SC SC Revenue Ruling #05-17 Income Tax 2005-12-13

How did South Carolina's 2005 small-business job tax credit work for businesses with 99 or fewer employees?

Short answer: For tax years beginning in 2006, many qualifying businesses with 99 or fewer employees could enter the job tax credit with a monthly average increase of at least two new full-time jobs instead of 10. County ranking and wages affected the amount, the credit began after the creation year, and unused credit could carry forward. RR 07-2 later superseded this guidance.

Apply this to your situation

This page answers the general question as of 2005. Ezel answers yours, under current South Carolina tax law, with citations.

Disclaimer: HISTORICAL guidance only. SC Revenue Ruling 07-2 expressly superseded RR 05-17. RR 05-17 described 2005 legislation for tax years beginning in 2006 and itself stated that the newly enacted provisions were repealed for tax years beginning after June 9, 2010. Its county rankings, dollar amounts, wage tests, forms, and examples are not current guidance. This summary is informational only and is not legal or tax advice.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

South Carolina Revenue Ruling #05-17 explained a historical expansion of the job tax credit for many qualifying small businesses with 99 or fewer employees. For tax years beginning in 2006, most qualifying small businesses could become eligible by creating and maintaining a monthly average increase of at least two new full-time jobs, rather than the 10 jobs generally required for larger businesses.

The ruling covered sole proprietorships, partnerships, corporations, S corporations, and LLCs that met the qualifying-business rules. A full-time job generally required at least 35 hours per week for the normal operating year; two half-time jobs of at least 20 hours each could count as one full-time equivalent. Transferred jobs and leased employees generally did not qualify.

Credit amounts depended on the county ranking and the wages paid for each job. Jobs meeting the ruling's 120% wage threshold received the full basic amount; lower-paid jobs could receive 50%. The credit was generally claimed in the five years after the job-creation year, was limited to 50% of the relevant tax liability for a year, and unused credit could be carried forward for 15 years.

The ruling is no longer operative guidance. RR 07-2 expressly superseded it, and RR 05-17 itself said these newly enacted provisions were repealed for tax years beginning after June 9, 2010.

What this means for you

Historical small-business claims

The two-job threshold was based on a monthly average, not merely two people employed on the last day of the year. The calculation used the taxpayer's tax-year months and rounded the average increase down to a whole number.

Employers evaluating workers

The ruling generally counted employees of the taxpayer who were subject to its withholding. It excluded jobs shifted from another South Carolina location and workers leased from another company, subject to the limited rules described in the ruling.

Businesses comparing credit amounts

County ranking, wage level, job maintenance, and certain additional-credit categories affected the result. The historical examples should not be used to calculate a current credit.

Common questions

Q: Did hiring two people automatically qualify a small business?
A: No. The ruling required a monthly average increase of at least two qualifying full-time jobs for most covered businesses, with higher thresholds for specified tourism and service facilities.

Q: Could part-time jobs count?
A: Two half-time jobs requiring at least 20 hours per week each could count as one full-time job under the ruling.

Q: When was the credit first claimed?
A: Under this ruling's annual method, the credit began in the year after the jobs were created and could continue for five years if the jobs were maintained, subject to the stated repeal limitation.

Q: Is RR 05-17 current?
A: No. RR 07-2 expressly superseded it, and RR 05-17 also described a repeal date for its newly enacted provisions.

Citations and references

S.C. Code Ann. § 12-6-3360 — historical job tax credit provision applied by the ruling
South Carolina Act No. 157 of 2005 — small-business changes described by RR 05-17
SC Revenue Ruling 07-2 — expressly superseded RR 05-17 and added annual and accelerated small-business guidance

Source

Landing page: SC Advisory Opinion Search
Original PDF: RR05-17.pdf
Official superseding RR 07-2 PDF: RR07-2.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC REVENUE RULING #05-17

SUBJECT:

Job Tax Credit – New Small Business Provisions
(Income Tax)

EFFECTIVE DATE: Tax Years Beginning On or After January 1, 2006
SUPERSEDES:

All previous advisory opinions and any oral directives in conflict
herewith.

REFERENCES:

S. C. Code Ann. Section 12-6-3360 (As Amended by Act No. 157
of 2005)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2000)
SC Revenue Procedure #05-2

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or general
category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court
decision, or another Departmental advisory opinion.

INTRODUCTION:
South Carolina Code Section 12-6-3360 provides a job tax credit against South Carolina
income tax or insurance premium tax for a taxpayer creating new jobs in South Carolina.
Sole proprietorships, partnerships, corporations, S corporations, and limited liability
companies are eligible for the credit. During the 2005 legislative session, the job tax
credit was expanded to make it available to most types of small businesses (i.e., a
business with 99 or fewer employees) who create and maintain a required minimum
monthly average number of new, full time jobs by reducing the required monthly average
increase of new, full time jobs from 10 jobs to 2 jobs for most types of qualifying
businesses.
The purpose of this advisory opinion is to provide small businesses that may now be
eligible for the credit for the first time a general overview of the credit requirements and
examples of its computation.

Caveat: This advisory opinion is limited to the basic credit principles. The job tax credit
statute rules and requirements can be complex. For additional guidance on more complex
principles and exceptions to the general rules discussed in this advisory opinion, see Code
Section 12-6-3360, the job tax credit statute, SC Revenue Ruling #99-5, a comprehensive
question and answer advisory opinion regarding the credit as the statute existed after a
substantial amendment in 1996, or consult your tax advisor.

