North Dakota Economic Development Directory
ND Statewide Economic Development Agencies
ND Regional Economic Development Agencies
ND County Economic Development Agencies
ND City Economic Development Agencies
North Dakota State Incentives
PROPERTY TAX EXEMPTION: Any new or expanding business project may be granted a property tax exemption for up to five years. All buildings, structures or improvements used in, or necessary to, the operation of the project qualify. The structure might be the project’s buildings or the project’s quarters within a larger building. Land does not qualify for an exemption. Two extensions are available:
- Agricultural processors may be granted a partial or full exemption for up to five additional years.
- A project located on 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.
WIND TURBINE ELECTRIC GENERATION PROPERTY TAX REDUCTION: A property tax reduction applies to a centrally assessed wind turbine electric generation unit—a unit that produces electric power for public use—with a nameplate generation capacity of 100 kilowatts or more. For an eligible wind turbine on which construction is completed before January 1, 2015, the taxable value is calculated at 3 percent of assessed value instead of at 10 percent which applies to other centrally assessed property. The taxable value is calculated at 1.5 percent of assessed value if:
- construction of the wind turbine is completed after June 30, 2006, and before January 1, 2015, or
- a purchased power agreement was executed after April 30, 2005, and before January 1, 2006, and the construction of the wind turbine was completed after April 30, 2005, and before July 1, 2006.
SALES TAX EXEMPTIONS
- AGRICULTURAL COMMODITY PROCESSING PLANT CONSTRUCTION MATERIALS: Construction materials used to construct an agricultural commodity processing facility are exempt from sales and use taxes.COAL MINE MACHINERY OR EQUIPMENT: A sales and use tax exemption may be granted for machinery or equipment used to produce coal from a new mine in North Dakota. The exemption for each new mine is limited to the first $5 million of sales and use tax paid. The exemption extends to replacement machinery or equipment if the capitalized investment in the new mine exceeds $20 million.
- COMPUTER & TELECOMMUNICATIONS EQUIPMENT: For primary sector businesses other than manufacturers and recyclers, a sales and use tax exemption is allowed for purchases of computer and telecommunications equipment. To qualify, the equipment must be an integral part of a new primary sector business or create an economic expansion of an existing business, and the primary sector business must be certified by the Department of Commerce Division of Economic Development and Finance. The exemption does not extend to the purchase of replacement equipment.
- ELECTRICAL GENERATING FACILITIES—COAL-POWERED: An exemption may be granted for purchasing building materials, production equipment and other tangible personal property used in the construction or expansion of coal-powered electrical generating facilities. To qualify, the facility must convert beneficiated coal or coal from its natural form into electrical power and have at least one single electrical generation unit with a capacity of 50,000 kilowatts or more.
- ELECTRICAL GENERATING FACILITIES—WIND-POWERED: An exemption is allowed for purchasing building materials, production equipment, and other tangible personal property used in the construction or expansion of wind-powered electrical generating facilities between July 2001 and January 2015. To be eligible, a facility must have at least one single electrical energy generation unit with a nameplate capacity of 100 kilowatts or more.
- ELECTRICAL GENERATING FACILITIES—OTHER: An exemption may be granted for purchasing building materials, production equipment and other tangible personal property used in the construction or expansion of an electrical generating facility other than a coal- or wind-powered facility. To qualify, the facility must produce electricity for resale or for consumption in a business activity and have at least one single electrical generation unit with a capacity of 100 kilowatts or more.
- GAS PROCESSING FACILITIES: An exemption may be granted for purchasing building materials, equipment and other tangible personal property used in the expansion or construction of a gas processing facility. Also, tangible personal property used to construct or expand a system to compress, process or gather gas recovered from an oil or gas well in ND may qualify for an exemption. In addition, purchases of machinery, equipment and related facilities for environmental upgrades that exceed $100,000 and that reduce emissions, increase efficiency or enhance reliability of equipment may also qualify for an exemption.
- MANUFACTURING, AGRICULTURAL OR RECYCLING EQUIPMENT: A new or expanding plant may exempt machinery or equipment from sales and use taxes if it is used primarily for manufacturing or agricultural processing, or used solely for recycling. The expansion must increase production volume, employment or the types of products that can be manufactured or processed.
- OIL REFINERIES: An exemption may be granted for building materials, equipment and other tangible personal property used to expand or construct an oil refinery in North Dakota. To qualify, the facility must have a nameplate capacity of processing at least 5,000 barrels of oil per day. In addition, purchases for environmental upgrades that exceed $100,000 and that reduce emissions, increase efficiency or enhance reliability of equipment may also qualify for an exemption.
- TELECOMMUNICATIONS INFRASTRUCTURE: An exemption may be granted through December 31, 2012 for purchasing tangible personal property used to construct or expand telecommunications service infrastructure within the state. To qualify, the property must be incorporated into a telecommunications service infrastructure owned by a telecommunications company.
- BIODIESEL EQUIPMENT: The sale of equipment not installed by the seller to a facility licensed under N.D.C.C. § 57-43.2-05 to enable the facility to sell diesel fuel containing at least 2 percent biodiesel fuel or green diesel fuel by volume is exempt from sales tax.
