Are R&D Tax Credits Available in South Carolina?

Yes. The state of South Carolina provides the Research and Development (R&D) Tax Credit for increasing qualifying research activities. South Carolina leverages of Internal Revenue Code Section 41 regarding qualified expenditures but calculates the credit based solely on expenditures incurred in South Carolina.

  • The Applicable South Carolina code section is S.C. Code Section 12-6-3415.
  • Research must be conducted within the state of South Carolina.
  • The SC R&D Tax Credit is 5% of the qualified research expenditures that occurred in SC.
  • The R&D Tax Credit taken in any one taxable year cannot exceed 50% of a taxpayer's liability.
  • SC allows a 10-year carryforward period for any unused R&D Tax Credit.

South Carolina R&D Tax Credit Case Study

A manufacturing company in SC creating specialized parts for the automotive industries took a credit for the past two years when it designed a highly specialized prototype. This project involved a multi-year study covering the tax years 2013 and 2014.

The Company qualified for the federal R&D Tax Credits of $213,867 and an additional $116,263 in South Carolina state R&D Tax Credits.

Total QREs
Total QREs
Total $2,457,750 $213,867 $2,457,750 $116,263

You can read more about this South Carolina tax credit case study here.

Four-Part Test

Qualified research activities are defined by the four-part test outlined below

Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.

Permitted Purpose
Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

Eliminate Uncertainty
Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.

All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.