III. Selective Income Tax Credits Applicable to Commercial Real Estate

• Library: Practical Guide to Commercial Real Estate in South Carolina (SCBar) (2024 Ed.)

III. Selective Income Tax Credits Applicable to Commercial Real Estate

Title 12, Chapter 6, of the Code of Laws of South Carolina 1976, as amended, provides a list of tax credits of interest to owners of commercial real estate. For pass-through entities such as an S Corporation, limited liability company taxed as a partnership, and single member limited liability company, the credit immediately passes through to the shareholder or member.²⁸²

A. Water Impoundments

A credit in the amount of 25% of all expenditures for the construction, installation, or restoration of water impoundments and water control structures designed for the purpose of water storage for irrigation, water supply, sediment control, erosion control, or aquaculture and wildlife management. Unfortunately, the credit is limited in the case of pass-through entities to $2,500.²⁸³ Retention ponds are often required in commercial development and should, if designed and constructed correctly, qualify for the credit.

B. Construction or Improvement of Infrastructure Project

A corporation may obtain a credit for the construction or improvement of an infrastructure project including water lines, sewer lines and their related facilities and roads. The amount of the credit is equal to 50% of the expense or contributions, but is limited in use to $10,000 annually and may only be carried forward three years. The credit is further limited to those expenditures that do not exclusively benefit the taxpayer and are dedicated to public use, or in the case of water and sewer lines, are deeded to a private utility furnishing water and sewage collection or treatment services to the public.²⁸⁴ This credit is limited in its application and is only available to corporations.

C. Qualified Rehabilitation Credit for Historic Structures

A credit equal to 10% of the expenditures that qualify for the federal rehabilitation tax credit is available for the rehabilitation of certain certified historic structures. To qualify for the credit, certain qualified rehabilitation expenditures must be made to a qualified rehabilitated building. A qualified rehabilitated historic building is defined in Section 47(c) of the Internal Revenue Code of 1986, as amended, as a building placed in service before 1936, or a certified historic structure listed in the National Register or located in a registered historic district and is certified as being historically significant to the district. Other than in the case of a certified historic...