Bill
H 3751
South Carolina would exclude from state gross income any income from digital assets that is included in federal gross income, effective for tax years after 2024.
Note on source materials
- The materials provided include two different bills both labeled H 3751: (A) a Massachusetts bill titled “An Act to rehabilitate regional roadways” (amending Mass. Gen. Laws ch. 6C, §50), and (B) a South Carolina bill that would exclude income from digital assets (cryptocurrency) from state gross income. This summary focuses on the South Carolina digital‑asset tax provision because your requested title is “Taxation of digital assets” and the SC bill text is included in full.
Purpose and intent
- To exclude from South Carolina taxable gross income any income that is included in federal gross income and that is derived from the receipt, sale, exchange, or other disposal of digital assets such as cryptocurrency. The intent is to decouple South Carolina income tax treatment from federal taxation for gains (and receipts) involving digital assets.
Key provisions
- Amendment: Adds a new paragraph (12) to S.C. Code § 12‑6‑1120 (Modifications of gross income).
- Text of new provision: “South Carolina gross income does not include any income included in federal gross income that is derived from the receipt, sale, exchange, or otherwise disposal of digital assets such as cryptocurrency.”
- Effective date: Takes effect upon approval by the Governor and “first applies to tax years beginning after 2024.”
Who would be affected
- Individual and corporate taxpayers subject to South Carolina income tax who have income from digital‑asset transactions (receipt, sale, exchange, disposal).
- Nonresident taxpayers with SC‑source digital‑asset income would be affected to the extent state taxable income rules apply.
- South Carolina Department of Revenue (administration, guidance, and enforcement responsibilities).
Practical effects and implications
- State-level exclusion: Taxpayers would no longer include cryptocurrency and similar digital‑asset gains/receipts in South Carolina gross income, even when those amounts are included in federal gross income and taxed federally.
- Revenue impact: Likely reduces individual and corporate income tax revenue for South Carolina relative to current law. The bill provides no fiscal estimate; actual revenue effect depends on the prevalence and magnitude of digital‑asset income among SC taxpayers.
- Compliance and administration: The Department of Revenue would need to update forms and guidance. Lack of a statutory definition of “digital assets” or rules for valuation, reporting, and loss treatment could create uncertainty and administrative challenges.
- Federal tax unchanged: Excluding this income from South Carolina gross income does not change federal taxable income—taxpayers remain responsible for federal tax on digital‑asset transactions.
Observations and open questions
- Definition: The phrase “digital assets such as cryptocurrency” is broad but not specific; ambiguous terms (e.g., NFTs, tokens, stablecoins, utility vs. security tokens) could lead to disputes without implementing guidance or a statutory definition.
- Interaction with other provisions: The bill does not state how related items (e.g., basis adjustments, capital loss recognition, withholding, information reporting) should be treated for state purposes.
- Anti‑abuse/anti‑avoidance: No explicit anti‑abuse provisions are included to address potential tax planning that recharacterizes income.
Procedural status
- The SC bill text indicates it takes effect upon gubernatorial approval and applies to tax years beginning after 2024. No SC legislative sponsors or committee actions are listed in the provided text. (See note above regarding mixed source materials for H 3751.)
If you want, I can:
- Draft suggested technical amendments (definitions, reporting, anti‑abuse language), or
- Produce a short fiscal‑impact checklist for legislative budgeting staff.
Compiled from official sources — confirm details with the bill’s official record.
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