Indicates Matter Stricken

Indicates New Matter

 

Committee Report

May 7, 2026

 

S. 688

 

Introduced by Senators Massey and Kimbrell

 

S. Printed 5/7/26--H.                                                                               [SEC 5/8/2026 1:30 PM]

Read the first time April 14, 2026

 

________

 

The committee on House Ways and Means

To whom was referred a Bill (S. 688) to amend the South Carolina Code of Laws by amending Section 41-31-5, relating to contributions and payments to the unemployment trust fund definitions, so as to, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

 

    Amend the bill, as and if amended, by striking all after the enacting words and inserting:

SECTION 1.  This act may be cited as the "State of South Carolina Small Business Tax Cut of 2026."

 

SECTION 2.A.  Section 12-37-220(B) of the S.C. Code is amended by adding:

 

    (54) the first ten thousand dollars of the net depreciated value of business personal property owned by a small business.  For purposes of this item, "small business" means a commercial retail service, industry entity, or nonprofit corporation, including affiliates, that: (a) the business' ownership is comprised of taxpayers who pay income taxes in this State; (b) is independently owned and operated; and (c) employs fewer than one hundred full-time employees or has gross annual sales of less than ten million dollars.

 

B. This SECTION takes effect upon approval by the Governor and first applies to property tax years beginning after 2026.

 

SECTION 3.A.  Section 12-37-900 of the S.C. Code is amended to read:

 

    Section 12-37-900. (A) Every person required by law to list property shall, annually, between the first day of January and the first day of March, make out and deliver to the assessor of the county in which the property is by law to be returned for taxation a statement, verified by his oath, of all the real estate which has been sold or transferred since the last listing of property for which he was responsible and to whom, and of all real property possessed by him, or under his control, on the thirty-first day of December next preceding, either as owner, agent, parent, spouse, guardian, executor, administrator, trustee, receiver, officer, partner, factor, or holder with the value thereof, on such thirty-first day of December, at the place of return, estimating according to the rules prescribed by law.

    (B) A manufacturer not under a fee agreement is not required to return personal property for ad valorem tax purposes if the property remains in this State at a manufacturing facility that has not been operational for one fiscal year and the personal property has not been used in operations for one fiscal year. The personal property is not required to be returned until the personal property becomes operational in a manufacturing process or until the property has not been returned for ad valorem tax purposes for four years, whichever is earlier. A manufacturer must continue to list the personal property annually and designate on the listing that the personal property is not subject to tax pursuant to this section.

    (C)(1) Notwithstanding any other provision of this section, a taxpayer that meets the application requirements of item (2) is not required to pay business personal property taxes if the taxpayer has less than ten thousand dollars of net depreciated value of business personal property.

       (2) To claim the exemption allowed by item (1), a taxpayer must annually certify, under penalty of perjury, to the department in a manner prescribed by the department that the taxpayer has less than ten thousand dollars of net depreciated value of business personal property. The form prescribed by the department must contain a conspicuous notation citing the State of South Carolina Small Business Tax Cut of 2026 as the source of the exemption.

 

B. This SECTION takes effect upon approval by the Governor and first applies to property tax years beginning after 2026.

 

SECTION 4.A.  Article 5, Chapter 37, Title 12 of the S.C. Code is amended by adding:

 

    Section 12-37-980. Notwithstanding any other provision of law, all business personal property required to be returned for ad valorem taxation must be returned to the Department of Revenue. The property is subject to the tax imposed by the taxing jurisdiction in which the property is situated.

 

B. This SECTION takes effect upon approval by the Governor and first applies to property tax years beginning after 2026.

 

SECTION 5.A.  Section 12-20-50 of the S.C. Code is amended by adding:

 

    (D)(1) A corporation subject to the provisions of this section whose corporate headquarters, as defined in Section 12-6-3410, is in South Carolina may exclude the first fifty million dollars of equity contributions from a qualifying entity from its paid-in or capital surplus subject to the annual license fee. To qualify for this exclusion, the corporation must obtain a certificate from the South Carolina Research Authority certifying that the exclusions result from equity contributions from a qualifying entity.

       (2) For purposes of this subsection, a qualifying entity includes:

           (a) a venture capital fund as defined pursuant to 17 C.F.R. Section 275.203(1) 1;

           (b) an angel or accredited investor, as defined pursuant to 17 C.F.R. Section 230.501; and

           (c) a private investment firm that does not solicit capital from investors, excluding another qualifying entity or the general public, and meets one of the exemptions outlined in the Investment Company Act of 1940.

