North Carolina Economic Development Directory

North Carolina State Incentives

ARTICLE 3J TAX CREDITS: North Carolina offers several types of tax credits to eligible taxpayers that undertake qualifying initiatives. One class of these credits, the Article 3J Tax Credits, may be used to offset up to 50 percent of the taxpayer’s state income and/or franchise tax liability, and unused credits may be carried forward for up to five years. Article 3J offers credits for:

• Creating jobs – Companies who meet a minimum threshold of new fulltime jobs created during the taxable year may claim a credit.
• Investing in business property – Companies can claim a credit based on a percentage of the cost of capitalized tangible personal property that is placed in service during the taxable year.
• Investment in real property – Companies located in a Tier 1 County (see below) that invest at least $10 million in real property within a three-year period and create at least 200 new jobs within two years are allowed a credit equal to 30 percent of the eligible investment.

CHANGES TO ARTICLE 3J IN 2011:

• Modifies the criteria applicable to companies that take the Article 3A tax credits to allow a company, otherwise required to maintain 200 employees, to take remaining credit installments if employment is above 125 and if the taxpayer makes an investment equal to $5,000,000 or greater than twice the amount of the remaining installments at the facility within two years of the employment level falling below 200.
• Establishment of port enhancement zones within 25 miles from a port allowing an Article 3J credit under certain conditions beginning 7/1/2013. The North Carolina Department of Commerce will publish a list of all PEZ and boundary descriptions annually.

TAX CHANGE FOR SMALL AND START-UP BUSINESS: This applies to calculating the North Carolina taxable income. A taxpayer may now deduct the first $50,000 of net business income the taxpayer receives during the taxable year.

RENEWABLE ENERGY TAX CREDITS: North Carolina’s various renewable-energy tax credits are unified into a statute that addresses nearly all renewables. The statute provides tax credits eligible for the cost of equipment and associated design; construction costs; and installation costs by a taxpayer and placed into service in North Carolina during the taxable year. The credit is subject to various ceilings depending on sector and the type of renewable-energy system. The following credit limits for various technologies and sectors apply:

• A maximum of $3,500 for non-business solar energy equipment for active space heating, combined active space and domestic water-heating systems, and passive space heating;
• A maximum of $1,400 for non-business solar water-heating systems, including solar pool-heating systems;
• A maximum of $10,500 for renewable-energy systems for non-business use;
• A maximum of $8,400 for geothermal equipment installation;
• A maximum of $2,500,000 for solar, wind, hydro, geothermal and biomass applications on commercial and industrial facilities, including photovoltaic (PV), daylighting, solar water-heating and space-heating technologies.

INTERACTIVE DIGITAL MEDIA TAX CREDIT: North Carolina taxpayers that develop Interactive Digital Media (IDM) within the state are allowed a tax credit. Credits are awarded for taxpayer’s expenses that exceed $50,000 that are paid during the taxable year in development phases, and may not exceed $7.5 million.

NORTH CAROLINA PORTS TAX CREDITS: Provide tax credits toward income taxes paid by businesses or individuals using NC Ports facilities at Morehead City and Wilmington. Businesses who pay NC state income tax and use NC ports can qualify for tax credits on both inbound and outbound cargo. The credit is earned on cargo wharfage and handling fees paid to the N.C. State Ports Authority which 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 forwarded up to five years for a total credit of up to $2 million.

TECHNOLOGY DEVELOPMENT TAX CREDIT: Businesses with qualified NC research expenses are allowed a tax credit equal to a percentage of those expenses. The allowable credits are determined by:

• Small Business status (annual receipts less than $1 million): Qualified businesses on the last day of the taxable year are allowed a credit of 3.25 percent.
• County Tier: Certain tax programs in NC are indexed to a county ranking system. For expenses for research performed in a Tier 1 county, a business is permitted a credit of 3.25 percent.
• Other research

JOB DEVELOPMENT INVESTMENT GRANTS (JDIG): Awards a limited number of cash grants directly to new and expanding businesses that will provide economic benefits to the State, and need the grant to carry out the project in North Carolina. Grants are based on the job creation and investment commitment made by companies in their formal applications to the State prior to a location decision. Grant funds are disbursed annually to approved companies based on a percentage of withholding taxes paid by new employees, following satisfaction of performance criteria set out in grant agreements.

ONE NORTH CAROLINA FUND: Helps recruit and expand quality jobs in high value-added, knowledge-driven industries and provides financial assistance to those businesses or industries deemed vital to a healthy economy that are making significant efforts to expand in North Carolina. Companies can receive money for:

• Installation or purchase of equipment.
• Structural repairs, improvements, or renovations of existing buildings to be used for expansion.
• Construction of, or improvements to, new or existing water, sewer, gas or electric utility distribution lines, or equipment for existing buildings.

SITE AND INFRASTRUCTURE GRANT FUND: Provides assistance for site development and infrastructure improvements for very high-impact projects.

JOB MAINTENANCE AND CAPITAL DEVELOPMENT FUND: Provides a limited number of grants to businesses located in Development Tier 1 counties, where the business has at least (i) 2,000 employees, and invests at least $200 million in capital improvements, or (ii) 320 employees, and invests at least $65 million in capital improvements to convert its manufacturing process to change the product it manufactures.

SALES AND USE TAX DISCOUNTS, EXEMPTIONS AND REFUNDS: Offers reduced rate allowances on certain parts, accessories and construction supplies for eligible industries and manufacturing processes.

INDUSTRIAL REVENUE BOND PROGRAM: Assist private business development and expansion by issuing low-interest tax-exempt bonds. It offers qualified manufacturing facilities and certain solid waste disposal facilities convenient, long-term, flexible financing. The Industrial Facilities and Pollution Control Financing Authority of each county issues these bonds in the county where the project is located.

IRBs can be either tax-exempt or taxable and can be used to finance an entire project, including the cost of land, construction of new or expanded facilities, acquisition and installation of depreciable property such as equipment, and construction period interest.

INDUSTRIAL ROAD ACCESS PROGRAM: Administered by North Carolina’s Department of Transportation (DOT), this program provides funds for the construction of roads to provide access to new or expanded industrial facilities. An access review committee comprised of representatives of the Department of Transportation performs a technical review of a requested project and makes recommendations about traffic and safety concerns and approval is based upon the resulting economic benefits of the project including the number of new jobs created, the amount of capital investment, highway’s use and the area’s economic conditions.

INDUSTRIAL RAIL ACCESS SYSTEM: Administered by the North Carolina DOT for businesses that want to locate or expand their facilities in NC. This program ensures that industries have the tracks needed to transport freight and materials and also assists in refurbishing tracks.

Grant funding is contingent upon approval prior to the company making a decision to locate or expand in North Carolina and a private and/or local source match of funds. Approval is also based upon the economic benefits of the project including the number of new jobs created, the amount of capital investment, rail use and the area’s economic conditions.

FOREIGN TRADE ZONES (FTZ): Neutral, secured areas legally outside of the U.S. customs territory that offer economic advantages for businesses involved in international trade. There are six FTZs in North Carolina; several subzones are also approved for use by individual manufacturers.