How did South Carolina Revenue Ruling 17-6 calculate and document the refundable motor fuel income tax credit?

Plain-English summary

South Carolina Revenue Ruling 17-6 explained the refundable income tax credit enacted to offset increases in the state's motor fuel user fee. Under the ruling, a South Carolina resident taxpayer could claim the credit for up to two qualifying vehicles registered in South Carolina.

For each vehicle, the credit was limited to the lesser of:

• the taxpayer's qualifying motor fuel user fee increase on fuel bought in South Carolina; or
• qualifying preventive-maintenance spending incurred in South Carolina, such as new tires, oil changes, and regular maintenance.

The credit was refundable: it could reduce income tax owed and any remaining amount could be refunded. The taxpayer calculated it on Form I-385 and attached that form to the South Carolina income tax return.

The ruling is historical. It made the credit first available for tax years beginning in 2018 and listed yearly credit calculations through 2022. It expressly said there was no credit for 2023 and later unless the General Assembly reauthorized it. The ruling therefore should not be treated as proof that the credit remained available after 2022.

Eligibility and calculation rules

• The claimant had to be a South Carolina resident taxpayer. The ruling included resident individuals and qualifying resident entities, but excluded nonresidents.
• Qualifying vehicles included South Carolina-registered private passenger vehicles, motorcycles, three-wheel motorcycles, and mopeds. Cars, minivans, SUVs, and qualifying light trucks were included under the cited vehicle definition.
• A leased vehicle qualified if registered in the resident taxpayer's name. A vehicle did not have to be new or owned for the full year.
• All-electric vehicles, boats, golf carts, tractors, travel trailers, and all-terrain vehicles were among the listed nonqualifying items.
• Fuel had to be purchased in South Carolina, subject to the motor fuel user fee, and used in the taxpayer's qualifying vehicle. Aviation fuel, dyed diesel, and fuel used in boats, aircraft, lawn equipment, farm machinery, generators, or off-road machinery did not qualify.
• The credit amount used an average yearly motor fuel user fee increase: 3 cents per gallon for 2018, 5 cents for 2019, 7 cents for 2020, 9 cents for 2021, and 11 cents for 2022.
• A statutory statewide credit cap applied. The Revenue and Fiscal Affairs Office could provide an adjustment factor, shown on the annual credit form, if needed to keep total credits within that cap.

Maintenance and recordkeeping

Qualifying preventive maintenance included new tires, oil changes, regular vehicle maintenance, and similar work performed in South Carolina. Registration charges, license-plate fees, insurance, property taxes, vehicle-loan interest, insurance-reimbursed costs, and body or paint work were not qualifying maintenance costs.

Taxpayers had to retain documentary support such as fuel receipts and paid maintenance invoices. Fuel records or credit-card statements needed to show the number of gallons purchased in South Carolina. Maintenance invoices needed to identify the vehicle, amount, and type of work performed in South Carolina. The ruling said not to submit those records with the return, but to keep them available for a Department audit.

Common questions

Q: Could a taxpayer claim more than two vehicles?

A: No. Each taxpayer could choose no more than two qualifying vehicles or vehicle equivalents for the year. A traded-in or totaled vehicle and its replacement could count together as one vehicle equivalent under the ruling's rules.

Q: Could spouses filing jointly claim four vehicles?

A: Potentially. Each spouse was treated as a taxpayer and could claim up to two vehicles, but eligibility depended on whose name appeared on each registration, and both spouses could not claim the same vehicle.

Q: Did business use disqualify a vehicle?

A: No. A qualifying vehicle used partly or entirely for business could qualify if it was registered in South Carolina in the resident taxpayer's name and met the private-passenger-vehicle or motorcycle requirements.

Q: Could a parent claim a dependent's vehicle?

A: No. The ruling said the dependent was the eligible taxpayer for a vehicle registered in the dependent's name and would have to file a resident return to claim the credit.

Q: Could the credit be claimed on an amended return?

A: Yes, if the refund-claim period remained open and a completed Form I-385 was attached.

Q: What did the ruling say about years after 2022?

A: It said no credit was allowed unless the General Assembly reauthorized it. Current availability must therefore be checked under later law and current Department forms.

Citations and references

• S.C. Code Section 12-6-3780 (refundable motor fuel income tax credit)
• S.C. Code Section 12-28-310 (motor fuel user fee)
• S.C. Code Section 56-3-630 (private passenger motor vehicle definition)
• S.C. Code Section 12-54-85 and SC Revenue Procedure #13-1 (refund-claim timing discussed for amended returns)
• South Carolina Form I-385 (credit calculation and filing form identified in the ruling)

Subject

Refundable Motor Fuel Income Tax Credit

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR17-6.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #17-6

SUBJECT:

Refundable Motor Fuel Income Tax Credit
(Income Tax)

EFFECTIVE DATE: Tax years beginning in 2018
REFERENCES:

S.C. Code Section 12-6-3780 (2017 S.C. Acts, Act No. 40)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public. 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 Department advisory opinion.

