
INSIGHTS FOR FINANCIAL INSTITUTIONS	MARCH 18, 2016

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South Dakota Eliminates Estimated Payments for Bank Franchise Tax

In 2014, the South Dakota state legislature began an initiative to both clean up and modernize the state's laws pertaining to the South Dakota Bank Franchise Tax (BFT), which had not been extensively revised since 1977. That initiative continued in 2015 with proposed legislation to update the implementation and administration of the BFT.

On March 10th, South Dakota Governor Dennis Daugaard signed into law South Dakota Senate Bill 53 (SB 53). This bill contained a total of 32 technical updates, clarifications, and removals of obsolete language. Importantly, for those financial institutions required to file a BFT Return, SB 53 eliminates the requirement for quarterly BFT estimated payments.

Reasons for Elimination

In comments to the state legislature supporting this change, South Dakota Department of Revenue's Property and Special Taxes Division Director Michael Houdyshell stated that the process of receiving quarterly estimated payments had not only become cumbersome for the Department of Revenue to administer, but also was difficult for the state to account for in its comprehensive annual financial statements.

Considering the declining revenue generated by the BFT and the desire to provide a benefit to taxpayers by allowing them to hold on to their money longer, SB 53 removes the requirement that quarterly BFT estimated tax payments be made when the prior year's BFT exceeds $10,000. Instead, for returns related to tax years ending in 2015 or thereafter and filed after December 31, 2015, 100 percent of the tax owed is now due at the original due date of the return.

Other Details

If your financial institution did not make BFT estimated payments in 2015, no penalty or interest should result as long as the BFT amount due is paid timely. Additionally, if your institution received vouchers or instructions to make quarterly BFT estimated payments in 2016, you are no longer obligated to make those estimated payments.

Please contact your local Eide Bailly LLP tax professional with questions about South Dakota's BFT or other state tax issues.

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