Distribution or Dispensing Facility

b. Credit for Processing Facility

8. Credit for Energy Conservation and Renewable Energy

F. Environmental Credits and Incentives

1. Conservation Credit

2. Credit for Water Impoundments and Water Controls

3. Habitat Management Credit

4. Brownfields Voluntary Cleanup Credit

5. Recycling Facility Tax Credit

6. Mercury Switch Disposal Credit

G. Motion Picture Credits and Incentives

1. Motion Picture Project Credit

2. Motion Picture Production Facility Credit

3. Motion Picture Commercial Production Credit

4. Motion Picture Production Company Rebate

5. Motion Picture Sales Tax Exemptions

H. Property Credits

1. Historic Structure Rehabilitation Credit

2. Textile Communities Revitalization Credits

a. Property Tax Credit

b. Corporation Tax Credit

c. Repealed Credit

3. Retail Facilities Revitalization Credit

I. Agricultural Credits and Incentives

1. Milk Producer Credit

2. Agricultural Use of Anhydrous Ammonia Credit

J. Miscellaneous Credits

1. Research and Development Credit

2. Corporate Headquarters Credit

a. General Provisions

b. Qualifying Headquarters

c. Real Property Costs

d. Personal Property Costs

e. Claiming the Credit

f. Assignment of Rights

3. Credit For Infrastructure Construction

4. Minority Business Credit

5. Credit Against License Tax for Infrastructure

6. South Carolina Business Development Corporation Shareholder Credit

7. County Business Development Corporation Shareholder Credit

8. Port Cargo Volume Increase Credit

9. Quality Improvement Program Credit

10. Whole Effluent Toxicity Testing Credit

11. Donated Deer Credit

K. Deferral of Tax on Income Attributable to Foreign Trade Receipts

2280.07. TAX RETURNS AND PAYMENT

A. Filing Returns and Payment

1. Due Dates

a. Income Tax Returns

b. Filing Requirements Where Nexus is an Issue

c. Information Returns

d. Final Returns

e. Amended Returns

f. Electronic Funds Transfer

2. Extensions of Time to File Income Tax Returns

a. Initial Request

b. Additional Request for Extension of Time to File Income Tax Returns

c. Special Extensions Granted by the Department

d. Invalid Extension

e. Estimated Tax Payments

3. Saturday, Sunday, or Holiday Due Dates

4. Timely Filing

B. Special Types of Returns

1. ‘Consolidated’ (Combined) Returns

a. Definition

b. General Rules

2. Composite Returns for S Corporations

C. Estimated Tax Payments

D. Certificate of Compliance

1. General Provisions

2. Taxes Due Upon Change of Ownership

2280.08. Annual Reports and License Fees

A. Annual Report

1. General Provisions

2. Initial Annual Report

3. Subsequent Annual Reports

4. Content

B. License Fee Overview

C. Entities Exempt from Annual Report and License Fee Provisions

D. License Fee Computation

1. Measure of License Fee Based on Capital Stock and Paid in Capital

a. General Provisions

b. Apportionment of License Fee for Multistate Business

c. Special Measure for Bank, Insurance, and Savings and Loan Holding Companies

2. Measure of License Fee Based on South Carolina Gross Receipts and Property

a. General Provisions

b. Computation

c. Special Measure for Electric Cooperatives

d. Example

E. License Fee Specific Issues

1. Corporations Subject to License Fee

a. General Provisions

b. Qualified Subchapter S Subsidiaries

2. Consolidated (Combined) Return Issues

3. Due Dates and Forms

4. Short Taxable Years, Initial Returns, and Final Returns

F. Credits and Incentives Against License Fees

2280.09. WITHHOLDING

A. Scope

B. Wage Withholding

1. General Provisions

2. Exemption Certificate

3. Withholding Agent Duties

a. Registration and Tax Deposits

b. Quarterly Returns and Annual Reconciliations

(1) General Provisions

(2) Rules for Claiming Job Development or Job Retraining Credits

c. Forms W–2 and 1099s

C. S Corporation Nonresident Shareholder Withholding

1. General Provisions

2. Exceptions

3. Helpful Tips

D. Qualified Subchapter S Subsidiaries

E. Taxpayers Temporarily Conducting Business in South Carolina

1. General Provisions

2. Exceptions

F. Rents and Royalties

1. General Provisions

2. Exceptions

G. Sale of Real Property and Associated Tangible Personal Property

1. General Provisions

2. Sale Subject to or Exempt From Withholding

3. Affidavit

4. Installment Sales

H. Job Development or Job Retraining Credits (Refunds of Wage Withholding)

2280.10. Procedure and Taxpayer Remedies

A. Records

1. Duty to Keep Records and Department's Authority to Examine

2. Record Keeping Media

a. Microfilm, Microfiche, or Other Storage–Only Imaging Systems

b. Electronic Records

3. Penalties

4. Confidentiality of Records

B. Tax Procedure

1. Representation of Taxpayers Before the Department

2. Assessment and Administrative Appeals

3. Claims for Refunds

4. Requirement to Exhaust Prehearing Remedies

5. Small Claims Cases

6. General Procedures in Revenue Cases Held Before the Administrative Law Judge Division or the Court

C. Time Limitations

1. Assessment of Tax

2. Claims for Refunds

3. Federal Income Tax Adjustments

4. Interpretation and Mitigation of the Time Limitations

D. Interest

E. Penalties

F. Appeals of Penalties and Interest

G. Administrative Dissolution for Failure to Pay Taxes

H. Provisions For Taxpayer Assistance

1. Advice from the Department

a. Oral Advice

b. Informal Written Advice

c. Formal Written Advice (Advisory Opinion)

2. Taxpayers' Bill of Rights

3. Relief for Voluntary Filers

a. Who Is a Voluntary Filer?

b. Voluntary Filer Relief

c. Registration Procedure for Voluntary Filers

d. Procedure for Nonvoluntary Filers

e. Procedure When Nexus Is Unclear

Working Papers

Item Description Sheet

Worksheet 1 Contact Information

Worksheet 2 Information Guide on Requesting a PLR

Worksheet 3 Tax Credits - Summary Chart

Worksheet 4 Nexus Questionnaire

Worksheet 5 Other Constitutional Limitations

Worksheet 6 BNA 2008 Survey of State Tax Departments: South Carolina Questionnaire

Worksheet 7 [Reserved.]

Worksheet 8 [Reserved.]

Worksheet 9 [Reserved.]

Worksheet 10 Geoffrey Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (S.C. 1993)

Opinion

Worksheet 11 Pub. L. No. 86-272

Worksheet 12 S.C. Revenue Ruling No. 05-5

Worksheet 13 S.C. Revenue Procedure No. 95-4 - Fairness

Worksheet 14 S.C. Revenue Procedure No. 02-4 - Economic Development

Worksheet 15 S.C. Revenue Ruling No. 97-15 - Public Law Guidelines

Worksheet 16 S.C. Revenue Procedural Bulletin No. 02-5 - Penalty Waiver

Worksheet 17 S.C. Revenue Ruling No. 99-5 - Job Tax Credit

Worksheet 18 Information Guide on Appeals

Worksheet 19 A. Administrative Law Court Rule on Representation of Taxpayers

Worksheet 20 Supreme Court Order

Worksheet 21 Rules of Procedure for the Administrative Law Court

Bibliography

Bibliography