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Indicates Matter Stricken
Indicates New Matter
Indicates Matter Stricken
Indicates New Matter
COMMITTEE AMENDMENT ADOPTED
April 6, 2005
H. 3007
Introduced by Reps. Wilkins, W.D. Smith, Harrell, Cato, Chellis, Harrison, Townsend, Witherspoon, G.R. Smith, Vaughn, Sandifer, Coates, Barfield, Young, Kirsh, Leach, E.H. Pitts, Battle, Viers, Clyburn, Littlejohn, Taylor, Rice, Hinson, Clark, Walker, Bales, Simrill, Mahaffey, Toole, Talley, Umphlett, Brady, Bailey, Hagood, Edge, Clemmons, Huggins, Neilson, Vick and Delleney
S. Printed 4/06/05--S. [SEC 4/7/05 4:21 PM]
Read the first time February 3, 2005.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-515 SO AS TO REDUCE THE SEVEN PERCENT TOP MARGINAL RATE OF SOUTH CAROLINA INDIVIDUAL INCOME TAX IN EQUAL ANNUAL INCREMENTS OF .225 PERCENT UNTIL A PERMANENT TOP MARGINAL RATE EQUAL TO 4.75 PERCENT IS ACHIEVED AND TO PROVIDE THAT A SCHEDULED REDUCTION IS POSTPONED IF GENERAL FUND REVENUE GROWTH FOR THE APPLICABLE FISCAL YEAR IS LESS THAN TWO PERCENT.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 5, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-545. (A) As used in this section:
(1) 'Active trade or business income or loss' means income or loss of an individual, estate, trust, or any other entity except those taxed or exempted from tax pursuant to Sections 12-6-530 through 12-6-550 resulting from the ownership of an interest in a pass-through business. Active trade or business income or loss does not include:
(a)(i) passive investment income as defined in Internal Revenue Code Section 1362(d) generated by a pass-through business and income of the same type regardless of the type of pass-through business generating it; and
(ii) expenses related to passive investment;
(b) capital gains and losses;
(c) any payments for services referred to Internal Revenue Code Section 707(c);
(d) amounts reasonably related to personal services. All amounts paid as compensation are deemed to be reasonably related to personal services. In addition, if an owner of a pass-through entity who performs personal services for the entity is not paid a reasonable amount for those personal services as compensation or payments referred to in Internal Revenue Code Section 707(c), all of the owner's income from the entity is presumed to be amounts reasonably related to personal services.
(2) 'Pass-through businesses' mean sole proprietorships, partnerships, and 'S' corporations, including limited liability companies taxed as sole proprietorships, partnerships, or 'S' corporations.
(B)(1) Notwithstanding Section 12-6-510, an income tax at the rate provided in item (2) of this subsection is imposed annually on active trade or business income received by the owner of a pass-through business. The amount subject to tax pursuant to this section is not subject to tax pursuant to Section 12-6-510.
(2) The rate of the income tax imposed pursuant to this subsection is:
Taxable Year Beginning in Rate of Tax
2006 6.5 percent
2007 6 percent
2008 5.5 percent
after 2008 5 percent
(C) Notwithstanding any other provision of this chapter, active trade or business loss must first be deducted, dollar for dollar against active trade or business income. Any remaining active trade or business loss is multiplied by a fraction, the numerator of which is the rate of tax imposed pursuant to subsection (B)(2) of this section, and the denominator of which is the highest income tax rate imposed pursuant to Section 12-6-510. The resulting amount is deductible from income taxed under Section 12-6-510 if otherwise allowable."
SECTION 2. This act takes effect upon approval by the Governor.
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