Implement SC H.3492: Partially Refundable EITC

[DTrim99]

Summary

South Carolina Bill H.3492 (126th Session, 2025-2026) proposes to amend Section 12-6-3632 to make a portion of the state EITC refundable.

Proposed Statutory Language

Section 12-6-3632. There is allowed as a nonrefundable credit against the tax imposed pursuant to Section 12-6-510 on a full-year resident individual taxpayer an amount equal to one hundred twenty-five percent of the federal earned income tax credit (EITC) allowed the taxpayer pursuant to Internal Revenue Code Section 32. If the credit allowed by this section exceeds the taxpayer's state income tax liability, then twenty-five percent of the excess credit must be refunded to the taxpayer.

Current Law

SC Code Section 12-6-3632 provides a nonrefundable credit equal to 125% of the federal EITC.

Current implementation: policyengine_us/variables/gov/states/sc/tax/income/credits/eitc/sc_eitc.py

• Rate: 1.25 (125% of federal EITC)
• Type: Nonrefundable (listed in non_refundable.yaml)

Proposed Change

If the SC EITC exceeds the taxpayer's state income tax liability, 25% of the excess becomes refundable.

Example calculation:

Item	Amount
Federal EITC	$4,000
SC EITC (125%)	$5,000
SC income tax liability	$3,000
Nonrefundable portion applied	$3,000 (reduces tax to $0)
Excess credit	$2,000
Refundable portion (25% of excess)	$500
Total benefit	$3,500

Implementation Tasks

Parameters

• Add gov/states/sc/tax/income/credits/eitc/refundable_excess_rate.yaml (0.25 when bill effective)
• Update references with H.3492 citation

Variables

• Create sc_eitc_non_refundable - the portion applied against tax liability
• Create sc_eitc_refundable - 25% of the excess beyond tax liability
• Update sc_refundable_credits to include sc_eitc_refundable
• Update sc_non_refundable_credits to use sc_eitc_non_refundable instead of sc_eitc

Tests

• Unit test: Credit fully used (no refund when credit ≤ tax liability)
• Unit test: Partial refund (credit > tax liability)
• Unit test: Maximum refund (tax liability = $0, full 25% of credit refunded)
• Integration test verifying total tax outcome

References

• Bill text: https://www.scstatehouse.gov/sess126_2025-2026/bills/3492.htm
• Current law: https://www.scstatehouse.gov/code/t12c006.php (Section 12-6-3632)
• Current SC EITC form: https://dor.sc.gov/forms-site/Forms/TC60_2023.pdf

Notes

• Bill status should be tracked; implementation should use a contrib/reform pattern if not yet enacted
• This is a proposed bill for the 2025-2026 session - verify enactment status before implementing in baseline