OVERVIEW:
Beginning July 2017, the motor fuel user fee increased from 16 cents a gallon to 18 cents a
gallon. 1 It will increase by two cents a gallon each year for the next five years. The funds raised
by the increase will be used for repairs, maintenance, and improvements to South Carolina’s
existing transportation system.
To offset the motor fuel user fee increase paid, Code Section 12-6-3780 was enacted to allow a
resident taxpayer a refundable motor fuel income tax credit for up to two private passenger
motor vehicles or motorcycles registered in South Carolina during the year, subject to certain
limitations. The credit is first available for tax years beginning in 2018 and is claimed on the
resident taxpayer’s income tax return.

1

Code Section 12-28-310 imposes the motor fuel user fee. Code Section 12-28-2355 continues to
impose an inspection fee of one-fourth cent a gallon on petroleum products and an environmental
impact fee of one-half cent a gallon (a total 0.75 cent a gallon). Accordingly, the total motor fuel
tax rate is 18.75 cents a gallon as of July 1, 2017.
1

QUESTIONS AND ANSWERS:
This advisory opinion provides guidance and examples regarding the provisions of the motor
fuel income tax credit. This question and answer document addresses questions in the following
general areas:
I.
General Credit Information
II. Eligible Taxpayer
III. Qualifying Vehicles
IV. Gasoline, Diesel and Other South Carolina Fuel Purchases for Highway Use
V. Preventative Maintenance Costs Incurred in South Carolina
VI. Vehicles – General Information
VII. General Filing Information
VIII. Expenses and Documentation
IX. Exhibit - Code Section 12-6-3780
I. GENERAL CREDIT INFORMATION

1. Q. When can a taxpayer first claim the credit?
   A. The credit may first be claimed for tax years beginning in 2018 for expenses incurred
   during the tax year. (See Question 32 for more information.)
   Note: For tax years beginning in 2023, the credit is repealed unless reauthorized by the
   General Assembly.
2. Q. How is the credit claimed?
   A. The credit is claimed on the resident taxpayer’s income tax return. The credit is
   calculated on South Carolina Form I-385, “Motor Fuel Income Tax Credit.” This form
   must be included with the taxpayer’s income tax return.
3. Q. What is the credit?
   A. A resident taxpayer may claim a credit for up to two private passenger motor vehicles or
   motorcycles 2 registered in South Carolina. The credit may not exceed the lesser of the
   resident taxpayer’s:
   (a) actual motor fuel user fee increase incurred on purchases of motor fuel in South
   Carolina subject to the motor fuel user fee in Code Section 12-28-310(D) for an eligible
   vehicle or
   (b) actual expenditures incurred in South Carolina on preventative maintenance for an
   eligible vehicle (e.g., new tires, oil changes, and regular vehicle maintenance).
   2

For simplicity, the use of the terms private passenger motor vehicles or motorcycles in this
document may be referenced as “vehicles.”
2

4. Q. Is there a maximum total credit amount available each year for all taxpayers?
A. The statute sets a maximum dollar amount of total credit that may not be exceeded for all
taxpayers. The maximum credit amount for each tax year is:
Tax Year
2018
2019
2020
2021
2022 and thereafter

Total Credit
$40 million
$65 million
$85 million
$110 million
$114 million

5. Q. What is the credit “adjustment factor”?
   A. To account for the maximum credit amount, the Revenue and Fiscal Affairs Office will
   provide the Department a credit “adjustment factor” each year in the event necessary.
   This method of determining the maximum credit allows all qualifying taxpayers an
   opportunity to receive a motor fuel income tax credit. The credit “adjustment factor”
   applicable to a tax year, if necessary, will be provided each year on the motor fuel income
   tax credit form.
6. Q. Is the credit refundable?
   A. Yes. A refundable credit reduces a taxpayer’s South Carolina income tax owed. It
   provides a refund to a taxpayer who owes no tax or a partial refund to a taxpayer who
   owes less tax than the full credit amount. A refundable credit is not related to a taxpayer’s
   adjusted gross income or tax liability.
   Example. If a taxpayer earns a $20 motor fuel income tax credit, but has only a $5 South
   Carolina income tax liability for the tax year, then he will offset his $5 tax liability by $5
   of his refundable credit, and would receive a refund for the remaining $15 motor fuel
   income tax credit. Assume instead that the taxpayer has a $0 South Carolina income tax
   liability for the tax year; if so, he would be refunded the entire $20 motor fuel income tax
   credit.
   II. ELIGIBLE TAXPAYER
7. Q. Who is the “taxpayer” that qualifies for the credit?
   A. A “taxpayer” must be a South Carolina resident taxpayer to qualify for the credit. A
   resident taxpayer may be an individual, partnership, corporation, trust, estate or any other
   entity subject to South Carolina income tax or required to file an income tax return. A
   nonresident taxpayer does not qualify for the credit.
   A “resident individual” is an individual domiciled in South Carolina. A resident
   individual includes a “part-year resident” (a resident individual for only a portion of the
   tax year).
   3

