411 Sunset Drive | Manning, SC 29102
CORPORATE INCOME TAX & TAX CREDITS
At 5%, South Carolina’s corporate income tax rate is among the lowest in the Southeast, and the state is currently phasing in a single factor sales formula for apportioning income that will be fully implemented by 2011.
The Corporate License Tax Rate is $1 for each $1,000 of capital stock and paid-in or capital surplus, plus a $15 annual fee.
Many companies qualify for corporate income tax credits, which together can eliminate or significantly reduce a company's corporate income tax liability for a specified number of years.
Jobs Tax Credits: A reward for job creation
By creating new jobs in Clarendon County, your company is eligible for a tax credit against annual corporate income tax liability. The value of these credits is $8,000 per job annually for a five-year period. If Clarendon County agrees to designate your site as a "multi-county industrial park," this designation allows your company to take advantage of an additional $1,000 per net new job—meaning Jobs Tax Credits of $9,000 per job are available. The credit is available for a five-year period beginning with Year 2 (Year 1 is used to establish the created job levels). Credits can be used to offset your annual state corporate income tax liability by up to 50%. Unused credits can be carried forward for up to 15 years. To be eligible for Jobs Tax Credits, your company must create an average of 10 net new jobs at the facility in one year.
Corporate Headquarters Credit
To offset the cost of relocating or expanding a corporate headquarters facility, South Carolina provides a generous 20% credit based on the value of the actual portion of the facility dedicated to headquarters operation or direct lease costs for the first five years of operation. The credit can be applied against either corporate income tax or the corporate license fee. These credits are not limited to 50% of the company’s income tax liability and can potentially eliminate corporate income taxes for as long as 10 years from the year earned.
Eligibility for this credit is determined by meeting each of the following criteria:
- Minimum of 40 new full-time jobs must be created that are engaged in corporate headquarters or R&D activities. Of these jobs, 20 must be classified as staff employees.
- Cost of new construction or addition must exceed $50,000.
- The facility must be the location where corporate staff members or employees are domiciled and where the majority of the company’s financial, legal, personnel, planning, and/or other staff functions are handled on a regional or national basis.
- The facility must be the sole corporate headquarters within the region or nation (a region is defined as a geographical area comprising either five states [including South Carolina]; or two or more states [including South Carolina] if the entire business operations of the company are performed in fewer than five states).
Enhanced Credit for Corporate Headquarters
In addition to the standard headquarters credit, there is an enhanced corporate headquarters credit to offset personal property costs. This credit is for 20% of the tangible personal property costs of establishing the headquarters (15-year carry-forward). Like the standard credit, these credits are not limited to 50% of the company’s income tax liability and can potentially eliminate corporate income taxes.
To qualify for this credit, your company must meet the criteria for the standard headquarters credit, and the tangible personal property must meet the following requirements:
- Be capitalized as personal property for income tax purposes under the federal Internal Revenue Code.
- Be purchased for the headquarters facility or research and development facility that is a part of the same project.
- Be used for headquarters or research and development–related functions and services.
- Be used to create a minimum of 75 permanent, new, full-time jobs performing headquarters or research and development–related functions and services. The new jobs must have an average cash compensation level of more than one and one-half times the per capita income in South Carolina at the time the newly created jobs are filled. At the same time, the average cash compensation level for all the company’s employees within the state must be greater than twice the per capita income in South Carolina.
Child Care Tax Credits
South Carolina offers businesses a credit for child care expenses that can be applied to state corporate income tax. Companies may claim credits for capital costs and operating costs associated with establishing or operating a child care program or facility. The maximum credit claimed might equal the following:
- 50% of the incurred capital expenditures (not to exceed $100,000).
- 50% of the child care payments incurred by the employer (not to exceed $3,000 per participating employee).
These credits are limited to 50% of the company’s income tax liability and have a carry-forward period of 10 years. When used in combination with other credits, such as the Jobs Tax Credit, the Child Care Tax Credit can lower your company’s effective corporate income tax rate to 1.25%.
Tax Credit for Research and Development Activities
To reward companies for increasing research and development activities in a taxable year, South Carolina offers a credit equal to 5% of the taxpayer’s qualified expenditures for research and development made in the state. The credit taken in any one taxable year may not exceed 50% of the company’s remaining tax liability after all other credits have been applied. Any unused portion of the credit can be carried forward for 10 years from the date of the qualified expenditure.