CONTENTS OF ADVISORY OPINION:
For ease of reading, this question and answer document is divided into the following
categories:
●A. Qualifying Taxpayers – A chart summarizing the small business types that may be
eligible to qualify for the credit, and the monthly average job creation requirement in
counties ranked as distressed, least developed, under developed, moderately developed,
or developed.
●B. Types of Qualifying New Jobs – The credit applicability to new full time jobs, new
part time jobs, transferred jobs, and leased employees.
●C. Determining the Monthly Average – The computation of the monthly average
increase in full time employees used to determine if a taxpayer meets the minimum job
creation requirements necessary to be eligible for the job tax credit. An example is
provided to illustrate the computation of “monthly average” increase in full time jobs.
●D. County Rankings – The county designations used to determine the credit amount
and the effect of future year changes in rankings on the credit.
●E. Credit Amount – The job tax credit “basic” credit amount, “additional” credit
amounts, and “maximum” credit amount a taxpayer with 99 or fewer employees on the
first or last day of it’s tax year may be eligible to claim depending on the county where
the taxpayer is located, and the amount of “gross wages” paid to each employee.
●F. 120% “Gross Wages” Rules – The effect of paying at or above the 120% wage
threshold or below the 120% wage threshold on the eligible credit amount, a definition of
“gross wages,” and the annualized method to compute the 120% threshold for each full
time or part time job at the end of the taxpayer’s tax year in which the job is created.
Examples are provided.
●G. Per Capita Income Requirements – The publication of the county and State per
capita amounts on the Department’s website, www.sctax.org, and the annual figures that
must be used to determine if the 120% wage threshold for each job is met.
●H. Determining and Claiming the Credit – The tax years to claim the credit, the
repeal of the credit for tax years beginning after June 9, 2010, the credit form to compute
and claim the tax credit, and the 50% income tax limitations of the job tax credit.

●I. Computing the Credit and Carryforwards – The determination of the number of
jobs used to compute the credit, fluctuations in the credit for additional jobs created or
jobs not maintained, and the 15 year carryforward period.
●Examples – Example D is a complex calculation of the job tax credit for Year 1 and
Year 2 of the credit showing the use of the 120% wage threshold to calculate the credit
amount for full time and part time jobs and the average increase in employees eligible for
the 100% credit amount and the 50% credit amount. Example E is a general example
showing the calculation for the entire 5 year credit period.

A. QUALIFYING TAXPAYERS
Question 1 – Examples of Qualifying Taxpayers
Q. What types of small businesses with 99 or fewer employees may be eligible to qualify for
the credit?
A. The following chart summarizes the types of small businesses that may be eligible to
qualify for the new credit and the number of new, full time jobs that must be created
by the business in a particular South Carolina county.
Qualifying Facility

Retail Facility (e.g., a
convenience store, restaurant)
Service Related Industry
(e.g., a seamstress, barber,
lawn care service, daycare)
Manufacturing *
Processing
Warehousing
Distribution
Research & Development
Corporate Office
Technology Intensive
Tourism
Qualifying Service Related
Facility, including health care
related facilities in NAICS
Manual Section 62, subsectors
621 (ambulatory health care),
622 (hospitals), and 623
(residential care facilities.)
Note: Legal, accounting,
investment services, and retail
sales are not a qualifying service
related facility.

County Ranking

Monthly Average
Job Creation
Requirement**

Distressed

Least
Developed

Under
Developed,
Moderately
Developed,
& Developed
N/A

N/A

X
X
X
X
X
X
X
X

N/A

2
2
2
2
2
2
2
2, except 20 for a
new hotel or motel
2

N/A

30-250 at a single
location based on
certain average
cash compensation
amounts

See Question 2 for definitions of certain types of “facilities.”
*Note: For illustrative purposes only, the number of new, full time jobs required to
be created is referred to as “2” throughout this advisory opinion. Exceptions to this
general rule are noted for certain “tourism” and “qualifying service related
facilities.”
4

Question 2 – Definitions of Types of Taxpayers
Q. Are the qualifying small business facilities listed in Question 1 defined?
A. Yes. The facilities marked with an asterisk in Question 1 are defined in Code Section
12-6-3360(M). Code Section 12-6-3360 and Regulation 117-750.1 defining the term
“facility” can be found on the Department’s website at www.sctax.org.
Question 3 – A “Small Business” With 99 or Fewer Employees
Q. When does the taxpayer determine if it has 99 or fewer employees?
A. To qualify for the new provisions available for a small business, the taxpayer has the
option to determine whether it has 99 or fewer employees at either the beginning or
the end of its tax year in which the new, full time jobs are created. A taxpayer with 99
or fewer employees must create at least 2 new, full time jobs to qualify for the credit
allowed under Code Section 12-6-3360(C)(2). Note: A taxpayer with 100 or more
employees must create at least 10 new, full time jobs to qualify for the credit allowed
under Code Section 12-6-3360(C)(1). (Note exceptions in Question 1 for certain
tourism and qualifying service related facilities that must create a monthly average
increase of 20 - 250 jobs.)

B. TYPES OF QUALIFYING NEW JOBS
Question 4 – Definitions of “Full Time” and “New Job”
Q. What is a qualifying new, full time job?
A. A “full time” job is one requiring a minimum of 35 hours of an employee’s time each
week for the entire normal year of company operations. A “new job” is a job created
in the State at the time a new facility or an expansion is initially staffed. See SC
Revenue Ruling #05-5 for more information on the meaning of the term “expansion.”
Question 5 – Part Time Jobs
Q. Is a part time job a qualifying new job?
A. Two half time jobs requiring a minimum of 20 hours of each employee’s time a week
qualify as one “full time” job. See SC Revenue Ruling #99-5, Question 10 and
Examples D and E for additional information on computing the number of half time
jobs and the monthly average.

Question 6 - Transferred Jobs:
Q. Do jobs transferred from another facility or related party qualify as new jobs?
A. A new job does not include a job created when an employee is shifted from an
existing location in South Carolina to a new or expanded facility whether the job is
transferred to or from another facility of the taxpayer or to or from a related party’s
facility. See SC Revenue Ruling #99-5, Question 8 for limited exceptions to this
general rule.
Question 7 - Leased Employees:
Q. Do leased employees qualify as new jobs?
A. Leased employees or other employees of another company who are working for a
qualifying taxpayer, such as a trucking company, do not qualify for the job tax credit.
Only employees of the taxpayer qualify for the credit (i.e., employees subject to
withholding by the qualifying taxpayer.) If, however, the trucking company in this
example subsequently hires full time employees who were previously leased or
temporary employees at the business, then they are considered new employees
eligible for the job tax credit, if all other statutory requirements are met.