A “resident corporation” is a corporation whose principal place of business is located in
South Carolina. A “resident partnership” is a partnership whose principal place of
business is located in South Carolina. Note: An entity “doing business” in South
Carolina whose principal place of business is not in South Carolina does not qualify for
the credit. See Code Section 12-6-30.

8. Q. Who is the “taxpayer” that qualifies for the credit when a married couple files a joint
   return?
   A. Each individual filing a joint return is a “taxpayer.” In other words, there are two
   taxpayers on a joint return and each resident individual is eligible for a credit. Each
   spouse may claim a credit for up to two private passenger motor vehicles or motorcycles
   registered in his or her name in South Carolina during the year. They may not both claim
   a credit on the same vehicle. (See Questions 24 and 29 for further explanation.)
9. Q. Is a pass through entity eligible for the credit?
   A. A resident S corporation, resident partnership, or resident limited liability company taxed
   as an S corporation or partnership is eligible for the credit.
10. Q. Is a sole proprietorship eligible for the credit?
    A. A sole proprietorship is not regarded as an entity separate from its individual owner.
    Accordingly, the sole proprietorship is treated as owned by the individual owner and the
    individual is the taxpayer eligible for the credit.
11. Q. Is a single member limited liability company, not taxed as a corporation, eligible for the
    credit?
    A. A single member limited liability company that is not taxed as a corporation is not
    regarded as an entity separate from its owner. Therefore, if a single member limited
    liability company does not elect to be treated as a corporation, it will be treated as part of
    its owner, e.g., as a sole proprietorship if it is owned by an individual, a division of a
    corporation if it is owned by a corporation, and a division of a partnership if it is owned
    by a partnership. Accordingly, the resident individual, resident corporation or resident
    partnership, respectively, is the taxpayer eligible for the credit.
12. Q. Is a resident who is not required to file a South Carolina income tax return eligible for the
    credit?
    A. Yes, but a qualifying taxpayer must file a South Carolina income tax return to claim the
    credit. For example, a retired individual or student who does not meet South Carolina’s
    minimum filing requirement or a nonprofit organization that has no filing requirement
    (i.e., no unrelated business income) would have to file a South Carolina income tax return
    to claim the credit.

4

III. QUALIFYING VEHICLES

13. Q. What types of vehicles qualify for the credit?
    A. Only private passenger motor vehicles of a resident taxpayer registered in South Carolina
    qualify for the credit.
    A private passenger motor vehicle is defined in Code Section 56-3-630 as a:
    (a) motor vehicle designed, used, and maintained for the transportation of 10 or fewer
    persons and
    (b) truck having an empty weight of 9,000 pounds or less and a gross weight of 11,000
    pounds or less.
    Based on the above, vehicles that qualify include cars, minivans, sport utility vehicles,
    and pickup trucks of a certain weight.
14. Q. Does a leased vehicle qualify for the credit?
    A. Yes, if the leased vehicle is registered in South Carolina in the resident taxpayer’s name.
15. Q. Do motorcycles and other two-wheeled or three-wheeled cycles qualify for the credit?
    A. Yes, a motorcycle, motorcycle three-wheel vehicle, or moped 3 registered in South
    Carolina in the name of the resident taxpayer qualifies for the credit.
16. Q. Is the credit available only for “new” vehicles?
    A. No. The credit is not limited to new vehicles or those vehicles first registered in South
    Carolina in 2018. Regardless of the age of the vehicle, a vehicle registered in South
    Carolina to a resident taxpayer during the qualifying tax year is eligible for the credit.
17. Q. What are examples of items that do not qualify for the credit?
    A. Examples of motorized items that are not eligible for the credit include the following: a
    truck having an empty weight over 9,000 pounds and a gross weight over 11,000 pounds,
    travel trailer, boat, golf cart, tractor, or all-terrain vehicle. In addition, an all-electric
    vehicle does not qualify for the credit.

