Economic Development Tax Breaks in South Carolina

Businesses expanding or relocating to the Palmetto State can tap a layered set of economic development tax breaks in South Carolina: job tax credits worth up to $25,000 per position, a complete corporate income tax moratorium lasting 10 or 15 years, an investment tax credit on manufacturing equipment, and negotiated property tax arrangements that can cut assessment ratios by more than half.¹ The size of most of these benefits depends on which county the project lands in, so the first question to answer is almost always a geographic one.

How the County Tier System Drives Every Incentive

The South Carolina Department of Revenue ranks all 46 counties into four tiers by December 31 each year, using three years of per capita income data and 36 months of unemployment data, weighted equally. The new rankings take effect for taxable years beginning the following calendar year.²

Tier I counties are the most prosperous. Tier IV counties face the steepest economic challenges. The worse a county’s economic indicators, the more generous the tax breaks for businesses that locate there. Two sites in South Carolina can offer credits that differ by a factor of ten or more, and that gap is intentional. Check the current tier assignment before you pick a site; it changes annually.

Job Tax Credits

Under S.C. Code Section 12-6-3360, the job tax credit offsets corporate income tax based on new full-time positions created. Each position must be full-time, include health insurance, and meet minimum wage thresholds. The standard program requires a net increase of at least 10 full-time jobs. Small businesses with 99 or fewer employees qualify with just two new jobs, but each position must pay at least 120% of the county’s or state’s average per capita income, whichever is lower.²

The per-job credit amounts:

Tier IV: $25,000 per new full-time job
Tier III: $20,250 per new full-time job
Tier II: $2,750 per new full-time job
Tier I: $1,500 per new full-time job

A company creating 50 jobs in a Tier III county would receive over $1 million in credits, compared with $137,500 in a Tier II county.² This isn’t a one-time filing. If employment drops below the minimum threshold in any year, the credit disappears for that year and all subsequent years until the threshold is met again.

Job Development Credit

The Job Development Credit (JDC) targets withholding taxes rather than corporate income tax. Under S.C. Code Section 12-10-81, qualifying businesses claim a credit against the state income tax they withhold from new employees’ paychecks, effectively recovering a portion of those withholdings for up to 15 years.³

The JDC is discretionary, not automatic. A business must apply to the Coordinating Council for Economic Development and sign a revitalization agreement setting out the company’s investment and employment commitments, a completion deadline within five years, and a maximum reimbursement amount.⁴ At least 10 new full-time jobs are required.³

The returned withholdings can be spent only on qualifying capital expenditures tied to the project: land, buildings, site development, pollution control equipment, and infrastructure.⁴ If a company uses the refunded withholding for anything else, the state treats it as misappropriated employee withholding, which carries serious consequences.³ Miss the job or investment targets, and the credits stop.

Corporate Income Tax Moratorium

Large projects in distressed areas can qualify for something stronger than credits: a complete moratorium on state corporate income tax for 10 or 15 years under S.C. Code Section 12-6-3367. The 10-year moratorium has two paths:⁵

Create at least 100 full-time jobs in a county where unemployment has averaged at least twice the state average for two consecutive years (or one of the three lowest per capita income counties), with at least 90% of the company’s total South Carolina investment in that county.
Create at least 100 full-time jobs and invest at least $150 million at a manufacturing facility in a qualifying distressed county, with the same 90% investment concentration.

The 15-year moratorium requires at least 200 full-time jobs created and maintained within five years of the first hire at the facility. If employment drops below the required threshold at any point, the moratorium ends that year.⁵

Investment Tax Credit for Manufacturing Equipment

Manufacturers and other qualifying businesses that place productive equipment into service in South Carolina can claim an investment tax credit under S.C. Code Section 12-14-60, calculated as a percentage of the equipment’s cost basis scaled to the asset’s useful life under federal depreciation rules:⁶

Three-year property: 0.5%
Five-year property: 1%
Seven-year property: 1.5%
Ten-year property: 2%
Fifteen-year property or longer: 2.5%

Unused credits carry forward for 10 years. Very large employers (at least 1,000 workers with $500 million or more invested in the state, or at least 850 workers with $750 million invested) who have made at least $50 million in capital investments over the previous five years can continue carrying the credit forward indefinitely, though it cannot reduce tax liability by more than 25% in any single year.⁶ On a $50 million equipment purchase, even a 2% credit delivers $1 million in tax savings.

Fee in Lieu of Tax (FILOT) Property Agreements

Property taxes can be a dealbreaker for capital-intensive projects. S.C. Code Chapter 12-44 lets a county replace standard property taxes with a negotiated annual fee, typically reducing the assessment ratio from the standard 10.5% industrial rate down to 6%.⁷ That alone cuts taxable value by more than 40%.