C. DETERMINING THE MONTHLY AVERAGE
Question 8 – Monthly Average Number of New Jobs Required to Create
Q. How is the “monthly average” number of new jobs determined?
A. The recently amended statute requires that a monthly average increase of 2 jobs or
more for the tax year be created and maintained in the applicable county for the small
business to qualify for the credit. The credit is not earned when a total of 2 jobs are
created by the end of a tax year or when a total of 2 jobs are created over several
years. (Note exceptions in Question 1 for certain tourism and qualifying service
related facilities that must create a monthly average increase of 20 - 250 jobs and to
which the 2 job general rule does not apply.)
The periods to compute the monthly average are the months that correspond to the tax
year of the taxpayer; a taxpayer may not choose any other 12 month period. Note:
When computing the increase in full time employees each year, the taxpayer must
round down to the lowest whole number of jobs.

Question 9 – Computing Monthly Average if Year 1 in Operation is Less Than 12
Months
Q. How is the monthly average number of new jobs computed if a taxpayer’s first year
in operation is not a full 12 months?
A. The taxpayer has the option of computing the monthly average in the first year of
operation by either dividing the total number of employees for Year 1 on the job tax
credit form by (a) 12 months or (b) the actual number of months in operation. See SC
Revenue Ruling #99-5, Question 5 for more information.

Question 10 – Definition of “Prior Year” Monthly Average
Q. What is the base or “prior” year used to compute the average increase in full time
employees?
A. The base year is the year preceding the first year a taxpayer creates the number of
new jobs necessary to qualify for the job tax credit, regardless of whether that year
was the first year of operation of the facility.

EXAMPLE A – Calculation of Monthly Average of Full Time Employees
This example illustrates the basic concept of “monthly average.” It assumes that each taxpayer is a
calendar year manufacturing facility with one location in South Carolina, pays all employees over
120% of the county or State average per capita income, and maintains all jobs in Year 2.
Taxpayer 1 –
New Business
Started 1/1/06

Taxpayer 2 –
New Business
Started 5/15/06

Taxpayer 3 –
Existing Business
Started 7/1/05

MONTHS IN YEAR 1
(e.g., 2006)

CUMULATIVE
TOTAL OF
EMPLOYEES*

January

1 (hired 1)

February

2 (hired1)

March

April

6 (hired 1)

May

2 (hired 2)

7 (hired 1)

June

3 (hired 1)

July

August

September

8 (hired 1)

October

5 (hired 2)

November

9 (hired 1)

December

*TOTAL EMPLOYEES (i.e., cumulative
total of full time employees in each county
for each month (number of employees in
January plus number in February, etc. It is
not the number of new jobs created in each
month.)

Divided by Months in Operation

Monthly Average of Full Time Employees

1.92

3.625

6.92

Less: Prior Year Monthly Average (e.g.,
2005)

AVERAGE INCREASE IN FULL TIME
EMPLOYEES

1** (1.92 rounded
down)

3** (3.625 rounded
down)

1 ** (1.92 rounded
down)

QUALIFY FOR CREDIT

Yes

**Note: The increase in new jobs is determined based on the Department’s longstanding policy of
rounding down to the lowest whole number.

D. COUNTY RANKINGS
Question 11 – Annual County Designations:
Q. How are the counties ranked?
A. Each of South Carolina’s 46 counties are ranked annually based in part on per capita
income and unemployment rate data received from the South Carolina Employment
Security Commission and Budget and Control Board. The rankings published reflect
the final county rankings for the year after making all adjustments to county
designations required. The rankings are done in late December for the next tax year.
Question 12 – Annual County Ranking List:
Q. What ranking list should be used to calculate the credit?
A. Each January, the Department publishes an Information Letter listing the ranking of
each county as “distressed,” “least developed,” “under developed,” “moderately
developed,” or “developed” to use for calculating the credit amount for jobs created
during that tax year. For example, the list published in January 2006 will contain the
county rankings for new jobs created in tax years which begin in 2006. See the
Department’s website at www.sctax.org for the annual rankings.
Question 13 – County Ranking Changes in Year 2
Q. What credit amount is a taxpayer eligible to claim in Year 2 (the first year of claiming
the credit on the tax return) if the county ranking changes from Year 1 (the year of
new job creation)?
A. The credit is based on the county ranking at the time the new jobs are created in Year

The credit created in Year 1 that is claimed in Years 2 through 6 is not affected by
any future reranking of the county in which the taxpayer is located for the jobs
created in Year 1. See SC Revenue Ruling #99-5, Question 17 for additional
information.
Question 14 – County Ranking Changes from Year 1 and Credit Amount for
Additional New Jobs
Q. What credit amount is a taxpayer eligible to claim for additional new jobs created in
Years 2 through 6 if the county designation changes from Year 1 (the year of the
initial job increase)?
A. The credit amount for any number of additional new jobs created is based on the
county designation for the year the additional new jobs are created. See SC Revenue
Ruling #99-5, Question 18 for additional information.

CREDIT AMOUNT

Question 15 – 100% Credit Amount and 50% Credit Amount
Q. What is the “basic” credit amount?
A. In general, the “basic” credit amount is $750 to $8,000 per year depending on the
county where the taxpayer is located, the number of new, full time jobs created and
maintained, and the amount of gross wages paid to each new, full time employee.
The following chart illustrates the “basic” credit amount for a qualifying taxpayer
creating 2 new, full time jobs paying at or above the 120% wage threshold or creating
2 new, full time jobs paying less than the 120% wage threshold, without regard to any
“additional” amounts for which a taxpayer may be eligible. Note: See Question 19 for
an exception to the credit amounts below for a taxpayer who creates the minimum of
2 new, full time jobs, but with one job paying at or above the 120% threshold and the
other job paying below the 120% wage threshold.
County Designation
(Location of Taxpayer with 99
or Fewer Employees on the First
or Last Day of its Tax Year of
Job Creation)
Distressed
Least Developed
Under Developed
Moderately Developed
Developed County

