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State and Local Tax

South Carolina Passes 2022-2023 Budget

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

by Maria T. Albanese, JD, LLM

South Carolina’s 2022-2023 budget was ratified by the legislature on June 16, 2022, but South Carolina Governor Henry McMaster vetoed certain provisions on June 24, 2022, including one tax-related item for exemption of food manufacturing equipment. On June 28, 2922, the veto of the food manufacturing equipment exemption was overridden. All other tax-related items were not vetoed, and thus were enacted, including a new law enforcement officer of the year award, the nontaxable reimbursement for teachers who purchase their own school supplies and materials, the consumer protection services deduction, the sales tax exemptions for personal property purchased for use in private schools and for prescription medications used to prevent respiratory syncytial virus and for viscosupplementation therapies, the exemption from motor fuels tax for school buses, an admissions tax exemption for NASCAR, tennis and soccer events, and the suspension of franchise fees imposed on nursing home beds. (L. 2022, H5150 (c. 239), effective 07/01/2022.)

Personal income tax.  

Governor’s Law Enforcement Officer of the Year Award: The Department of Public Safety is to create an award nomination and recipient selection process for the Governor’s Law Enforcement Officer of the Year Award. An advisory committee will annually select a state law enforcement officer of the year, a county law enforcement officer of the year, and a municipal law enforcement officer of the year. Each winner will be recognized by the Office of the Governor and will also receive a tax-free award of $10,000, to be distributed by the Department.

Consumer protection services deduction: A personal income tax deduction of $300 for an individual, and $1,000 for a joint return or a return claiming dependents, is authorized for the actual costs incurred by a taxpayer to purchase a monthly or annual contract or subscription for identity theft protection and identity theft resolution services. The deduction is only available to those taxpayers that filed a return with the Department of Revenue for any taxable year after 1997 and before 2013 or to any person whose personally identifiable information was contained on the return of another eligible person, including minor dependents. The deduction cannot be claimed by taxpayers who deducted the same costs as a business expense, or by taxpayers enrolled in the theft protection services offered free of charge by South Carolina. The Department may require the taxpayer to provide proof of the actual costs and the taxpayer’s eligibility.

Teacher award exemption: Amounts granted to winners of the Teacher of the Year Award are exempt from personal income taxes.

School supplies: Effective for fiscal year 2022-2023, all certified and non-certified public school teachers, certified special school classroom teachers, certified media specialists, and certified guidance counselors who are employed by a school district, charter school or lead teachers may continue to receive reimbursement of up to $275 each school year to offset expenses incurred by them for teaching supplies and materials. This reimbursement is not considered taxable income for South Carolina state income tax purposes.

Credits and incentives.  

Renewable fuel credit: The date the taxpayer must place property or facility into service that is used for distribution or dispensing renewable fuel was extended to January 1, 2023.

Retail Facilities Revitalization Act repeal suspension: Effective for fiscal year 2022-2023, the repeal of Retail Facilities Revitalization Act, as to sites for which written notification of election of mode of credit has been provided to the Department prior to July 1, 2016, and for which a building permit has been issued prior to July 1, 2016, is suspended.

Sales tax.

Food manufacturing equipment: Clothing required by Current Good Manufacturing Practices at perishable prepared food manufacturing facilities defined by the North American Industry Classification System 311991, and other attire required by federal law for persons working in direct contact with food, food contact services, and food packaging materials to protect against contamination of food in perishable prepared food manufacturing facilities is exempt from all sales and use taxes.

School exemption: The bill continues the use tax exemption for sales of tangible personal property purchased for use in private primary or secondary school, including kindergartens and early childhood education programs exempt from income taxes under IRC § 501(c)(3).

Medical and prescription-related exemptions: The legislation continues the exemption from sales and use tax for prescription medicines used to prevent respiratory syncytial virus, and on viscosupplementation therapies.

