(A) Corporations having a valid "S" election for South Carolina income tax purposes are required to withhold income taxes at a rate of five percent on a nonresident shareholder's share of South Carolina taxable income of the corporation, whether distributed or undistributed, and pay the withheld amount to the department in the manner prescribed by the department. For a taxable year beginning after 1991, the corporation shall make a return and pay over the withheld funds on or before the fifteenth day of the third month following the close of its tax year. Taxes withheld in the name of the nonresident shareholder must be used as credit against taxes due at the time the nonresident files income taxes for the taxable year.

(B) An "S" corporation required to withhold taxes on distributed or undistributed income shall make a return with each payment of tax to the department disclosing on the return the names, taxpayer identification numbers, the total amount of South Carolina taxable income paid or credited to each nonresident shareholder, the tax withheld for each nonresident shareholder, and any other information the department requires. The "S" corporation shall furnish to each nonresident shareholder a written statement as required by Section 12-8-1540(A) as proof of the amount of his share of distributed or undistributed income and of the amount that has been withheld.

(C) Partnerships are required to withhold income taxes at a rate of five percent on a nonresident partner's share of South Carolina taxable income of the partnership, whether distributed or undistributed, and pay the withheld amount to the department in the manner prescribed by the department. The partnership shall make a return and pay over the withheld funds on or before the fifteenth day of the third month following the close of its tax year. Taxes withheld in the name of the nonresident partner must be used as credit against taxes due at the time the nonresident files income taxes for the taxable year.

(D) A partnership required to withhold taxes on distributed or undistributed income shall make a return with each payment of tax to the department disclosing on the return the name, taxpayer identification number, the total amount of South Carolina taxable income paid or credited to each nonresident partner, the tax withheld for each nonresident partner, and other information the department requires. The partnership shall furnish to each nonresident partner a written statement as required by Section 12-8-1540(A) as proof of the amount of his share of distributed or undistributed income that has been withheld.

(E) If a nonresident shareholder or partner provides the partnership or "S" corporation with a statement that the shareholder or partner is an organization exempt from income taxes under Internal Revenue Code Section 501(a), then the partnership or "S" corporation is not required to withhold with regard to that partner or shareholder. The statement must contain the shareholder's or partner's name, federal identification number, Internal Revenue Code section exemption number, and a copy of the Internal Revenue Service exemption letter.

(F)(1) For purposes of computing the penalty under Section 12-54-55, the amount withheld is deemed a payment of estimated tax, and an equal part of the amount is deemed paid on each estimated tax due date for the previous taxable year.

(2) If an "S" corporation or partnership is subject to withholding on the sale of real property pursuant to Section 12-8-580, the "S" corporation or partnership is exempt from withholding on income attributable to the sale under this section.

(3) If a nonresident shareholder or partner files an affidavit with the department in a form acceptable to the department by which he agrees that he is subject to the personal jurisdiction of the department and courts of this State for the purpose of determining and collecting any South Carolina taxes, including estimated taxes, together with any related interest and penalties, then the "S" corporation or partnership is not required to withhold with regard to that shareholder or partner. The department may revoke an exemption granted by this item at any time it determines that the nonresident shareholder or partner is not abiding by its terms.

(G) The department is authorized to require such returns and other information as it considers appropriate to administer the provisions of this section, and to issue rulings and promulgate regulations as necessary or appropriate to implement this section.

HISTORY: 1995 Act No. 76, Section 2; 2007 Act No. 110, Section 20, eff June 21, 2007; 2007 Act No. 116, Section 26, eff June 28, 2007, applicable to tax years beginning after 2007; 2016 Act No. 160 (H.4328), Section 4.B, eff April 21, 2016.

Effect of Amendment

2016 Act No. 160, Section 4.B, in (C), in the second sentence, deleted reference to taxable year beginning after 1991, and substituted "third month" for "fourth month".