Gross Wages Per Job
Greater Than or Equal
To (i.e., > ) 120% County
or State Average Per
Capita Income (i.e., the
100% Credit Amount)
$8,000
$4,500
$3,500
$2,500
$1,500

Gross Wages Per Job
Less Than (i.e., < )
120% County or State
Average Per Capita
Income (i.e., the 50%
Credit Amount)
$4,000
$2,250
$1,750
$1,250
$ 750

Question 16 - “Additional” Credit Amount
Q. What is the “additional” credit amount?
A. Certain small business taxpayers may also be entitled to job tax credit amounts in
addition to the “basic” credit amounts listed above. These “additional” amounts are
available to the following qualifying taxpayers:

A small business located in a multi-county industrial park may be allowed an
additional $1,000 credit amount per year for 5 years for each new job created
beginning in the taxable year following the creation of the job. Two or more
counties determine if an area in the county is designated as a multi-county
industrial park by entering into an agreement under Code Section 4-1-175. This
determination is not made by the Department.

2. A small business that creates qualifying new, full time jobs on property where a
response action has been completed pursuant to a nonresponsible party voluntary
cleanup contract under Title 44, Chapter 56, Article 7 (the Brownfields Voluntary
Cleanup Program) may be allowed an additional $1,000 credit amount per year
for 5 years for each new job created beginning in the taxable year following the
creation of the job. Taxpayers must have a certification of completion from the
South Carolina Department of Health and Environmental Control.

A small business engaged primarily in manufacturing, warehousing, or
distribution that uses South Carolina port facilities and increased base port cargo
volume at these facilities by 5% over 2005 totals. See Code Section 12-6-3375 for
the additional job tax credit amounts available.
Note: For simplicity, the examples used in this advisory opinion assume a taxpayer does
not qualify for any “additional” credit amounts.
Question 17 – Maximum Credit Amount
Q. Is there a cap on the credit amount for each new job?
A. Yes. The maximum credit amount that may be claimed for any tax year for a single
employee under the job tax credit statute and the “basic” part of the family
independence credit under South Carolina Code §12-6-3470(A), is $5,500. The
$5,500 limitation is not applicable to a taxpayer qualifying for the job tax credit in a
“distressed” county.
Note: As discussed in Question 30, the job tax credit taken in one tax year may not
exceed 50% of the taxpayer’s income tax or insurance premium tax liability.

F. 120% “GROSS WAGES” RULES
Question 18 – Definition of “Gross Wages”
Q. How is the “gross wage” amount per job determined for purposes of calculating the
120% county or State average per capita income requirement?
A. Gross wages are wages subject to withholding (i.e., “net” wages after pre tax benefits,
such as pretax medical, dental, disability, retirement, 401(k) contributions, pretax
dependent care plan deduction, and pretax medical reimbursement plans deductions).
An example illustrates how gross wages is used to determine if 120% of the county or
State average per capita income requirement is met and whether the small business is
eligible for the 100% credit amount or the 50% credit amount listed in Question 15.
For example, a new employee hired by a manufacturer in X County who is paid $20
per hour gross or $41,600 per year elects pretax family medical and dental coverage

of $100 per week ($5,200 per year), a $5,000 annual pre tax medical reimbursement,
a $5,000 pretax dependent care plan deduction, and a $4,000 401(k) contribution.
This employee has “gross wages” subject to withholding of $22,400 for purposes of
the per capita computation. For illustrative purposes, assume that as of December 31,
2006, X County’s average per capita income is $28,005 and is less than the State
average per capita income; the $22,400 gross wage amount subject to withholding is
not 120% or more of the county or State average per capita income, and the new job
would be eligible for the 50% credit amount.
Question 19 – Determination of Credit Amount for a Full Time Job and a Part Time
Job
Q. How does the payment of gross wages at or above the 120% threshold or below the
120% threshold affect the credit amount for each job?
A. The 120% threshold is determined for each job at the end of the taxpayer’s tax year in
which the jobs are created (Year 1) based on data published by the Department. (See
Section G below for more information on State and county per capita income
amounts to use.) To determine the credit amount, a monthly average number of full
time jobs and full time equivalents with gross wages at or above 120% of the per
capita income threshold amount is determined and then a monthly average number of
full time jobs and full time equivalents with gross wages of less than 120% of the per
capita income threshold amount is determined. This separate calculation is needed
since the “monthly average” number of new jobs created is most often not the same
as the “actual” number of new jobs created.
The following general examples explain the affect on the credit amount based on the
gross wages paid to each employee. See Example D for a more detailed example.
Note: A minimum number of 2 new, full time jobs must be created paying gross
wages at or above 120% of the county or State per capita income to receive the 100%
credit amount. See Question 1 for exceptions for certain tourism facilities and
qualifying service related facilities. (*See Example B4.)

Example B - Full Time Jobs
Simplified examples illustrate the affect of the 120% wage threshold on the credit amount
for each new, full time job. These examples assume the taxpayers illustrated below meet
all the statutory requirements of the credit in 2006, are located in a distressed county, and
hire 3 new, full time employees in Example 1 on January 1, 2006, and 2 new, full time
employees on January 1, 2006, in Examples 2, 3, and 4, and all employees are maintained
in Years 2 - 6.

