South Carolina Incentives and Laws

Last Updated July 2006

State Incentives

Alternative Fuel Vehicle (AFV) Tax Credit

Effective for taxable years beginning after 2005, a state income tax credit equal to 20% of the federal fuel cell, advanced lean burn, hybrid, and AFV credits is available to South Carolina resident taxpayers who are eligible for and claim the federal credits. If the amount of the credit exceeds the taxpayer's liability for the applicable tax year, any unused credit may be carried forward and claimed in the five succeeding taxable years. The state tax credit is calculated without regard to the phase out period limits of Internal Revenue Code Section 30(B)(f). (Reference House Bill 4312, 2006 and South Carolina Code of Laws Section 12-6-3377)

Alternative Fuel Vehicle (AFV) Sales Tax Rebate

A $300 sales tax rebate has been established for in-state purchases of flexible fuel vehicles (FFVs) capable of operating on E85 motor fuel, hydrogen fuel cell vehicles, and plug-in hybrid electric vehicles (PHEVs). A sales tax rebate up to $500 has been established for the purchase of equipment that results in the conversion of a conventional hybrid electric vehicle to a PHEV. (Reference House Bill 4810, 2006)

Biofuels Retail Incentive

A $0.05 incentive payment is available to E85 retailers for each gallon of E85 fuel sold, provided that the E85 fuel is subject to the South Carolina motor fuel tax and the price of the E85 fuel is at least $0.05 lower than the price as compared to the lowest priced non-E85 gasoline fuel being sold at the same retail facility.

Additionally, a $0.05 incentive payment is available to biodiesel retailers for each gallon of B20 fuel sold, provided that the B20 fuel is subject to the South Carolina motor fuel tax and the price of the B20 fuel is at least $0.05 lower than the price of the lowest priced non-B20 diesel fuel being sold at the same retail facility. Biodiesel fuel is defined as a fuel for motor vehicle diesel engines comprised of vegetable oils or animal fats and meeting the specifications of American Society of Testing and Materials (ASTM) D 5761. (Reference House Bill 4810, 2006)

Biodiesel Production Tax Credits

For tax years beginning after December 31, 2005, there are business or personal income tax credits of a) $0.20 for each gallon of biodiesel motor fuel produced mostly from soybean oil and sold, and b) $0.30 for each gallon of biodiesel motor fuel a majority of which is produced from feedstock other than soybean oil and sold, up to a maximum of three million gallons per year from each facility, for a maximum of five years for each facility. Credits are available for not more than one facility in each county in any calendar year, with priority given to the first facility in a county that produces biodiesel motor fuel using soybean oil as the feedstock. Credits are available to individuals or businesses without regard to a “per county” limitation. These credits may be carried forward for up to three years. Payments must be made upon compliance with verification procedures set forth by the Department of Agriculture. (Reference House Bill 4810, 2006)

Biofuels Production Tax Credit

For taxable years beginning between 2006 and 2014 there is tax credit for ethanol and biodiesel facilities. To qualify, the facility must be placed in use after 2006 and in production at the rate of at least 25% of its name plate design capacity by December 31, 2009. The credit equals $0.20 per gallon of ethanol or biodiesel produced and is allowed for 60 months beginning with the first month for which the facility is eligible to receive the credit and ending not later than December 31, 2014. The credit may only be claimed if the ethanol or biodiesel facility maintains an average production rate of at least 25% of its name plate design capacity for at least six months after the first month for which it is eligible to receive the credit.

An ethanol or biodiesel facility eligible for this tax credit is also eligible to receive $0.20 per gallon of ethanol or biodiesel produced in excess of the original name plate design capacity which results from expansion of the facility completed after 2006 and before 2009. The tax credit is allowed for 60 months beginning with the first month for which production from the expanded facility is eligible to receive the tax credit and ending not later than 2014.

Beginning January 1, 2014, an ethanol or biodiesel facility is eligible for a credit against the tax imposed in the amount of $0.075 per gallon of ethanol or biodiesel, before denaturing, for new production for a period not to exceed 36 consecutive months.

Additionally, there is a tax credit for 25% of the cost for constructing or installing equipment for the construction of a qualified commercial facility that distributes or dispenses ethanol or biodiesel.

(Reference Senate Bill 1245, 2006 and South Carolina Code of Laws Section 12-6-3600 and 12-6-3610)

State Laws and Regulations

Low-Speed Vehicle Access to Roadways

Low-speed vehicles may operate only on a secondary highway that has a posted speed limit of 35 miles per hour or less. A low-speed vehicle must be registered and licensed in the same fashion as a passenger vehicle and is subject to the same insurance requirements applicable to other motor vehicles. Homemade low-speed vehicles, retrofitted golf carts, or any other similar vehicles do not qualify as low-speed vehicles. (Reference South Carolina Code of Laws Sections 56-1-10, 56-2-100 to 56-2-130, and 56-5-820)

Alternative Fuel Use

Whenever practical and economically feasible, all state agencies operating alternative fuel vehicles are required to use alternative fuels in those vehicles. Private businesses are encouraged to increase the use of alternative fuels in the state. (Reference Executive Order 2001-35)

The state Liquefied Petroleum Gas (LPG) Board's powers and duties include ensuring that the laws of South Carolina affecting LPG are executed faithfully, instituting proceedings for violations of laws relevant to LPG, and declaring and enforcing regulations relating to LPG and LPG equipment. (Reference South Carolina Code of Laws Sections 40-82)

All fuels, including alternative fuels and alternative fuel blends are exempt from the state sales and use tax. However, all fuels are subject to a state fuels tax. Alternative fuels include liquefied petroleum gas, and compressed natural gas. Blended fuels are defined as a mixture composed of gasoline or diesel fuel and another liquid, other than products such as carburetor detergent or oxidation inhibitor that can be used as a fuel in a highway vehicle. (Reference South Carolina Code of Laws Sections 12-28-110 and 12-36-2120)