3

See Chapters 1 and 3 of Title 56 for definitions. Effective November 19, 2018, a moped
qualifies for the credit under 2017 S.C. Acts, Act No. 89. For simplicity, references to
“motorcycles” in this document also refer to three-wheel vehicles and mopeds.
5

IV. GASOLINE, DIESEL AND OTHER SOUTH CAROLINA FUEL PURCHASES FOR
HIGHWAY USE

18. Q. What type of “motor fuel” qualifies for the credit?
    A. A user fee per gallon is imposed on all gasoline and gasohol used for any purpose in
    South Carolina and all diesel fuel or alternative fuel (e.g., compressed natural gas,
    liquefied petroleum gas, and liquefied natural gas) purchased in South Carolina and
    consumed in generating power for propelling motor vehicles. Motor fuel purchases
    eligible for the credit must be in South Carolina and must be subject to the motor fuel
    user fee. The fuel must be used in the resident taxpayer’s vehicle.
    Note: The motor fuel income tax credit is not available for aviation fuel, dyed diesel,
    liquefied natural gas used in large trucks, or gasoline, diesel or other fuels used in a lawn
    mower, generator, boat, airplane, farm machinery, machinery designed for off-road use,
    etc. See Code Sections 12-28-310 and 12-28-320.
19. Q. What is the motor fuel user fee increase each year and what amount is used to calculate
    the credit?
    A. South Carolina’s motor fuel user fee will increase by 2 cents each July from 2017 to
20. During this time, the motor fuel user fee will increase from 16 cents per gallon to
    28 cents per gallon. The motor fuel user fee will remain at 28 cents per gallon beginning
    July 2022. The average increase in motor fuel user fee each calendar year will be used to
    calculate the income tax credit each tax year. The amounts are listed below.

Tax
Year

Motor Fuel User
Fee Increase

Motor Fuel User
Fee Increase

January – June

July – December

2017

n/a

2 cents

2018
2019
2020
2021
2022
2023 and
thereafter

2 cents
4 cents
6 cents
8 cents
10 cents
n/a

4 cents
6 cents
8 cents
10 cents
12 cents
n/a

6

Amount Used for Income Tax
Credit Purposes
(Average Yearly Increase in Motor
Fuel User Fee)
No credit allowed for tax year
2017
3 cents
5 cents
7 cents
9 cents
11 cents
No credit unless reauthorized by
the General Assembly

20. Q. What is the “gasoline gallon equivalent” or “diesel gallon equivalent” conversion factor
used to calculate the credit on purchases of compressed natural gas, liquefied petroleum
gas, and liquefied natural gas?
A. Since the motor fuel user fee is imposed on a per gallon basis, the calculation of the
motor fuel user fee for compressed natural gas, liquefied petroleum gas, and liquefied
natural gas used in a motor vehicle must be converted into gallons. For the purpose of
calculating the motor fuel user fee on compressed natural gas purchased in South
Carolina and used in producing or generating power for propelling a motor vehicle, each
126.67 cubic feet of compressed natural gas (or 5.66 pounds if the compressed natural
gas is dispensed via a mass flow meter) equals one gallon of motor fuel. For the purpose
of calculating the motor fuel user fee on liquefied petroleum gas purchased in South
Carolina and used in producing or generating power for propelling a motor vehicle, each
gallon of liquefied petroleum gas equals .73 of a gallon of motor fuel. For the purpose of
calculating the motor fuel user fee on liquefied natural gas purchased in South Carolina
and used in producing or generating power for propelling a motor vehicle, each 6.06
pounds of liquefied natural gas equals one gallon of motor fuel. See Code Sections 1228-120, 12-28-110(73) and 12-28-110(74).
V. PREVENTATIVE MAINTENANCE COSTS INCURRED IN SOUTH CAROLINA

21. Q. What qualifies as a “preventative maintenance” cost eligible for the credit?
    A. Preventative maintenance costs eligible for the credit include new tires, oil changes,
    regular vehicle maintenance, and the like. These costs must be incurred in South Carolina
    for a vehicle registered in South Carolina to qualify.
    Note: General costs associated with owning, operating, and registering a vehicle are not
    eligible for the credit. Ineligible costs include, but are not limited to, infrastructure
    maintenance fees paid upon registering a vehicle in South Carolina, license plate fees,
    insurance, property taxes, interest expense on vehicle loans, costs reimbursed by
    insurance, or body and paint work expenses.
    VI. VEHICLES – GENERAL INFORMATION
22. Q. How many vehicles may each taxpayer use in computing the credit?
    A. A taxpayer may claim a credit for up to two private passenger motor vehicles or
    motorcycles, providing the vehicle or motorcycle is registered in South Carolina in the
    name of the resident taxpayer.
    If a taxpayer owns or leases more than two vehicles or motorcycles in the tax year, then
    the taxpayer may choose a combination of any two to use in computing the credit. For
    example, a taxpayer may be eligible to claim a credit for two private passenger motor
    vehicles, or a credit for one private passenger motor vehicle and one motorcycle, or a
    credit for two motorcycles.
    7

A taxpayer may not, however, claim a credit for two private passenger motor vehicles
and two motorcycles. The choice of qualifying vehicles is made each tax year by each
taxpayer.

