How to make the South Carolina PTET election.

Can your business elect?

A qualified entity can elect: a partnership or S corporation, including an LLC taxed as either, whose owners are all qualified owners (individuals, estates, trusts, or partnerships that are themselves owned by qualified owners). An entity cannot elect if a C corporation, S corporation, electing small business trust, bank, insurance company, or tax-exempt organization appears anywhere in its ownership chain. Sole proprietorships cannot elect.

The election applies to all owners, and an owner cannot opt out. An owner that is itself a qualified entity can make its own election for its own active trade or business income. An S corporation that owns an interest in a partnership that cannot elect may still elect for its own income, including income passed through to it.

Rate: 3% flat rate on active trade or business income apportioned to South Carolina.

Only active trade or business income, apportioned to South Carolina under Section 12-6-2240. Passive investment income, capital gains and losses, interest, dividends, compensation, and guaranteed payments for services are excluded and still pass through to the owners.

Available for 2026. Act No. 61 of 2021 (S.627) added the entity-level election to S.C. Code Section 12-6-545(G) for tax years beginning after 2020, and the provision has no sunset. New to PTET? See how the election works.

Deadlines

These dates are for a calendar-year business. Pay at least two business days early, since state payment sites slow down on deadline days.

Electing, step by step

Deadline: By the due date of the SC1065 or SC1120S, including extensions. For a calendar-year 2026 entity, that is March 15, 2027, or September 15, 2027 if a valid extension was filed. The election can be made or revoked on an amended return until that date.

Start with 2025 SC1065 Partnership Return, from the South Carolina Department of Revenue.

1. Complete Form I-435, Active Trade or Business Income For Electing Partnerships and S Corporations, to identify the active trade or business income and figure the 3% tax.
2. On page 1 of the 2026 SC1065 (partnerships) or SC1120S (S corporations), check the box labeled 'Check for Active Trade or Business election.'
3. On the SC1065, enter Active Trade or Business Income from I-435, line 14 on line 2 and the tax from I-435, line 17 on line 3. On the SC1120S, the same amounts go on lines 5 and 6.
4. Attach Form I-435 and file the return by March 15, 2027, or by September 15, 2027 if an extension was filed. The election covers all owners and applies only to 2026.

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Paying the tax, step by step

An electing entity must make estimated payments. Partnerships use Form SC1065-ES, due April 15, June 15, and September 15, 2026, and January 15, 2027, if the expected tax is $100 or more. S corporations use the corporate dates: April 15, June 15, September 15, and December 15, 2026. Payments can be made through MyDORWAY before the election is made.

What you need

• Nothing to set up. MyDORWAY takes payments without an account.
• The business's FEIN and legal business name.
• The tax period and payment amount.
• Bank routing and account numbers for an electronic check, or a credit card.

Start at MyDORWAY, South Carolina's official site.

1. Go to MyDORWAY at dor.sc.gov/pay. No account is required; a business with a MyDORWAY account can log in to schedule payments.
2. Select Business Income Tax Payment.
3. Enter the FEIN and Legal Business Name, and select the tax type (Partnership Tax for a partnership).
4. Select Estimated/Declaration Payment for a quarterly estimate, enter the required information, and choose a payment method (electronic check or credit card).
5. To pay by mail instead, send the SC1065ES voucher with a check payable to SCDOR, with the name, FEIN, tax year, and SC1065ES in the memo. Do not mail the voucher if paying online.

Filing the return: Form SC1065 (partnerships) or SC1120S (S corporations) with Form I-435, due March 15, 2027 for a calendar-year 2026 entity. An extension extends the time to file up to six months but does not extend the time to pay.

Claiming the credit

Owners exclude the entity-taxed active trade or business income from their South Carolina taxable income, provided the entity properly filed and paid. The SC K-1 has a check box showing the election was made and reports the owner's share of the income taxed at the entity level. Owners use Form I-335 with the SC1040 to account for that income.

Good to know

• The tax applies only to active trade or business income. Wages, guaranteed payments for services, and other amounts tied to personal services stay taxable to the owner at regular individual rates.
• If an owner who performs services is not paid reasonable compensation, all of the owner's income from the entity is presumed to be personal service income and does not qualify.
• Nonresident withholding under Section 12-8-590 does not apply to the extent of the tax the electing entity pays on active trade or business income.
• Owners' South Carolina basis is figured as if the election had not been made.
• If the electing entity does not pay, the Department may collect the tax from the entity or from its direct or indirect owners.
• Paying your personal South Carolina estimates? See how to pay South Carolina estimated taxes.
• Business in more than one state? Each state has a guide of its own.

Official sources

Checked October 2026 against the South Carolina Department of Revenue's own publications and S.C. Code Ann. Section 12-6-545(G).

• S.C. Code Section 12-6-545 (South Carolina Legislature)
• SC Revenue Ruling #21-15, Active Trade or Business Income annual election
• Form I-435 and instructions (Rev 1/30/25)
• SCDOR Partnership page (election, SC1065-ES, due dates)
• 2026 H.4216 (Act No. 110 of 2026) status page
• 2025 SC1065 Partnership Return (Rev. 6/18/25)
• SC1120S S Corporation Income Tax Return (Rev. 6/17/25)
• SC1065ES Partnership Declaration of Estimated Income Tax (MyDORWAY payment steps)
• SC1120-CDP Corporate Declaration of Estimated Tax (MyDORWAY payment steps)

This guide is for general education and reflects rules as of October 2026. Tax law and agency websites change, and your situation may have details that change the answer. Please talk with your tax professional before acting on it.