North Dakota Incentives and Workforce Development Guide
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Agricultural Products Utilization Commission (APUC): The mission of APUC is to create wealth and jobs though the development of new and expanded uses of North Dakota’s agricultural products. This is accomplished through the administration of a grant program. Applicants can present funding proposals for these categories on a quarterly basis: basic and applied research grants, marketing and utilization grants, farm diversification grants and an agricultural prototype development grant program. Please note: Qualifying APUC grants are for North Dakota companies that add value to a raw North Dakota agriculture commodity.
Beginning Entrepreneur Loan Guarantee Program: Designed to assist in business start-up financing by providing a financial institution with guaranty of a loan not to exceed $200,000. Loans may be used to finance the purchase or improvement of real property, equipment or personal property, or working capital needs. The guarantee term may not exceed five years. The guarantee fee is .5% per year or a one time fee of 2% of the guarantee portion. The guarantee fee may be included in the loan or in the rate charged by the lender.
Business Development Loan Program: Designed to assist new and existing businesses in obtaining loans that would have a higher degree of risk than would normally be acceptable to a lending institution. The maximum limit is $1,000,000 per project. Proceeds can be used for working capital, equipment and real property or refinancing. The interest rate is variable at Prime less .50% or fixed at comparable FHLB plus 2.25%. Terms average three to five years for working capital, five to seven years for equipment, and 12-20 years for real estate.
Export Enhancement Program: A financing tool for foreign buyers purchasing equipment from North Dakota manufacturers. Loans are made by the Bank of North Dakota and are guaranteed by the Export-Import Bank of the United States utilizing their medium-term credits program. Community financial institutions may participate in the loans. The loan requires a down payment of at least 15% of the contract amount prior to shipment and a signed promissory note for the balance. The minimum transaction size is $200,000. Eligibility is based on the financial strength of the foreign buyer, as well as the financial and political stability of the country where the buyer is located, as determined by Ex-Im Bank.
PACE Program: The PACE Fund is designed to assist North Dakota communities in expanding 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% or more of their sales outside of the state of North Dakota. A lead lender is required. The PACE Fund may provide an interest rate buy down up to a maximum of $300,000. The buy down is matched by the community at the designated participation level.
Agriculture Partnership in Assisting Community Expansion (Ag PACE): This program has been established to buy down the interest rate on loans to farmers who are investing in other nontraditional agriculture activities to supplement farm income. Qualifying borrowers will receive an interest rate reduction of a maximum of 4% below the yield rate with a minimum rate of 1%. The total buy down amount per borrower may not exceed $20,000 per project or biennium. The borrower lifetime buy down cap is $60,000. Eligible applicants for interest buy down dollars exceeding $20,000 must have a net worth of less than $1,000,000. State Water Commission funds, not exceeding $20,000 per borrower, may be used to supplement Ag PACE funds for the purchase of irrigation equipment on new irrigated acreage.
Biofuels PACE: Biofuels PACE (Biofuels Partnership in Assisting Community Expansion) was established to buy down the interest rate on loans to biodiesel and ethanol production facilities and livestock operations. Recipients of Biofuels PACE are not eligible for regular PACE funds. Biofuels PACE is a $5 million fund with an interest buy down of 5% below the note rate and no community match.
Flex PACE: This special feature of the 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. Each borrower is capped at $200,000 of PACE funds per biennium under Flex PACE.
Industrial Development Bond Program (IDB): Under its IDB Program, the Authority makes loans to manufacturers that qualify as small issue manufacturers. Qualified small issue manufacturers are defined within the Internal Revenue Code as “any facility that is used in the manufacturing or production of tangible personal property including the process resulting in a change in the condition of such property.” Within that definition, the qualifying organizations must also meet a capital spending requirement. The Authority is limited to $2,000,000 per project. The interest rates paid by a qualifying manufacturer are market rates that are set through a competitive bid process when the Authority issues and sells its program bonds to fund the loan. The IDB has been assigned a rating of A+ by Standard & Poors Rating Group.