23. Q. If a taxpayer trades in a vehicle (Vehicle A) during the tax year and purchases another
    vehicle (Vehicle B), or totals a vehicle (Vehicle A) and replaces the wrecked vehicle with
    another vehicle (Vehicle B), are both the “old” and the “new” vehicles eligible for the
    credit?
    A. Both Vehicle A and Vehicle B are eligible for the credit. The vehicle traded in or totaled
    (Vehicle A) and the replacement vehicle (Vehicle B) count as “one vehicle equivalent”
    when determining the number of vehicles a taxpayer may use in computing the credit.
    The taxpayer will combine the motor fuel expenses of the “old” vehicle (Vehicle A) and
    the “new” vehicle (Vehicle B) and will combine the preventative maintenance expenses
    of the “old” vehicle (Vehicle A) and the “new” vehicle (Vehicle B) for purposes of
    computing the credit. Note: The result is different if Vehicle A is sold after the purchase
    of Vehicle B.
    Example. A resident taxpayer trades in his small pickup truck in June and purchases a
    Volvo. He also owns a BMW the entire year. On the motor fuel income tax credit form,
    I-385, the taxpayer will list as “Vehicle 1” the vehicle make, model, tag number and other
    information of the vehicle owned and registered in South Carolina (i.e., the Volvo). He
    will combine his motor fuel expenses and preventative maintenance expenses paid during
    the year for the pickup truck and the Volvo and report the total combined expenses as
    “Vehicle 1” on the credit form. His BMW is eligible for the credit as “Vehicle 2.” Note:
    A taxpayer is not eligible to claim the credit on three vehicles; he may choose a
    combination of any two vehicles or “vehicle equivalents” to use in computing the credit.
24. Q. How do taxpayers filing a joint South Carolina income tax return determine which
    vehicle each spouse (i.e., each taxpayer) may use in computing the credit?
    A. For a couple filing a joint return, the number of vehicles or motorcycles eligible for the
    credit by each spouse depends upon the name or names in which the vehicle is registered.
    One taxpayer may claim a credit for up to two private passenger motor vehicles or
    motorcycles. It is possible for a married couple filing a joint return to claim credit for up
    to four vehicles or motorcycles.
    Example 1 – Jointly Owned Vehicles: Assume a couple filing a joint resident South
    Carolina individual income tax return owns three vehicles. All vehicles are registered
    jointly in the names of both spouses. Spouse 1 may choose which two of the vehicles to
    use in computing his credit and Spouse 2 will use the third vehicle in computing her
    credit.
    Example 2 – Individually Owned Vehicles: Assume a couple filing a joint resident South
    Carolina individual income tax return owns four vehicles. All vehicles are registered
    solely in the name of Spouse 1. Spouse 1 may choose which two of the vehicles to use in
    computing his credit. Spouse 2 is not eligible for the credit.
    8

Example 3 – Jointly Owned, Individually Owned, Business Owned, and Dependent
Owned Vehicles: The following illustrates which vehicle a spouse (i.e., which taxpayer)
may use in computing his/her credit when multiple cars are registered in various ways.
This example assumes a couple files a joint resident South Carolina individual income
tax return, the family owns multiple vehicles, all vehicles are registered in South
Carolina, the vehicles are registered either separately, jointly or in the name of a sole
proprietorship or single member limited liability company, as listed in the chart below,
and a dependent has a vehicle registered in his name.
Vehicle
Vehicle 1
Vehicle 2
Vehicle 3

Name on Car Registration
Husband
Sole Proprietorship – Husband is
Owner of Business
Husband and Wife

Vehicle 4
Vehicle 5

Wife
Wife and Wife’s Elderly Parent

Vehicle 6

Single Member LLC – Wife is Owner
of Disregarded LLC
Dependent

Vehicle 7

Taxpayer Eligible for Credit
Husband
Husband
Either husband or wife is
eligible, but not both
Wife
Either wife or parent is eligible,
but not both
Wife
Neither husband nor wife is
eligible. Dependent is the
eligible taxpayer.

In this example, Taxpayer 1 (husband) may be eligible for the credit on two vehicles – he
may choose to compute the credit based on expenses of Vehicle 1, 2, or 3. Taxpayer 2
(wife) may also be eligible for the credit on two vehicles – she may choose to compute
the credit based on expenses of Vehicle 3, 4, 5, or 6. They may not both claim a credit on
the same vehicle (i.e., Vehicle 3.) Neither spouse may claim a credit on the vehicle
registered in the name of their dependent - Vehicle 7. (See Question 30 regarding the
claiming of the credit by a dependent.)

