Amid 2025 income tax filing season, will SC conform with One Big Beautiful Bill?
Income tax filers and accountants waiting to see if lawmakers adopt tax deductions included in the One Big Beautiful Bill Act, have an avenue of hope.
House budget writers are trying again to pass tax a tax conformity bill for 2025 with about a month-and-a-half remaining in the income tax filing season. The legislature is also tackling a tax reform bill that would affect 2026 taxes.
Tax conformity means the state adopts deductions accepted by the federal government. Among the new deductions for 2025 on federal returns are no taxes on $12,500 of overtime pay and $25,000 of tips.
Conforming to the federal tax code for 2025 would cost about $288 million.
Lawmakers annually would adopt a tax conformity bill, but did not last year as they worked on a tax reform bill.
Lawmakers are looking to pass an income tax reform package that is meant to use adjusted gross income as the starting point to calculate how much someone owes the state as opposed to the lower federal taxable income.
The House and Senate, however, have to reconcile what the final tax reform package will look like.
“Those provisions will take effect in 2026, (but) 2025 still requires some work on the General Assembly’s behalf to deal with. So tax year 2025 (is) still on the table that will not be affected by the income tax bill if, even if the governor signs it,” Ways and Means Chairman Bruce Bannister told reporters.
Timing on when the House passes the proposed tax conformity bill is still being determined.
State Rep. Gilda Cobb-Hunter, D-Orangeburg, had concerns the House may be moving too hastily with the conformity bill.
“A part of my concern is that what we may wind up doing inadvertently, is having to make some really tough choices about funding other, what I consider core functions of government in order to make room for this,” Cobb-Hunter said.
Debate over tax conformity comes in the middle of tax filing season.
“We’ve heard from accountants who want some certainty on how to file the taxes and do the refunds correctly. And we’ve heard from a lot of tax professionals saying, ‘Listen, we just need to know one way or the other’,” Bannister said.
However, the Senate taking up tax conformity appears unlikely.
Senate Finance Committee Chairman Harvey Peeler said the tax conformity bill was in the House and declined to answer when asked if the Senate would take it up.
Senate Majority Leader Shane Massey said pushing for tax conformity is surprising.
“That’s contrary to what they passed last year, and it’s contrary to what we passed last week, in trying to move away from being dependent upon federal tax policy in setting our policy,” Massey said.
Massey is worried conforming to federal tax policy for 2025 could lead to higher tax bills for 2026 returns.
“If you do that, and you do the transfer from the federal taxable income to AGI, if you do what the House passed in their bill last year, if you conform for ‘25 and you pass the House’s bill, you’re setting up for a significant income tax increase next year,” Massey said.
