South Carolina · S.688 / Act 243

Small business tax and unemployment tax changes (S.688, Act 243): $10,000 business property exemption, new UI trust fund target

Effective July 1, 2026

Published October 18, 2026 · Last updated October 18, 2026

What it does

Small business property tax. The act adds a new property tax exemption for “the first ten thousand dollars of the net depreciated value of business personal property owned by a small business.” (Act No. 243, Section 6, § 12-37-220(B)(54)) A “small business” is a commercial retail service, industry entity or nonprofit corporation, including affiliates, that:

• is owned by taxpayers who pay income taxes in South Carolina;
• is independently owned and operated; and
• employs fewer than 100 full-time employees or has gross annual sales under $10 million. (§ 12-37-220(B)(54))

Separately, a taxpayer with less than $10,000 of net depreciated value of business personal property is not required to pay business personal property taxes, if it certifies that each year, under penalty of perjury, to the Department of Revenue. The form must cite the “State of South Carolina Small Business Tax Cut of 2026” as the source of the exemption. (Section 7, § 12-37-900(C))

Where to file. “All business personal property required to be returned for ad valorem taxation must be returned to the Department of Revenue.” The property is still taxed by the jurisdiction where it is located. (Section 8, new § 12-37-980)

Unemployment insurance (UI) taxes. The act changes several parts of the employer UI tax law run by the Department of Employment and Workforce (DEW):

• Benefit ratio lookback. An employer’s benefit ratio (benefits charged divided by taxable payroll) uses 12 calendar quarters through tax year 2026, 16 quarters for tax year 2027, and 20 quarters beginning in tax year 2028. An employer in rate class one in 2026 stays on the 12-quarter calculation until it no longer qualifies for that class. (Section 1, § 41-31-5(1))
• Solvency target. The trust fund’s “fund solvency target” is 0.08 times the state labor force, times the maximum weekly benefit, times the maximum number of benefit weeks. A solvency surcharge on contributory employers applies each year the reserve is below the target, set to reach the target within five years, with limits tied to benefits paid. If the fund is above the target, DEW may use the surplus to reduce taxes the next year. (Section 2, § 41-31-45)
• Unpaid tax executions. For tax executions issued on or after January 1, 2027, an employer with an unpaid execution pays its normal rate plus 2 percentage points. For executions issued before that date, the employer may not pay at a reduced rate class while the execution is unpaid. An employer with a DEW-approved installment payment agreement pays its normal annual rate as long as it keeps up with the agreement. (Section 3, § 41-31-60)
• Penalties. Failing to file a wage or contributions report within 15 days of DEW’s demand costs 10% of contributions due, at least $25. Contributions unpaid 10 days after an assessment carry a 10% penalty, plus interest of 1% a month. (Sections 4–5, §§ 41-31-350, 41-31-370) The act’s title says these changes remove caps on those penalties. (Act title)

Corporate license fee. A corporation headquartered in South Carolina may exclude the first $50 million of equity contributions from venture capital funds, angel or accredited investors, or certain private investment firms from the paid-in or capital surplus subject to the annual license fee, with a certificate from the S.C. Research Authority. This first applies to the tax year beginning after July 1, 2026. (Section 9, § 12-20-50(D))

Who it affects

• Small business owners and nonprofits that own business personal property. (§§ 12-37-220(B)(54), 12-37-900(C))
• Every employer that pays state unemployment insurance tax. (§§ 41-31-5, 41-31-45, 41-31-60)
• Counties and other local governments, which keep taxing business personal property but will receive returns through the Department of Revenue. (§ 12-37-980)
• Startups backed by outside investors and headquartered in the state. (§ 12-20-50(D))

What it means for you

• If you own a qualifying small business, the first $10,000 of your business personal property is exempt starting with property tax years after 2026. If all of it is worth less than $10,000, you can avoid the tax entirely by certifying to the Department of Revenue each year. (Sections 6–7)
• If you are an employer, your UI tax rate from 2027 on will be based on a longer history of benefits charged to your account. (§ 41-31-5(1))
• The act does not change unemployment benefits for workers. (Act No. 243)

Cost and impact

The act text does not include a cost estimate or say how many businesses qualify. We did not find a fiscal impact statement linked on the bill page. (Act No. 243; bill page)

Current status

The Senate passed the bill 45–0 on third reading on April 1, 2026, and the House passed an amended version 115–0 on May 12. After the chambers disagreed, a conference report was adopted May 14, 2026, by votes of 107–0 in the House and 40–0 in the Senate. It was ratified May 20 and signed by the Governor on May 22, 2026, as Act No. 243. (Bill history)

What happens next

The act’s general effective-date section says it “takes effect upon approval by the Governor on July 1, 2026.” (Section 10) The business personal property changes first apply to property tax years beginning after 2026, the new unpaid-execution rate applies to executions issued on or after January 1, 2027, and the longer UI lookback starts with tax year 2027. (Sections 1, 3, 6–8)

Sources

• SC Legislature: 2025-2026 Bill 688, status, history and ratified text
• Ratified text of Act No. 243 (Word)

Legislators connected to this bill

Current members listed as sponsors on the official bill page, or with a sourced public statement about it. Details and sources are on each member page.

SC Senate

• Sen. Josh Kimbrell (Senate District 11): sponsor
• Sen. A. Shane Massey (Senate District 25): sponsor

Every statement above is drawn from the official source text linked here; section references are shown in grey. This is a plain-English summary, not legal advice. Spot an error? Tell us.