Federal and State Credits. One Coordinated Study.
South Carolina may provide an additional 5% state R&D credit for qualifying SC research expenses, subject to state rules, limitations, and CPA review. Alexander & Blake prepares both credits through a single, coordinated engagement — so your business captures the full value without going through two disconnected processes.SC offers an additional 5% state R&D credit. We prepare both federal and state credits through one coordinated engagement.
How the South Carolina credit fits into the study.
The SC state credit follows federal qualification rules under IRC Section 41. That means the technical interviews, four-part test documentation, business component mapping, and QRE analysis we prepare for the federal credit also serve as the foundation for the state credit. Your business goes through one process, not two.
We identify qualifying activities, conduct technical interviews, calculate QREs, and prepare the full study package — project narratives, methodology memo, and Form 6765 support.
The same qualifying activities and expense analysis support the SC credit calculation. We prepare SC Schedule TC-18 documentation and coordinate state-specific filing with your CPA.
Your CPA receives one coordinated study package covering both federal and state credits — with filing support for Form 6765 and SC Schedule TC-18 in a single delivery.
The practical result: SC businesses do not pay for or sit through two separate engagements. The federal qualification work naturally supports the state credit, and we coordinate both through one structured process.
Why this matters for South Carolina companies.
South Carolina's economy is built on industries that routinely perform qualifying R&D work — but many SC businesses have never explored the credit because they assume it only applies to labs or pharmaceutical companies.
SC Manufacturers
Custom tooling, process improvement, new product development, materials testing, and production automation are among the most common qualifying activities we see in the Upstate and Midlands.
Common qualifying activities: CNC programming, die design, quality system development, lean process engineering
SC Software & Technology
Custom application development, algorithm design, platform engineering, and systems integration work performed by Greenville, Charleston, and Columbia tech teams frequently qualifies.
Common qualifying activities: API development, database architecture, UI/UX prototyping, cloud migration engineering
SC Engineering & Architecture
Structural design, simulation, civil engineering innovation, and prototype development performed by SC engineering firms often meet the four-part test.
Common qualifying activities: Structural analysis, environmental engineering, load-bearing design, BIM modeling
SC Construction
Innovative building methods, structural problem-solving, prefabrication development, and energy-efficiency engineering performed by SC general contractors and specialty firms may qualify.
Common qualifying activities: Modular construction methods, seismic design, sustainable materials testing
SC Food & Beverage
New product formulation, process optimization, shelf-life testing, packaging engineering, and USDA compliance work performed by SC food producers qualifies more often than most owners expect.
Common qualifying activities: Recipe formulation, pasteurization optimization, quality control process development
SC Life Sciences & Biotech
Drug development, medical device prototyping, clinical protocol design, and laboratory process improvement performed by SC biotech firms are strong candidates for both credits.
Common qualifying activities: Assay development, compound screening, regulatory pathway engineering
How the coordinated credit works in practice.
Illustrative examples based on common R&D credit engagement profiles. These examples are hypothetical and provided for educational purposes only. Individual results depend on qualifying activities, expenses, documentation, tax posture, and CPA review.
Illustrative examples based on common R&D credit engagement profiles. These examples are hypothetical and provided for educational purposes only. Individual results depend on qualifying activities, expenses, documentation, tax posture, and CPA review.
SC R&D Tax Credit — What You Need to Know
What is the SC R&D Tax Credit?
A state income tax credit equal to 5% of qualified research expenses incurred in South Carolina. It follows the same qualification rules as the federal credit under IRC Section 41.
Who qualifies?
Any business operating in SC that incurs qualified research expenses — manufacturers, software developers, construction firms, food producers, biotech companies, and engineers — regardless of size.
How is it calculated?
The credit equals 5% of SC qualified research expenses that exceed the base amount, using the same methodology as the federal credit. Cannot exceed 50% of SC income tax liability in a given year.
Can I claim both federal and state?
Yes. SC businesses may be able to claim both a federal R&D credit and a South Carolina R&D credit on qualifying research expenses, subject to federal and state rules, limitations, and CPA review. Alexander & Blake coordinates both through a single study.
What about unused credit?
Unused SC R&D credits carry forward for up to 10 years. This is especially valuable for businesses in high-growth years where credit may temporarily exceed liability.
How do I file?
File SC Schedule TC-18 (Research Expenses Credit) with your annual SC state tax return. Your CPA handles filing — Alexander & Blake prepares the supporting documentation and coordinates delivery.
State credit availability, limitation rules, carryforward treatment, and filing requirements should be confirmed by the taxpayer's CPA or qualified tax professional based on the taxpayer's specific facts and filing posture.
Serving Businesses Across South Carolina
We work with companies across the state — from the manufacturing corridor in the Upstate to the tech hubs in Charleston and Columbia.
SC Credit Questions
Is the SC R&D credit refundable?
No, the SC R&D credit is non-refundable. However, unused credits can be carried forward for up to 10 years to offset future SC tax liability.
Do I need to claim the federal credit too?
Yes. South Carolina follows federal R&D credit rules, so you must claim or be eligible for the federal credit under IRC Section 41 to qualify for the SC state credit.
Can small businesses and startups claim the SC credit?
Yes. Any SC business that performs qualified research activities can claim the credit regardless of size. There is no minimum revenue or employee requirement.
Can I file amended returns to claim past SC credits?
Yes. If you did not originally claim the SC R&D credit, there may be open tax years within the statute of limitations. Alexander & Blake can evaluate those periods and prepare the study materials your CPA or qualified tax professional may use to support amended filings where appropriate.
Does Alexander & Blake handle both credits or just one?
Both. The federal qualification analysis and documentation process supports the state credit workflow, so SC clients receive coordinated federal and state credit support through one engagement with one study package delivered to their CPA.
How does the SC credit interact with federal amended returns?
When prior-year federal returns are being amended to claim R&D credits, we prepare the SC state credit documentation for the same tax years alongside the federal study. Your CPA receives coordinated study materials and filing support for both.
What industries qualify in South Carolina?
Manufacturing, software development, construction engineering, biotech, automotive, aerospace, food and beverage processing, and many more. If your SC team develops, improves, or solves technical problems, there is a reasonable chance qualifying activities exist.
Your CPA or qualified tax professional should confirm final filing posture, state limitations, carryforward treatment, and return integration.
SC Filing Support Includes
Evaluate Your South Carolina R&D Credits
A complimentary consultation to review your qualifying activities and outline what a coordinated federal and SC credit study would include. No obligation.