Under South Carolina Revenue Ruling 92-9, could banks request return extensions, use a noncalendar tax year, and seek refunds of pre-1991 bank-tax overpayments?

Plain-English summary

South Carolina Revenue Ruling 92-9 answered three administrative questions for banks after a 1991 statutory change:

1. A bank could request an extension to file its South Carolina bank tax return.
2. Its South Carolina accounting period had to match its federal taxable year, so it could use a noncalendar year when that was its federal year.
3. It could request a refund of bank-tax overpayments from years before 1991 instead of receiving only a nonrefundable paper credit.

Why the procedures changed

Before July 1, 1991, bank tax was distributed directly to counties and municipalities under the formula then in Section 12-11-50. Because the Tax Commission had to analyze returns and prepare distribution vouchers, it required calendar-year filing, denied filing extensions, and used nonrefundable “paper” credits rather than cash refunds after amended returns or audits.

The State Aid to Subdivisions Act changed that system. Bank tax went to the state general fund, while local distributions were calculated under the new act. The ruling said this removed the administrative obstacle to ordinary extensions, federal-year accounting periods, and refunds.

The underlying bank franchise tax quoted in the ruling was 4.5% of entire net income for a bank engaged in South Carolina business. Section 12-11-40 incorporated appropriate income-tax administration and enforcement provisions.

The three answers

1. Filing extensions were available

Section 12-54-70 allowed the Tax Commission, for good cause, to extend a return or payment deadline.

The bank had to file its extension request on or before the original due date, submit a tentative return reflecting 100% of anticipated tax, and remit that tentative liability.

The ruling said South Carolina did not recognize a corporate filing extension issued by the IRS or another state.

2. The bank return followed the federal taxable year

Section 12-7-1410 required the South Carolina taxable year to be the same as the taxpayer's federal income-tax year.

If the federal year changed, the South Carolina year changed too, and the taxpayer had to provide the Commission the written IRS permission described in the statute. A bank was therefore not limited to a calendar year when its federal taxable year was different.

3. Pre-1991 overpayments could be refunded

Section 12-54-30 authorized the Commission to refund or credit tax, penalty, or interest paid above the amount legally due.

The ruling discontinued the nonrefundable paper-credit system and allowed banks to request refunds of overpayments from tax years before 1991. It said those claims remained subject to the appeal-right rules discussed in SC Revenue Ruling 91-10 after Bass v. State of South Carolina.

What this means for you

Banks reviewing historical filings

The ruling replaced three special administrative restrictions with the more general extension, taxable-year, and refund provisions then applicable.

Return preparers

An extension was not automatic. Timely filing, a tentative return, full anticipated tax, and the state's own process were required.

Fiscal-year banks

The South Carolina period followed the federal taxable year rather than a mandatory calendar year under this ruling.

Refund claimants

The availability of a refund did not eliminate procedural requirements or appeal limits. The ruling pointed claimants to separate historical guidance.

Common questions

Q: Did an IRS extension automatically extend the South Carolina bank return?
A: No. The ruling required a South Carolina extension request and did not recognize federal or other-state corporate extensions.

Q: When was the extension request due?
A: On or before the original return due date.

Q: Could a bank use a fiscal year?
A: Yes when that was its federal taxable year; the South Carolina return had to match the federal period.

Q: Could a bank get cash back for an overpayment before 1991?
A: It could request a refund under Section 12-54-30, subject to the historical refund and appeal procedures.

Q: What happened to paper credits?
A: The ruling discontinued the former nonrefundable paper-credit system.

Citations and references

• S.C. Code Ann. §§ 12-11-20 and 12-11-40 — historical bank franchise tax and incorporated administration rules
• S.C. Code Ann. § 12-11-50 — bank-tax payment and the 1991 revenue-handling change
• S.C. Code Ann. § 12-7-1410 — taxable year matching the federal year
• S.C. Code Ann. § 12-54-30 — refund or credit of overpayments
• S.C. Code Ann. § 12-54-70 — extension request, tentative return, and remittance
• S.C. Code Ann. § 12-54-190 — priority of the uniform collection chapter
• Bass v. State of South Carolina, 395 S.E.2d 171 (S.C. 1990)
• SC Revenue Ruling 91-10 — refund appeal-right guidance cited by the ruling

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR92-9.pdf

Original ruling text

SC REVENUE RULING #92-9

SUBJECT:

Administration of Bank Taxes
(Bank Taxes)

TAX ANALYST:

Deana West

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCE:

S.C. Code Ann. Section 12-11-20 (1976)
S.C. Code Ann. Section 12-11-40 (Supp. 1991)
S.C. Code Ann. Section 12-11-50 (Supp. 1991)
S.C. Code Ann. Section 12-7-1410 (Supp. 1991)
S.C. Code Ann. Section 12-54-30 (Supp. 1991)
S.C. Code Ann. Section 12-54-70 (Supp. 1991)
S.C. Code Ann. Section 12-54-190 (Supp. 1991)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1991)
SC Revenue Procedure #87-3

SCOPE:

A Revenue Ruling is the Commission's official interpretation of how
tax law is to be applied to a specific set of facts. A Revenue Ruling
is public information and remains a permanent document until
superseded by a Regulation or is rescinded by a subsequent Revenue
Ruling.

Questions:
1.

May an extension of time be requested for filing a South Carolina bank tax return?

2.

May a bank file a South Carolina bank tax return on a basis other than a calendar year?

3.

May a bank request a refund of tax overpayments made in tax years prior to 1991?

Facts:
As a result of a recent amendment to Code Section 12-11-50, questions have arisen concerning
administrative procedures with respect to banks. The purpose of this document is to set forth
guidelines that will assist the Commission and taxpayers in the interpretation of the amended
law.

