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State program

South Carolina Research and Development Credit

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  • Offset only

Last reviewed November 2026

At a glance

  • Jurisdiction: South Carolina (SC)
  • Credit name: Research Expenses Credit (S.C. Code §12-6-3415)
  • Administering agency: South Carolina Department of Revenue (SCDOR)
  • Rate(s) and base: 5% of qualified research expenses (as defined in IRC §41(b)) for research done in South Carolina. There is no base amount: the credit applies to total South Carolina QREs. You must claim the federal §41 credit for the same year.
  • Refundable? No.
  • Transferable? No. Credits earned by pass-through entities flow to owners through the SC K-1.
  • Carryforward: Up to 10 years from the year the expenses were incurred.
  • Annual cap / proration: No statewide cap. The credit used in a year cannot exceed 50% of the taxpayer's remaining tax liability after all other credits.
  • Pre-approval / application and deadline: None. Claim the credit on the annual return.
  • Forms: Schedule TC-18 (Research Expenses Credit), attached to the SC1040, SC1120 or other income tax return.
  • Sunset / recent changes: No sunset. H.4216 (Act 110 of 2026, signed March 30, 2026) changed individual income tax rates and deductions starting in tax year 2026 and kept all other existing state credits.

What it is

South Carolina gives a nonincremental credit of 5% of South Carolina QREs. It can be used against individual or corporate income tax and corporate license fees (S.C. Code §12-20-50), up to half of the remaining liability each year. Unused credit carries forward 10 years.

Who can claim it

  • Individuals, corporations, and owners of pass-through entities that claim a federal research credit under IRC §41 for the year and incur QREs for research done in South Carolina.

How it is calculated

  1. Total South Carolina QREs for the year, using the IRC §41(b) definitions.
  2. Multiply by 5%.
  3. Add credits passed through on SC K-1s and any carryforwards.
  4. Limit the credit used in the year to 50% of the tax liability remaining after all other credits.
  5. Carry the excess forward. It cannot be used in a year beginning 10 or more years after the expenses were incurred.

How to claim it

  • Complete Schedule TC-18. For pass-through credits, enter the pass-through entity's name and FEIN, and enter the credit from your SC K-1 on line 2. Attach a schedule of any carryforward.
  • Paper filers attach TC-18 to the return. E-filers keep a copy with their records.
  • Keep the federal Form 6765 showing the federal credit claim.

Recent changes

  • H.4216 (2026), Act 110, signed March 30, 2026, effective for tax year 2026:
    • restructures individual income tax: rates of 1.99% and 5.21%, federal AGI as the starting point, and a new South Carolina deduction in place of federal standard or itemized deductions
    • caps the state earned income tax credit at $200
    • keeps all other current state credits, including this one
  • 2024–2026: no changes to §12-6-3415 itself.

Likely examiner questions

These questions illustrate what an examiner may ask about this credit. They are drafts for illustration and should be reviewed by a specialist before use. Most state claims also face standard questions: where the research was physically performed, how wages, supplies and contract research were apportioned between South Carolina and other locations, how South Carolina amounts reconcile to federal Form 6765, the South Carolina credit and carryforward schedule for each year claimed, and whether the claiming entity is the one subject to South Carolina tax.

  • Did the taxpayer claim the federal §41 credit for the same year? Can you provide Form 6765?
  • How were South Carolina QREs separated from QREs in other states?
  • Do the South Carolina QREs reconcile to the federal QREs?
  • Was the 50% limit applied after all other credits?
  • Does the carryforward schedule show when each amount was incurred and when it expires?

Common weak spots

  • Claiming the South Carolina credit without claiming the federal credit.
  • Including QREs for research done outside South Carolina.
  • Applying the 50% limit before other credits instead of after.
  • Using carryforwards more than 10 years old.

Next steps

Important

This page is general information, not tax advice. Rules change; confirm current requirements with the state revenue agency or a qualified tax professional. creditARMOR is a free service. Passing this mock audit does not guarantee that your claim will pass an IRS or state examination. If needed, Swanson Reed can assist you with representation before the IRS. creditARMOR and TaxTrex are products of Swanson Reed.

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