Main Street Loan Program: Today’s economy makes it difficult for emerging businesses or businesses in rural areas to get financing. The Dakota CDC Main Street Loan Program was created to fill this financing void. Loans up to $24,999 will be available from Dakota CDC in participation with a local lenders or economic development organization for small businesses looking to expand or to start a new business. Loans can be used for any business purpose.
MATCH Program: Designed to encourage and attract financially strong companies to North Dakota. The program is targeted to manufacturing, processing and value-added industries. The Bank of North Dakota (BND) provides some of the lowest interest rates in the nation through this program. The primary candidates for this program are businesses that create new wealth for the state and provide new jobs outside of the retail sector. These companies shall also provide evidence of considerable financial strength, as demonstrated by a long-term credit rating in the “Investment Grade” category of BBB or stronger from a national rating agency.
Loan funds may be used to finance real estate, machinery and equipment and for the purchase or leasing of equipment. The term of the loan will vary depending on the loan purpose with a maximum of 15 years.
New Venture Capital Fund: The New Venture Capital Program is an innovative financial program that provides flexible financing through debt and equity investments for new or expanding businesses in the state of North Dakota. The Bank may provide funding for early stage companies that 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 types of businesses, including North Dakota Department of Commerce 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.
North Dakota Development Fund: Provides flexible gap financing through debt and equity investments for new or expanding primary sector businesses. It makes investments of up to $300,000 through direct loans, participation loans and subordinated debt and equity investments. The board may adjust the limit when deemed appropriate.
Value-Added Agriculture Equity Loan Program (Envest): The borrower must be a North Dakota resident. To be eligible under this program, the borrower may own no more than 25% of the project. For the purchase of shares in start-up or expansion of ag processing plants intended to process North Dakota grown products. Use of loan proceeds is for the purchase of equity shares in a North Dakota feedlot or dairy operation that must feed a byproduct of an ethanol or biodiesel facility. Loans are eligible for an interest buy down of up to 4% that may be used to reduce the borrower’s interest rate on loans made by a local lender and BND, subject to a minimum rate of 1% to the borrower.
Personal Property Tax Exemption: North Dakota imposes no personal property tax, except that of certain oil and gas refineries and utilities.
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% of assessed value instead of at 10% which applies to other centrally assessed property. The taxable value is calculated at 1.5% 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.
Agricultural Commodity Processing Plant Construction Materials Sales Tax Exemption: Construction materials used to construct an agricultural commodity processing facility are exempt from sales and use taxes.
Coal Mine Machinery or Equipment Sales Tax Exemption: 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 Sales Tax Exemption: 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) Sales Tax Exemption: 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) Sales Tax Exemption: 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) Sales Tax Exemption: 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 Sales Tax Exemption: 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 Sales Tax Exemption: 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 Sales Tax Exemption: An exemption may be granted for building materials, equipment and other tangible personal property used to expand or construct an oil refinery in ND. 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.
- 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% 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 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% 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 10 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. Angel funds must be organized for the purpose of investing in at least three early-stage or mid-stage private, non publicly traded, primary sector businesses with strong growth potential. Investments in real estate or real estate holding companies are not eligible. The credit is equal to 45% 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, 2013, a taxpayer is allowed no more than $500,000.
Biodiesel Tax Credits: An income tax credit for adapting or adding equipment to retrofit a facility or to construct a new facility in North Dakota that either (1) produces or blends biodiesel fuel or (2) crushes soybeans or canola. The credit is equal to 10% of the direct costs incurred, and is allowed in each of five tax years, starting with the tax year in which the production, blending or crushing begins. An unused credit may be carried forward up to five tax years. A corporation is allowed no more than $250,000 of credits for all tax years.
