South Carolina motorists will be eligible for a larger break on their gasoline taxes for 2019, based on figures released by the state Revenue and Fiscal Affairs Office.

The credit will come out to 3.84 cents per gallon, compared to 1.902 cents per gallon during the 2018 tax year.

Officially known as the “motor fuel income tax credit,” the refund was a byproduct of 2017 legislation the raised the state gasoline tax. The tax, which was 16 cents per gallon prior to July 2017, has been rising by 2 cents each July and will continue to do so until it reaches 28 cents in 2022.

To offset the increase, South Carolina residents and businesses can claim the credit for up to two vehicles (cars, motorcycles, pickups, mopeds and SUVs, but not ATVs, tractors or heavy vehicles) when they file their annual tax return. The state is setting aside funds each year and calculating the credit based on estimates of fuel usage and the number of taxpayers expected to claim it.

A Sept. 27 letter from Frank Rainwater, executive director of the Fiscal Affairs Office, to Hartley Powell, director of the S.C. Department of Revenue, outlined the data that went into this year’s calculation.

For 2018, it’s estimated that by the time extensions are filed, a little under 86,000 tax returns will have claimed the credit for only $2.087 million out of a set-aside pool of $40 million.

“While we have the experience from one year, 2018, which had a very low claim rate, we believe that experience is not representative of the future,” Rainwater said.

For the 2019 tax year, $65 million is being set aside to pay the credit. Slightly more than 4.1 million vehicles are expected to qualify for the credit. An average of 511 gallons of gas is expected to be purchased for each vehicle.

To claim the credit, taxpayers must keep track of the number of gallons of gas pumped – not miles driven or dollars spent on gas – during the tax year. They must also keep maintenance records for each vehicle, because the tax credit is paid on the lesser of maintenance expenses or gas taxes paid.

“We anticipate that all taxpayers will incur maintenance expenses of at least $25.54 annually,” Rainwater said in his letter to Powell.

Rainwater said taxpayers may not have been aware of the credit in 2018. He said recordkeeping requirements, the size of the credit and problems with claiming the credit in tax preparation software may have also contributed to the low claim rate and he expects more claims in 2019.

“The key factors for expecting a higher compliance level are a higher value of the credit this year, the experience and increased taxpayer awareness of the credit, and better ease and improved use of tax software,” Rainwater said.

Tax professionals contacted by South Carolina CEO remain skeptical. Allison Ford, an officer with Burkett Burkett & Burkett Certified Public Accountants PA, which has offices in Columbia and Rock Hill, said her clients were eligible for credits of $6-$12 on their 2018 returns.

“Based on the recordkeeping requirements, it’s just too voluminous to make even double the credit worth it,” she said. “Someone’s got to remember to do that all year long, because by the time we get the receipts, often they’re not legible.”

It’s estimated that between a quarter and a third of the gasoline tax in South Carolina is paid by non-residents. The purpose of the credit was to “protect South Carolinians as best you can,” while raising funds for road construction, said Rep. Gary Simrill, a Rock Hill Republican and House Majority Leader who co-sponsored the gas tax legislation.

“I’ve talked to residents who said the juice wasn’t worth the squeeze,” Simrill said. But he also pointed out that by 2022, some drivers will be paying upwards of $50 per year in additional gasoline taxes. “I hope that redemption rate continues to grow.”