S.C. Code Ann. § 12-6-40 — Application of federal Internal Revenue Code to State tax laws

(A)(1)(a) Except as otherwise provided, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 31, 2024, and includes the effective date provisions contained in it.
(b) For purposes of Sections 63 and 179 of the Internal Revenue Code, the amendments made by Sections 103 and 202 of the Jobs and Growth Tax Relief Reconciliation Act of 2003, P.L. 108-27 (May 28, 2003) are effective only for taxable years beginning after December 31, 2003.
(c) If Internal Revenue Code sections adopted by this State which expired or portions thereof expired on December 31, 2024, are extended, but otherwise not amended, by congressional enactment during 2025, these sections or portions thereof also are extended for South Carolina income tax purposes in the same manner that they are extended for federal income tax purposes.
(d) To the extent loans are forgiven and excluded from gross income for federal income tax purposes under the paycheck protection program in Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or from any extension of the paycheck protection program, those loans are excluded for South Carolina income tax purposes. Further, to the extent the federal government allows the deduction of expenses associated with the forgiven paycheck protection program loans, these expenses will be allowed as a deduction for South Carolina income tax purposes.
(e) South Carolina adopts the federal tax treatment for any exclusion from federal taxable income or allowance of expenses as provided in the federal Consolidated Appropriations Act of 2021 in Sections 276 (Clarification of Tax Treatment of Forgiveness of Covered Loans), 277 (Emergency Financial Aid Grants), and 278 (Clarification of Tax Treatment of Certain Loan Forgiveness and Other Business Financial Assistance).
(2)(a) For purposes of this title, "Internal Revenue Code" is deemed to contain all changes necessary for the State to administer its provisions. Unless a different meaning is required:
(i) "Secretary", "Secretary of the Treasury", or "Commissioner" means the Director of the Department of Revenue.
(ii) "Internal Revenue Service" means the department.
(iii) "Return" means the appropriate state return.
(iv) "Income" includes the modifications required by Article 9 of this chapter and allocation and apportionment as provided in Article 17 of this chapter.
Other terms in the Internal Revenue Code must be given the meanings necessary to effectuate this item.
(b) For purposes of Internal Revenue Code Sections 67 (Two Percent Floor on Miscellaneous Itemized Deductions), 71 (Alimony and Separate Maintenance Payments), 85 (Unemployment Compensation), 165 (Losses), 170 (Charitable Contributions), 213 (Medical and Dental Expenses), 219 (Retirement Savings), 469 (Passive Activity Losses and Credits Limited), and 631 (Gain or Loss in the Case of Timber, Coal, or Domestic Iron Ore), "Adjusted Gross Income" for South Carolina income tax purposes means a taxpayer's adjusted gross income for federal income tax purposes without regard to the adjustments required by Article 9 and Article 17 of this chapter.
(c) For a taxpayer utilizing the provisions of Internal Revenue Code Section 1341 (Computation of Tax where Taxpayer Restores Substantial Amount Held under Claim of Right) for South Carolina tax purposes the phrase "taxes imposed by this chapter" means taxes imposed by Chapter 6 of this title.
(d) The terms defined in Internal Revenue Code Sections 7701, 7702, and 7703 have the same meaning for South Carolina income tax purposes, unless a different meaning is clearly required.
(B) All elections made for federal income tax purposes in connection with Internal Revenue Code sections adopted by this State automatically apply for South Carolina income tax purposes unless otherwise provided. A taxpayer may not make an election solely for South Carolina income tax purposes except for elections not applicable for federal purposes, including filing a combined or composite return as provided in Sections 12-6-5020 and 12-6-5030, respectively.
(C) If a taxpayer complies with the provisions of Internal Revenue Code Section 367 (Foreign Corporations), it is not necessary for the taxpayer to obtain the approval of the department. A taxpayer filing a paper return shall attach a copy of the approval received from the Internal Revenue Service to his next South Carolina income tax return. A taxpayer filing an electronic return shall keep a copy of the approval with his tax records.