SC Treatment of Wages Related to the Federal Employee Retention Credit

The South Carolina Department of Revenue (the Department) recently issued SC Revenue Ruling #22-14 addressing whether a modification to federal taxable income on a South Carolina income tax return is allowed for certain qualified wages related to the federal employee retention credit. In 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) established the federal employee retention credit.1 The CARES Act also provided for the disallowance of a related wage deduction pursuant to rules similar to Internal Revenue Code (IRC) Section 280C, which reduces the amount of wage deduction by the amount of the credit. Under South Carolina law, the limiting provisions of IRC §280C do not apply when computing South Carolina taxable income.2

In its ruling, the Department treated the federal disallowance of the wage deduction as though it occurred pursuant to IRC §280C. Therefore it determined that South Carolina taxpayers may modify their federal taxable income on their South Carolina income tax return for the deduction of qualified wages that were disallowed for federal tax purposes related to the claiming of the federal employee retention credit. The modification only applies to qualified wages paid or accrued after March 12, 2020, and before January 1, 2022.

SC Increases the Manufacturing Partial Property Tax Exemption

As part of the Comprehensive Tax Cut Act of 2022 recently enacted in South Carolina, the manufacturing property tax exemption has increased from 14.2857% to 42.8571% of the property tax value.3 Additionally, the limit on total manufacturing property tax exemptions taken pursuant to S.C. Code Ann. §12-37-220(52) increased from $85 million per year to $170 million per year.4 As was the case prior to the Comprehensive Tax Cut Act of 2022, property owned or leased by a public utility does not qualify for the exemption.5 If the Revenue and Fiscal Affairs Office projects exemptions to exceed the (now $170 million) limit for the year, then there will be a proportional reduction of the exemption amount.6

SC Updates IRC Conformity Date

South Carolina House Bill No. 5057 was recently signed into law, updating the state’s IRC conformity date through December 31, 2021.7

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  • 1Pub. L. No. 116-136, Section 2301 (the employee retention credit was later codified in I.R.C. § 3134)
  • 2S.C. Code Ann. § 12-6-1130(7)
  • 3S.C. Senate Bill 1087 (Act No. 228) (amending S.C. Code Ann. § 12-37-220(52))
  • 4S.C. Senate Bill 1087 (Act No. 228) (amending S.C. Code Ann. § 12-37-220(52)(b))
  • 5S.C. Code Ann. § 12-37-220(52)(a)(i)
  • 6S.C. Code Ann. § 12-37-220(52)(c)
  • 7S.C. House Bill 5057 (Act No. 201) (amending S.C. Code Ann. § 12-6-40)

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