NASCAR, tennis and soccer events: The bill continues the exemption from admissions tax for the current fiscal year, up to $114,000 in admissions tax revenue collected annually from all events held at a NASCAR sanctioned motor speedway or racetrack that hosts at least one race each year featuring the preeminent NASCAR cup series and must be rebated to the motorsports entertainment complex facility in the current fiscal year to keep a NASCAR race at the motorsports entertainment complex facility. In addition, any sports facility that hosts at least one preeminent Women’s Tennis Association-sanctioned tournament or any sports facility that operates as the home venue for a professional soccer team that participates in the United Soccer Leagues, second division or higher, must receive a rebate of half of its admissions tax revenue for the fiscal year, to be used by that facility for marketing the events held at the facility.

Distribution facility: The sales tax exemptions related to the purchase of equipment and construction materials is renewed for the 2022-2023 fiscal year. The definition of “distribution facility” is expanded to include the State Ports and the Navy Base Intermodal Facility owned by Palmetto Railways Authority.

Funding of public safety at events: Of the accommodation tax returned to Horry County or the municipalities therein (excluding municipalities that have enacted a Tourism Development Fee), the local government, by October 31, must inform the Department the percentage of accommodation tax to withhold, not to exceed one-third of the estimated yearly return, which will be dedicated to direct policing activities, fire safety, and emergency medical services. These funds will be sent by the Department to the local governing entity upon request of the local entity. The county or municipalities must submit a report on the expenditure of these funds must be submitted by to the governor, the Chairman of the Senate Finance Committee, and the Chairman of the House Ways and Means Committee no later than 90 days after the end of the fiscal year in which these funds are expended.

Referendum notification: A county or municipal election commission must notify the Department 60 days prior to a referendum on the imposition of a local sales tax or local option permit.

Property.

Notification of protest: If a taxpayer other than an individual files a property tax written protest, the Department must notify any affected county and school district of the written protest.

Catastrophic weather event: Any improvements made to real property or personal property used as a residence, such as a mobile home or manufactured housing unit, that was damaged during the catastrophic weather event in October 2015, Hurricane Matthew of 2016, or Hurricane Florence of 2018, after the event and before June 30, 2023, is not considered an improvement and may not be reassessed at a higher rate as a result of the assistance provided. During the current fiscal year, the property tax value of an eligible property will remain the same unless an assessable transfer of interest occurs. No refund is allowed on account of values adjusted due to this provision.

Homestead Exemption Fund credit suspended: For Fiscal Year 2022-23, S.C. Code Ann. § 11-11-156(C) is suspended; it provides that if there is any balance left in the Homestead Exemption Fund at the end of the fiscal year, a credit is to be divided up and applied to the eligible property parcels in a county.

Motor fuels tax.

School bus exemption: The law also continues the motor fuels tax exemption for school buses operated by school districts, other governmental agencies or head start agencies for the purpose of transporting students for school or school-related activities. School districts, other governmental agencies or head start agencies may purchase this fuel, on a cost reimbursable-plus basis, from the Department of Education School Bus Maintenance Shops.

Interest rates.

As in previous years, the budget directs the Department to reduce the rate of interest paid on refunds; for fiscal year 2022-2023, the reduction is 3% from the rate for underpayments.

Miscellaneous taxes and provisions.  

Nursing homes: The legislation continues the suspension of franchise fees imposed on nursing home beds and enacted by the General Assembly July 1, 2002.

Tax on self-insurers: Notwithstanding another provision of law, the sunset provision provided for in Act 68 of 2017 is suspended for the current fiscal year to allow the Workers’ Compensation Commission to continue to collect tax on self-insurers.

Fraudulent tax return program: The Department may establish a Fraudulent Tax Return Detection Program to prevent payment of fraudulent tax refunds.

Electronic filing: In the current fiscal year, in order to allow certain applications for licenses or permits to be filed electronically, the Department may require a statement subject to penalties of perjury instead of a statement under oath.

 

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