The Senate Finance Committee unanimously approved Tax Conformity bill H.5341 on Wednesday, Sept. 26.
Last week, a special Senate Finance Subcommittee on Conformity approved a measure that addressed the Tax Conformity legislation introduced by both the House and Senate during this past legislative session. The subcommittee amended H.5341 (the House-passed version of tax conformity) with an amendment described by Chairman Thomas Alexander (R-Oconee and Pickens) as a hybrid of the House-passed bill with the Senate’s S.1258.
The bill, as adopted, met the subcommittee’s goals of being revenue neutral; helping families, particularly those with children; maintaining a stable environment for business and industry; and being as simplistic as possible.
The full Senate will meet in extended session on Tuesday, Oct. 2 at noon, where they are expected to give the bill a second reading. The next day, the Senate is expected to give third and final reading to the bill and send it to the House, where they are expected to concur in the Senate amendments. Should they do so, the bill will be sent to Gov. Henry McMaster for his signature. The General Assembly is also expected to address the governor’s budget vetoes when they return next week.
H.5341 updates South Carolina’s Conformity to the Internal Revenue Code through Feb. 9, 2018, and any provisions that expired on Dec. 31, 2017, that are extended but not amended by congressional enactment during 2018. Conforming to changes to the IRC through Feb. 9, 2018, will incorporate the changes in both the Tax Cuts and Jobs Act of 2017 (H.R.1) and the Bipartisan Budget Act of 2018 (H.R.1892).
The bill as amended specifies additional IRC sections not adopted by the State and adds a state deduction for dependents in South Carolina that equals $4,110 for tax year 2018, with dependents under age 6 receiving a total exemption of $8,220.
Proposed South Carolina-specific modifications to Section 12-6-50 contained in the bill include non-conforming to the following:
- Federal limits on interest expense deductions to 30% of adjusted taxable income
- New rules on foreign income deductions related to foreign-derived intangible income and amounts paid pursuant to a hybrid transaction or paid by or to a hybrid entity
- Federal deduction of up to 20% of income from partnerships, sole proprietorships, and other pass-through businesses
- Federal provision that eliminated tax deductions for insurance premiums paid to the FDIC by banks and savings and loan institutions
- Amend current non-conforming statute to adopt the federal Opportunity Zone tax benefits. This federal provision allows investors to defer (up to 9 years) paying tax on gains if those gains are invested in Qualified Opportunity
- Funds that in turn invest in economically distressed communities designated by the governor
More information on the bill can be found in this “South Carolina Revenue and Fiscal Affairs Office Statement of Estimated Fiscal Impact” for H. 5341.
Leatherman Announces Senate Finance Tax Reform Subcommittee
Senate Finance Committee Chairman Hugh Leatherman (R-Florence) also announced Wednesday the formation of a Senate Finance Tax Reform Subcommittee.
The subcommittee, to be co-chaired by Sen. Sean Bennett (R- Berkeley) and Sen. Vincent Sheheen (D-Kershaw) will study ways to reform and simplify the state’s code.
Other members of the subcommittee are Sen. Tom Corbin (R-Greenville), Sen. Tom Davis (R-Beaufort), Sen. Greg Gregory (R-Lancaster), Sen. Glenn Reece (D-Spartanburg) and Sen. John Scott (D-Richland).