Monthly average
increase of each new, full
time job paying gross
wages > 120%
100% credit amount for
each new, full time job
paying gross wages > 120%
Monthly average
increase of each new, full
time job paying gross
wages < 120%
50% credit amount for
each new, full time job
paying gross wages < 120%
Total Credit for Monthly
Average Increase of All
New, Full Time Jobs (Line
2 + Line 4)

Example 1

Example 2

Example 3

Example 4

1 * (must move to
below 120% wage
category)

2 x $8,000 =
$16,000

N/A

0* x $8,000 =
$0

1 x $4,000 =
$4,000

N/A

2 x $4,000 =
$8,000

$20,000

$16,000

$8,000

2 x $4,000 =
$8,000
(Line 1 + Line 3)
$8,000

Example 1 and Example 2 illustrate that the minimum 2 new job threshold is met in the
“at or above 120%” wage threshold, thereby making these 2 new jobs eligible for the
100% credit amount. Example 1 also illustrates that the wage threshold for each
additional job is looked at separately and the 1 additional job in this example is eligible
for the 50% credit amount since it is paid at the “below 120%” wage threshold.
Example 3 illustrates that the minimum 2 new job threshold is met in the “below 120%”
wage threshold, thereby making these 2 new jobs eligible for the 50% credit amount.
Example 4 illustrates that a small business creating a monthly average of 2 new, full time
jobs paying one job in the “at or above” 120% threshold and the other job in the “below”
120% threshold qualifies only for the 50% credit amount for these 2 jobs since the 2 job
minimum is not met in the same wage threshold category. If these 2 jobs are maintained,
any additional jobs created will earn either the 50% credit amount or the 100% credit
amount, depending on the wage threshold of each additional job.

Example C - Part Time Jobs
Simplified examples illustrate the affect of the 120% threshold on the credit amount for part time
jobs. This example assumes the taxpayers illustrated below meet all the statutory requirements of
the credit, hire all part time employees in a distressed county on January 1, 2006, and maintain
the jobs. Reminder: Two half time jobs requiring at least 20 hours of each employee’s time a
week qualify as one “full time” job.
Example 1

Example 2

Example 3

Example 4

Example 5

Monthly
average increase
of each part time
new job paying
gross wages >
120%

2 part time
(1 full time
equivalent –
must move to
“below” 120%
wage category)

5 part time
(2 full time
equivalents, i.e.,
2.5 rounded
down – the .5 job
is moved down
and added to the
“below” 120%
wage category)*

3 part time
(1 full time
equivalent –
i.e., 1.5
rounded)
down

100% credit
amount for each
new “full time”
job paying gross
wages > 120%
Monthly
average increase
of each part time
new job paying
gross wages <
120%

$0 x $8,000 =
$0

5 part time
(2 full time
equivalents,
i.e., 2.5
rounded
down to the
lowest whole
number – the
.5 job is
moved down
and added to
the “below”
120% wage
category)
2 x $8,000 =
$16,000

2 x $8,000 =
$16,000

3 part time
(1.5 full time
equivalents + .5
equivalent
rounded from
above = 2)*

4 part time
(2 full time
equivalents)

50% credit
amount for each
new “full time”
job paying gross
wages < 120%
Total Credit
for Monthly
Average Increase
of All New, “Full
Time Equivalent”
Jobs (Line 2 +
Line 4)

2 x $4,000 =
$8,000

2 part time
(1 full time
equivalent +
.5 equivalent
rounded from
above = 1.5,
rounded to 1)
1 x $4,000 =
$4,000

*2 x $4,000 =
$8,000

2 x $4,000
$8,000

$8,000

$20,000

$24,000

$8,000

2 part time
(1 full time
equivalent)

Example 1 illustrates hiring 1 “full time equivalent” (i.e., 2 part time jobs) paying in the
“at or above” 120% threshold and hiring 1 “full time equivalent” (i.e., 2 part time jobs)
paying in the “below” 120% threshold qualifies only for the 50% credit amount for these
2 “full time equivalent” jobs since the 2 job minimum is not met in the same wage
threshold category.
Example 2 illustrates that the minimum 2 new, full time job threshold is met in the “at or
above” 120% wage threshold, thereby making these 2 new, full time equivalent jobs
eligible for the 100% credit amount. It further illustrates that the wage threshold for each
additional job is looked at separately and the 1 additional full time equivalent job in this
example is eligible for the 50% credit amount since it is paid at the “below” 120% wage
threshold. Note the rounding down to the lowest whole number and any remaining
fraction moved to the “below” 120% wage category. The .5 job in the “at or above”
120% amount is added to the number of jobs in the 50% credit amount, however it does
not affect the monthly average since the 1 full time equivalent in the “below” 120%
category plus the .5 job moved down from the “at or above” 120% wage category is 1.5
and rounds down to 1 full time equivalent job.
*Example 3 illustrates that in computing the monthly average increase (see Example A),
the 8 part time equivalent jobs are calculated as 4 “full time equivalents,” after rounding.
After classifying each job as “at or above” the 120% wage threshold or “below” the
120% threshold, then any remaining fraction of a job is moved down to the monthly
average computation for the 50% credit amount and rounded to the lowest whole number
(i.e., the .5 job in the “at or above” 120% amount is added to the number of jobs in the
50% credit amount, thereby increasing the number of jobs in the monthly average
computation for the “below” 120% category from 1.5 to 2 full time equivalents.)
Example 4 illustrates that the 3 part time jobs do not qualify for the credit since the
minimum 2 new, full time job equivalents are not created.
Example 5 illustrates that the minimum 2 new, full time job equivalent threshold is met in
the “below” 120% wage threshold, thereby making these 2 new full time equivalent jobs
eligible for the 50% credit amount.

Question 20 – Gross Wages of 120% County or State Average Per Capita Income
Q. How is the 120% threshold calculated?
A. To determine if the 120% threshold is met, gross wages paid for each new job created
in the tax year is annualized. For example, assume a new job created July 1, 2006
pays a gross wage of $20,000 for the 6 month period July 1, 2006 through December
31, 2006. The annualized salary is $40,000 (i.e., $20,000 ÷ 6 x 12).
The threshold for each full time job is computed using the following formula:
Gross wages
x 12 months
Months worked in tax year
Question 21 – Calculation of Gross Wages of 120% for Part Time Jobs
Q. How is the 120% threshold for 2 half (part) time jobs calculated?
A. Each part time job is converted to a “full time equivalent” to determine if the
threshold is met. For example, one full time and two part time jobs are created by a
calendar year taxpayer and maintained the following year. The threshold for each part
time job is computed using the following formula:
Gross wages
Months worked in tax year

