South Carolina R&D Tax Credit

Access to incentives is essential when choosing where to locate your research and development facilities. Fortunately, some great R&D tax incentives are available for companies operating in South Carolina. If you are planning to relocate your business or start a company in the area, it would be best to learn more about the South Carolina research tax credit and how it can benefit your organization.

South Carolina Research and Development Tax Credit

To be eligible for the South Carolina R&D incentive, you must claim a federal income tax credit (IRC § 41) for increasing research operations during a taxable year. Furthermore, you can claim it against corporate license fees, corporate income tax, and individual income tax. To apply, you’ll need to use SC Schedule TC-18.

To calculate the South Carolina R&D tax credit, you can use the requirements similar to the federal tax credit. However, you must apply them solely to your local QREs. In other words, the credit is equivalent to 5% of South Carolina’s QREs.

Furthermore, keep in mind that this incentive comes with a limit. Generally speaking, according to your tax liability, you must use the credit the same year you obtain it. In addition, after every other credit has been applied, your South Carolina research tax credit can’t exceed 50% of your tax due for the year.

That said, you are allowed to carry forward the unused credit for up to ten years. You can file an updated tax return for an out-of-statute year to claim a credit that can be carried over into one or more open years. However, the credit you carry over must be decreased by the amount you might have used in the years out of the statute.

How to Calculate the South Carolina R&D Tax Credit

The credit equals 5% of your SC QREs.

South Carolina Research and Development Tax Credit: Takeaway

If you increasingly conduct research activities in South Carolina, you qualify for the R&D tax credit the state provides. Regarding QREs, South Carolina relies on IRC § 41 but computes the credit entirely on costs incurred in the state.

FAQs

What kind of companies can apply for an R&D tax credit in South Carolina?

Partnerships, LLCs, S-Corporations, C-Corporations

What is the deadline for applying for an R&D tax credit in South Carolina?

You must submit your application with the South Carolina Tax Return.

What data do I need to calculate credit an R&D tax credit in South Carolina?

Claim period South Carolina QREs (Qualified R&D Expenses)

What information do I need to provide to file an R&D tax credit in South Carolina?

Federal Form 6765 and South Carolina QREs for the current year.

Is credit carryforward an option in South Carolina?

Yes, up to ten years. However, there’s no carry-back option.