The South Carolina General Assembly passed tax reform legislation providing targeted relief to individuals and to manufacturers, including (i) a one-time rebate of up to $700 in 2021 taxes for individuals; (ii) cuts to the individual income tax rates; and (iii) a reduction of the effective property tax assessment ratio for manufacturers from about 9 percent down to as low as 6 percent.
In May, the South Carolina Senate and House appointed a conference committee to work out differences between the two sides as to the State budget. On June 15, the South Carolina House and Senate adopted a final conference report amending Senate Bill 1087; the Governor signed the amended bill into law on June 17. The legislation includes three significant changes to South Carolina’s tax system:
1) Individual Income Tax – One-Time Tax Rebate of Up to $700 To Be Issued by December 31
The revised language of Senate Bill 1087 requires the South Carolina Department of Revenue (SCDOR) to issue up to $700 for each individual income tax return filed with the State for the 2021 tax year. For those taxpayers whose returns showed a total liability of less than $700, the rebate will equal the tax liability. The SCDOR is authorized to increase the maximum rebate above $700 if sufficient funds exist to issue an equal refund to eligible taxpayers. SCDOR has until December 31 to issue the rebates.
2) Individual Income Tax – Top Rate Cut From 7% to 6.5% for 2022, To Be Further Cut to 6% Over Time
Senate Bill 1087 immediately cuts the top marginal income tax rate for individuals from 7 percent to 6.5 percent for the 2022 tax year. In addition, the bill authorizes an additional annual cut of .1 percent until the top rate reaches 6 percent. The future annual .1 percent cuts will only be effective in years where the State’s general fund revenues are projected to increase by at least five percent relative to the prior year. Consequently, the future reduction of the top rate down to 6 percent could be delayed by future revenue shortfalls.
3) Manufacturing Property Tax – Effective Assessment Ratio Lowered From 9% to as Low as 6%
Senate Bill 1087 immediately reduces manufacturers’ effective property tax assessment ratio from about 9 percent to 6 percent. Due to limitations in the South Carolina Constitution, the General Assembly cannot change the legal assessment ratio. Instead, the General Assembly has granted a partial property tax exemption applicable to all manufacturing property, reducing the effective assessment ratio to as low as 6 percent. This “manufacturing exemption” is significant and will provide substantial savings to those manufacturers who are not currently benefitting from a fee in lieu of tax arrangement or other incentives providing property tax relief. Such taxpayers should see their property tax bills drop by about a third.
Senate Bill 1087 specifically appropriates up to a maximum of $170 million per year in the State budget to reimburse local governments such as counties, municipalities, school districts, and other political subdivisions of the State dollar-for-dollar for any loss of revenue caused by the manufacturing exemption.
We have a team of attorneys and lobbyists at Parker Poe and Parker Poe Consulting tracking state and local tax developments in NC, SC, and GA. For more information on this new change in the law and to discuss how it may impact you or your business, please contact us or your regular Parker Poe contact, and stay up-to-date on all tax developments by subscribing here.