Area Development North Dakota Resource Page
Basic Business Taxes
A tax on corporations doing business in the state is imposed against the portion of net income apportioned and allocated to the state. Less than $3,000 in N.D. income is taxed at 2.6 percent; $3,001 to $8,000 is taxed $78 plus 4.1 percent of amount over $3,000; $8,001 to $20,000, $283 plus 5.6 percent of amount over $8,000; $20,001 to $30,000, $955 plus 6.4 percent of amount over $20,000; amounts over $30,000 are taxed $1,595 plus 6.5 percent of amount over $30,000. If a corporation elects to use the water's edge method to apportion its income, the corporation will be subject to an additional 3.5 percent surtax on its N.D. taxable income. (Note: The federal income tax is no longer allowed as a deduction in calculating N.D. taxable income.)
Corporate income tax exemptions/credits:
A new business or a business expansion may be granted an income tax exemption of up to 100 percent for up to five years. Applications for the exemptions are subject to the approval of the State Board of Equalization.
Wages and salaries may receive a credit if the corporation is a new business engaged in assembling, fabricating, manufacturing, mixing or processing of an agricultural, mineral or manufactured product. The credit is 1 percent of all North Dakota wages and salaries for the first three years and 0.5 percent of all wages and salaries for the fourth and fifth years. A corporation qualifies for this credit only if it has not received a new-industry five-year income tax exemption.
A "primary sector" business may be granted an income tax exemption for five years; for investments made in a North Dakota venture capital corporation, the credit is limited to 25 percent of the amount invested, up to a maximum credit of 250,000.
North Dakota provides a corporation income tax credit for research and experimental expenditures within the state.
Seed capital investment credit:
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for investing in a qualified business, certified by the Department of Commerce Division of Economic Development and Finance. The credit is equal to 45 percent of the investment. No more than $112,500 of the credit may be used in any year. An unused credit may be carried forward for up to four years. For businesses certified on or after 1/1/2005, or recertified on or after 1/1/2007, only the first $500,000 of eligible investments in a certified business are eligible for the tax credit. The total amount of tax credits allowed for investments made in all certified businesses in any calendar year is limited to $3.5 million.
Agricultural commodity processing facility investment tax credit:
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for investing in an agricultural commodity processing facility in North Dakota certified by the Department of Commerce Division of Economic Development and Finance. In the case of a passthrough entity, such as a partnership or S corporation, the credit is passed through to its owners in proportion to their respective interests in the entity. The credit is equal to 30 percent of the investment, up to a maximum credit of $50,000 per tax year. Not more than 50 percent of the credit is allowed in any tax year. The credit in any tax year may not exceed 50 percent of the tax liability. An unused credit may be carried forward five ten taxable years. A taxpayer is allowed no more than $250,000 in credits for all tax years.
Biodiesel tax credits:
For tax years beginning after December 31, 2002, corporate taxpayers may claim a tax credit equal to 10 percent per year for five years of costs incurred to establish, adapt, or retrofit a facility to produce or blend at least 2 percent biodiesel fuel. The costs must be direct costs incurred after December 31, 2002. The credit is first allowed in the year the facility begins producing or blending biodiesel fuel. Any credit in excess of the current year's liability may be carried forward five taxable years. A corporation is limited to a cumulative credit of $250,000 for all taxable years.
For tax years beginning after December 31, 2004, licensed fuel suppliers who blend at least 5 percent biodiesel fuel are entitled to a tax credit of five cents per gallon of blended fuel. Any credit in excess of the current year's liability may be carried forward five taxable years.
For tax years beginning after December 31, 2004, sellers of at least 2 percent biodiesel fuel blends are entitled to a tax credit equal to 10 percent per year for five years of the seller's direct costs incurred to adapt or add equipment to their facilities to enable them to sell the biodiesel blend. The credit is first allowed in the year the facility begins selling the biodiesel fuel. Any credit in excess of the current year's liability may be carried forward five taxable years. The seller is limited to a cumulative credit of $50,000 for all taxable years.
For passthrough entities, such as a partnership or S corporation, the credits allowed to suppliers and sellers after 2004 are determined at the entity level and passed through to the entity's owners in proportion to their respective interests in the entity.
Sales, Use and Gross Receipts Tax:
The general sales and use tax rate in North Dakota is 5 percent. Special rates include 7 percent gross receipts tax on alcohol, 3 percent gross receipts tax on new farm machinery and new farm irrigation equipment, 3 percent sales tax on new mobile homes, and 1 percent sales tax on natural gas. In addition, many cities and a few counties impose a local option sales, use and gross receipts tax which is administered by the state. For additional information on state and local taxes, including general exemptions to the taxes, please refer to the Office of State Tax Commissioner website at www.nd.gov/tax.
North Dakota offers exemptions from sales and use tax to new or expanding businesses. Included are exemptions for electrical generating facilities, agricultural commodity processing facilities, manufacturing facilities, primary sector businesses (computer and telecommunication equipment), gas processing facilities, and oil refineries. For additional information on these incentive exemptions, please refer to the Office of State Tax Commissioner website at www.nd.gov/tax.
Property tax:
Any and all property reasonably necessary for use by of utility companies in the operation and conduct of their business is subject to property taxation. Property is assessed at 50 percent of true and full value in the local taxing district where it is situated. Taxable value is 10 percent of the assessed value for commercial property, agricultural property, and centrally assessed property; and 9 percent for residential property; and .3 percent or 1.5 percent for centrally assessed wind turbine electric generation units. Taxable value is multiplied by the local mill rate to determine the tax.
Property tax abatement:
The governing board of a city or county may grant a partial or complete abatement from property taxation for up to five years for a new or expanding business' building facilities.
A municipality may grant partial or complete exemptions from property taxation of unoccupied buildings, structures, and improvements constructed and owned by a local development corporation for the purpose of attracting new business to the state. A food- project that produces or manufactures a product from agricultural commodities in North Dakota can receive five years of complete property tax exemptions and partial or full exemptions for years six through 10 of plant operation. A project located in property leased from a government entity qualifies for an exemption for up to five additional years upon annual application by the project operator.
In addition to or instead of an exemption, local governments and any project operator may negotiate payments in lieu of property tax for a period of up to 20 years from the date project operations begin.
Personal property tax:
North Dakota does not tax personal property except for property of utility companies. Personal property includes equipment, inventory, materials and supplies, and accounts receivable.
Additional jobs credit:
North Dakota allows a credit to corporations that hire developmentally disabled or chronically mentally ill persons equal to 5 percent of the first $6,000 in wages paid during the first 12 months of employment.
Energy and fuel conservation measures:
Machinery and equipment installed as part of wind, solar, or geothermal energy systems; as part of systems used to produce mechanical power or electricity; or as part of storage systems for any of these energy sources are exempt from property tax for five years following installation. An income tax credit is available for 5 percent of the acquisition and installation costs of the energy device. Only the land upon which a coal conversion facility is located is subject to property tax. In lieu of the property tax, the coal conversion facility is subject to the coal conversion tax.
North Dakota Dept. of Commerce
Division of Economic Dev. & Finance
P.O. Box 2057
Bismarck, ND 58502
(701) 328-5300
Fax: (701) 328-5320
