North Carolina Direct Financial Incentives 2011
North Carolina's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the One North Carolina Fund, Job Development Investment Grants (JDIG), and the Access Road Improvements Program.
The fund helps the state by recruiting and expanding quality jobs in high value-added, knowledge-driven industries, and by providing financial assistance to those businesses or industries deemed by the governor to be vital to a healthy and growing state economy. The fund currently consists of nonrecurring appropriations made by the General Assembly, and is intended to be available for companies seeking to undertake new expansion or locate new operations in the state. The fund is competitive, and the location or expansion must be in competition with another location outside the state. Payments are made on an incremental basis as performance targets are met.
Job Development Investment Grant:
The Job Development Investment Grant (JDIG) is a performance-based discretionary incentive capable of providing sustained annual grants to new and expanding businesses measured against a percentage of withholding taxes paid by new employees. In adopting JDIG, the North Carolina General Assembly intended to stimulate economic activity and to create new jobs for the citizens of the state by encouraging and promoting the expansion of existing businesses and industry within the state and by recruiting and attracting new business and industry to the state. Up to 25 grants may be authorized in a single grant year. The JDIG program requires companies to meet certain state health insurance and workplace safety requirements, and its benefits must outweigh its costs. The project must result in a net increase in employment and be competitive with another state or country.
Community Development Block Grant:
The Community Development Block Grant (CDBG) Program provides grants for infrastructure development. Funds available are based on an annual federal allocation to North Carolina from the U.S. Department of Housing and Urban Development and may be applied for by a local government for economic development projects. Private businesses cannot apply directly for this funding but instead work collaboratively with a local government and receive a loan or grant through the local government for the project. Funded projects lead to the creation or retention of jobs. Economic development category projects involve assistance for public facilities needed to serve the target business.
Access Road Improvements Program:
Funds are available through the NC Board of Transportation to construct roads to provide access to new or expanded industrial or manufacturing facilities, including mills, processing facilities, and laboratories and other industrial research operations. The board also may consider requests for access road improvements to recreational facilities if they are expected to produce additional jobs and attract people to the facilities from other sections of North Carolina and from out of state. Other eligible projects include construction of public school drives; construction of driveways at public medical facilities and public airports; and pavement of entrance aprons at volunteer fire departments and rescue squads that are located inside an incorporated municipality.
Rail Access Program:
The Rail Industrial Access Program provides grant funding to aid in financing the construction or rehabilitation of railroad access tracks required by a new or expanding industry that will result in a significant number of new jobs or capital investment.
NC Port Tax Credits:
Businesses who pay North Carolina state income tax and use North Carolina ports can qualify for tax credits and outbound cargo. The credit is earned on cargo wharfage and handling fees paid to the NC State Ports Authority that exceed the average for over three tax years. The credit applies to taxes due to the state - up to 50 percent of the total tax liability for each tax year. Any unused credit may be carried forward up to five years for a total credit of up to $2 million. The tax credit expires on January 1, 2014.
Enterprise Zone Credits:
Urban Progress Zones (UPZ) and Agrarian Growth Zones (AGZ): Municipalities with a population of at least 10,000 have the ability to define qualifying areas of poverty as Urban Progress Zones. Counties that do not have a municipality with a population of at least 10,000, have the ability to define qualifying areas of poverty as Agrarian Growth Zones. Projects located within these zones receive enhanced Article 3J Credits.
Industrial Development Fund:
The Industrial Development Fund (IDF) is available to assist local governments of the most economically distressed counties in the state. An eligible county or city applies for the funds on behalf of a private manufacturing business located or locating in its jurisdiction. IDF funds may be used for the construction of water, sewer, gas, and electric lines to the site or for the construction or repair of industrial buildings. Funds available for a single project are determined by multiplying the number of jobs committed to be created by $10,000, up to a maximum of $500,000.
Industrial revenue bonds:
Counties establish authorities to issue industrial revenue bonds, which provide tax-exempt financing for eligible new or expanded-product research and development facilities, manufacturing facilities and distribution centers necessary to the manufacturing process. The maximum tax-exempt bond amount is $10 million. Qualifying projects must include local support, a commitment to locate in an area of severe unemployment, the procurement of required environmental permits, the creation of a sufficient number of jobs to impact the local economy (a minimum of six jobs per $1 million of bonds) and the assurance that the new financing will not result in the company closing another North Carolina facility. Bonds are issued by a company based on the company's credit, and all privately owned companies must obtain a bank letter of credit to collateralize the bond.
Industrial Training Program:
North Carolina's Industrial Training Program is a national model for providing industry with customized training. The industrial training service is available to new or expanding industries. The program provides for instructors' wages and travel expenses (even if the instructor is a company employee), as well as classroom materials and suitable training facilities.
Tax credits for qualified investments:
The Article 3J Tax Credit Program offers tax credits to eligible taxpayers that undertake qualifying activities in North Carolina and may be combined to offset up to 50 percent of the taxpayer's state income and franchise tax liability, and unused credits may be carried forward for up to five years. The program establishes three basic credits: for creating new jobs, for investing in business property and for investing in real property in disadvantaged rural counties. The enterprise factors of the county in which the firm operates determine the value of the credits.
Eligible business types include aircraft maintenance and repair; air courier services hub; company headquarters; customer service call centers; electronic shopping and mail order houses; information technology and services; manufacturing; motorsports facility; motorsports racing team; research and development; warehousing; and wholesale trade.
Credits are available based on the primary business at each establishment. A taxpayer may divide a credit between the taxes against which it is allowed. Previously, credits were taken against only one of the taxes against which it was allowed.
Technology Development Tax Credit:
The Technology Development Tax Credit based on a percentage of qualified research expenses with the highest amounts for research performed by North Carolina universities. Businesses with qualified North Carolina research expenses are allowed a credit equal to a percentage of those expenses. The allowable credits are determined by: (1) Small business (annual receipts less than $1 million) - Qualified businesses on the last day of the taxable year are allowed a credit of 3.25 percent; (2) Low-tier research - for expenses for research performed in a Tier 1 county, a business is permitted a credit of 3.25 percent; (3) Other research - for expenses not covered above, for qualified R&D expenses: $0-$50 million, 1.25 percent; $50-$200 million, 2.25 percent; more than $200 million, 3.25 percent.
Credit for NC University Research Expenses
A taxpayer that has NC university research expenses for the taxable year is allowed a credit equal to 20 percent of the expenses. This tax credit expires January 1, 2014.
Interactive Digital Media Tax Credit
A North Carolina taxpayer that develops interactive digital media (IDM) within the state is allowed a tax credit. IDM products are defined by those used for electronic media distribution, including file download over the Internet; contains a computer-controlled virtual universe with which an individual who uses the program may interact in order to achieve a goal; and/or contains a significant amount of at least three of the following five types of data: animated images, fixed images, sound, text, and 3D geometry. This includes game platforms, game engines, and games that have both entertainment and serious applications.
Renewable Energy Tax Credit
Renewable energy expenditures eligible for a tax credit include the cost of equipment and associated design; construction costs; and installation costs less any discounts, rebates, advertising, installation-assistance credits, name-referral allowances or other similar reductions. The credit is repealed for renewable energy property put in place on or after January 1, 2016. The credit is subject to various ceilings depending on the type of renewable energy technology.
North Carolina State Contact:
North Carolina Department of Commerce
301 N. Wilmington Street
4318 Mail Service Center
Raleigh, NC 27699-4318
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.