Under a new bill signed into law on March 11, 2024, the South Carolina Department of Revenue will have to satisfy additional standards before it may force affiliated corporate taxpayers to file a unitary combined return.\u00a0 These new standards, enacted as part of Senate Bill 298, are expected to rein in the Department\u2019s aggressive use of forced combination, which has led to considerable tax controversy in the state.<\/p>\n
Modeled on section 18 of the Uniform Division of Income for Tax Purposes Act, section 12-6-2320 of the South Carolina Code of Laws has long authorized the Department to require, and taxpayers to petition for, a reasonable alternative apportionment methodology when the standard apportionment provisions do not fairly represent the extent of the taxpayer\u2019s in-state business activity.\u00a0 However, until Senate Bill 298, no standards or guidelines\u2014other than those in the statute itself\u2014existed for invoking and applying this alternative apportionment authority.\u00a0 The absence of any standards or guidelines created considerable uncertainty for taxpayers.<\/p>\n
Senate Bill 298 shifts the landscape.\u00a0 Now, before it may require the filing of a unitary combined return, the Department must find that the taxpayer\u2019s intercompany transactions lack economic substance or are not at fair market value.\u00a0 To determine whether intercompany transactions are at fair market value, Senate Bill 298 specifies the Department must apply the federal transfer pricing standards contained in the Treasury Regulations.\u00a0 When the Department finds that a combined return is required, it must provide the taxpayer with a written statement detailing the facts, circumstances, and reasons supporting the Department\u2019s finding no later than ninety days after issuing a proposed assessment.<\/p>\n
Two other features of Senate Bill 298 are noteworthy.\u00a0 In determining whether intercompany transactions lack economic substance or are not at fair market value, the Department must consider each tax year separately.\u00a0 In addition, when a taxpayer appeals a final determination by the Department under section 12-6-2320 to the South Carolina Administrative Law Court in a contested tax case, Senate Bill 298 requires the administrative law judge to review de novo<\/em> each of the following:<\/p>\n The new law is effective March 11, 2024 and applies to all open tax periods, but not assessments under judicial review by the Administrative Law Court, the South Carolina Court of Appeals, or the South Carolina Supreme Court as of that date.<\/p>\n [View source.]<\/p>\n","protected":false},"excerpt":{"rendered":" Fact: Under a new bill signed into law on March 11, 2024, the South Carolina Department of Revenue will have to satisfy additional standards before it may force affiliated corporate taxpayers to file a unitary combined return.<\/p>\n","protected":false},"author":6,"featured_media":9434,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[7694,7667,1863,3492,186,7688,932,581,2294,6242,5679,7315,4428,5612,7692,1827,168,1065,7191,6985,973,5265,7693],"class_list":["post-9433","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-other","tag-alternative-apportionment","tag-assessment","tag-assessments","tag-bill","tag-business","tag-business-activity","tag-court","tag-court-of-appeals","tag-income","tag-judge","tag-law","tag-petition","tag-regulations","tag-revenue","tag-south-carolina-department-of-revenue","tag-statement","tag-supreme-court","tag-tax","tag-taxpayers","tag-transfer-pricing","tag-treasury","tag-uncertainty","tag-unitary-combined-return"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"\n\n