§ 12-6-40 — Application of federal Internal Revenue Code to State tax laws.

South Carolina § 12-6-40

• Jurisdiction: South Carolina
• Title 12: TAXATION
• Ch. 6: SOUTH CAROLINA INCOME TAX ACT

Text

(A)(1)(a) Except as otherwise provided, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 31, 2024, and includes the effective date provisions contained in it. (b) For purposes of Sections 63 and 179 of the Internal Revenue Code, the amendments made by Sections 103 and 202 of the Jobs and Growth Tax Relief Reconciliation Act of 2003, P.L. 108-27 (May 28, 2003) are effective only for taxable years beginning after December 31, 2003. (c) If Internal Revenue Code sections adopted by this State which expired or portions thereof expired on December 31, 2024, are extended, but otherwise not amended, by congressional enactment during 2025, these sections or portions thereof also are extended for South Carolina income tax purposes in the same manner that they are extended for federal income tax purposes. (d) To the extent loans are forgiven and excluded from gross income for federal income tax purposes under the paycheck protection program in Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or from any extension of the paycheck protection program, those loans are excluded for South Carolina income tax purposes. Further, to the extent the federal government allows the deduction of expenses associated with the forgiven paycheck protection program loans, these expenses will be allowed as a deduction for South Carolina income tax purposes. (e) South Carolina adopts the federal tax treatment for any exclusion from federal taxable income or allowance of expenses as provided in the federal Consolidated Appropriations Act of 2021 in Sections 276 (Clarification of Tax Treatment of Forgiveness of Covered Loans), 277 (Emergency Financial Aid Grants), and 278 (Clarification of Tax Treatment of Certain Loan Forgiveness and Other Business Financial Assistance). (2)(a) For purposes of this title, "Internal Revenue Code" is deemed to contain all changes necessary for the State to administer its provisions. Unless a different meaning is required: (i) "Secretary", "Secretary of the Treasury", or "Commissioner" means the Director of the Department of Revenue. (ii) "Internal Revenue Service" means the department. (iii) "Return" means the appropriate state return. (iv) "Income" includes the modifications required by Article 9 of this chapter and allocation and apportionment as provided in Article 17 of this chapter. Other terms in the Internal Revenue Code must be given the meanings necessary to effectuate this item. (b) For purposes of Internal Revenue Code Sections 67 (Two Percent Floor on Miscellaneous Itemized Deductions), 71 (Alimony and Separate Maintenance Payments), 85 (Unemployment Compensation), 165 (Losses), 170 (Charitable Contributions), 213 (Medical and Dental Expenses), 219 (Retirement Savings), 469 (Passive Activity Losses and Credits Limited), and 631 (Gain or Loss in the Case of Timber, Coal, or Domestic Iron Ore), "Adjusted Gross Income" for South Carolina income tax purposes means a taxpayer's adjusted gross income for federal income tax purposes without regard to the adjustments required by Article 9 and Article 17 of this chapter. (c) For a taxpayer utilizing the provisions of Internal Revenue Code Section 1341 (Computation of Tax where Taxpayer Restores Substantial Amount Held under Claim of Right) for South Carolina tax purposes the phrase "taxes imposed by this chapter" means taxes imposed by Chapter 6 of this title. (d) The terms defined in Internal Revenue Code Sections 7701, 7702, and 7703 have the same meaning for South Carolina income tax purposes, unless a different meaning is clearly required. (B) All elections made for federal income tax purposes in connection with Internal Revenue Code sections adopted by this State automatically apply for South Carolina income tax purposes unless otherwise provided. A taxpayer may not make an election solely for South Carolina income tax purposes except for elections not applicable for federal purposes, including filing a combined or composite return as provided in Sections 12-6-5020 and 12-6-5030, respectively. (C) If a taxpayer complies with the provisions of Internal Revenue Code Section 367 (Foreign Corporations), it is not necessary for the taxpayer to obtain the approval of the department. A taxpayer filing a paper return shall attach a copy of the approval received from the Internal Revenue Service to his next South Carolina income tax return. A taxpayer filing an electronic return shall keep a copy of the approval with his tax records.