- A licensed fuel supplier who blends at least 5% biodiesel fuel is allowed an income tax credit of five cents per gallon of blended fuel. An unused credit may be carried forward up to five tax years.
- A licensed seller of biodiesel fuel having at least a 2% blend is allowed an income tax credit for adapting or adding equipment to the seller’s facility to enable it to sell the biodiesel blend. The credit is equal to 10% of the direct costs incurred, and is allowed in each of five tax years, starting with the tax year in which the facility begins selling the biodiesel fuel. An unused credit may be carried forward up to five tax years. A seller is allowed no more than $50,000 of credits for all years.
Biomass, Geothermal, Solar, or Wind Energy Credit: An income tax credit for the cost of a geothermal, solar, wind or biomass energy device installed before January 1, 2015, in a building or on property owned or leased in North Dakota. The credit provided for the actual cost of acquisition and installation of a device installed before January 1, 2001 is equal to 5% per year for three years, and for devices installed after December 31, 2000, is equal to 3% per year for five years. If the device is a part of a system which also uses other means of energy, only that portion of the total system directly attributable to the cost of the geothermal, solar, wind or biomass energy device may be included in determining the amount of the credit. Installation costs may not include costs of redesigning, remodeling or otherwise altering the structure of a building in which the device is installed.
Certified Nonprofit Development Corporation Investment Credit: An income tax credit for buying membership in, paying dues to, or contributing to a certified nonprofit development corporation. The credit is equal to 25% of the qualifying payments, up to a maximum credit of $2,000. The unused credit may be carried forward seven years.
Internship Employment Credit: An income tax credit for employing an individual under an internship program located in North Dakota. The credit is equal to 10% of the compensation paid to an intern. An employer is allowed to employ a maximum of five interns at the same time. A maximum of $3,000 of credits for all years is allowed under the program.
Microbusiness Income Tax Credit: An income tax credit for new investment and new employment in a microbusiness—defined as a business with up to five employees that is located in a community of 100 to 2,000 people having an active economic development organization, a relationship with a regional or urban economic development organization, or a city sales tax of which part or all is dedicated to economic development. The business may not compete with other established businesses within 15 miles of the business, and may not be located within 15 miles of a city with a population of 2,000 or more. The business must be certified by the Commerce Department’s Division of Economic Development and Finance, and no more than 200 businesses may be certified as a microbusiness. The credit is equal to 20% of the amount of new investment and new employment during the tax year. A taxpayer is allowed no more than $10,000 of credits for all years. An unused credit may be carried forward up to five years.
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% 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 pass through 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 ND. 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% for the first $100,000 of excess expenses in a tax year. For excess expenses over $100,000 in a year, the applicable percentage is 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% 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% 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% of wages and salaries paid during the tax year for each of the first three tax years of operation, and
- .5% 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% 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% 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.
Renaissance Zones: Businesses and individuals may qualify for one or more tax incentives for purchasing, leasing or making improvements to real property located in a North Dakota renaissance zone. A renaissance zone is a designated area within a city that is approved by the Department of Commerce Division of Community Services. The tax incentives consist of a variety of state income and financial institution tax exemptions and credits, and local property tax exemptions.
Jobs Training Assistance: A program is available that assists a new or expanding primary sector business with training new employees. The cost of the training under the program is paid for in whole or in part with the income tax withheld from the new employees. The state income tax withholding can be captured for up to a 10-year period.
Workforce 20/20: A program that assists employers who provide retraining and upgrade training to support the introduction of new technologies and work methods into the workplace. Businesses and industries that bring new revenue to the state by selling a majority of products and services outside of ND will be given priority for funding. Businesses that sell products or services in the local area are eligible, but need to demonstrate compelling economic benefit to the community or state. Only direct training costs can be reimbursed. Costs can include:
- Instructor wages, per diem and travel
- Tuition and registration fees
- Curriculum development and training materials
- Lease of training equipment and training space
- Misc. direct training costs