State & Local Tax Impacts of COVID-19 for South Carolina – 2022

Information current as of December 31, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor^™ or visit our COVID-19 Resource Center for current information as needed.

Information Specific to South Carolina

• South Carolina announced it will follow the deadline change announced by the IRS for individual income taxes, moving the normal April 15 deadline to May 17, 2021.
  • South Carolina DOR, News Release; March 18, 2021.
• South Carolina has extended through September 30, 2021 (previously applied through June 30, 2020), guidance that the state won’t use changes solely in an employee’s temporary work location due to the remote work requirements arising from, or during, the COVID-19 relief period as a basis for establishing nexus or altering apportionment of income. The extension also covers related guidance that was issued on employer withholding requirements.
  • South Carolina DOR, Information Letter 21-8; April 7, 2021.
• South Carolina legislation updated its Internal Revenue Code (IRC) conformity date from December 31, 2019, to December 31, 2020. If IRC sections adopted by South Carolina that expired on December 31, 2020, are extended, but not amended, by congressional enactment during 2021, then those sections also are extended for South Carolina income tax purposes. To the extent that loans are forgiven and excluded from gross income for federal income tax purposes under the Paycheck Protection Program (PPP), or from any extension of the program, those loans also are excluded for South Carolina income tax purposes. In addition, to the extent the federal government allows the deduction of expenses associated with the forgiven PPP loans, the expenses also will be allowed as a deduction for South Carolina income tax purposes. For tax year 2020, South Carolina specifically adopts the amendment in the American Rescue Plan Act of 2021 (ARPA) relating to the exclusion from taxable income of $10,200 of unemployment compensation for a taxpayer with less than $150,000 in federal adjusted gross income. Certain provisions of the CARES Act and the 2021 Consolidated Appropriations Act are specifically not adopted by South Carolina, including: IRC §62(a)(22) relating to the $300 charitable deduction allowed in 2020 for persons who claim the standard deduction; IRC §172(a) relating to the modification of the income limitations allowed for the use of net operating losses in tax years 2018, 2019, and 2020; IRC §461(l) relating to the modification of the limitation on losses allowed for noncorporate taxpayers in tax years 2018, 2019, and 2020; and IRC §274(n) relating to the temporary allowance of the full business deduction for business meals that are paid or incurred after December 30, 2020, and before January 1, 2023.
  • South Carolina H.B. 4017, effective May 18, 2021.
• South Carolina issued guidance regarding the federal exclusion of unemployment compensation for 2020. On March 11, 2021, Congress enacted the federal ARPA, allowing taxpayers to exclude the first $10,200 of unemployment compensation per person from federal income for tax year 2020, for taxpayers with an adjusted gross income of less than $150,000. On May 17, 2021, South Carolina adopted the federal exclusion for tax year 2020. South Carolina taxpayers who filed their state return SC1040 prior to May 18, 2021, should review their return to determine if the correct amount of unemployment compensation is reported in federal taxable income, which is the starting point of SC1040. To amend an SC1040 for tax year 2020, a taxpayer should file an SC1040 with a Schedule AMD, Amended Return Schedule. For tax year 2021 and thereafter, unemployment compensation is taxable income because the federal provision is effective for tax year 2020 only. Taxpayers currently receiving unemployment compensation should review their tax situation to determine if they should elect to have South Carolina income tax deducted and withheld from unemployment payments at the rate of 7 percent or choose to make estimated tax payments. 
  • South Carolina DOR, Information Letter No. 21-14; May 26, 2021.
• South Carolina issued information on the taxation of COVID-19-related distributions from retirement plans under the federal Coronavirus Aid, Relief, and Economic Security Act for individual income tax purposes. South Carolina conforms to the federal tax treatment for such distributions—specifically, coronavirus-related distributions (not to exceed $100,000) from an eligible retirement plan made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan are allowed to be included in income ratably over a three-year period and treated as though they were paid in a direct rollover to an eligible retirement plan (and not be includable in income) if the distribution is eligible for tax-free rollover treatment and is recontributed to an eligible retirement plan within a three-year period beginning on the day after the date on which the distribution was received. 
  • South Carolina DOR, Information Letter No. 21-15; June 2, 2021.
• South Carolina has extended through December 31, 2021, relief regarding the establishment of income and sales tax nexus solely because an employee is temporarily working in a different work location due to COVID-19. Under the relief provisions, South Carolina will not use changes solely in an employee’s temporary work location due to the remote work requirements arising from, or during, the COVID-19 relief period as a basis for establishing nexus or altering apportionment of income. The extension also covers related guidance that was issued on employer withholding requirements.
  • South Carolina DOR, Information Letter No. 21-22; August 25, 2021.
• South Carolina issued individual income tax guidance on retirement income deductions for COVID-related distributions from retirement plans under Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the effect of full or partial repayment of the distributions. The state adopted the CARES Act provision but doesn’t impose a penalty for premature distributions. Because the distributions aren’t subject to an early withdrawal penalty under the Internal Revenue Code, the distributions from qualified retirement plans qualify for a deduction up to $3,000 through age 64, and up to $10,000 annually at age 65 and thereafter. To the extent taxpayers fully or partially repay reported distributions, federal and state taxable income is lowered for tax years that previously included the distributions. Taxpayers should lower the state deduction originally claimed to the extent the repaid distribution was included in that deduction.
  • South Carolina DOR, Revenue Ruling No. RR 21-12; September 28, 2021.
• South Carolina has further extended through March 31, 2022, relief that it previously announced regarding the establishment of income and sales tax nexus solely because an employee is temporarily working in a different work location due to COVID-19. Under the relief provisions, which previously applied through December 31, 2021, South Carolina will not use changes solely in an employee’s temporary work location due to the remote work requirements arising from or during the COVID-19 relief period as a basis for establishing nexus or altering apportionment of income. The extension also covers related guidance that was issued on employer withholding requirements.
  • South Carolina DOR, Information Letter No. 21-31, December 21, 2021.
     

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