Legislative History

HISTORY: 1995 Act No. 76, SECTION 1; 1996 Act No. 410, SECTION 1; 1997 Act No. 155, Part II, SECTION 10A; 1998 Act No. 268, SECTION 1; 1999 Act No. 114, SECTION 3; 2000 Act No. 387, Part II, SECTION 7, eff June 30, 2000; 2001 Act No. 89, SECTION 6, eff July 20, 2001, applicable to taxable years beginning after December 31, 2000; 2002 Act No. 220, SECTION 1, eff April 22, 2002; 2003 Act No. 69, SECTION 3.E.1, eff June 18, 2003; 2005 Act No. 145, SECTION 7, eff June 7, 2005; 2006 Act No. 386, SECTION 4, eff June 14, 2006; 2007 Act No. 9, SECTION 2, eff April 11, 2007, applicable to county designations beginning in 2007; 2007 Act No. 110, SECTIONS 9, 37, eff June 21, 2007; 2007 Act No. 116, SECTIONS 15, 43, eff June 28, 2007, applicable for tax years beginning after 2007; 2008 Act No. 311, SECTION 54, eff June 4, 2008; 2009 Act No. 16, SECTION 1, eff May 7, 2009; 2010 Act No. 142, SECTION 1, eff March 31, 2010; 2011 Act No. 5, SECTION 1, eff April 12, 2011; 2012 Act No. 126, SECTIONS 1, 2, eff March 13, 2012; 2013 Act No. 10, SECTIONS 1, 2, eff April 9, 2013; 2014 Act No. 126 (S.953), SECTION 1, eff March 4, 2014; 2015 Act No. 5 (S.397), SECTION 1, eff March 27, 2015; 2016 Act No. 160 (H.4328), SECTION 3, eff April 21, 2016; 2017 Act No. 4 (S.250), SECTION 1, eff April 5, 2017; 2018 Act No. 266 (H.5341), SECTION 2, eff October 3, 2018; 2019 Act No. 16 (H.3985), SECTION 1, eff March 28, 2019; 2020 Act No. 147 (S.545), SECTION 3.A, eff September 28, 2020; 2021 Act No. 87 (H.4017), SECTIONS 1.A, 1.B, eff May 18, 2021; 2022 Act No. 201 (H.5057), SECTION 1, eff May 16, 2022; 2023 Act No. 46 (H.4017), SECTION 1, eff May 16, 2023; 2024 Act No. 175 (H.4594), SECTION 1, eff May 20, 2024; 2025 Act No. 63 (S.507), SECTION 1, eff May 22, 2025. Editor's Note 2005 Act No. 145, SECTION 42, provides as follows: "Notwithstanding the ratification of another act during the 2004-2005 Session of the General Assembly affecting the sections of the 1976 Code amended in Sections 7, 8, 9, and 10 of this act, the ratification of this act is deemed to be the last action of the General Assembly regarding those code sections." 2007 Act No. 9, SECTION 3.B, provides as follows: This section takes effect upon approval by the Governor and only for the purpose of locking into the 2006 classification. 2018 Act No. 266, SECTIONS 1, 7, 8, and 9, provide as follows: "SECTION 1. This act may be referred to as the 'South Carolina Taxpayer Protection and Relief Act'." "SECTION 7. The Department of Revenue shall take actions necessary to implement the provisions of this act and take the appropriate actions to educate taxpayers of the amendments contained within this act, especially those, if any, that impact filing requirements or determination of taxable income. "SECTION 8. By January 15, 2025, the Department of Revenue, in coordination with the Revenue and Fiscal Affairs Office, shall deliver a report to the General Assembly that specifies the many provisions of the Tax Cuts and Jobs Act of 2017 that expire after tax year 2025. "SECTION 9. Except where specified otherwise, this act takes effect upon approval by the Governor and first applies to tax years beginning after 2017." 2020 Act No. 147, SECTIONS 2.A., 3.B., and 4, provide as follows: "SECTION 2.A. For tax year 2020, to the extent loans under the paycheck protection program in Section 1102 of Public Law 116-136, Title 1 are forgiven and excluded from gross income for federal income tax purposes under Section 1106 of Public Law 116-136, Title 1, those loans are excluded for South Carolina income tax purposes. Further, to the extent the federal government allows the deduction of expenses associated with the forgiven paycheck protection program loans, these expenses will be allowed as a deduction for South Carolina income tax purposes." "[SECTION 3.]B. Notwithstanding any other provision of law, for purposes of any law that provides for taxes administered by the Department of Revenue, the State specifically does not adopt the provisions of Section 204(a) of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 as it pertains to individuals. In administering taxes, the Department of Revenue shall account for the nonadoption set forth in this section." "SECTION 4. This act takes effect upon approval by the Governor and applies to property tax returns due after December 31, 2020." 