South Carolina R&D Tax Credit

SC R&D Tax Credit

Provides South Carolina companies with support for research expenses through state innovation tax treatment.

Eligibility · United States · US-SC

South Carolina's Research and Development Tax Credit (TC-18) is a nonrefundable income tax credit equal to 5 percent of qualified research expenses incurred in South Carolina for the applicable tax year. Authorized under SC Code §12-6-3415, the credit is designed to parallel the federal R&D credit framework: a taxpayer must have claimed, or be eligible to claim, the federal IRC §41 research credit on the same South Carolina research activities in order to claim the state credit. The credit reduces South Carolina income tax liability dollar-for-dollar and is available to for-profit corporations and other income-tax-paying business entities that conduct qualifying research within the state. Nonprofit organizations, universities, and individual researchers are not eligible.

The credit is nonrefundable, meaning it offsets tax owed but cannot generate a cash refund if state tax liability is zero or insufficient. In any single tax year, the credit is capped at 50 percent of the taxpayer's South Carolina income tax liability, with any unused balance carrying forward for up to ten years. Qualified research expenses follow the federal IRC §41 definition and include in-state wages for employees performing qualified research, supplies consumed in the research process, and contract research payments where the work is performed in South Carolina. The credit is filed using Form TC-18 alongside the taxpayer's South Carolina income tax return, submitted electronically through the SC Department of Revenue's MyDORWAY portal.

The credit is a continuous annual benefit requiring no separate pre-approval or competitive application — taxpayers self-certify eligibility on TC-18 each tax year. There is no program-level cap on total credits claimed statewide. To maximize benefit, companies should document their qualified research expenses with the same rigor applied to the federal IRC §41 claim, as SC DOR audits may request supporting documentation. Inquiries can be directed to TaxCredits@dor.sc.gov.