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Georgia & South Carolina Enact Pass-Through Entity Tax Election

June 4, 2021

From the time the state tax deduction limitation was enacted at the federal level for individuals, many states have been looking for work arounds. Georgia and South Carolina are the most recent states to provide an election to tax pass-through entities at the entity level, thereby allowing the state tax to be fully deductible for state tax purposes.

Georgia

On May 4, 2021, Georgia enacted House Bill 149 (H.B. 149), allowing an entity-level tax election for S-corporations and entities treated as partnerships. This annual election must be made on or before the due date for filing the applicable income tax return, including extensions. The election will be available for tax years beginning on or after January 1, 2022.

South Carolina

On May 17, 2021, South Carolina enacted legislation creating an annual election for entities treated as partnerships and S Corporations with qualified owners to pay tax at the entity level on active trade or business income. The annual election must be made on or before the due date for filing the applicable income tax returns, including extensions. The election will be available for tax years beginning on or after January 1, 2021.

If you have questions, contact your Cherry Bekaert tax advisor or Cathie Stanton, the Firm’s state and local tax national leader.