25. Q. Is a vehicle used for both personal and business use eligible for the credit?
    A. A vehicle used for both personal and business use by a taxpayer (e.g., a realtor, a home
    health nurse, a food delivery person) is eligible for the credit, providing the vehicle is a
    private passenger motor vehicle or motorcycle and the vehicle is registered in South
    Carolina in the name of the resident taxpayer.
26. Q. Is a vehicle used exclusively in a business eligible for the credit?
    A. A vehicle used exclusively in a business (e.g., a fleet of security trucks, fleet of house
    cleaning cars, or an auto dealer’s courtesy minivan) is eligible for the credit, providing
    the vehicle is registered in South Carolina in the name of the resident taxpayer. Further,
    the business vehicle must be a private passenger motor vehicle designed, used, and
    maintained for the transportation of ten or fewer persons, a truck having an empty weight
    of 9,000 pounds or less and a gross weight of 11,000 pounds or less, or a motorcycle.
    9

27. Q. Does a vehicle registered in the name of a sole proprietorship or single member limited
liability company which is disregarded for tax purposes affect the number of vehicles a
taxpayer may use in computing the credit?
A. A vehicle registered in the name of an individual’s sole proprietorship is considered a
vehicle owned by the individual taxpayer for purposes of the credit. For example,
assume a resident individual owns two vehicles in his name and his sole proprietorship
owns one vehicle in its name. The individual must choose which two of the three vehicles
to use in computing the credit. The individual may not claim a credit for three vehicles
and the sole proprietorship may not claim a credit for any vehicle. The result is the same
if the vehicle is owned in the name of a single member limited liability company that is
disregarded for tax purposes. (See example in Question 24.)

28. Q. Does the vehicle have to be owned by the taxpayer the entire tax year to be eligible for
    the credit?
    A. No. A vehicle is eligible for the credit during the time it is registered in South Carolina by
    a resident taxpayer. Eligible expenses, however, are those incurred only in South
    Carolina. For example, a vehicle that is totaled in a wreck and not replaced in the tax
    year qualifies for the credit during the period the vehicle is registered in South Carolina.
    Likewise, if a resident individual purchases his first vehicle in the spring after graduation
    from school, then the vehicle qualifies for the credit for the portion of the year the vehicle
    is registered in South Carolina.
    VI. GENERAL FILING INFORMATION
29. Q. How is the credit calculated and claimed by a resident taxpayer?
    A. The credit is claimed on the resident taxpayer’s income tax return. The credit is
    calculated on South Carolina Form I-385, “Motor Fuel Income Tax Credit.” This form
    must be included with the resident taxpayer’s income tax return. The credit is available
    for up to two private passenger motor vehicles or motorcycles per taxpayer. The credit is
    computed separately for each vehicle or motorcycle.
    Full Year or Part-Year Individual Resident. A resident individual claims the credit on
    Form SC 1040. He completes Form I-385, “Motor Fuel Income Tax Credit,” for up to
    two private passenger motor vehicles or motorcycles (see above rules for vehicles owned
    by a sole proprietorship or disregarded limited liability company and vehicles owned by
    dependents) and attaches the credit form to his income tax return. The credit may be
    used to reduce his tax liability, applied to estimated payments, donated to a check-off
    fund, or refunded.
    For a couple filing a joint return, each spouse generally must complete a separate
    Form I-385. Each spouse may claim a credit for up to two private passenger motor
    vehicles or motorcycles. If the couple owns only one vehicle or owns two vehicles that
    are registered in both names, then only one Form I-385 must be completed. The credit, if
    requested to be refunded, will be issued as a joint refund.
    10

