Bill 944

                    Current Status

Bill Number:               944
Ratification Number:       458
Act Number:                414
Introducing Body:          Senate
Subject:                   Relating to the state income tax

(A414, R458, S944)

AN ACT TO AMEND SECTIONS 12-7-20, AS AMENDED, 12-7-430, 12-7-435, 12-7-450, 12-7-455, 12-7-618, 12-7-2410, AND 12-9-310, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, AND ACT 101 OF 1985, ALL RELATING TO THE STATE INCOME TAX, SO AS TO MAKE TECHNICAL CORRECTIONS AND CORRECT REFERENCES FOR PURPOSES OF THE SOUTH CAROLINA INCOME TAX FEDERAL CONFORMING AMENDMENTS OF 1985; TO AMEND ACT 176 OF 1977, AS AMENDED, RELATING TO APPROVAL OF REGULATIONS BY THE GENERAL ASSEMBLY PURSUANT TO THE ADMINISTRATIVE PROCEDURES ACT, SO AS TO EXEMPT FROM REVIEW REGULATIONS OF THE SOUTH CAROLINA TAX COMMISSION ADOPTING INTERNAL REVENUE SERVICE REGULATIONS FOR PURPOSES OF THE SOUTH CAROLINA INCOME TAX FEDERAL CONFORMING AMENDMENTS; AND TO REDESIGNATE SECTION 12-35-1125 AS SECTION 12-35-1127 OF THE 1976 CODE SO AS TO CORRECT THE DUPLICATION OF A DESIGNATION.

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

Definition

SECTION 1. Item (11) of Section 12-7-20 of the 1976 Code, as last amended by Section 76, Part II, of Act 201 of 1985, is further amended to read:

"(11) 'Internal Revenue Code' means the Internal Revenue Code of 1954 as amended through December 31, 1985."

Exclusion

SECTION 2. Subitem (1) of item B of Section 12-7-430 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended to read:

"(1) The exclusion from gross income authorized by Internal Revenue Code Section 103 is modified to exempt only interest upon obligations of this State, any of its political

subdivisions and to exempt interest upon obligations of the United States."

Definition

SECTION 3. Subitem (6) of item (d) of Section 12-7-430 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended to read:

"(6) For purposes of computing the deduction allowed by Internal Revenue Code Section 691(c) the term 'estate tax' means the taxes imposed under Chapter 15 of Title 12 including any South Carolina generation-skipping transfer tax."

Exclusion from gross income

SECTION 4. Section 12-7-430 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended by adding two new items at the end to read:

"(g) South Carolina gross income does not include gross income excluded from federal income tax by reason of any treaty of the United States.

(h) South Carolina taxable income does not include income of an organization exempt from income tax pursuant to Internal Revenue Code Section 501."

Deduction

SECTION 5. Item (d) of Section 12-7-435 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended to read:

"(d) All amounts received from the South Carolina Retirement Systems as provided in Title 9."

Deductions must be reduced

SECTION 6. Subitem (4) of item (b) of Section 12-7-450 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended to read:

"(4) The itemized deductions of a nonresident estate or nonresident trust must be reduced by an amount which is the same proportion as South Carolina gross income is of federal gross income."

Net operating loss carried forward

SECTION 7. Subsection (x) of Section 12-7-455 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended to read:

"(x) Any net operating loss carryforward under Section 12-7-705 as in effect on December 31, 1984, is allowed for South Carolina income tax purposes before any loss carryforwards pursuant to Internal Revenue Code Section 172 as modified by subparagraph 2 of item (d) of Section 12-7-430, but in no event is the same loss deductible more than once. Any net operating loss that has not expired prior to January 1, 1985, shall expire under the rules provided in Internal Revenue Code Section 172."

Charitable deduction carryover

SECTION 8. Section 12-7-455 of the 1976 Code, as added by Section 7 of Act 101 of 1985, is amended by adding two new subsections at the end to read:

"(aa) If a taxpayer has a charitable deduction carryover, as permitted by Internal Revenue Code Section 170, from a tax year prior to January 1, 1985, the taxpayer is not allowed to deduct the charitable deduction carryover for South Carolina income tax purposes.

(bb) For any taxable year beginning after December 31, 1984, to the extent gross income, adjusted gross income, or taxable income of any taxpayer is affected by any provision of federal law enacted prior to January 1, 1985, which provision is not contained in the Internal Revenue Code, the provision is applicable in determining the South Carolina gross, adjusted gross, and taxable income of the taxpayer in the appropriate taxable year."

Credit

SECTION 9. Section 12-7-618 of the 1976 Code, as added by Section 9 of Act 101 of 1985, is amended to read:

"Section 12-7-618. For South Carolina income tax purposes, an individual may claim a credit for expenses related to a dependent as provided

in Internal Revenue Code Section 21, except that the term 'applicable percentage' means seven percent and is not reduced if a taxpayer's adjusted gross income exceeds ten thousand dollars for a taxable year. Only expenses that are directly attributable to items of South Carolina gross income qualify for the credit allowed by this section."

