Form I-338 - Composite Return Affidavit (Page 2 of 3) in pdf

I-338 COMPOSITE RETURN AFFIDAVIT INSTRUCTIONS

Option to File Composite Returns

A composite return is a single return filed by a partnership, S-Corporation, or limited liability company (LLC) taxed as a

partnership or S-Corporation on behalf of two or more nonresident participants.

Participants are limited to individuals, trusts or estates who are partners of the partnership, shareholders of the

S-Corporation, or members of a LLC taxed as a partnership or S-Corporation.

The composite return includes income received by the participant from the partnership, S-Corporation or LLC.

Each participant’s tax is computed separately and added together to arrive at the total tax due on the composite return.

The composite return must be signed by an authorized partner, an authorized officer of the S-Corporation, or an

authorized member of the LLC.

Compute the participant's South Carolina income tax in the same manner as if it were being separately reported.

For taxable years beginning after 2005, the partnership, S-Corporation or LLC may elect to determine each participant's

tax due by one of the following methods:

Method A. If the participant provides an affidavit to the South Carolina Department of Revenue through the entity stating

that he has no income taxable to South Carolina other than the income from the entity:

Option 1:

(1) Prorate the standard deduction or itemized deductions and personal exemptions. For an individual, this means

multiplying the standard deduction or itemized deductions and personal exemptions by the amount of South Carolina

adjusted gross income, and dividing the result by the amount of federal adjusted gross income. For an estate or trust, this

means multiplying the standard deduction or itemized deductions and personal exemptions by the amount of South

Carolina gross income, and dividing the result by federal gross income.

(2) At the participant’s election, tax active trade or business income at the active trade or business income rate.

(3) Tax all other taxable income using the graduated rate for individuals, estates and trusts.

Option 2:

(1) Do not use the standard deduction, itemized deductions or personal exemptions.

(2) At the participant’s election, tax active trade or business income at the active trade or business income rate.

(3) Tax all other taxable income using the graduated rate for individuals, estates and trusts.

Method B. If the participant does not provide an affidavit to the Department through the entity stating that he has no

income taxable to South Carolina other than the income from the entity:

(1) Do not use the standard deduction, itemized deductions or personal exemptions.

(2) Tax active trade or business income at the active trade or business income rate. The “safe harbor” is not available

under Method B.

(3) Tax all other taxable income at 7% (.07).

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Form I-338 - Composite Return Affidavit Page 2