C Corporation, Savings and Loan Association, Public Utility or Nonprofit Organization.
A resident business entity claims the credit on its tax return, i.e., SC Form 1120, 1104,
1120U, or 990-T, respectively. It completes Form I-385, “Motor Fuel Income Tax
Credit,” for up to two private passenger motor vehicles or motorcycles and attaches the
credit form to its income tax return. The credit may be used to reduce its income tax or
license fee liability or may be applied to estimated tax payments. Any credit remaining
will be refunded to the business entity.
S Corporation. A resident S Corporation claims the credit on Form SC 1120S. It
completes Form I-385, “Motor Fuel Income Tax Credit,” for up to two private passenger
motor vehicles or motorcycles and attaches the credit form to its income tax return. The
credit may be used to reduce its income tax or license fee liability or may be applied to
estimated tax payments. As an offset to the motor fuel user fee increase or the
preventative maintenance costs incurred by the S Corporation, any credit remaining will
be refunded to the S Corporation.
Partnership. A resident partnership claims the credit on Form SC 1065. It completes
Form I-385, “Motor Fuel Income Tax Credit,” for up to two private passenger motor
vehicles or motorcycles and attaches the credit form to its partnership income tax return.
As an offset to the motor fuel user fee increase or the preventative maintenance costs
incurred by the partnership, the entire credit will be refunded to the partnership.
Limited Liability Company Taxed as a Corporation or Partnership. See above discussion
for Corporations or Partnerships, as appropriate.
Sole Proprietorship. The credit is claimed by the individual owner on his Form SC 1040.
The individual completes Form I-385, “Motor Fuel Income Tax Credit,” for up to two
private passenger motor vehicles or motorcycles and attaches the credit form to his
income tax return. The credit may be used to reduce the individual’s tax liability, applied
to estimated payments, donated to a check-off fund, or refunded. (See Question 27
regarding the combination of vehicles an individual may choose in computing the credit.)
Single Member Limited Liability Company that is a Disregarded Entity. The credit is
claimed by the owner of the limited liability company (e.g., if an individual is the owner
of the limited liability company, then the individual claims the credit on his Form SC
1040, if a partnership is the owner of the limited liability company, then the partnership
claims the credit on its Form SC 1065, etc.). The sole member of the limited liability
company (e.g., the individual, the partnership) completes Form I-385, “Motor Fuel
Income Tax Credit,” for up to two private passenger motor vehicles or motorcycles and
attaches the credit form to his/its income tax return.
Nonresident. A nonresident is not eligible for the credit and does not complete Form I385, “Motor Fuel Income Tax Credit.” (See Question 7 regarding eligible taxpayers.)

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30. Q. May a parent claim the credit on behalf of a dependent?
A. A parent is not eligible to claim credit for a vehicle that is registered in the name of a
dependent. The dependent must file a resident South Carolina income tax return to claim
the credit.

31. Q. If a taxpayer fails to claim the credit on an original return, can an amended South
    Carolina income tax return be filed to claim the credit?
    A. Yes. An amended South Carolina income tax return can be filed if the time limitation
    period for filing a refund claim is open. The taxpayer must attach a completed motor fuel
    income tax credit form, Form I-385, to the amended return. See Code Section 12-54-85
    and SC Revenue Procedure #13-1.
    VIII. EXPENSES AND DOCUMENTATION
32. Q. Are vehicle expenses incurred by a taxpayer from July 1, 2017 through December 31,
    2017 eligible for the credit?
    A. No. The income tax credit is first effective for tax years beginning in 2018. Motor fuel
    expenses and preventative maintenance expenses incurred before January 1, 2018 are not
    eligible for the credit.
    Calendar Year Taxpayer. For a calendar year 2018 taxpayer, motor fuel expenses and
    preventative maintenance expenses incurred January 1, 2018 – December 31, 2018 are
    used to compute the credit.
    Fiscal Year Taxpayer. For a fiscal year taxpayer, motor fuel expenses and preventative
    maintenance expenses incurred during its tax year beginning in 2018 are first used to
    compute the credit. For example, for a fiscal year taxpayer with a September year end,
    motor fuel expenses and preventative maintenance expense incurred October 1, 2018 –
    September 30, 2019 for its tax year beginning in 2018 are used to compute the credit.
    Expenses incurred during October 1, 2017 – September 30, 2018, the taxpayer’s fiscal
    year that began in 2017, are not eligible for the credit.
33. Q. How are expenses determined for a taxpayer who is reimbursed mileage or deducts travel
    or maintenance expenses for income tax purposes?
    A. The expenses are determined based on actual expenses. The computation of the credit is
    determined without regard to: (1) the taxpayer deducting the South Carolina fuel and
    maintenance expenses as an ordinary and necessary business expense, (2) the taxpayer
    (employee) deducting the employee business expense as a miscellaneous itemized
    deduction, or (3) the taxpayer (employee) receiving of any mileage reimbursement
    provided by an employer. See Internal Revenue Code Sections 162 and 212.

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34. Q. How does a part-year resident compute expenses used in determining the credit?
A. Eligible expenses for a part-year resident begin on the date the vehicle is registered in
South Carolina and only include the motor fuel user fee increases on motor fuel
purchased in South Carolina and preventative maintenance expenses incurred in South
Carolina while the individual is a South Carolina resident. The computation of the credit
is determined without regard to any proration of deductions used by a part-year resident
in determining South Carolina taxable income.