       (3) A corporation claiming this exclusion must:

           (a) submit an annual report to the department that contains the name of each qualifying entity, the date of the equity contribution, the manner in which the qualifying entity meets the requirements of item (2), the amount of the paid-in or capital surplus for each year that is attributable to each qualifying entity, and any other information that the department may require; and

           (b) keep detailed books and records, including segregating out equity contributions attributable to each qualifying entity and retaining information concerning the information required to be provided in subitem (a).

 

B. Section 33-44-409(b)(3) of the S.C. Code is amended to read:

 

    (3) to refrain from competing with the company in the conduct of the company's business before the dissolution of the company. This item does not apply when a member is also a member of another LLC and there is not an enforceable noncompete provision in the operating agreement.

 

C. This SECTION takes effect upon approval by the Governor and first applies to the tax year beginning after July 1, 2026.

 

SECTION 6.  This act takes effect upon approval by the Governor.

Renumber sections to conform.

Amend title to conform.

 

B.W. BANNISTER for Committee.

 

 

 

_______

 

 

 

 

 

 

 

 

A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 41-31-5, RELATING TO CONTRIBUTIONS AND PAYMENTS TO THE UNEMPLOYMENT TRUST FUND DEFINITIONS, SO AS TO CHANGE THE LOOKBACK PERIOD FOR THE BENEFIT RATIO; BY AMENDING SECTION 41-31-45, RELATING TO DEBT STATUS ESTIMATES, SO AS TO PROVIDE FOR A SOLVENCY TARGET FOR THE FUND; BY AMENDING SECTION 41-31-60, RELATING TO THE TAX RATE WHEN A DELINQUENT REPORT IS RECEIVED, SO AS TO CHANGE THE PENALTY FOR AN OUTSTANDING LIEN; BY AMENDING SECTION 41-31-350, RELATING TO THE PENALTY FOR FAILURE TO FILE A REPORT, SO AS TO REMOVE THE CAP ON THE PENALTY FOR FAILING TO FILE A REPORT; AND BY AMENDING SECTION 41-31-370, RELATING TO INTEREST ON UNPAID CONTRIBUTIONS, SO AS TO REMOVE THE CAP ON THE PENALTY FOR FAILURE TO PAY CONTRIBUTIONS.

 

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

 

SECTION 1.  Section 41-31-5 of the S.C. Code is amended to read:

 

    Section 41-31-5. As used in this chapter:

    (1) "Benefit ratio" means:

       (a) for the period of January 1, 2011, through December 31, 2013, the number calculated by dividing the sum of all benefits charged to an employer during the forty calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than forty but more than one calendar quarter of data are available, the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place;

       (b) from January 1, 2014, through Tax Year 2026, the number calculated by dividing the sum of all benefits charged to an employer during the twelve calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than twelve but more than one calendar quarter of data are available, the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place.;

       (c) For Tax Year 2027, the number calculated by dividing the sum of all benefits charged to an employer during the sixteen calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than sixteen but more than one calendar

quarter of data are available, then the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place;

       (d) Beginning in Tax Year 2028, the number calculated by dividing the sum of all benefits charged to an employer during the twenty calendar quarters immediately preceding the calculation date by the sum of the employer's taxable payroll for the same period. If fewer than twenty but more than one calendar quarter of data are available, then the data from those available calendar quarters shall be used in the calculation. The benefit ratio must be calculated annually using data for quarters filed through June thirtieth of the current year to the sixth decimal place; and

       (e) Notwithstanding the provisions contained in items (a) through (d), an employer who is in rate class one in Tax Year 2026 remains subject to the calculation contained in item (b) until the employer no longer qualifies for rate class one, at which time the employer shall be subject to the calculation in item (c) or (d), as appropriate.

    (2) "Department" means the Department of Employment and Workforce.

    (3) "Statewide average required rate" means the amount of income projected to be needed by the unemployment insurance trust fund for the upcoming calendar year divided by the estimated taxable wages over the same period rounded to the sixth decimal place.

    (4) "Statewide average interest surcharge" means the amount of income projected to be needed to pay interest on outstanding federal advances during the upcoming calendar year divided by the estimated taxable wages for the upcoming calendar year.

 

SECTION 2.  Section 41-31-45 of the S.C. Code is amended to read:

 

    Section 41-31-45.  (A) For the purposes of this section:

       (1) "Average high cost multiple" means the number of years the department could pay unemployment compensation, based upon the statewide reserve ratio, if the department paid the compensation at a rate equivalent to the average benefit cost rate in the three calendar years during the previous twenty calendar years, or the last three recessions, in which the benefit cost rates were the highest.