x 12 months

x 40 hours per ÷ part time hours worked
full time work
per week
week

To determine if the 120% threshold is met, each part time job is converted into a full
time equivalent job. In this example, the computations for each job are:
Part time Job 1. This job is created on March 1, 2006 to work 20 hours per week at
gross wages of $25,000 for the 10 month period March 1, 2006 through December
31, 2006. The full time equivalent of this part time job is $60,000 annualized for a
full time equivalent (i.e., $25,000 ÷ 10 x 12 x 40 ÷ 20.) Part time job 1 meets the
120% threshold. If eligible, it would qualify for the 100% credit amount.
Part time Job 2. This job is created on June 1, 2006 to work 25 hours per week at
gross wages of $5,000 for the 7 month period June 1, 2006 through December 31,
2006. The full time equivalent of this part time job is $13,714 annualized for a full
time equivalent (i.e., $5,000 ÷ 7 x 12 x 40 ÷ 25.) Part time job 2 does not meet the
120% threshold. If eligible, it would qualify for the 50% credit amount.
Note: Assuming the taxpayer created 1.5 full time jobs in the “at or above” 120%
wage category, and .5 full time equivalents in the “below” 120% category, then the
taxpayer would qualify for the 50% credit amount for the 2 new jobs, since the
minimum threshold of 2 new jobs was not met in the same wage threshold category.

Question 22 – When to Compute 120% Threshold
Q. When is the 120% requirement calculated?
A. The 120% threshold is calculated at the end of the tax year in which the job is created.

G. PER CAPITA INCOME REQUIREMENTS
Question 23 - County Per Capita Income
Q. When are the County Per Capita Income Amounts Published?
A. The per capita income for each county is received annually from the South Carolina
Board of Economic Advisors, usually in May or June. Upon receipt, the Department
publishes an Information Letter listing the most recent per capita income data for
each county. This information can be obtained from the Department’s website at
www.sctax.org.
Question 24 - State Per Capita Income
Q. When are the State Per Capita Income Amounts Published?
A. The per capita income for the State is received twice each year from the Board of
Economic Advisors, usually in May and October. Upon receipt, the Department
publishes an Information Letter listing the most recent State per capita income data.
This information can be obtained from the Department’s website at www.sctax.org.
Question 25 – Per Capita Figures to Use in Computing 120% Threshold
Q. What annual figures should be used to determine the 120% threshold?
A. The most recent figures published by the Department as of the end of the taxpayer’s
tax year in which the new jobs are created must be used. For example, a calendar year
small business eligible for the newly enacted job tax credit in 2006 will use the
county per capita income published in the summer of 2006 and the State per capita
income published in the fall of 2006 to determine if the 120% threshold is met for
each job created in its 2006 tax year.

H. DETERMINING AND CLAIMING THE CREDIT
Question 26 – Years Credit is Claimed
Q. When is the newly enacted job tax credit available to a small business?
A. The credit is available to qualifying small businesses in tax years which begin on or
after January 1, 2006. Except for the repeal of the credit, as discussed in Question 27,
the general rule would allow the job tax credit to be taken each year for 5 years, if the
jobs are maintained each year. Year 1 is the year the jobs are created; the credit is not
claimed in Year 1. The credit is claimed in Years 2 through 6 on the taxpayer’s
income tax return.
For example, a calendar year sole proprietor creating qualifying new jobs in 2006
(Year 1) generates a credit available for first use on the 2007 tax return (Year 2), and
thereafter on the 2008 tax return (Year 3), the 2009 tax return (Year 4), the 2010 tax
return (Year 5), and the 2011 tax return (Year 6). If the jobs are maintained, the credit
is claimed on the qualifying taxpayer’s tax return filed on or before April 15, 2008,
2009, 2010, 2011, and 2012.
Caution: An exception to the general rule exists due to the repeal of the credit. See
Question 27 and Example E concerning the repeal of this newly enacted credit and its
affect on Year 6 of the 5 year credit period and on additional jobs created during these
years.
Question 27 – Repeal of Credit for Small Business
Q. When is this newly enacted job tax credit for small businesses repealed?
A. Act No. 157 of 2005, Section 5 provides that this incentive for small businesses
discussed in this advisory opinion is repealed for tax years beginning after June 9,
2010.
The practical effect of this repeal is:

The job tax credit as amended by Act No. 157 is repealed for tax years beginning
after June 9, 2010. Accordingly, the job tax credit for new and additional jobs
cannot be claimed by a calendar year taxpayer for tax years beginning on or after
January 1, 2011, and cannot be claimed for a fiscal year taxpayer for tax years
beginning after June 9, 2010.
For example, a calendar year qualifying sole proprietor creating new jobs in 2006
and maintaining them will only be able to claim Years 2 (claimed on the 2007 tax
return filed on or before April 15, 2008) through 5 (claimed on the 2010 tax return
filed on or before April 15, 2011) of the job tax credit period (i.e., claim the credit
for a maximum 4 year credit period) since the credit is repealed before Year 6 of

the credit period (i.e., the 5th credit year for a job created in 2006 or the year
claimed on the 2011 tax return filed on or before April 15, 2012).

