Changes to Existing Law

26.372.15 26.372.16 101st Legislative Session 18 2026 South Dakota Legislature Senate Bill 18 Introduced by: The Chair of the Committee on Taxation at the request of the Department of Revenue Underscores indicate new language. Overstrikes indicate deleted language. ENROLLED AN ACT ENTITLED An Act to repeal income modifications for the bank franchise tax pertaining to bad 1 debts. 2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 3 Section 1. That § 10-1-47 be AMENDED: 4 10-1-47. The terms "United States Internal Revenue Code" and "Internal Revenue 5 Code" mean the United States Internal Revenue Code as amended and in effect on January 6 1, 2025. This section applies to §§ 10-4-9.1, 10-4-9.2, 10-4-9.3, 10-4-9.4, 10-4-39, 10-7 6-157, 10-6-157, and 10-43-10.1, and subdivisions 10-6A-1(7), 10-6B-1(5), 10-18A-1(6), 10-43-8 10.3(6) 10-43-10.3(5), and 10-45A-1(5). 9 Section 2. That § 10-43-10.2 be AMENDED: 10 10-43-10.2. Added to taxable income are: 11 (1) Interest or dividend income derived from obligations or securities of states or 12 political subdivisions, or authorities thereof, not included in taxable income as 13 determined under the Internal Revenue Code; 14 (2) All income taxes paid or accrued, as the case may be applicable, during the tax 15 year under the provisions of chapter 10-43 this chapter or under the provisions of 16 any income tax, or franchise or privilege taxes measured by income levied by any 17 other state or political subdivision to the extent that such the taxes were deducted 18 to determine federal taxable income; 19 (3) Bad debt deductions in excess of credits actually ascertained to be worthless and 20 charged off within the tax year; 21 (4) Any amount subsequently received on account of a bad debt previously charged 22 off as a deduction for tax purposes; 23 (5) Any amount received as a refund of federal income taxes during the tax year if 24 that amount was previously deducted in determining net income; 25 26.372.15 2 18 Underscores indicate new language. Overstrikes indicate deleted language. (6)(4) (4) Dividends received from other corporations to the extent that such the dividends 1 have been deducted from net income as determined under the Internal Revenue 2 Code; and 3 (7)(5) (5) Any capital loss from liquidating : 4 from: 26.372.16 2 18 SB18 ENROLLED (a) Liquidating sales within the twelve-month period beginning on the date on 5 which a financial institution adopts a plan of complete liquidation, if all of 6 the assets of the financial institution are distributed in complete liquidation, 7 less assets retained to meet claims within the twelve-month period, period; or from 8 the ; or 9 (b) The distribution of property in complete liquidation of the financial 10 institution which that is subject to federal corporate income taxes pursuant 11 to § 336 of the Internal Revenue Code. 12 Section 3. That § 10-43-10.3 be AMENDED: 13 10-43-10.3. Subtracted from taxable income are: 14 (1) Dividends received from financial institutions subject to taxation under this 15 chapter, to the extent such the dividends were included in taxable income as 16 determined under the Internal Revenue Code; 17 (2) Taxes imposed upon the financial institution within the tax year, under the Internal 18 Revenue Code, excluding any taxes imposed under 26 USC § 1374 and 26 USC 19 § 1375; 20 (3) Any interest expense described in §§ 291(e)(1)(B) and 265(b) of the Internal 21 Revenue Code, which interest expense shall be is deductible; 22 (4) Any capital gain from liquidating : 23 from: (a) Liquidating sales within the twelve-month period beginning on the date on 24 which a financial institution adopts a plan of complete liquidation, if all of 25 the assets of the financial institution are distributed in complete liquidation, 26 less assets retained to meet claims within the twelve-month period, period; or from 27 the ; or 28 (b) The distribution of property in complete liquidation of the financial 29 institution which that is subject to federal corporate income taxes pursuant 30 to § 336 of the Internal Revenue Code; 31 (5) Any adjustment to taxable income due to a change in the method used to compute 32 the federal bad debt deduction where the adjustment has already been included in 33 taxable income for purposes of the tax imposed by this chapter; 34 26.372.15 3 18 Underscores indicate new language. Overstrikes indicate deleted language. (6) For those financial institutions making an election pursuant to 26 USC § 1362(a) 1 of the United States Internal Revenue Code, as defined by § 10-1-47, imputed 2 federal income taxes in an amount equal to the taxes that would have been paid 3 on net income as defined in § 10-43-10.1 had the financial institution continued to 4 file its federal tax return without making an election to file pursuant to 26 USC 5 § 1362(a); and 6 (7)(6) (6) For those financial institutions organized as limited liability companies, imputed 7 federal income taxes in an amount equal to the taxes that would have been paid 8 26.372.16 3 18 SB18 ENROLLED on net income as defined in § 10-43-10.1 had the financial institution elected to 9 file as a subchapter C corporation under the Internal Revenue Code. 10 26.372.16 4 18 SB18 ENROLLED An Act to repeal income modifications for the bank franchise tax pertaining to bad debts. I certify that the attached Act originated in the: Senate as Bill No. 18 Secretary of the Senate President of the Senate Attest: Secretary of the Senate Speaker of the House Attest: Chief Clerk of the House Senate Bill No. 18 File No. ____ Chapter No. ______ Received at this Executive Office this _____ day of _____________, 2026 at ____________M. By for the Governor The attached Act is hereby approved this ________ day of ______________, A.D., 2026 Governor STATE OF SOUTH DAKOTA, ss. Office of the Secretary of State Filed ____________, 2026 at _________ o'clock __M. Secretary of State By Asst. Secretary of State