       (2) "Benefit cost rate" means the rate determined by dividing the unemployment compensation benefits paid during a calendar year by the total covered wages in the State during that year. The calculation of the benefit cost rate may not include the wages and unemployment compensation paid by employers covered under Section 3309 of the Internal Revenue Code of 1986.

       (3)(1) "Income needed to pay benefits" means the estimate of benefits payable in a given calendar year less the estimate of interest to be earned by the unemployment insurance trust fund for that calendar

 year.

       (4) "Statewide reserve ratio" means the ratio determined by dividing the balance in the trust fund reserve as of June thirtieth by the total covered wages for the previous twelve months in the State as of June thirtieth. The calculation of the statewide reserve ratio may not include the wages and unemployment compensation paid by employers covered under Section 3309 of the Internal Revenue

Code of 1986.

       (5)(2) "Fund adequacysolvency target" means an average high-cost multiple of one is defined as the value computed as the product of 0.08 and:

           (a) the size of the South Carolina labor force as determined annually by the U.S. Bureau of Labor Statistics;

           (b) the maximum weekly benefit amount set by the department in accordance with Section 41-35-40; and

           (c) the maximum number of weeks of unemployment benefits available in accordance with Section 41-35-50.

       (6)(3) "Trust fund reserve" excludes distributions from the federal government pursuant to 42 U.S.C. 1103, commonly referred to as the Reed Act.

       (4) "Solvency surcharge" is a surcharge imposed on contributory employers in each year the unemployment trust fund is solvent but the trust fund reserve does not meet the fund solvency target.

       (5) "Fiscal year" begins on July first of each year and ends on June thirtieth of the succeeding year.

       (6) "Tax year" begins on January first of each year and ends on December thirty-first of each year.

       (7) "Cap" is the maximum projected amount of revenue to be generated in a single year and is the greater amount of either:

           (a) the actual benefits paid in the prior fiscal year; or

           (b) the projected benefits for the next tax year.

       (8) "Actual tax collections" excludes all penalties, interests, contingency surcharges, and recording fees.

    (B) Each year the department must calculate the income necessary to pay benefits and reach the fund solvency target for the unemployment trust fund. The department determines the total income needed as follows:

       (1) Projected benefits will be determined for the next tax year with annual historical data as well as unemployment rate projections provided by the Congressional Budget Office.

       (2) A solvency surcharge shall be in effect for each tax year the trust fund reserve is less than the fund solvency target, as of June thirtieth. The aggregate amount of the solvency surcharge will be determined for each tax year to be the amount calculated to return the unemployment trust fund to the fund solvency target within five years subject to:

           (a) When actual benefits paid in the prior fiscal year are greater than the actual tax collections

 received in the prior fiscal year, then the cap is triggered. Once triggered, then:

               (i) If projected benefits for the next tax year are less than the actual benefits paid in the prior fiscal year, then the solvency surcharge shall be the difference between the actual benefits paid in the prior fiscal year and the projected benefits.

               (ii) If projected benefits for the next tax year are greater than the actual benefits paid in the prior fiscal year, then no additional solvency surcharge will be added for the next tax year.

           (b) After the cap has been triggered, once actual benefits paid in the prior fiscal year were less than actual tax collections in the prior fiscal year, then tax rates for the next tax year will be set based on returning the unemployment trust fund to the fund solvency target within the next five years.

       (3) If the balance of the unemployment trust fund, as of the end of the most recently completed fiscal year, is greater than the fund solvency target, then the department may use the surplus amount to reduce taxes in the next tax year.

       (4) Notwithstanding the provisions of subsection (2), once the fund solvency target has been met, in subsequent tax years, if the unemployment trust fund balance does not meet the fund solvency target as of the end of the most recently completed fiscal year, then the solvency surcharge shall be set as follows:

17 18	Percentage the unemployment trust fund balance is below the fund adequacy target	Rebuilding period
19	More than 0.0000%, but less than 2.5000%	One year
20	2.5000% or more, but less than 5.0000%	Two years
21	5.0000% or more, but less than 7.5000%	Three years
22	7.5000% or more	Four years

    (B)(C) For each calendar year during which the state Unemployment Insurance Trust Fund is in debt status, the department must estimate the amount of income necessary to pay benefits for that year, the amount of income necessary to avoid automatic FUTA credit reductions, and an amount of income necessary to repay all outstanding federal loans within five years. Additional estimates of interest costs shall be determined concurrently.

