The Palmetto Insider

The blog of the South Carolina Policy Council

TRAC Corporate Income Tax Subcommittee Meets

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The Corporate Income Tax subcommittee of the Taxation Realignment Commission (TRAC) met Thursday to briefly go through what Chairman Burnie Maybank referred to as “housekeeping.” The subcommittee members present included the chairman, Ken Wingate, and (via telephone) Ben Kochenower.

On the agenda for the members to consider were a number of suggestions proposed by Maybank. The chairman began by explaining how other bodies similar to TRAC nationally have considered transitioning their state to a combined corporate income tax return. Currently, South Carolina is a separate entity state, like all states east of the Mississippi. The recommendation was to change the state to a combined return, as it exists at the federal level.

Other suggestions proposed were:

  • The adoption of Section 482 of the federal corporate income tax code, which attempts to resolve situations in which certain parties are able to pay deductions to related parties in states without income tax (such as Delaware) and avoid paying taxes because of these deductions
  • The adoption of an “economic substance rule,” which would be adopted verbatim from the federal language if accepted, and
  • Examining deductions for related-party REITs, which have been a major part of state tax battles over the past five or six years as states have attempted to attack these.

Chairman Maybank described how South Carolina currently has one of the longest “carry forwards” for tax credits, standing at 15 years in comparison to 3 years for many states and the federal government.  Finally, the chairman proposed the full adoption of the circular 230, which largely prevents contingency fees. The circular 230 is, for the most part, adopted through federal tax conformity each year but the state has failed to adopt it fully, a decision which Maybank doubted would be controversial. The final recommendation was to reexamine the rules governing why certain corporations (such as credit unions) receive exemptions.

The subcommittee will consider these recommendations during the next full TRAC meeting on October 7th, where COST (Committee on State Taxation), as well as, the state’s Chamber and Department of Commerce have been invited to speak.

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Written by SCPC

October 1, 2010 at 10:07 am

One Response

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  1. […] Tax Subcommittee met briefly to review the recommendations that had previously been presented at a meeting on September 30th at which some members were not present. Finally, the TRAC Tourism Subcommittee […]


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