South Carolina Passes 2024-2025 Budget

By Maria T. Albanese

South Carolina’s 2024-2025 budget bill was ratified by the legislature on June 26, 2024, but on July 3, 2024,Governor Henry McMaster vetoed certain provisions that were not tax-related. The vetoes were not overridden and the budget bill was enacted, which included the following tax-related items: an extension of the Textile Communities Revitalization Act; the repeal of the suspension of the Retail Facilities Revitalization Act; an income tax exemption or law enforcement officer and teacher of the year awards and for the reimbursement for teachers who purchase their own school supplies and materials; the consumer protection services income tax deduction; a sales tax exemptions for the admissions tax exemption for NASCAR, tennis, and soccer events; a retail classification exemption for craftsmen at art shows and fairs; a sales tax exemption for personal property purchased for use in private schools; and a sales tax exemption prescription medications used to prevent respiratory syncytial virus, and for viscosupplementation therapies. It also contains a prohibition against additional requirements for timberland to gain the agricultural use property exemption. Lastly, the budget contains an exemption from motor fuels tax for school buses, and the suspension of franchise fees imposed on nursing home beds, and the reduction of the interest rate paid on refunds. (L. 2024, H5100, effective 07/03/2024.)

Interest rates.

As in previous years, the budget directs the Department of Revenue to reduce the rate of interest paid on refunds; for fiscal year 2024-2025, the reduction is 3% from the rate for underpayments.

Personal income tax.

Withholding provision: For the current fiscal year, the Department is required to clarify that any income tax withholding provision that requires withholding at the rate of 7% means withholding at the maximum individual income tax rate. Note: South Carolina’s top marginal income tax rate in S.C. Code Ann. § 12-6-510 decreases over a minimum of six years. In 2023 the top rate was 6.4% but will decrease in 2024 to 6.3%.

Consumer protection services deduction: A personal income tax deduction of $300 for an individual return 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 who filed a return with the Department 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.

Exemption for 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. Each winner will be recognized by the Office of the Governor and will receive a tax-free award of $10,000.

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 2024-2025, 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 $400 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. 

Textile Communities Revitalization Act: The Textile Communities Revitalization Act is extended. Any project involving an abandoned textile mill of between 130,000 and 135,000 square feet with estimated rehabilitation expenses of between $5.5 million and $6.5 million, in which a Notice of Intent to Rehabilitate is filed pursuant to the South Carolina Textile Communities Revitalization Act on or before June 30, 2025, will be effective as of the effective date designated by the taxpayer in the Notice to Intent to Rehabilitate for purposes of S.C. Code Ann. § 12-65-30(C)(2). The effective date may be earlier than the date of the Notice of Intent to Rehabilitate, and any rehabilitation expenses incurred on or after the effective date designated by the taxpayer is eligible for credits under S.C. Code Ann. § 12-65-30(A)(2), provided all other applicable statutory requirements are satisfied.

Retail Facilities Revitalization Act repeal suspension: Effective for fiscal year 2024-2025, the repeal of the Retail Facilities Revitalization Act is suspended with respect to sites for which written notification of election of mode of credit had been provided to the Department prior to July 1, 2016, and for which a building permit had been issued prior to July 1, 2016.

Sales tax.  

Retail business classification exemption: In the current fiscal year, a person including, but not limited to, artists, craftsmen, or hobbyists, who makes sales not more than four times in the fiscal year at a fair, festival, carnival, or event that operates for a period of less than 12 consecutive days, will not be considered to be engaged in business or making sales at retail. However, this proviso does not apply to persons who are engaged in the business of making sales at retail for which they are required to obtain a license.

School exemption: The legislation continues for another fiscal year, 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 tax under IRC § 501(c)(3).

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

NASCAR, tennis, and soccer events: The legislation 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, to 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 be rebated half of its admissions tax revenue for the fiscal year and be used by that facility for marketing the events held at the facility.

Distribution facility: The Navy Base Intermodal Facility owned by the State Ports Authority is considered a distribution facility for the purposes of sales tax exemptions associated with the purchase of equipment and construction materials.

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 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.

Manufacturing property exemption-exclusion: In the current fiscal year, property owned by or leased to any utility, including solar farms, are not allowed the property tax reduction percentage for manufacturing 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, 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, 2025, is not considered an improvement and may not be reassessed at a higher rate as a result of the assistance provided. This provision only applies if, as a result of the catastrophic weather event, the improvements made to the property were funded by the U.S. Department of Housing and Urban Development Block Grant – Disaster Recovery program implemented by the Office of Resilience, or its predecessor, the Disaster Recovery Office. This provision also applies if, at the discretion of the county and using qualifications determined by the county, the improvements were made with the assistance of a volunteer organization active in disaster, or a similar volunteer organization. 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.

Timberland requirements for agricultural use exemption: A county shall have its portion of the Aid to Subdivisions, Local Government Fund withheld if the county imposes any additional requirements for an agricultural use exemption for a landowner’s timberland beyond what is required by S.C. Code Ann. § 12-43-230(a) and S.C. Code Ann. § 12-43-232.

Motor fuels tax.

Farm machinery exemption: For the current fiscal year, chemicals and oils including, but not limited to, greases, lubricants, and coolants used in an exempt farm machine that are essential to the functioning of the exempt machine are exempt fuels used in farm machinery and farm tractors.

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.

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 on 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 can establish a Fraudulent Tax Return Detection Program to prevent payment of fraudulent tax refunds. To implement the program, the Department may contract with information and technology entities to provide the necessary detection capabilities. The Department must pay for the program from the savings realized by implementation.

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.