       (1) Estimates of the revenue needed to pay benefits will be based on Congressional Budget Office projections for the subsequent calendar year's total unemployment rate. This total unemployment rate will be adjusted for South Carolina based on the historic relationship between the unemployment rate in South Carolina and the national unemployment rate calculated from 1980 to present.

       (2) The historic relationship, calculated from 1980 to present, between the total unemployment rate and the insured unemployment rate in South Carolina will be used to adjust the projected total unemployment rate to the rate of insured unemployment.

       (3) Estimates of forecasted benefits will be based upon the prior three year average of the annual number of weeks compensated multiplied by an estimate of the average weekly benefit for the next

 year.

       (4) Estimates of amounts to pay to avoid FUTA credit reductions and amount of repayments on the loan will be projected through consultation with officials at the US Department of Labor.

    (C) After the fund returns to solvency, the department must promulgate regulations concerning the income needed to pay benefits in each year and return the trust fund to an adequate level as defined in

subsection (A)(5).

 

SECTION 3.  Section 41-31-60 of the S.C. Code is amended to read:

 

    Section 41-31-60.  (A) If on the computation date upon which an employer's tax rate is to be computed as provided in Section 41-31-40 there is a delinquent report, the tax class twenty rate must be assigned to the employer until the next computation date or until all outstanding tax reports have been filed.

    (B)(1) No employer is permitted to pay his unemployment compensation tax at a reduced tax rate class for any quarter when a tax execution issued prior to January 1, 2027, in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer.  If on the computation date upon which an employer's tax rate is computed as provided in Section 41-31-40 there is an outstanding tax execution, the tax class twenty rate must be assigned to the employer until the next computation date or until such time as all outstanding tax executions have been paid.  An employer who has a department-approved installment payment agreement shall be permitted to pay its unemployment compensation tax at the annual rate as determined pursuant to Section 41-31-50.  However, any such employer's tax rate shall immediately revert to the tax class twenty rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

       (2) For any quarter when a tax execution issued on or after January 1, 2027, in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer, an employer must pay his unemployment compensation tax at an increased rate of contribution that is the sum of two percent plus the employer's rate as otherwise determined pursuant to this chapter.

       (3) When an employer has an outstanding tax execution issued on or after January 1, 2027, and a tax execution issued prior to January 1, 2027, also remains outstanding, the tax class twenty rate must be assigned to the employer until such time as all outstanding tax executions issued prior to January 1, 2027, have been paid.

    (C) An employer with an outstanding tax execution who has a department-approved installment payment agreement shall be permitted to pay its unemployment compensation tax at the annual rate as

 determined pursuant to this chapter. However, any such employer's tax rate shall immediately revert to the applicable increased rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

 

SECTION 4.  Section 41-31-350 of the S.C. Code is amended to read:

 

    Section 41-31-350. An employer that fails to file a report concerning wages or contributions pursuant to Chapters 27 through 41 of this title within fifteen days from the date upon which the department mailed a demand for the report, the department shall assess the employer a penalty of ten percent of the contributions due but no less than twenty-five nor more than one thousand dollars in addition to the contributions payable with respect to the report.

 

SECTION 5.  Section 41-31-370 of the S.C. Code is amended to read:

 

    Section 41-31-370. (A) Contributions unpaid on the date on which they are due and payable, as prescribed by the department, shall bear interest at the rate of one percent for each month or fraction for which they remain unpaid but contributions as have accrued prior to the establishment of an employer's liability shall bear interest at the rate of one-half of one percent a month or fraction of a month, to the date on which liability is established, unless it is found by the department that the delay in the establishment of liability resulted from wilful negligence of the employer, and shall bear interest at the rate of one percent a month or fraction for which they remain unpaid thereafter.

    (B) If any employer's amount of contributions which are due and payable, as prescribed by the department, are unpaid ten days following the date on which an assessment or debit memorandum was issued, a penalty of ten percent of the amount of contributions due and payable, not to exceed one thousand dollars, must be paid in addition to any other interest or penalty which may be applicable.

    (C) The department may, for good cause, extend the time for the filing of reports and the payment of contributions. Any person to whom the extension is granted shall pay in addition to the contribution due, interest at the rate of one percent per month or fraction of a month from the due date of the contribution to the date of payment.

 

SECTION 6.  This act takes effect upon approval by the Governor on July 1, 2026.

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