How did South Carolina increase the statewide Community Development Tax Credit limit for 2021 and later years?

Plain-English summary

South Carolina added $3 million to the aggregate amount available for Community Development Tax Credits under § 12-6-3530.

The added capacity was divided by year:

• $1 million could be used for credits earned and certificates issued in tax year 2021.
• The remaining $2 million could be used only for credits earned and certificates issued for tax years beginning after 2021.

The credit supported qualifying investments in or donations to a certified community development corporation (CDC) or community development financial institution (CDFI):

• an equity investment generated a credit equal to 33% of the investment; and
• a cash donation generated a credit equal to 50% of the donation.

Taxpayers had to apply. The South Carolina Department of Commerce authorized the credits each year on a first-come, first-served basis and issued a certificate to the qualifying taxpayer.

The credit could be used against Chapter 6 income tax, Chapter 11 bank franchise tax, and insurance premium taxes. The letter noted a $1 million annual issuance limit and said the previous $6 million all-years aggregate limit had already been allocated before Act No. 83 added the new capacity.

What this means for you

Investors and donors

Making a qualifying investment or donation did not by itself secure the credit. Application timing and Commerce authorization mattered because the program was capped and first-come, first-served.

Taxpayers planning after 2021

The $2 million later-year pool was separate from the $1 million reserved for 2021 certificates.

Current claims

The letter stated that the statute would be repealed June 30, 2023 unless reauthorized. Verify current authorization and funding before relying on the historical amounts.

Common questions

Q: What percentage applied to an equity investment?
A: 33%.

Q: What percentage applied to a cash donation?
A: 50%.

Q: How much new credit capacity was added?
A: $3 million—$1 million for 2021 and $2 million for tax years beginning after 2021.

Q: Was the credit automatic?
A: No. The taxpayer had to apply and receive a Department of Commerce certificate.

Citations and references

• S.C. Code Ann. § 12-6-3530
• S.C. Code Ann. § 34-43-20(2) and (3)
• Senate Bill 436, Act No. 83 of 2021
• S.C. Code Ann. §§ 12-4-320 and 1-23-10(4); SC Revenue Procedure #09-3

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL21-16.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC INFORMATION LETTER #21-16
SUBJECT:

Community Development Credits – Increase in Credit Limit for Tax Years 2021 and Thereafter

DATE:

June 3, 2021

MODIFIES:

SC Revenue Ruling #21-4

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to announce general information useful in complying with the laws administered by the Department. An Information Letter has no precedential value.

The purpose of this Information Letter is to inform taxpayers that the amount of income tax 1 credits available for making investments in, or donations to, community development corporations or community development financial institutions has been increased for tax years 2021 and thereafter. Taxpayers must apply for these tax credits, and the South Carolina Department of Commerce must authorize the tax credits each year on a first-come, first-served basis. Qualifying taxpayers are issued a certificate by the Department of Commerce. The income tax credit is provided for in Code Section 12-6-3530 and is available to taxpayers who make equity investments in, or cash donations to, a certified community development corporation (“CDC”) or community development financial institution (“CDFI”) as defined under Code Section 34-43-20(2) and (3). The credit is equal to 33% of all investments for taxpayers making equity investments, or 50% of the cash donation for taxpayers making cash donations. The credits contain a limit on the total amount of credits that may be issued for all taxpayers for all years ($6 million), and an annual limit which provides that up to $1 million in tax credits may be issued to all taxpayers in a single year. 2 On May 18, 2021, the Governor signed Senate Bill 436 (Act No. 83), which increased the aggregate limit for credits for all taxpayers for all years by $3 million. A credit is allowed against the income tax imposed under Chapter 6 or bank franchise tax under Chapter 11. The credit may also be used against insurance premium taxes. While all of these taxes are not income taxes, for simplicity, in this Information Letter, they are referred to as income taxes. Note: insurance premium taxes and credits are administered by the South Carolina Department of Insurance. 2 The $6 million limit for all taxpayers for all years has previously been allocated. 1

1

Of the additional $3 million, $1 million may be used for credits earned and certificates issued in tax year 2021, and the remaining $2 million may only be used for credits earned and certificates issued for tax years beginning after 2021. Unless reauthorized by the General Assembly, Code Section 126-3530 is repealed on June 30, 2023. Taxpayer’s who make qualifying investments or donations and intend on claiming the credit should contact Amber Stewart with the South Carolina Association for Community Economic Development at [email protected] for further information about the certification process.

2