South Carolina General Assembly
121st Session, 2015-2016

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Bill 397

Indicates Matter Stricken
Indicates New Matter

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

Indicates Matter Stricken

Indicates New Matter


February 18, 2015

S. 397

Introduced by Senators Leatherman, Setzler and O'Dell

S. Printed 2/18/15--S.

Read the first time February 3, 2015.



To whom was referred a Bill (S. 397) to amend Section 12-6-40, as amended, Code of Laws of South Carolina, 1976, relating to the application of the Internal Revenue Code to State Income, etc., respectfully


That they have duly and carefully considered the same and recommend that the same do pass with amendment:

Amend the bill, as and if amended, by striking SECTION 1 and inserting:

/        SECTION    1.    Section 12-6-40(A)(1)(a) and (c) of the 1976 Code, as last amended by Act 126 of 2014, is further amended to read:

"(a)    Except as otherwise provided, 'Internal Revenue Code' means the Internal Revenue Code of 1986, as amended through December 31, 2013 2014, and includes the effective date provisions contained in it.

(c)    If Internal Revenue Code sections adopted by this State which expired or portions thereof expired on December 31, 2013 2014, are extended, but otherwise not amended, by congressional enactment during 2014 2015, 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."            /

Renumber sections to conform.

Amend title to conform.

HUGH K. LEATHERMAN, SR. for Committee.



Fiscal Impact Summary

This bill would have no expenditure impact to the general fund, federal funds, and other funds.

This bill would increase general fund income tax revenue by $196,281 in FY 2014-15 due to the expiration of the refinery property provision.

Explanation of Fiscal Impact

State Expenditure

The Department of Revenue anticipates that this bill would have no expenditure impact to the general fund, federal funds, and other funds.

State Revenue

This bill updates South Carolina's conformity to the Internal Revenue Code (IRC) through December 31, 2014. Research by the Department of Revenue reports the only significant federal tax legislation enacted in 2014 was the Tax Increase Prevention Act of 2014. This legislation retroactively restored over fifty federal tax provisions that expired at the end of 2013. Of these extended provisions, twenty-four directly impact South Carolina taxpayers. The attached table provides a brief summary of the twenty-four provisions including the year they were first enacted.

South Carolina has proactively adopted the twenty-four extended federal tax provisions that impact South Carolina taxpayers pursuant to Section 12-6-40(A)(1)(c), as added in Act 126 of 2014. This new subsection adopted these expired provisions of the federal IRC for South Carolina income tax purposes in the event any of these expired sections were extended, but not otherwise amended, by the federal government in 2014.

These twenty-four temporary provisions have generally been in the Internal Revenue Code for years and are routinely extended as they were most recently extended in the Tax Increase Prevention Act of 2014. While Congress extended these provisions in 2014, this is a one-year extension that expires at the end of 2014. Additional federal legislation is necessary to continue their effectiveness for 2015 and beyond.

Given the continuing nature of these twenty-four provisions, proactively adopted under the South Carolina income tax code, we expect no revenue impact from the continuation of the extended provisions.

One provision that impacts South Carolina taxpayers was not extended for 2014. This provision allows taxpayers to expense 50 percent of the cost of qualified refinery property when placed in service. Normally, this type of property is depreciated over a ten-year time frame. Qualified refinery property includes assets used in the refining of liquid fuels, including biomass or biodiesel. The federal provision was originally enacted as part of the Energy Policy Act of 2005. It was extended through 2013 as part of the Emergency Economic Stabilization Act of 2008. Based on U.S. revenue estimates of extending this provision by the U.S. Joint Committee on Taxation and adjusting for South Carolina taxpayers only, we expect that the expiration of this provision will increase income tax revenue by $196,281 in FY 2014-15 when the impacted taxpayers file their 2014 tax returns.

The Tax Increase Prevention Act of 2014 also created the Achieving a Better Life Experience Act (ABLE) tax-favored savings accounts for individuals with disabilities for tax years after 2014. The ABLE Act authorizes states to create an ABLE program similar to Code Section 529 college savings accounts. Any revenue impact from this authorization will be determined when the South Carolina enabling legislation is introduced.

Federal Tax Provisions Impacting South Carolina

Taxpayers Extended though Tax Year 2014 by the     First

    "Tax Increase Prevention Act of 2014"    Enacted

1    Deduction for qualified tuition and related expenses     1978

2    Tax credit for research and experimentation expenses

(SC credit uses federal credit to calculate SC tax liability

reduction, without federal credit the state credit is limited to

credits earned in previous years and carried forward due to

lack of tax liability)    1981

3    Empowerment zone tax incentives    1993

4    Accelerated depreciating for business property on Indian

reservations    1993

5    Special rules applicable to qualified small business stock    1993

6    Above the line deduction of up to $250 for teacher classroom expenses    2002

7    Increase in section 179 expensing amounts and threshold limits to

$500,000/$2,000,000. In 2014 limitations would revert back

to $25,000 with a $200,000 investment limit without further

federal legislation.    2003

8    15 year straight line cost recovery for qualified leasehold,

restaurant, and retail improvements    2004

9    Special rule for sales or dispositions to implement Federal

Energy Regulatory Commission or state electric restructuring policy    2004

10    Seven year recovery period for certain motorsports racing facilities    2004

11    Special expensing rules for certain film and television productions    2004

12    Enhanced charitable deduction for contributions of food inventory    2005

13    Tax free distributions from IRAs to certain public charities

for individuals aged 70-1/2 or older, not to exceed $100,000

per taxpayer per year; special transition rules for certain

distributions made in December 2012 and January 2013    2006

14    Premiums for mortgage insurance deductible as interest that

is qualified residential interest    2006

15    Extension of energy efficient commercial buildings deduction    2006

16    Basis adjustment to stock of S corporations making charitable

contributions of property    2006

17    Automatic extension of the period of years required to amortize

certain unfunded liabilities for multiemployer defined benefit

pension plans and additional funding rules endangered or critical

status plans    2006

18    Contributions of capital gain real property made for qualified

conservation purposes    2006

19    Election to expense advanced mine safety equipment    2006

20    Modify tax treatment of certain payments under existing

arrangements to controlling exempt organizations    2006

21    Discharge of indebtedness on principal residence excluded

from gross income of individuals    2007

22    Change the depreciation classification for race horses that are

two-years old or younger from seven-year property to three-year

property    2008

23    Reduction in recognition period for S corporation built in gains tax    2009

24    Extends income exclusion for employer provided mass transit

and parking benefits    2009

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office



Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Section 12-6-40(A)(1)(a) of the 1976 Code, as last amended by Act 126 of 2014, is further amended to read:

"(a)    Except as otherwise provided, 'Internal Revenue Code' means the Internal Revenue Code of 1986, as amended through December 31, 2013 2014, and includes the effective date provisions contained in it."

SECTION    2.    This act takes effect upon approval by the Governor.


This web page was last updated on February 18, 2015 at 6:47 PM