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Prior to July 1, 1991, the tax collected from banks was distributed directly to the counties and
municipalities based on the formula contained in Code Section 12-11-50. The vouchers detailing
this distribution were prepared by the Tax Commission's Corporate Section and provided to the
State Treasurer by May 1 of each year. Because of the time involved in analyzing the bank return
and preparing the vouchers, the Tax Commission (1) required banks to file returns on a calendar
year basis, (2) did not allow an extension of time to file a bank tax return, and (3) provided banks
non-refundable "paper" credits to offset future tax due instead of refunds which resulted from an
amended return or audit.
Pursuant to the newly enacted State Aid to Subdivisions Act, the taxes collected from banks are
now deposited to the credit of the State's general fund and amounts are distributed to the counties
and municipalities based on a formula contained in the Act.
Discussion:
Code Section 12-11-20 provides for a franchise tax based on net income on banks and reads:
A tax is imposed upon every bank engaged in business in the State which shall be
levied, collected and paid annually with respect to the entire net income of the
taxpayer doing a banking business within this State or from the sales or rentals of
property within this State, computed at the rate of four and one half per cent of the
entire net income of such bank or taxpayer.
Code Section 12-11-40 governs enforcement and administration of the franchise tax on banks
and provides:
For the purpose of administration, enforcement, collection, liens, penalties, and
other similar provisions, all of the provisions of Chapter 7 of this Title [Income
Tax Act of 1926] that may be appropriate or applicable are adopted and made a
part of this chapter for the enforcement and administration of this chapter,
including the requirement to make declarations of estimated tax and make
estimated tax payments.
The law, therefore, imposes a franchise tax based on net income on banks engaged in business in
South Carolina and its administration and enforcement is governed by appropriate income tax
provisions contained in Chapter 7 of Title 12.
Additionally, in addressing the questions at hand, we must also consider Chapter 54 of Title 12,
entitled "Uniform Method of Collection and Enforcement of Taxes Levied and Assessed by
South Carolina Tax Commission". Specifically, Code Section 12-54-190 provides that "[u]nless
otherwise specified, the provisions of this chapter take precedence over all other related statutory
provisions".
EXTENSION FOR FILING RETURN
Code Section 12-54-70 provides for an extension of time for filing a return and reads, in part:

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(a) The Commission may, for good cause, allow further time for the filing of
returns or remitting of tax due, required under the provisions of law administered
by the Commission. The request for an extension may be granted only if the
request is filed with the Commission on or before the day the return of the tax is
due. A tentative return is required reflecting one hundred percent of the
anticipated tax to be paid for the taxable period, to be accompanied by a
remittance for the tentative tax liability....
In summary, the law allows the Tax Commission, for good cause, to grant extensions of time to
file tax returns.
TAXABLE YEAR FOR FILING RETURN
As previously stated, appropriate income tax provisions contained in Chapter 7 of Title 12
govern the enforcement and administration of bank taxes. Code Section 12-7-1410 provides rules
for the acceptable accounting methods and periods of taxpayers and reads, in part:
(a) A taxpayer's taxable year under this chapter must be the same as his taxable
year for federal income tax purposes.
(b) If a taxpayer's taxable year is changed for federal income tax purposes, his
taxable year for purposes of this chapter is similarly changed without applying to
the Commission, but the taxpayer must provide the Commission with a copy of
the written permission received from the Internal Revenue Service....
The law, therefore, provides that a taxpayer's South Carolina tax year be the same as the tax year
used for federal income tax purposes.
REFUNDS OF OVERPAYMENTS
Code Section 12-11-50 provides for the payment of franchise tax on banks and reads:
The taxes provided for in this chapter must be paid to the commission as provided
in Section 12-11-40 and the income tax paid under the provisions of this chapter
must be deposited to the credit of the general fund of the State.
Code Section 12-54-30 provides for a refund or credit to the taxpayer in the event of an
overpayment and reads, in part:
If the commission discovers on examination of a return or otherwise that the tax,
penalty, or interest paid by any person is in excess of the amount legally due, the
commission may order a refund or give credit for the overpayment.
Prior to its amendment in 1991, Code Section 12-11-50 specified how taxes provided for in this
chapter would be distributed between the general fund, counties and municipalities. As a result,

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it was administratively impractical for the Tax Commission to allow refunds once the tax was
distributed. The recent amendment to Code Section 12-11-50, however, has relieved this
administrative burden. Therefore, the Commission, when deemed appropriate, may order
refunds of bank tax overpayments.
In light of the South Carolina Supreme Court case Bass v. State of South Carolina, 395 S.E. 2d
171 (1990), taxpayers seeking a claim for refund should refer to SC Revenue Ruling #91-10 for a
discussion of their appeal rights.
Conclusions:
1.

An extension of time may be requested for filing a South Carolina bank tax return, in
accordance with Code Section 12-54-70. An extension form must be filed with the Tax
Commission on or before the original due date of the return. South Carolina does not
recognize a corporate extension issued by the Internal Revenue Service or any other State.

2.

The accounting period for which the South Carolina bank tax return is filed must be the
same as that used for federal income tax purposes, as provided in Code Section 12-7-1410.

3.

The non-refundable "paper" credit system will be discontinued, therefore, banks may
request a refund of tax overpayments made in tax years prior to 1991, pursuant to Code
Section 12-54-30. These refund requests are subject to the provisions set forth in SC
Revenue Ruling #91-10.

For further information, contact the Tax Commission's Corporate Section at 803-737-4705.
SOUTH CAROLINA TAX COMMISSION
s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Chairman
s/T. R. McConnell
T. R. McConnell, Commissioner
s/James M. Waddell Jr.
James M. Waddell, Jr., Commissioner

Columbia, South Carolina
, 1992
July 21

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