Did South Carolina's six-year tax-assessment period for a 25% omission apply retroactively to returns due before its September 1, 1985 effective date?

Plain-English summary

South Carolina Revenue Ruling 89-6 concluded that the six-year assessment period in section 12-54-80(2) did not apply retroactively to returns due before September 1, 1985.

The provision allowed six years to assess tax when a taxpayer omitted 25% of the gross income, sales price, gross receipts, gross proceeds of sale, or gross estate properly includable on a return. But the ruling relied on the South Carolina Supreme Court's decision in South Carolina National Bank v. South Carolina Tax Commission, which found no clear legislative intent to apply the provision to earlier return periods.

The result was a date-based dividing line: the six-year rule applied only to returns due after September 1, 1985. Earlier returns remained governed by the limitation statute previously applicable to them.

The new limitations framework

Act 201, section 32, of 1985 enacted a uniform collection and enforcement chapter that took effect September 1, 1985.

As quoted in the ruling, section 12-54-80 generally required the Commission to determine and assess tax within 36 months after a return was filed or due, whichever was later. It also described exceptions:

• tax could be assessed at any time for a fraudulent return intended to evade tax or for failure to file; and
• tax could be assessed within six years when a return omitted 25% of the specified tax base.

RR 89-6 addressed only whether that six-year exception reached returns due before the new chapter's effective date.

Why the six-year period was not retroactive

The ruling quoted the state Supreme Court's explanation that legislative intent controls whether a limitations statute operates prospectively or retrospectively. Statutes were not to be applied retroactively unless that result was clearly compelled, and doubt in enforcing tax statutes favored the taxpayer.

The court found no retroactive command in section 12-54-80(2). Although the assessment notice in the cited case was issued after the new provision took effect, the disputed tax quarters preceded its enactment.

The court therefore applied former section 12-35-1370 instead. For the final quarter at issue—ending June 30, 1982—the notice of underpayment should have been mailed before July 31, 1985. The Commission was barred from collecting tax for quarters before July 1, 1982.

What this means for you

Taxpayers reviewing historical assessments

The ruling treated the return's due date—not merely the later assessment date—as controlling whether the new six-year period applied.

Accountants and tax controversy professionals

An expanded limitations period did not automatically revive or extend the assessment window for returns already governed by prior law. The ruling required clear legislative intent before applying the later period retroactively.

Businesses with significant return omissions

For returns due after September 1, 1985, the quoted statute allowed a six-year assessment period when the omission reached 25% of the specified tax base. Fraud and failure to file were addressed separately and could permit assessment at any time under the quoted provision.

Common questions

Q: Did RR 89-6 make the six-year rule apply to all open returns?

A: No. It said the rule applied only to returns due after September 1, 1985.

Q: What triggered the six-year period under the quoted statute?

A: An omission of 25% of gross income, sales price, gross receipts, gross proceeds of sale, or gross estate properly includable on the return.

Q: Why did the assessment date not control?

A: The cited court decision focused on the pre-enactment tax quarters and found no clear legislative intent to apply the new rule retroactively.

Q: What happened in the cited bank case?

A: The court applied the former use-tax limitation statute and held the Commission barred from collecting tax for quarters before July 1, 1982.

Q: Is this necessarily the current South Carolina limitations rule?

A: No. RR 89-6 interprets statutes and a court decision as they stood in 1989. Current law and later guidance must be checked.

Citations and references

• S.C. Code section 12-54-80(2) (Supp. 1988) — six-year assessment period for a 25% omission
• Former S.C. Code section 12-35-1370 — three-year notice period applied in the cited use-tax case
• Act 201, section 32, of 1985 — enacted Title 12, Chapter 54, effective September 1, 1985
• S.C. Code section 12-3-170 and SC Revenue Procedure 87-3 — authority cited for the Revenue Ruling
• South Carolina National Bank v. South Carolina Tax Commission, Opinion No. 22957 (February 6, 1989) — no retroactive application of section 12-54-80(2)
• Cannon v. Johnson, Lane, Space, Smith & Co., 460 F. Supp. 724 (D.S.C. 1978), aff'd, 638 F.2d 12 (4th Cir. 1980) — legislative intent and limitations periods
• Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988); Hyder v. Jones, 271 S.C. 85, 245 S.E.2d 123 (1978); Cooper River Bridge v. South Carolina Tax Commission, 182 S.C. 72, 188 S.E. 508 (1936) — statutory-construction principles quoted in the ruling

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR89-6.pdf

Original ruling text

SC REVENUE RULING #89-6

SUBJECT:

Six Year Statute of Limitations Applicable Returns
(All Taxes)

EFFECTIVE DATE:

Applies to all returns due to be filed after September 1, 1985

SUPERSEDES:

All previous documents and any oral directives in conflict
herewith.