2021 Act No. 87, SECTIONS 2, 3, provide as follows: "SECTION 2. (A) The following amendments in the Coronavirus Aid, Relief, and Economic Security Act (CARES) of 2020, P.L. 116-136 (March 27, 2020) are specifically not adopted by this State: "(1) Internal Revenue Code (IRC) Section 62(a)(22) relating to the $300 charitable deduction allowed in 2020 for persons who claim the standard deduction; "(2) Section 2205(a), (b), and (c) of the CARES Act relating to the modification of limitations on individual and corporate cash charitable contributions for 2020 and relating to the increase in limits on charitable contributions of food inventory for 2020; "(3) IRC Section 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; "(4) IRC Section 461(l) relating to the modification of the limitation on losses allowed for noncorporate taxpayers in tax years 2018, 2019, and 2020. "(B) The following amendments in the Consolidated Appropriations Act of 2021, P.L. 116-260 (December 27, 2020) are specifically not adopted by this State: "(1) Amendment to Division N Section 275 relating to the allowance of personal protective equipment expenses for the educator expense deduction under IRC Section 62(a)(2)(D)(ii); "(2) IRC Section 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; "(3) IRC Section 170(p) relating to the $300 or $600 charitable deduction allowed in 2021 for persons taking the standard deduction; "(4) Amendment to CARES Act Section 2205 relating to the temporary extension of the modification of limitations on individual and corporate cash charitable contributions and the increase in limits on charitable contributions of food inventory to tax year 2021; "(5) Amendments to the Taxpayer Certainty and Disaster Tax Relief Act of 2020, P.L. 116-260 Division EE Section 304 relating to the special rules for qualified disaster relief for charitable contributions and special rules for qualified disaster-related personal casualty losses. "SECTION 3. For tax year 2020, the amendment in the American Rescue Plan of 2021, P.L. 117-2 (March 11, 2021) relating to the exclusion from taxable income for tax year 2020 of $10,200 of unemployment compensation for a taxpayer with less than $150,000 in federal adjusted gross income is specifically adopted by South Carolina. The Department of Administration's Director of the Executive Budget Office is authorized to allocate sixty-one million three hundred thousand dollars in the appropriate fiscal years from the American Rescue Plan Act of 2021 to the general fund to account for the provisions of this SECTION." 2022 Act No. 201, SECTION 2, provides as follows: "SECTION 2. For tax year 2021, South Carolina adopts the federal exclusion from gross income for targeted Economic Injury Disaster Loan advances received from the Small Business Administration (SBA) and the federal exclusion from gross income for restaurant revitalization grant amounts received from the SBA as provided in Sections 9672 and 9673 of the American Rescue Plan Act." Effect of Amendment The 2013 amendment, in subsection (A)(1)(a), substituted "January 2, 2013" for "December 31, 2011"; and deleted former subsection (A)(1)(c), relating to Internal Revenue Code sections adopted by the state which expired on December 31, 2011, or January 1, 2012. 2014 Act No. 126, SECTION 1, in subsection (A)(1)(a), substituted "December 31, 2013" for "January 2, 2013"; made nonsubstantive changes in subsection (A)(1)(b); and added subsection (A)(1)(c), relating to extension. 2015 Act No. 5, SECTION 1, in (A)(1)(a) and (A)(1)(c), substituted "December 31, 2014" for "December 31, 2013"; and in (A)(1)(c) substituted "by congressional enactment during 2015" for "by congressional enactment during 2014". 2016 Act No. 160, SECTION 3, in (A)(1)(a), substituted "2015" for "2014"; and in (A)(1)(c), substituted "2015" for "2014" and "2016" for "2015". 2017 Act No. 4, SECTION 1, in (A)(1)(a), substituted "2016" for "2015", and in (A)(1)(c), substituted "2016" for "2015" and "2017" for "2016". 2018 Act No. 266, SECTION 2, in (A)(1), in (a), substituted "February 9, 2018" for "December 31, 2016", and in (c), substituted "December 31, 2017" for "December 31, 2016" and "2018" for "2017". 2019 Act No. 16, SECTION 1, in (A)(1), in (a), substituted "December 31, 2018" for "February 9, 2018", and in (c), inserted "or during 2018," following "December 31, 2017,", and substituted "2019" for "2018". 2020 Act No. 147, SECTION 3.A, in (A)(1), in (a), substituted "December 31, 2019" for "December 31, 2018", and in (c), substituted "December 31, 2019" for "December 31, 2017, or during 2018" and "2020" for "2019". 2021 Act No. 87, SECTION 1.A, in (A)(1), in (a), substituted "December 31, 2020" for "December 31, 2019", and in (c), substituted "December 31, 2020" for "December 31, 2019" and "during 2021" for "during 2020". 2021 Act No. 87, SECTION 1.B, in (A)(1), added (d) and (e). 2022 Act No. 201, SECTION 1, in (A)(1), in (a), substituted "December 31, 2021" for "December 31, 2020", and in (c), substituted "December 31, 2021" for "December 31, 2020" and "2022" for "2021". 2023 Act No. 46, SECTION 1, in (A)(1), in (a), substituted "December 31, 2022" for "December 31, 2021", and in (c), substituted "December 31, 2022" for "December 31, 2021" and "2023" for "2022". 2024 Act No. 175, SECTION 1, in (A)(1)(a), substituted "2023" for "2022", and in (c), substituted "2023" for "2022" and "2024" for "2023". 2025 Act No. 63, SECTION 1, in (A)(1)(a), substituted "December 31, 2024" for "December 31, 2023"; in (A)(1)(c), substituted "December 31, 2024" for "December 31, 2023" and "during 2025" for "during 2024".