The South Carolina return starts from federal ordinary income. Also, the federal Form 1120S, Schedule K amounts are reported on the Form SC1120S, Schedule SCK, including any South Carolina adjustments. Except as noted for municipal bond interest and capital gains and losses, the use of FS codes is not required to prepare the South Carolina return. Generally, additions and deductions to federal taxable income are handled through entries on South Carolina's interview forms.
Federal Source Items
The following items from the federal return are carried to the South Carolina return and do not require additional entries on state interview forms:
Interest on U.S. Obligations
Municipal Bond Interest from States Other than South Carolina
Work Opportunity Credit Wage Reduction
State, City and Local Taxes Based on Income
Differences Between Federal and State Gains and Losses
Difference Between Federal and State Depreciation
Difference Between Federal and State Amortization
Excess Net Passive Income Subject to Federal Tax
Taxable Portion of Certain Capital Gains Subject to Federal Tax
Schedule K Income (Losses) and Deductions
General Shareholder Information
Capital and PaidIn Surplus for License Fee
State Tax Refunds
Net Capital Gains Held More Than 2 Years
Municipal Bond Interest
Included in South Carolina net income is municipal bond interest from sources outside the state. Interest on municipal bonds and taxexempt private activity bonds from states other than South Carolina carries to Form SC1120, page 2 as an addition to federal income. To override the federal amounts, enter your amount on South Carolina Income and Deductions worksheet, Additions section, Interest Income from Obligations of States Other than South Carolina field.
Be sure to indicate the source of municipal bond interest. Enter the source of interest in the Interest worksheet, Interest section.
Depreciation Differences
The federal and state depreciation differences are carried to Form SC1120S, page 2, Schedule A and Schedule B (see the "Form SC1120 and Form SC1120S and South Carolina depreciation" section of this instruction guide). Do not duplicate the depreciation adjustment on South Carolina Income/Deduction worksheet. The depreciation adjustment can be overridden with an entry on the "Depreciation Adjustment Override" field on Income/Deduction worksheet, Other Adjustments and Overrides section, South Carolina NOL Carryover field. If the federal depreciation exceeds the South Carolina depreciation, enter the override as a positive number. Conversely, if the South Carolina depreciation exceeds the federal amount, enter the amount as a negative entry.
Amortization Differences
The federal and state amortization differences are carried to Form SC1120S, page 2, Schedule A and Schedule B. Do not duplicate the amortization adjustment on South Carolina Interview Form SC2. The amortization adjustment can be overridden on Income/Deduction worksheet, "Amortization Adjustment Override" box. If the federal amortization exceeds the South Carolina amortization, enter the override as a positive number. Conversely, if the South Carolina amortization exceeds the federal amount, enter the amount as a negative entry.
License Fee Computation
The License Fee, Form SC1120S, Part II, is prepared from the federal balance sheet entries. To suppress the computation of the License Fee, check on Taxes worksheet, License Fee section, "X to Prevent Preparation of License Fee" field. No license fee is processed for a final year return. You may enter an override amount on check on Taxes worksheet, License Fee section, "License Fee override" field. Zero is a valid entry.
Excess Net Passive Income Subject to Federal Tax
On Form SC1120S, page 2, Schedule A, the federal net income is increased by the excess net passive income and calculates state tax on the excess net passive income. Do not duplicate this entry on Income/Deduction worksheet, Additions section.
Certain Capital Gains Subject to Federal Tax
On Form SC1120S, page 2, Schedule A, capital gains taxed on the federal return are added back to the federal net income. The state tax on the capital gains is calculated. Do not duplicate this entry on Income/Deduction worksheet, Other Adjustments and Overrides section.
Schedule K Income (Losses) and Deductions
All income and deduction items reported on federal Schedule K pass through to the shareholders on South Carolina Schedule SCK, Column A, lines 1 through 11. Do not duplicate these items on Income/Deduction worksheet, Distribution section. You may enter any other South Carolina additions and subtractions on Income/Deduction worksheet, Distribution section.
Multiple State Apportionment and Allocation
Methods: South Carolina uses a single factor sales apportionment formula.
Select Detail Code: On the federal Common State category Allocation and Apportionment worksheet, Sales Factor section, a detail code is entered at the head of each column, and the amount for each state is entered on the line for that state. The total everywhere amount will be computed as the sum of the entries for each state, plus entries on the lines for foreign and other. The federal Common State category, total Everywhere Overrides worksheet are available to override the total everywhere amounts for each factor.
Refer to the federal instruction guide section for MultiState Processing for additional information.
The following sales code inputs are used in computing the South Carolina apportionment and allocation:
SALES
Use the Common State category, Apportionment worksheet, Sales section to enter the following codes:
Total Sales:
OSTATE, ISTATE, USGOVT, NONTAX, INT, RENTS, RYLTY, RLTANG, INTANG, SERVICE, OTHER, less RTNWOS, RTNWIN, RTNGOV, RTNNON, and TOTAL
Income Subject To Direct Allocation
Dividends received:
DIV
Interest not connected with business:
TXEXIN, OTHINT
Rents:
RNTSRL, RNTSTN
Royalties from tangible personal property:
RYLTTN
Capital gain (loss)
STCPGL, LTCPGL
Ordinary gain (loss)
ORD
Gains/losses on real property:
REALPR
Gains/losses on intangible personal property:
INTNG
Investment income directly allocated:
Federal State Specific Information worksheet
Total income directly allocated:
Computed or TOTAL
Income directly allocated to S.C.:
Computed or TOTAL
Allocation of Income or Loss
Use the federal Allocation and Apportionment worksheet, Allocation, Other State Apportionment Information and Other State Allocation Information sections to allocate income or loss to another state or other states.
Tentative Corporation Tax Return and Conditional Extension
South Carolina Tentative Tax Return and Conditional Extension (SC1120T) is prepared when "SC" is entered in the "State Code" field on the federal State Extensions worksheet, State Extensions section.
To prevent preparation of the License Fee, check on South Carolina Taxes worksheet, License Fee section. The computed Tentative Tax and License Fee and the estimated payments, overpayment from prior year, Total Capital and Paid in Surplus and prevent preparation of the License Fee can be overridden by making entries in the the federal State Extensions worksheet, State Extensions section.
Interest Rates Overrides
Federal Penalties worksheet, State/City Late Penalty and Interest section is available for overriding rates which apply to the calculation of late payment interest and underpayment penalty. South Carolina uses the same rates as the federal law stipulates, therefore the same rates are applied to South Carolina late payment interest and underpayment penalty when an override is used for the federal return. An override of the rates can be entered for the South Carolina calculation.