The repeal does not affect the carryforward of any remaining portion of the credit
previously claimed but unused (i.e., only unused credits that could not be claimed
because of income tax limitations may be claimed after the repeal date of this job
tax credit incentive.)
Question 28 – Credit Form to File
Q. What form is used by a small business to compute and claim the newly enacted job
tax credit?
A. South Carolina Form TC-4SB is used. This form is currently being designed and will
be available on the Department’s website at www.sctax.org by January 2007.
Computer designed forms or spreadsheets are acceptable in lieu of Form TC-4SB,
providing all information on Form TC-4SB is reflected on the substitute form. The
form is attached to the taxpayer’s tax return. (Note: The existing Form TC-4 will
continue to be used only by taxpayers creating 10 new jobs under Code Section 12-63360(C)(1)).
Question 29 – Claiming Credit When $0 Tax Liability
Q. If a taxpayer has a loss or no South Carolina taxable income for the year, should the
credit be computed and a South Carolina return filed?
A Yes, the taxpayer is required to file an income tax return even if there is no South
Carolina tax liability. Form TC-4SB should be completed and attached to each year’s
tax return, even if there is no South Carolina taxable income. This allows the taxpayer
to claim the credit and establish a credit carryforward.
Question 30 – Income Tax Limitations of Credit:
Q. How much of the credit may be claimed per year?
A. The job tax credit taken in one tax year may not exceed 50% of the taxpayer’s income
tax or insurance premium tax liability.
The credit generated by a pass through entity is limited to 50% of the partner’s,
shareholder’s, or member’s income tax liability or married couple’s income tax
liability. An S corporation must first use the credit against its own income tax
liability, if any, before passing the credit through to its shareholders. The amount of
credit allowed a shareholder, partner, or member of a limited liability company is
equal to the shareholder’s percentage of stock ownership, partner’s interest in the
partnership, or member’s interest in the limited liability company for the taxable year
multiplied by the amount of the credit the entity would have been entitled to if it was

taxed as a corporation. Once the credit is passed through by the entity generating it,
the credit may not later be used by the entity.
I. COMPUTING THE CREDIT AND CARRYOVERS
Question 31 – Determining the Number of New Jobs
Q. How is the number of new, full time jobs determined?
A. The number of new and additional new, full time jobs is determined by comparing the
monthly average number of full time employees subject to South Carolina income tax
withholding in the applicable county for the taxable year with the monthly average
for the prior taxable year.
The months to reflect on Form TC-4SB are the months of the business’ tax year.
Further, an appropriate and justifiable day in the month to determine the monthly
number of new, full time employees, such as the last day of each month, must be
used. Once a day of the month is chosen, it must be used for all future months and
years.
Question 32 – Credit for Additional New Jobs
Q. Are additional jobs created during the 5 year credit period also eligible for the credit?
A. The credit is adjusted for job increases or job decreases and is allowed for the job
level maintained in the taxable year that the credit is claimed. The general rule would
allow a business to take credit for additional new, full time jobs added and maintained
during the 5 year credit period (Years 2 – 6), even if only 1 additional job is added.
This additional credit would be claimed for 5 years beginning in the year following
the year in which the qualifying additional new, full time jobs are created. The credit
amount for any number of additional new, full time jobs created is based on the
county designation for the year the additional new, full time jobs are created. See SC
Revenue Ruling #99-5, Question 27.
Caution: An exception to the general rule exists due to the repeal of the credit. See
Questions 27 above concerning the repeal of the credit and its effect on additional
jobs created.

Question 33 – Credit Reduced if Employment Falls
Q. How is the credit adjusted for job decreases?
A. No credit is allowed for the year or any subsequent year in which the net employment
falls below the minimum level. If the job level for which a credit was claimed
decreases, the 5 year period for eligibility for the credit continues to run. The general
rule would allow that a decrease of jobs that does not fall below the minimum
required will result in the credit being allowed in Years 2 through 6 for those jobs that
are maintained.
Caution: An exception to the general rule exists due to the repeal of the credit. See
Questions 27 above concerning the repeal of the credit and its effect on the 5 year
credit period.
Question 34 – Carryforward Period
Q. What is the carry forward period?
A. Any unused credit previously claimed but unused can be carried forward 15 years
from the taxable year in which it is earned.

Example D – Credit Calculation for Year 1 and Year 2
This example is provided to illustrate the complexities of computing the job tax credit for
Year 1 and Year 2 for a small business in a developed county that creates full time and
part time jobs in the “at or above” 120% threshold and full time and part time jobs in the
“below” 120% threshold. This example assumes that all jobs are maintained. The credit
computation must be done in 3 steps.
Step 1 – Determine the number of full time and “full time equivalent” employees paid
gross wages in the “at or above” 120% wage threshold for each month during
the tax year.

Compute the monthly average increase for the employees paid gross wages in
the “at or above” 120% threshold, using rounding methods discussed in
Question 19 (i.e., fractions of jobs remaining in the “at or above” 120% wage
threshold category due to rounding down to the lowest whole number are
moved down to the monthly average computation for the “below” 120%
threshold.)
Determine the credit amount for employees eligible for the 100% credit amount.
Step 2 – Determine the number of full time and “full time equivalent” employees paid
gross wages in the “below” 120% threshold.
Compute the monthly average increase for the employees paid gross wages in
the “below” 120% threshold, using rounding methods discussed in Question 19.
If applicable, include any fractions of jobs remaining from the “at or above”
120% threshold amount moved to the monthly average increase of jobs created
in the “below” 120% category due to rounding fractions of jobs from Step 1.
Determine the credit amount for employees eligible for the 50% credit amount.
Step 3 – Compute the total eligible amount of the job tax credit for the year.
In order to properly determine the monthly average increase in a wage category, a
taxpayer who has jobs in the “prior year” must categorize each job in the “at or above”
120% wage threshold or in the “below” 120% wage threshold in Steps 1 and 2 below.
This is done using the State and county per capita income figures published as of the end
of the taxpayer’s “prior year” tax year (i.e., 2005 in this example.) For simplicity, this
example does not illustrate this principle.

Step 1 – Computation of full time and part time jobs paying gross wages
at or above the 120% threshold.
Months of Tax
Year (e.g., 2006)
January
February
March
April
May
June
July
August
September
October
November
December
Cumulative Total
of Full Time
Jobs > 120% for
Each Month
Divided by
Months in
Operation
Monthly
Average Increase
in New Jobs >
120%
Less: Prior Year
Monthly
Average
Monthly
Average Increase
– Rounded Down
to Lowest Whole
Number
(Fraction moves
down to Step 2)
Developed
County Credit
Amount
100% Credit
Amount

Prior
Year*
(e.g.,
2005)
0
0
0
0
0
0
0
0
0
0
0
0

Total Full
Time Jobs
In Year 1

Total “Full Time
Equivalents” in
Year 1

Year 1
Total Jobs

Year 2
Total Jobs

0
6
6
6
6
6
6
6
6
6
6
6
66

1.5
1.5
1.5
2
2
2
2
2
2
2
2
2
22.5

1.5
7.5
7.5
8
8
8
8
8
8
8
8
8
88.5

8
8
8
8
8
8
8
8
8
8
8
8
96

7.375

$1,500

$10,500
(7 x $1,500)

