The push to enact Tax Conformity in South Carolina passed a significant milestone as the Senate Finance Subcommittee on Conformity unanimously adopted an amendment to a House bill on Tuesday afternoon, Sept. 18.
The subcommittee amended H.5341, the House-passed version of Conformity, with an amendment described by Chairman Thomas Alexander (R-Oconee and Pickens) as a hybrid of the House-passed bill with S.1258, the version introduced in the Senate in May.
Tuesday’s bill, as adopted, met the subcommittee’s goals of a) being revenue neutral, b) helping families, particularly those with children, c) maintaining a stable environment for business and industry, and d) being as simplistic as possible.
If enacted, the bill will conform South Carolina to the Internal Revenue Code as amended through Feb. 9, 2018.
It decouples from numerous provisions, including qualified business income, as well as trade or business expenses relating to FDIC premiums. It will provide an exemption of $4,110.00 for each eligible dependent and an additional $4,110.00 for each eligible dependent under 6 years of age.
The signature of Gov. Henry McMaster will make the bill apply to the adjustment made for tax year 2019, with the 2018 tax brackets being used first as the base year upon which adjustments are made. Beginning on Dec. 15, 2018, and each after year, the SC Department of Revenue shall cumulatively adjust the brackets in each section using the Chained Consumer Price Index.
To get to the governor’s desk, the bill must be adopted by the full Senate Finance Committee and then by the full Senate. After the full Senate gives second and third readings, the House of Representatives must concur in the amendment.
The South Carolina Association of CPAs and our lobbying partner Copper Dome Strategies understand that the Senate Finance Committee will likely meet on the bill next week. The full Senate, along with the House, is expected to return to Columbia in early October to adopt the Conformity bill and address the governor’s budget vetoes.
Chaired by Sen. Alexander, the committee was formed in July by Hugh Leatherman, Chair of the Senate Finance Committee, to address the Tax Conformity legislation introduced by both the House and Senate during this past legislative session.
In previous years, South Carolina has generally conformed to Federal tax code changes but can decouple from provisions as necessary. This year, a Federal tax law overhaul proved to be a major challenge to conforming. Because President Donald Trump this past December signed into law the first major revamp of our Federal tax code since the Reagan Administration, South Carolina’s legislature must examine a multitude of changes.
Other subcommittee members include Sen. Ronnie Cromer (R-Newberry), Sen., Vincent Sheheen (D- Kershaw), Sen. John Scott (D-Richland), and Sen. Sean Bennett (R-Berkeley, Charleston & Dorchester).
Tuesday marked the subcommittee’s third and final meeting.