- CARBON DIOXIDE FOR ENHANCED OIL & GAS RECOVERY: The sale of carbon dioxide to be used for enhanced recovery of oil or natural gas is exempt from sales and use tax.
- HYDROGEN GENERATION FACILITY: Sales of hydrogen used to power an internal combustion engine or fuel cell are exempt from sales tax. Equipment used directly and exclusively in the production and storage of this hydrogen by a hydrogen generation facility is also exempt from sales tax.
INCOME TAX EXEMPTION: A primary sector or tourism business may qualify for an income tax exemption for up to five years. “Primary sector” refers to a business that adds value to a product, process or service that produces new wealth in ND. Eligibility is limited to a new business or existing business that expands its operations in the state. A business is not eligible for the exemption if it has received a property tax exemption under tax increment financing; there is an outstanding recorded lien for delinquent property, income, sales or use taxes against the business; or the exemption fosters unfair competition or endangers existing business.
AGRICULTURAL COMMODITY PROCESSING FACILITY INVESTMENT CREDIT: An income tax credit may be allowed for investing in an agricultural commodity processing facility—a livestock feeding, handling, milking or holding operation that uses as part of its operation a by-product produced at a biofuels production facility—in ND certified by the Dept. of Commerce Division of Economic Development and Finance (EDF). An investment may consist of a direct cash payment, a transfer of a fee simple interest in ND real property or a direct transfer of cash from a retirement plan for which the investor controls where the plan’s assets are invested. The credit is equal to 30 percent of the investment. No more than $50,000 of the credit may be used in any year. An unused credit may be carried forward up to ten years. A taxpayer is allowed no more than $250,000 in credits for all years.
ANGEL FUND INVESTMENT CREDIT: An income tax credit is allowed for investing in an angel fund in ND certified by the Department of Commerce EDF. The credit is equal to 45 percent of the investment, up to a maximum credit of $45,000 per year. An unused credit may be carried forward up to seven tax years. For credits based on investments made on or after January 1, 2011, a taxpayer is allowed no more than $150,000.
AUTOMATION CREDIT: Allowed only for the 2013, 2014 and 2015 tax years, it is an income tax credit for purchasing machinery and equipment for the purposes of automating a manufacturing process in ND. The credit is equal to 20 percent of the cost of the machinery and equipment approved by the Department of Commerce EDF. The business must be certified by EDF as a primary sector business to be eligible for the credit. An unused credit may be carried forward up to five tax years. 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 ownership interests. Total credits are limited to $2 million in any calendar year.
RESEARCH EXPENSE CREDIT: An income tax credit for conducting research in North Dakota. The credit is equal to a percentage of the excess of qualified research expenses in ND over the base amount in North Dakota.
The applicable percentage is 25 percent for the first $100,000 of excess expenses in a tax year. For excess expenses over $100,000 in a year, the applicable percentage for tax years 2007 through 2016 is:
- 20 percent, if qualified research in North Dakota first begins in 2007 through 2010, or
- 7.5 percent for 2007, 11 percent for 2008, 14.5 percent for 2009, and 18 percent for 2010 through 2016, if qualified research in North Dakota began before 2007, or
- 8%, if qualified research in North Dakota first begins after 2010.
For tax years after 2016, the applicable percentage for excess expenses over $100,000 in a year is 8 percent for all taxpayers, regardless of when qualified research first begins.
SEED CAPITAL INVESTMENT CREDIT: An income tax credit for investing in a business certified by the Department of Commerce EDF. 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 up to four tax years. Only the first $500,000 of eligible investments in the 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.
WAGE & SALARY CREDIT: A corporation doing business in North Dakota for the first time is allowed an income tax credit if it did not receive a property or income tax exemption under N.D.C.C. ch. 40-57.1; was not created from a reorganization or acquisition of an existing ND business; and is engaged in assembling, fabricating, manufacturing, mixing or processing of an agricultural, mineral or manufactured product. The credit is equal to:
- 1 percent of wages and salaries paid during the tax year for each of the first three tax years of operation, and
- ½ percent of wages and salaries paid during the tax year for the fourth and fifth tax years.
WORKFORCE RECRUITMENT CREDIT: If extraordinary recruitment methods are used to hire employees for hard-to-fill positions in ND, an income tax credit equal to 5 percent of the compensation paid during the first 12 consecutive months to the employee hired is allowed in the first tax year following the tax year in which the employee completes the 12 consecutive month employment period. Unused credit may be carried forward up to four tax years. To qualify, an employer must pay an annual salary that is at least 125 percent of North Dakota’s average wage and must have employed all of the following recruitment methods for at least six months to fill a position for which the credit is claimed:
- Contracted with a professional recruiter for a fee;
- Advertised in a professional trade journal, magazine or publication directed at the trade or profession;
- Provided employment information on a web site for a fee; and
- Paid a signing bonus, moving expenses or atypical fringe benefits.
In addition, if an employer claims the credit, the employee hired in the hard-to-fill position is allowed a deduction for the signing bonus, moving expenses, or atypical fringe benefits paid by the employer that are included in the employee’s federal taxable income.