$1,500
(1 x $1,500)

Claimed in
Years 2 – 5 if
jobs are
maintained

Claimed in Years
3 – 5 if job is
maintained

(See Question 27
for credit repeal
in Year 6)

Step 2 – Computation of full time and part time jobs paying gross wages below the
120% threshold.
Months of Tax Year
(e.g., 2006)
January
February
March
April
May
June
July
August
September
October
November
December
Cumulative Total of
Full Time Jobs <
120% for Each Month
Divided by Months in
Operation
Monthly Average
Increase in New Jobs
< 120%
Rounded Fraction
from Step 1, if
applicable
Less: Prior Year
Monthly Average
Monthly Average
Increase – Rounded
Down to Lowest
Whole Number
Developed County
Credit Amount
50% Credit Amount

Prior
Year*
(e.g.,
2005)
0
0
0
0
0
0
0
0
0
0
0
0

Total Full
Time Jobs
in Year 1
0
0
0
0
0
2
2
3
3
3
3
3
19

Total “Full
Time
Equivalents”
in Year 1
0
0
1.5
1.5
1.5
1.5
1.5
1.5
1.5
1.5
1.5
1.5
15

(See Question 27 for
credit repeal in Year 6

Total Jobs in
Year 1

Total Jobs in
Year 2

0
0
1.5
1.5
1.5
3.5
3.5
4.5
4.5
4.5
4.5
4.5
34

4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
54

2.833

4.5

0.375

N/A

3 (2.833 + .375
= 3.208)

1 (i.e.,1.5
rounded down)

$750

$2,250
(3 x $750)
Claimed in
Years 2 - 5 if
jobs are
maintained

$750
(1 x $750)
Claimed in Year
3 – 5 if jobs are
maintained

Step 3 – Computation of Total Credit for All New Jobs Created in Year 1 and 2
Step 1 – 100% Credit
Step 2 – 50% Credit
Total Job Tax Credit

Claimed in Year 2
$10,500
$ 2,250
$12,750

Claimed in Year 3
$12,000
$ 3,000
$15,000

Example E – Calculation of Credit for 5 Year Credit Period
For New Jobs Created in 2006 ALL With Gross Wages >
120% Threshold
This example is provided below to explain the job tax credit calculation for the entire 5
year credit period (i.e., Years 2 through 6 – 2007 - 2011.) This is an oversimplified
example; it assumes that the corporate taxpayer is a retail facility with one store in a
distressed county, has a calendar year, initially staffed the new facility in May 2006, and
hired all full time employees at gross wages over the 120% threshold.
STEP 1: COMPUTATION OF AVERAGE INCREASE IN FULL TIME EMPLOYEES OF
EMPLOYEES PAID GROSS WAGES > 120% THRESHOLD

Cumulative Total of Full
Time Employees in Each
County for Each Month.
(e.g., See Taxpayer 2 in
Example A on page 8)
Divided by Number of
Months in Operation
Monthly Average of Full
Time Employees (rounded
down to lowest whole number)
Less: Previous Year Monthly
Average
Average Increase in Full
Time Employees (Line 3 minus
Line 4)

Prior Year
(2005)

Year 1
(2006)

Year 2
(2007)

Year 3
(2008)

Year 4
(2009)

Year 5
(2010)

Year 6
(2011)**

n/a

(1)

n/a

*NOTE:

The Year 2 increase of 2 jobs is reduced by the 1 job since the 2 job increase in
Year 2 is not maintained. See Step 2, Year 2 Increase, Year 4.
The Year 5 increase of 2 jobs does not qualify for the credit since the credit is
repealed for tax years beginning after June 9, 2010.

STEP 2: COMPUTATION OF EMPLOYEES ELIGIBLE FOR CREDIT WITH GROSS
WAGES > 120% THRESHOLD

Year 1 Increase

Year 2

Year 3

Year 4

Year 5

Year 6

n/a**

n/a

Year 2 Increase
Year 3 Increase
Year 4 Increase
Year 5 Increase
Number of New Jobs

n/a
3

n/a

STEPS 3: COMPUTATION OF ELIGIBLE CREDIT AMOUNT FOR NEW JOBS CREATED
WITH GROSS WAGES > 120% THRESHOLD
Year 2
(2007)

Year 3
(2008)

Year 4
(2009)

Year 5
(2010)

Year 6
(2011)

Number of New Jobs – at or above 120% threshold

n/a**

Credit Amount for a Distressed County where the
employer pays all new employees greater than 120%
of the county or State average per capita income for
all years

$8,000

n/a

Job Tax Credit (Line 1 x Line 2)
(Limited to 50% of tax liability)

$24,000

$40,000

$32,000

n/a

**N/A – The newly enacted provisions of the job tax credit for small businesses are
repealed. No credit is allowed in Year 6 (2011) of this example. See Question 27
concerning the carryforward of any portion of the credit previously claimed in Years
2007 – 2010 but unused.
NOTE: This example only shows the entire credit period for the initial 3 jobs created in
2006. The credit is first claimed in the year following the creation of the new jobs; it is
not claimed in the year the new jobs are created. For example, qualifying new jobs
created in this example in the 2006 tax year generate a credit available for first use on the
2007 tax return, filed March 15, 2008, providing the jobs are maintained. Additional
credits are created for the job increase in 2007; it is claimed on the 2008 through 2010 tax
returns for the jobs maintained. No credit is allowed in 2011 and thereafter since the
credit is repealed.
SOUTH CAROLINA DEPARTMENT OF REVENUE
s/Burnet R. Maybank
Burnet R. Maybank III, Director
December 13
, 2005
Columbia, South Carolina
26

Get today's answer for your situation

You just read a 2005 ruling on this question. Ezel checks current South Carolina tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.