How long does South Carolina's R&D credit carry forward?

South Carolina's credit is 5 percent of the qualified research expenses you incur in the state, with no base to subtract, and you must claim the federal Section 41 credit for the same taxable year. Whatever you cannot use carries forward for 10 years. The statute measures those 10 years from the date the qualified research expenses were paid, so the window is tied to when the money went out the door, not to the year you first have tax to offset.

The credit can be applied against South Carolina income tax and against the corporate license fee under section 12-20-50. It is claimed on Schedule TC-18.

In any one year the credit can offset at most 50 percent of the tax that remains after all your other credits are applied. A company that turns profitable with a large banked balance will usually spread it across several years, because each year's draw is capped at half the remaining tax. That ceiling is the main reason a 10-year window can run short: a big balance and a modest tax bill can leave old credit unused when its 10 years are up.

South Carolina's research credit is nonrefundable. If you have no South Carolina tax this year, the credit waits. Planning comes down to tracking each year's credit separately, with the payment dates behind it, so you know which amounts face the 10-year limit first.

Say a pre-profit SaaS company pays $400,000 of qualified research expenses in South Carolina in its first year and claims the federal credit for that year. Its South Carolina credit is 5 percent of $400,000, or $20,000. It owes no tax that year, so the full $20,000 carries forward.

Two years later the company owes $30,000 of South Carolina tax after all other credits. Half of that, $15,000, is the most the research credit can cover, so it uses $15,000 and still carries $5,000. That remaining $5,000 has to be used before 10 years pass from the date those first-year expenses were paid. These figures are illustrative, not a projection for any company.

When a credit is used five or eight years after it was earned, the documentation from the year it was earned is what supports it. The state credit rests on the federal Section 41 claim for the same year, so the four-part test analysis and expense records behind that federal claim need to still make sense to someone reading them long after the engineers who did the work have moved on.

R&D Binder produces the federal Section 41 documentation the South Carolina credit rests on. Your CPA files the returns, and whether your facts qualify is your CPA's call.

• South Carolina's R&D credit (full overview)
• South Carolina R&D credit rate
• South Carolina vs the federal credit
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• California R&D credit
• Idaho R&D credit

• South Carolina Code 12-6-3415 (research expenses credit) - South Carolina General Assembly
• South Carolina Schedule TC-18, Research Expenses Credit - South Carolina Department of Revenue
• SCACPA, Claiming the federal R&D tax credit: don't overlook the state opportunity (November 2024) - South Carolina Association of CPAs
• Wilson Lewis, Discover new savings: state tax incentives (May 2025) - Wilson Lewis CPA