The minimum investment to qualify is $2.5 million, dropping to $1 million in counties where unemployment has averaged at least twice the state average. Standard agreements run up to 30 years from the date the property is placed in service, with a possible 10-year extension approved by the county. Projects that meet the enhanced investment threshold get a 40-year base term, also extendable by 10 years. Enhanced investment requires either $150 million and 125 new full-time jobs, or $400 million in total investment regardless of job count.⁸

Enhanced-level projects can also negotiate the assessment ratio down to 4%.⁷ The process starts with the county council adopting an inducement resolution, followed by negotiation of the fee agreement between the company and the county.

Special Source Revenue Credits

Counties can sweeten a FILOT further through Special Source Revenue Credits (SSRCs), which reduce the company’s annual FILOT payment to offset infrastructure and development costs.⁹ SSRC funds must be spent on eligible purposes: acquiring, constructing, or improving infrastructure serving the project or county; purchasing real estate; or buying machinery and equipment used in a manufacturing or commercial operation.¹⁰ If SSRC-funded personal property later leaves the project without being replaced, the company owes the full fee on that property for the removal year and the two years following.

Stacking With Federal Opportunity Zones

South Carolina has 135 federally designated Qualified Opportunity Zones, 95 of them rural. These zones overlap with many Tier III and Tier IV counties, which opens the door to combining state incentives with federal capital gains benefits.

Investors who reinvest capital gains into a Qualified Opportunity Fund within 180 days can defer recognition of those gains. The original program (OZ 1.0) requires deferred gains to be recognized on the earlier of the date the QOF investment is sold or December 31, 2026, and the step-up in basis benefits that once rewarded five- and seven-year holding periods are no longer available for OZ 1.0 investments.¹¹

A new version (OZ 2.0), established by the One Big Beautiful Bill Act signed in mid-2025, extends Opportunity Zone benefits beyond that expiration. The core mechanics are the same: invest capital gains in a QOF within 180 days, take an equity interest, and elect deferral by filing IRS Form 8949. For investments held at least 10 years, gains above the original deferred amount can be eliminated entirely.¹¹ A South Carolina site in a designated zone should be evaluated for whether the federal savings combine effectively with the FILOT and job credits available in the same area.

E-Verify: The Compliance Trap

One state requirement catches out-of-state companies off guard and can undo the value of every other incentive. Under S.C. Code Section 41-8-20, every private employer in South Carolina must participate in E-Verify and confirm the work authorization of every new hire within three business days. This applies to all employers regardless of headcount, not just government contractors or large companies.¹²

New employees work provisionally until verification clears. If E-Verify does not confirm authorization, the employment relationship cannot continue. A first violation triggers three years of probation with quarterly reporting; repeat violations trigger business license suspensions of 10 to 30 days. Losing a license after negotiating millions in tax incentives is an expensive mistake.

Applying and Reporting

The application path depends on the incentive. Job tax credits are claimed on the company’s annual state tax return after confirming that net new employment meets the minimum threshold. The JDC requires a separate application to the Coordinating Council for Economic Development before any credits can be claimed, and the resulting revitalization agreement sets the terms for the entire credit period.

FILOT agreements take longer. The company and county negotiate terms, the county council adopts an inducement resolution signaling its intent, and the parties then execute a formal fee agreement. County councils have their own meeting schedules and public hearing requirements, so budget time accordingly. Once the agreement is finalized, the company files with the Department of Revenue to begin paying the negotiated fee instead of standard property taxes.

State credits that reduce corporate income tax liability are also reported to the IRS using Form 3800, the General Business Credit form, filed with the company’s federal return.¹³ Skipping this does not void the state credit, but it creates discrepancies between state and federal filings that invite scrutiny during an audit. Companies running investment credits and job credits simultaneously should coordinate state and federal filings so the incentives flow correctly through both returns.

1
South Carolina Department of Commerce. Corporate Income Tax and Incentives
2
South Carolina Legislature. South Carolina Code 12-6-3360 – Job Tax Credit
3
South Carolina Legislature. South Carolina Code 12-10-81 – Job Development Tax Credits
4
South Carolina Department of Commerce. State Discretionary Incentives
5
South Carolina Legislature. South Carolina Code 12-6-3367 – Moratorium on Corporate Income and Insurance Premium Taxes
6
South Carolina Legislature. South Carolina Code 12-14 – Economic Impact Zone Community Development Act of 1995 – Section: 12-14-60
7
South Carolina Department of Revenue. Chapter 6 – Negotiated Fees in Lieu of Property Taxes and Comparison Chart
8
South Carolina Legislature. South Carolina Code 12-44 – Fee in Lieu of Tax Simplification Act – Section: 12-44-30
9
South Carolina Legislature. South Carolina Code 4-1-175 – Special Source Revenue Bonds Authorized
10
South Carolina Department of Revenue. South Carolina Tax Incentives for Economic Development
11
HUD.gov / U.S. Department of Housing and Urban Development (HUD). Opportunity Zones Investors
12
South Carolina Legislature. South Carolina Code 41-8-20 – E-Verify Requirements
13
Internal Revenue Service. About Form 3800, General Business Credit