M&A Advisory in South Carolina

SC Code §12-6-1150 allows individuals, estates, and trusts to deduct 44% of net long-term capital gain (holding period >1 year) from SC taxable income. At the 2025 top rate of 6%, the effective top LTCG rate is 3.36%. On a $20M gain, the deduction saves ~$528,000 vs. taxing the full gain at 6%. The deduction applies to stock/equity sales, partnership/LLC interests held >1 year, and flows through from S-corps and partnerships. For maximum benefit: confirm >1-year holding period on all interests, structure as equity sale to produce capital gain (vs. asset sale with ordinary recapture), and layer on top of federal §1202 for non-excluded portions.

SC Code §12-6-545 provides two stacked elections: (a) an owner-level I-335 election taxing active trade or business income at a flat 3% instead of graduated rates; and (b) an entity-level PTE election on Form I-435 paying 3% at the entity level to bypass the federal SALT cap. Both are made annually by the extended return due date with estimated payments. Passive investment income, capital gains, interest, and dividends are excluded from the 3% PTE rate — a key structural consideration for deal gain flowing through a pass-through entity.

South Carolina's flat 5.0% corporate income tax plus a 0.1% license fee on capital/paid-in surplus applies to C corporations and LLCs taxed as C corps. Among the lowest in the Southeast (below Georgia's 5.19% and Florida's 5.5%; above North Carolina's 2.25% declining to 0% by 2030). Single-sales-factor apportionment benefits SC-headquartered companies with national revenue but concentrated in-state operations. The corporate rate has been flat since 2007, providing structural stability for platform-holding-company planning.

Fee-in-Lieu of Property Tax (FILOT) agreements under SC Code §12-44-100 allow qualifying manufacturers and distributors to pay a 6% assessment ratio (vs. 10.5% standard manufacturing rate) for up to 30 years — reducing effective property tax 40–50% on qualifying assets. FILOT assignment on change of control requires County Council consent (SC Code §12-44-120), typically 60–90 days. Failed assignments trigger full ad valorem reversion retroactively with interest. FILOT preservation can add 10–15% to enterprise value; Multi-County Industrial Park designations add $1,000-per-job bonuses. Buyers increasingly request FILOT continuity opinions at LOI.

SC Code §12-54-124 imposes successor liability on buyers for unpaid withholding, sales, and use taxes — making an SCDOR tax compliance certificate obtained via MyDORWAY an essential closing deliverable. SC UCC Article 6 bulk sales is repealed but successor liability survives. Stock sales avoid the deed recording fee ($1.85/$500 per §12-24-10) and sales/use tax on asset transfers but carry historical SC tax exposure. The SCDOR clearance process should be initiated no later than 6 months pre-close; buyers increasingly require tangible progress by signing to avoid personal liability up to purchase price.

SC uses fixed-date IRC conformity as of December 31, 2024 (SC Code §12-6-40), so it does not yet conform to OBBBA for tax year 2025 — H.3368 is pending. SCDOR automatically extended the 2025 individual filing deadline to October 15, 2026 to accommodate. Once H.3368 passes, SC's 44% LTCG deduction can apply on top of the federal QSBS exclusion to any non-excluded portion of gain (e.g., the 25% taxable sliver on a 75% exclusion at year 4). C-corp conversions and non-grantor trust "stacking" of the $15M per-issuer cap are planning strategies to model pre-close.