North Dakota Direct Financial Incentives
North Dakota's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment.
Corporate Taxes & Incentives Guide
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.
The Bank of North Dakota (BND) provides a Business Development Loan Program that is designed to assist new and existing businesses in obtaining loans that reflect a higher degree of risk than would normally be acceptable to a lending institution. The Bank of North Dakota will consider a participation in the range of 50% - 70% of the loan. The maximum BND loan participation is $1 million and BND's interest rate can either be fixed or variable.
BND also participates in the Partner in Assisting Community Expansion (PACE) Loan Program, an interest buy-down program with state, local lender, and community participation. The program is intended to assist North Dakota communities to expand their economic base by providing for new job development. The borrower can be any person or entity whose business is in 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 a PACE qualified business, and all other service companies and wholesalers that generate 75 percent or more of their sales outside of the state of North Dakota. The program uses monies set aside in the PACE fund with local monies to reduce the interest rate on loans. The PACE Fund may provide an interest rate buy down up to a maximum of $300,000. In all cases, the buy down is matched by the community at the designated participation level described under Community Percentage Factor. In addition, the PACE Fund's participation is limited to the amount required to buy down the interest to the lower of 5% below the yield rate but in no event may the interest rate be more than 500 basis points below the national prime rate. The borrower's rate shall never fall below 1% at any time.
The PACE program has expanded to include the Flex PACE Program and the Biofuels PACE Program.
The Flex PACE feature of the PACE program provides interest buy down to borrowers that do not fit into the traditional definition of a PACE qualifying business. Under Flex PACE, the community determines eligibility and accountability standards. Flex PACE allows communities the ability to provide assistance to borrowers with a business focus or need outside of the current requirements of PACE, such as jobs retention, technology creation with no new jobs, retail, smaller tourist businesses and essential community services. Job creation is not a requirement of Flex PACE, but jobs will be tracked for informational purposes. BND will provide up to $100,000 of Flex PACE funds for regular projects, $500,000 of Flex PACE funds for Affordable Housing Projects and up to $300,000 for Licensed Child Care Projects.
The Biofuels PACE program was established to buydown the interest rate on loans to biodiesel and ethanol facilities and livestock operations.
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 or 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: 40-50 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; project maximum: $500,000 of interest buy down; loan terms: 7 to 12 years; equity: 40 percent to 50 percent.
Green Diesel Production Criteria: Production facility must be located in North Dakota; facility must produce fuel derived from non-fossil renewable resources; fuel must be suitable for blending with diesel fuel for use in internal combustion diesel engines; project maximum - $500,000 of interest buy down; loan terms - 7 to 12 years; equity - 40% to 50.
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 including a biodigester system; project maximum: $250,000 of interest buy down to any single livestock operation' loan terms: 5-15 years; equity: 40 percent.
Other Biofuels PACE Parameters: Recipients of Biofuels PACE are not eligible for regular PACE funds; interest buy down of 5 percent below the note rate; no community match is 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.
BND also offers The MATCH program. This program is designed to encourage and attract financially strong companies to North Dakota that will provide a major economic benefit to the State. This strength must be evidenced by a long-term credit rating of “BBB”or better as determined by a national rating agency. The Borrower may also access the program by: pledge of a certificate of deposit or marketable securities of a quality and level acceptable to BND; securing a full guarantee of BND’s portion of the loan from a federal guaranty agency or a company with a qualifying long term credit rating; substitution of a credit enhancement (letter of credit for example) from a financial institution which provides the equivalent of an Investment Grade rating; substitution of a credit enhancement (letter of credit for example) from a financial institution backed by the pledge of Fed book entry securities or substitution of a credit enhancement (letter of credit for example) from a financial institution with an established fed funds line with BND (the enhancement may not exceed 50% of the fed funds line available at BND for the institution).
The program is targeted to manufacturing, processing and value-added industries. The interest rate on BND's portion of the loan shall be determined based upon the strength of the Borrower’s credit rating or the rating equivalent provided by the credit enhancement. The interest rate may be adjusted periodically throughout the term of the loan depending upon the conditions of the MATCH funding and the ability of the borrower to maintain its long-term credit rating.
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 in loan or equity funding.
The state-sponsored North Dakota 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. If a business can't handle added debt, the Development Fund could take an equity financing position. The North Dakota Development Fund and the Rural Revolving Loan Fund initial funding amount into "Primary Sector" businesses is up to $1,000,000.
The Development Fund also administers the Child Care Loan Program to provide financial assistance to North Dakota Child Care Providers. Eligible organizations are licensed profit, non-profit and public child care facilities. Faith-based organizations are eligible, but must follow all appropriate federal guidelines, if receiving federal subsidies. The maximum amount of funding available to Child Care facilities is $100,000 and can be used for acquiring, leasing, or remodeling of real estate facilities, purchasing equipment or working capital.
The North Dakota Development Fund also administers the Small Business Technology Program. The Small Business Technology Program provides loan or equity funding to any start-up primary sector business that is in the technology field of up to $50,000. Each $1 dollar accessed under the program must be matched by $2 dollar of funding from a certified North Dakota angel fund. The recipient may only receive one investment under this program.
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: Paul Lucy, Director
Economic Development & Finance Division
North Dakota Department of Commerce
PO Box 2057
Bismarck, ND 58502-2057
For tax incentive information:
Ryan Rauschenberger, Commissioner
Office of State Tax Commissioner
600 E Boulevard Ave, Dept 127
Bismarck, ND 58505-0599
For tax information:
Email: email@example.com 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. This information was last updated January 2016.