Rep. Steven Long, R-Boiling Springs, presents his tax plan to the House Ways and Means Committee in Columbia, S.C., on Tuesday, March 3, 2026. (Photo by Skylar Laird/SC Daily Gazette)
COLUMBIA — Amid confusion from taxpayers and accountants, the House is quickly moving a bill that lets filers use the tax deductions in the massive federal spending package that Congress passed last summer — but effective for this tax season only.
When President Donald Trump signed the bill, named the One Big Beautiful Bill Act, into law last July 4, South Carolina seemed poised to be one of just five states where taxpayers would automatically also benefit on their state income taxes from changes to standard deductions, no taxes on overtime or tips, and increased breaks for people over the age of 65.
That’s because South Carolina usually sticks with the federal tax code.
However, under a bill passed by the House last year and the Senate last month, that would no longer be the case. Starting with tax year 2026, for tax filings due in April 2027, the bill decouples from the federal tax code and lowers overall rates. Legislators tout the legislation as a tax cut, though that depends on the filer.
The effort was about perception, as untethering would make state income tax rates reflect South Carolina’s comparatively low taxes, instead of appearing as the highest in the Southeast.
Federal law could cut SC taxes by $500M. Republicans say that’s incentive for a state overhaul.
However, by not conforming to the major changes in federal taxes, legislators have made this tax season a headache for South Carolina taxpayers, and they’re angry.
Amid the complaints, the House is passing a bill that would once more adopt the federal code as a starting point for state taxes. What began as a limited bill exempting taxes on bonuses and overtime — pre-filed a month before Trump took office — was amended Tuesday to simply adopt all IRS changes for 2025.
The bill that advanced from subcommittee to committee to the House floor in one day picks up all the federal changes, but only for tax filings due in a month.
“This is what the people of South Carolina want,” said Rep. Steven Long, a Boiling Springs Republican who sponsored the bill.
People are having a hard time filing their taxes, said House Ways and Means Chairman Bruce Bannister.
He’s among legislators who have heard from “lots and lots of folks who want us to conform to the One Big Beautiful Bill,” the Greenville Republican told reporters.
Filers are confused over how much they owe or frustrated over smaller tax breaks than anticipated. Accountants aren’t quite sure what to do.
“We’ve heard from accountants who want some certainty on how to file their taxes and do the refunds correctly,” Bannister said.
“And we’ve heard from a lot of tax professionals who say, ‘Listen, we need to know one way or the other. Y’all are going to do it or you’re not,’” he added, referring to conformity and the uncertainty of pending legislation.
As advanced by the House Ways and Means Committee on a 22-1 vote, the bill attempts to clear that up for this tax season — what’s left of it.
House Minority Leader Todd Rutherford cast the only “no” vote.
The bill is unlikely to become law before the April 15 tax deadline. Taxpayers who want to wait and see what the Legislature ultimately passes can file for extensions.
Taxpayers who have already filed or will file before the bill is potentially signed could re-file their taxes to take advantage of the full refunds, Bannister said.
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Its fate in the Senate is unclear.
“I’m interested to get some numbers on that and then how that might affect anything else,” said Senate Majority Leader Shane Massey, R-Edgefield.
According to the state Revenue and Fiscal Affairs Office, the bill would reduce revenues by an estimated $288.5 million for the fiscal year starting July 1.
But that’s only if the Legislature stays on track to decouple from the federal system starting with the 2026 tax year — for tax filings due in spring 2027. Further complaints from taxpayers over the confusions created by separate state and federal systems might change those plans.
If the state sticks with the federal code beyond this tax season, conformity will reduce revenue by $534.1 million in the 2026-27 state budget, according to the revenue office’s latest predictions, updated ahead of Tuesday’s meetings.
The conformity bill was sent to the House floor one week ahead of that chamber debating the next state budget. It won’t alter the spending package advanced by the Ways and Means Committee last month — not for next week’s debate, anyway.
The House will deal with how to incorporate a $289 million reduction when the budget comes back from the Senate, Bannister said.
That could come on top of a combined $556 million in revenue reductions from other income and property tax bills that legislators expect to become law this year.
Hundreds of millions of dollars less in collections due to conforming will mean more unfulfilled requests from agencies to maintain or improve services, said Rep. Gilda Cobb-Hunter.
“A part of my concern is that what we may wind up doing inadvertently is having to make some really tough choices about funding other, what I consider, core functions of government in order to make room for this,” the Orangeburg Democrat said.
Legislators will find a way, Long replied.
“We make a lot of tough decisions every single year,” Long said. “And I think we’ve made a lot of good decisions as part of this committee.”
Bannister insists the legislation is about addressing complaints for this year only — that conformity will end with this tax season. He believes the same confusion won’t exist next year because, by then, the other tax changes to state income and property taxes will already be law.
“It should feel like a tax cut the whole way,” Bannister said.
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Courtesy of South Carolina Daily Gazette
