North Dakota Direct Financial Incentives 2010 | North Dakota Income Tax Capital Credit

Industrial development bonds:
Cities and counties issue tax-exempt industrial development bonds to provide financing for land, buildings, and equipment to businesses. Interest rates are negotiated with the lender. Bond terms are up to 40 years. Bonds issued to build a project are exempt from all state and local taxes with the exception of transfer, estate, and inheritance taxes. Principal and interest may be guaranteed by the state.

The Bank of North Dakota (BND) operates a business development loan program that may provide up to $500,000 in loan proceeds per borrower. The program requires a minimum of 30 percent participation from another financial institution that will originate and service the loan. The interest rate is tied to the BND base rate.

BND also participates in the Partnership in Assisting Community Expansion (PACE) Program, an interest buy-down program with state, local lender, and community participation. The program uses monies set aside in the PACE fund with local monies to reduce the interest rate on loans by as much as 5 percent below the note rate (floor of 1 percent or 5 percent below WSJ Prime which is greater). The borrower must create 1 job for every $100,000 of loan proceeds.

The funds are targeted for manufacturing, processing, value-added processing, and targeted service industries. Targeted service industries are businesses involved in data processing, telemarketing, telecommunications, major tourist attractions, holding companies involved in leasing assets to entities otherwise defined as PACE business, and all other service companies and wholesalers that generate 75 percent or more of their sales outside the state of North Dakota.

The MATCH program provides long-term, fixed-rate financing for companies with a long term bond rating of "A" or better from a national rating agency. The interest rate is set at an equivalent term U.S. Treasury note plus .25 to .50 percent. The funds are targeted for businesses that provide a major economic benefit to the state.

Administered by the North Dakota Development Fund, the New Venture Capital Program through the Bank of North Dakota provides funding for early stage companies which can show clear proof of completed product development and market acceptance as evidenced by growing sales. The Bank will invest in a variety of technologies and businesses types, including strategic target industries. BND will also invest in growth and later stage manufacturing, service and businesses with profitable growth potential. The New Venture Capital Program will invest up to $300,000 with appropriate capital structures favoring subordinated debt with warrants to acquire common stock, preferred stock with warrants to acquire common stock and common stock.??

The state-sponsored Development Fund provides "gap financing" through loans and equity investments not available from most conventional lenders and is available to any primary-sector business with the exception of production agriculture. The Development Fund also administers the Regional Rural Revolving Loan Fund, which provides funding for primary-sector projects located in a community of less than 8,000 in population or located more than five miles outside the city limits. The fund is a secondary source of financing, subordinate to private sources. If a business can't handle added debt, the Development Fund can take an equity financing position.

The Flex PACE program will provide interest buy-down to non-PACE qualifying businesses where the community determines eligibility and accountability standards. Flex PACE will allow communities the ability to provide assistance to businesses that would not meet the current requirements of PACE such as: jobs retention, technology creation with no new jobs, retail, smaller tourist businesses and essential community businesses. Jobs creation will not be a requirement of Flex PACE, but jobs will be tracked for informational purposes. BND will designate set aside money from the existing PACE funds for Flex PACE, but this designation is not an exclusive reservation of the funds and therefore will be available for other PACE eligible projects. The cumulative amount of PACE funds available per biennium under Flex PACE to a North Dakota community or an individual borrower may be capped by the Investment Committee.

Biofuels PACE (Biofuels Partnership in Assisting Community Expansion) was established to buy down the interest rate on loans to biodiesel and ethanol production facilities, livestock operations, biofuels retailers, and grain handling facilities.

Ethanol Production Criteria: Production facility must be located in North Dakota; facility must produce agriculturally derived denatured ethanol; fuel must be suitable for blending with a petroleum product for use in internal combustion engines; ownership must consist of Ag producers who hold at least 10 percent interest in the facility; residents of North Dakota must own at least 50 percent of the company; project maximum: $500,000 of interest buy down; loan terms: 7 to 12 years; equity: 40 percent to 50 percent.

Biodiesel Production Criteria: Production facility must be located in North Dakota; facility must produce biodegradable, combustible liquid fuel derived from vegetable oil or animal fat; fuel must be suitable for blending with diesel fuel for use in internal combustion diesel engines; ownership must consist of Ag producers must hold at least 10 percent interest in facility and residents; North Dakota must own at least 50 percent; project maximum: $500,000 of interest buy down; loan terms: 7 to 12 years; equity: 40 percent to 50 percent.

Livestock Operations Criteria: Livestock operations located in North Dakota that feed, handle, milk, or hold livestock with these operations using as part of its operation a byproduct produced at a biodiesel or an ethanol production facility' eligible uses are for the purchase or construction of real property, expansion of facilities, and purchase or installation of equipment; project maximum: $250,000 of interest buy down to any single livestock operation' loan terms: 5 to 15 years; equity: 40 percent.

Retailer Pumps Criteria: Pumps must be installed by a North Dakota biofuels retailer; the retailer must dispense and distribute biodiesel blends with a minimum of 5 percent biodiesel or gasoline blends with greater than 60 percent ethanol' project maximum: $10,000 of interest buy down to any single location of a biofuels retailer; loan terms: 5 to 7 years; equity: 25 percent.

Grain Handling Facilities: Grain handling facilities located in North Dakota and licensed to do business in North Dakota which provide condominium storage of grain that is principally intended for the production of biofuels' eligible uses are for the purchase or construction of real property expansion of facilities and purchase or installation of equipment; project maximum: $50,000 of interest buy down to a grain handling facility; loan terms: 5 to 10 years; equity: 25 percent to 40 percent.

Other Biofels PACE Parameters: Recipients of Biofuels PACE are not eligible for regular PACE funds' interest buy down of 5.0 percent below the note rate; community match required; existing PACE Program parameters (ex.: interest rate buy down maximum, BND's participation amounts, default) will apply to Biofuels PACE; loan funds may not be used to refinance any existing debt or for relocation within the state. A maximum of $4.5 million of the $5 million PACE program will fund ethanol production, biodiesel production, feedlot operations and dairy operations. The remaining dollars will be fund projects related to retailer pumps and condo grain storage for a total of $250,000 each.

Customized industrial training:
The Specialized Job Training Program custom-trains people for the specific needs of new and expanding industries. The state assists firms in recruiting, screening, and testing potential trainees.

North Dakota offers a New Jobs Training Program for new or expanding businesses. Qualifying businesses can obtain loans that are repaid through state income tax withholding credits. State income tax on wages paid normally goes into the state's general fund. In this instance, the income tax revenue is used to pay off the loan instead. In practice, the training is at no cost to the business, since the revenue comes from individual state income taxes that would have to be paid.

Workforce 20/20 is a state funded program that provides direct grants to employers for training, retraining, and upgrade training. The program is administered through Job Service North Dakota and requires a match from the employer.

North Dakota State Contact:
North Dakota Dept. of Commerce
Division of Economic Development and Finance
P.O. Box 2057
Bismarck, ND 58502
(701) 328-5300 Fax: (701) 328-5320

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.