35. Q. How are motor fuel expenses and preventative maintenance expenses substantiated?
    A. A taxpayer must maintain documentary evidence to substantiate expenses incurred in
    South Carolina and reported on SC Form I-385, “Motor Fuel Income Tax Credit,” such as
    gas receipts and paid maintenance invoices. Receipts or other documentation should not
    be included with the taxpayer’s South Carolina income tax return when filed, but must be
    readily available in the event of a Department audit. Since fuel receipts can become
    illegible over time, a taxpayer may choose to scan or photocopy the receipts to have for
    future substantiation.
    Fuel receipts or credit card statements must show the number of gallons purchased in
    South Carolina during the tax year. The maintenance invoices must show the car model,
    amount, and type of preventative maintenance work performed in South Carolina.
    Note: Fuel purchased outside of South Carolina and preventative maintenance performed
    outside of South Carolina may not be used in determining the credit.
    SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
September 20
, 2017
Columbia, South Carolina

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EXHIBIT – South Carolina Infrastructure and Economic Development Reform Act
Act No. 40 of 2017 – Section 15 A and C
Section A. Code Section 12-6-3780 (A)(1). A resident taxpayer is allowed a refundable income
tax credit for preventative maintenance on a private passenger motor vehicle as defined in
Section 56-3-630, including motorcycles, registered in this State during the appropriate year,
subject to other limitations contained in this section. The total amount of the credit may not
exceed the lesser of: (i) the resident taxpayer's actual motor fuel user fee increase incurred for
that motor vehicle as a result of increases in the motor fuel user fee pursuant to Section 12-28310(D) or (ii) the amount the resident taxpayer expends on preventative maintenance. The
resident taxpayer shall claim the credit allowed by this section on the resident taxpayer's income
tax return in a manner prescribed by the department. The department may require any
documentation it deems necessary to implement the provisions of this section. Notwithstanding
any other provision of this section, a resident taxpayer may claim the credit for up to two private
passenger motor vehicles, with the credit being calculated separately for each vehicle. For the
purposes of this section, ‘preventative maintenance’ includes costs incurred within this State for
new tires, oil changes, regular vehicle maintenance, and the like. In addition, ‘motor fuel
expenditures’ are purchases of motor fuel within this State to which the motor fuel user fee
imposed pursuant to Section 12-28-310(D) applies.
(2) Notwithstanding any other provision of this section:
(a) For tax year 2018, the credit allowed by this section may not exceed forty million dollars
for all taxpayers.
(b) For tax year 2019, the credit allowed by this section may not exceed sixty-five million
dollars for all taxpayers.
(c) For tax year 2020, the credit allowed by this section may not exceed eighty-five million
dollars for all taxpayers.
(d) For tax year 2021, the credit allowed by this section may not exceed one hundred ten
million dollars for all taxpayers.
(e) For all tax years after 2021, the credit allowed by this section may not exceed one hundred
fourteen million dollars for all taxpayers.
On or before September 30, 2018, and by September thirtieth of each year thereafter, the
Revenue and Fiscal Affairs Office shall estimate the number of taxpayers expected to claim the
credit for the current tax year and the total amount expected to be claimed. In the event that the
Revenue and Fiscal Affairs Office estimates that the total amount of credits claimed will exceed
the maximum amount of aggregate credit allowed pursuant to this item, the Revenue and Fiscal
Affairs Office shall certify to the Department of Revenue a pro rata adjustment to the credit
otherwise provided.
(B)(1) In order to offset the credit allowed by the section, on or before January 31, 2019, and
by January thirty-first of each year thereafter, an amount of funds necessary to entirely offset the
estimated credit as certified by the Revenue and Fiscal Affairs Office, must be transferred from
the Safety Maintenance Account to the Department of Revenue. If any funds exist in the Safety
Maintenance Fund after all the income tax credits are claimed for the year or if any transferred
funds still exist after all the income tax credits are claimed for the year, the remainder must be
credited to the Infrastructure Maintenance Trust Fund.
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(2) If the transferred funds pursuant to item (1) are not sufficient to completely offset the
credit, on or before January 31, 2019, and by January thirty-first of each year thereafter, the
Department of Transportation shall transfer to the Department of Revenue an amount equal to
the total amount of credits estimated by the Revenue and Fiscal Affairs Office to be claimed for
the applicable tax year minus any amounts transferred pursuant to item (1). If the credit claimed
by all taxpayers in a tax year is less than the amounts transferred pursuant to this item, then the
excess shall revert back from the Department of Revenue to the Department of Transportation as
soon as practicable within the same year that the transfer occurred.
(C) Unless reauthorized by the General Assembly, the credit allowed by this section may not
be claimed for any tax year beginning after 2022.

Section C. This Section takes effect upon approval by the Governor, and subsection A first
applies to tax years beginning after 2017.

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