Income tax liability

SECTION 10. Section 12-7-2410 of the 1976 Code is amended to read:

"Section 12-7-2410. Whenever an individual who is a resident of South Carolina is liable for income tax in another state on account of (1) income earned from personal services rendered in the other state, or (2) income received through a nonresident fiduciary, the Tax Commission shall credit the amount of income tax payable for the income year by the taxpayer under this title with the amount of tax paid by the taxpayer to another state on South Carolina taxable income. In no case shall the credit herein allowed exceed an amount equivalent to the proportion of South Carolina income tax attributable to the South Carolina taxable income as determined in accordance with Section 12-7-410, as modified by Sections 12-7-430 and 12-7-435 and taxed by another state."

Distribution of taxable income

SECTION 11. Item (4) of Section 12-9-310 of the 1976 Code, as added by Section 8 of Act 101 of 1985, is amended to read:

"(4) Making any distribution of South Carolina taxable income to a nonresident beneficiary of any estate or trust shall withhold from the distribution seven percent of the beneficiary's South Carolina taxable income attributable to the distribution. The amounts withheld must be paid over each year to the Commission with the annual tax return of the estate or trust. The nonresident beneficiary

may claim the amount withheld as a credit against any South Carolina income tax liability and shall receive a refund of any excess. A trust that is exempt from taxation pursuant to Internal Revenue Code Section 501 is not subject to this item."

References

SECTION 12. Item (b) of Section 12 of Act 101 of 1985 is amended to read:

"(b) Sections 22 through 52, 515, 853, 901 through 908, and 960 relating to tax credits."

Section redesignated

SECTION 13. Section 12-35-1125 of the 1976 Code, as added by Section 5 of Act 308 of 1986, is redesignated Section 12-35-1127.

Regulations

SECTION 14. Section 12 of Act 176 of 1977, as last amended by Act 414 of 1982, is further amended to read:

"Section 12. All regulations except those specifically exempted under this article must be submitted to the General Assembly for review in accordance with the provisions of the article. To initiate the process of review, the agency shall file with the President of the Senate and the Speaker of the House of Representatives a copy of any regulations promulgated along with a request for review. Upon receipt of the request, the President and Speaker reviewing the request shall submit it for consideration to the standing committees of the Senate and House which are most concerned with the function of the promulgating agency. The committees shall have one hundred twenty days from the date regulations are submitted to the General Assembly to consider regulations so referred and determine their action thereon. If no action is taken by either the Senate or House of Representatives' committee to introduce a resolution to approve or disapprove the regulations within one hundred twenty days after submission to the General Assembly, the regulations are effective upon publication in the State Register. Upon introduction of the first joint resolution disapproving a regulation by a standing committee to which the regulation was referred for review, additional days must be added to the days remaining on the one-hundred-twenty-day period for automatic approval, if less than sixty, to equal sixty days. The introduction of a resolution by the committee of either House does not prevent the introduction of a resolution by the committee of the other House to either approve or disapprove the regulations concerned.

The one-hundred-twenty-day period of review begins on the date the regulation is filed with the President and Speaker. Sine die adjournment of the General Assembly tolls the running of the period of review and the remainder of the period shall begin to run upon the next convening of the General Assembly excluding special sessions called by the Governor.

Any member may introduce a joint resolution approving or disapproving a regulation or group of regulations thirty days following the date the regulations concerned are submitted to a standing committee for review and no committee resolution approving or disapproving such regulations has been introduced and the regulations concerned have not been withdrawn by the promulgating agency pursuant to Section 12A but the introduction does not toll the one-hundred-twenty-day period of automatic approval.

General Assembly review is not required for regulations promulgated to maintain compliance with federal law including, but not limited to, grant programs. Review also is not required for regulations promulgated by the State Board of Financial Institutions in order to authorize state-chartered banks, state-chartered savings and loan associations, and state-chartered credit unions to engage in activities that are authorized pursuant to Section 34-1-110 of the 1976 Code. Review is not required for regulations promulgated by the South Carolina Tax Commission to adopt regulations, revenue rulings, revenue procedures, and technical advice memoranda of the Internal Revenue Service so as to maintain conformity with the Internal Revenue Code of 1954. All regulations submitted to the General Assembly for approval shall have attached thereto a brief synopsis or analysis of the regulations submitted explaining the content therein and any changes in existing regulations resulting therefrom. The synopsis or analysis shall include citations of federal law, if any, mandating changes in the regulations. The one-hundred-twenty-day period of review provided for in this section does not begin to run until the synopsis or analysis is attached to regulations submitted."

Provisions effective

SECTION 15. The provisions of Sections 1 through 8 and 10 of this act are effective for taxable years beginning after December 31, 1984. The provisions of Section 9 are effective for taxable years beginning after December 31, 1985.

Time effective

SECTION 16. This act shall take effect upon approval by the Governor.