REFERENCE:

S.C. Code Ann. Section 12-54-80(2) (Supp. 1988)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
SC Revenue Procedure #87-3

SCOPE:

A Revenue Ruling is the Commission's official interpretation of
how tax law is to be applied to a specific set of facts. A Revenue
Ruling is public information and remains a permanent document
until superseded by a Regulation or is rescinded by a subsequent
Revenue Ruling.

Question:
Does the six year statute of limitations, provided for in Code Section 12-54-80(2), apply
retroactively to returns due to be filed prior to the code section's effective date, September 1,
1985?
Facts:
Act 201, Section 32, of 1985 enacted a "Uniform Method of Collection and Enforcement of
Taxes Levied and Assessed by the South Carolina Tax Commission". This Section of the Act
was codified as Chapter 54 of Title 12 and became effective September 1, 1985.
Code Section 12-54-80 establishes the time within which the South Carolina Tax Commission
("Commission") must assess taxes due. That section reads:
Except as otherwise provided in this section, the amount of taxes due on any return
which has been filed as required by provisions of law administered by the
Commission must be determined and assessed within thirty-six months from the date
the return was filed or due to be filed, whichever occurs later.

1

If, before the expiration of the time prescribed in this section for the mailing of a
notice of any assessment, the taxpayer has consented in writing to the mailing of the
notice after the time, notice of assessment may be mailed at any time prior to the
expiration of the period agreed upon. The period so agreed upon may be extended by
subsequent agreements in writing made before the expiration of the period previously
agreed upon.
(1)

When a fraudulent return with the intent to evade tax has been filed, or in the
case of failure to file a return, the tax may be assessed and collected and suit or
proceedings for the collection of the tax may begin at any time.

(2)

In the case of any tax administered by the Commission, if the taxpayer omits
twenty-five percent of gross income, sales price, gross receipts, gross proceeds
of sale, or gross estate properly includable therein on any tax return due to be
filed under provisions of law administered by the Commission, the tax may be
assessed within six years after the return was filed.

Except under specific circumstances, this section provides for a three year time period, from the
date a return was filed or due to be filed, for the Commission to assess taxes due. Those
exceptions are: (1) failure to file, (2) fraud, and (3) a twenty-five percent omission of "gross
income, sales price, gross receipts, gross proceeds of sale or gross estate properly includable" on
the return.
In cases involving a twenty-five percent omission from the return, the statute of limitations, or
time within which the Commission must issue an assessment, is six years after the return was
filed.
Discussion:
The issue is whether Code Section 12-54-80(2) applies to returns due to be filed prior to
September 1, 1985.
The case of South Carolina National Bank, as Successor in interest by way of merger to the First
National Bank of South Carolina v. South Carolina Tax Commission, Opinion No. 22957 dated
February 6, 1989, (which concerned a use tax audit for quarters ending December 31, 1979
through December 31, 1984) is on point.
The Supreme Court of South Carolina held:
Legislative intent governs whether a statute of limitations will have prospective or
retrospective application. Cannon v. Johnson, Lane, Space, Smith & Co., Inc. 460 F.
Supp. 724 (D.S.C. 1978), aff'd., 638 F.2d 12 (4th Cir. 1980). In ascertaining
legislative intent, words must be given their plain and ordinary meanings. Bryant v.
City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988). Statutes are not to be
applied retroactively unless that result is so clearly compelled as to leave no room for
doubt. Hyder v. Jones, 271 S.C. 85, 245 S.E.2d 123 (1978). In the enforcement of tax
statutes, the taxpayer should receive the benefit in cases of doubt. Cooper River
Bridge v. S.C. Tax Commission, 182 S.C. 72, 188 S.E. 508 (1936).
2

The court, after reviewing Code Section 12-54-80(2), further held:
A literal reading of the statute does not indicate that the legislature intended
retroactive application. Although the Notice of Assessment was issued subsequent to
the effective date of Section 12-54-80(2), the tax quarters in controversy are for a
period prior to the section's enactment. Thus, we conclude that Section 12-54-80(2)
does not apply to the returns at issue.
We find that Section 12-35-1370 is applicable in this case. This section provides, in
relevant part, as follows:
"...[E]very notice of an underpayment shall be mailed within three years after the last
day of the calendar month following the period for which the amount is proposed for
assessment or within three years after the day on which the return was filed..."
The quarter ending June 30, 1982 is the final quarter for which SCN paid taxes under
protest. Pursuant to Section 12-35-1370, notice of underpayment should have been
mailed before July 31, 1985.
Accordingly, we reverse the Circuit Court's order and hold that, in this instance, the
Commission is barred from collecting taxes for the quarters prior to July 1, 1982.
Conclusion:
The six year statute of limitations, provided for in Code Section 12-54-80(2), applies only to tax
returns due to be filed after September 1, 1985.

SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman

s/A. Crawford Clarkson, Jr.
A. Crawford Clarkson, Jr., Commissioner

s/T. R. McConnell
T. R. McConnell, Commissioner

Columbia, South Carolina
April 7
, 1989

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