I-435: Active Trade or Business Income for Electing Partnerships and S Corporations (Revision 2025-01)
South Carolina · South Carolina DOR · Used for tax years 2024, 2025, 2026
South Carolina Form I-435 identifies active trade or business income for electing partnerships and S corporations and calculates the 3% tax imposed on the entity. It reports federal Schedule K amounts, South Carolina amounts, and income already taxed by another partnership or S c
Who files this form
Qualified partnerships, S corporations, and LLCs taxed as partnerships or S corporations must complete I-435 if they elect to have active trade or business income taxed at the entity level at the 3% flat rate.
A qualified entity must be owned entirely by qualified owners or by partnerships owned directly by qualified owners or through other partnerships. Qualified owners include individuals, trusts, estates, and certain other entity types described in the form.
Complete one I-435 for each return.
What you'll need
Have these items available to complete I-435:
- The partnership or S corporation's name and FEIN.
- Federal Schedule K amounts for Column A.
- Schedule SC-K amounts allocated or apportioned to South Carolina for Column B.
- South Carolina active trade or business amounts for Column C.
- SC K-1s received from other partnerships or S corporations showing active trade or business income already taxed at the entity level, for line 15.
- Your SC1065 or SC1120S, which receives the totals from I-435 and must have I-435 attached.
How to file
Complete one I-435 and attach it to your SC1065 or SC1120S.
- Add the amounts in Column C and enter the total on line 14. Also enter it on SC1065, line 2, or SC1120S, line 5.
- On line 15, enter active trade or business income already taxed by another partnership or S corporation, as shown on SC K-1s received.
- Subtract line 15 from line 14 to calculate line 16.
- Multiply line 16 by 3% and enter the tax on line 17. Also enter it on SC1065, line 3, or SC1120S, line 6.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Do not enter amounts in Column C that are greater than the corresponding amounts in Column B.
- Do not include capital gains or losses, or passive investment income and related expenses, in active trade or business income.
- Do not enter income from personal services in Column C on line 1, or guaranteed payments for services on line 4.
- Do not treat all rental income as active business income. Rental income is typically passive. Only qualifying income from an active rental business belongs in Column C.
- Do not include dividends, short-term or long-term capital gains or losses, or line 13 other deductions in active trade or business income.
- Remember to attach I-435 to your SC1065 or SC1120S.
Questions people ask
What tax rate does I-435 use?
The form uses a 3% flat tax rate. Multiply taxable active trade or business income on line 16 by 3% to calculate the tax on line 17.
Does the entity make the election every year?
Yes. Qualified entities elect each year whether to have active trade or business income taxed at the entity level.
What if another partnership or S corporation already paid tax on some of the income?
Enter the already-taxed active trade or business income shown on SC K-1s received on line 15. Subtract line 15 from line 14 to calculate taxable active trade or business income.
How is the entity-level income reported to owners?
The electing entity reports active trade or business income taxed at the entity level to partners or shareholders on SC K-1s. Partners or shareholders use I-335 with their SC1040 to account for that income.