For a list of North Carolina economic development agencies that can help with the site selection process, visit our Online Site Seekers’ Guide.
Targeted, performance-based incentive programs complement North Carolina’s competitive cost structure. Program eligibility and incentive value depend on factors including the tier ranking of the county in which a project is considering locating, the number of net new jobs proposed, the wages of those jobs and the proposed capital investment.
The Economic Development Partnership of North Carolina will assist companies in navigating the incentive process.
For more information about North Carolina’s incentive programs, contact the Economic Development Partnership of North Carolina at (919) 447-7744 or [email protected], or visit edpnc.com.
Job Development Investment Grant: The Job Development Investment Grant (JDIG) is a performance-based, discretionary incentive program that provides cash grants directly to new and expanding businesses to help offset the cost of locating or expanding a business facility in the state. The grant amount is based on a percentage of the personal income tax withholdings associated with the new jobs.
The grant amount is calculated by weighing several factors, including the location of the project, the county tier designation, the number of net new jobs, the job wages compared to the county average wage, the level of investment and whether the industry is one of the state’s targeted industry sectors. Grant funds are disbursed annually, generally for up to 12 years, to approved companies following the satisfaction of performance criteria set out in grant agreements.
For high-yield projects that invest more than $500 million and create more than 1,750 jobs, JDIG can provide a grant worth up to 100% of personal income tax withholdings for 20 years.
In 2017, lawmakers approved a provision that allows larger incentive packages for companies that invest more than $4 billion and create at least 5,000 jobs in North Carolina. Such “transformative” projects will not be subject to the state’s cap on JDIG awards. They can also receive grants that reimburse up to 100 percent of the personal income tax withholdings associated with new jobs for up to 25 years.
One North Carolina Fund: The One North Carolina Fund (OneNC) is a discretionary cash-grant program that allows the Governor to respond quickly to competitive job creation projects. The North Carolina Department of Commerce administers OneNC on behalf of the Governor. Awards are based on jobs created, level of investment, location of the project, economic impact of the project, the importance of the project to the state and region and the quality of industry. Awards are allocated to local governments as part of a negotiated challenge grant. By statute, OneNC requires that a local government provide an incentive to match the OneNC funding.
Building Reuse Program: The Building Reuse Program, administered by the Rural Division of the North Carolina Department of Commerce, provides grants to local governments for two purposes: the renovation of vacant buildings and the renovation or expansion of a building occupied by an existing North Carolina company wishing to expand in its current location.
Grants are available to support the renovation of vacant buildings. A shell building built on speculation that has never been inhabited is not eligible, except in instances when the building is at least 5 years old without ever having a tenant. The building must be vacant for at least three months prior to application deadlines. Grants are also available to support the renovation or expansion of buildings occupied by a company operating in the state of North Carolina for at least 12 months.
Community Development Block Grant Program Economic Development (CDBG Economic Development): The Community Development Block Grant Economic Development Program (CDBG Economic Development), which is administered by the North Carolina Department of Commerce, provides grants to local governments for public infrastructure development. Funds are administered based on an annual federal allocation to North Carolina from the U.S. Department of Housing and Urban Development and are made available to most local governments for economic development projects. Companies cannot apply directly for this funding, but instead work collaboratively with a local government applicant.
Eligible projects, primarily manufacturing projects, can receive a maximum of $10,000 to $15,000 per job committed depending on the tier designation of the county. Other types of projects can receive a maximum of $4,000 to $10,000 per job. CDBG Economic Development funds are limited to a maximum of $1,000,000 per project to a local government located in Tier 1 & 2 counties and $750,000 to a local government located in a Tier 3 county. The local government must provide at least one dollar for every three dollars provided by CDBG Economic Development. The state’s 25 most economically distressed counties are not required to provide a local match.
Community Development Block Grants Building Reuse (CDBG Building Reuse) Program: The CDBG Building Reuse Program, which is administered by the North Carolina Department of Commerce, provides funds to renovate and upfit vacant industrial and commercial buildings for economic development purposes. The program is designed to return vacant industrial/commercial buildings to economic use for new and/or expanding business and industry. The goal of the program is to provide jobs for low and moderate-income persons. The program is available to local government applicants that work in conjunction with a company that wishes to operate in a vacant building. The project must result in the creation of permanent, full-time jobs. A CDBG Building Reuse award is limited to $750,000 per local government. The grant amount cannot exceed $20,000 per job for priority projects (primarily manufacturing) and $12,000 per job for all other projects.
Economic Infrastructure Program: The Economic Infrastructure Program, under the Rural Division of the North Carolina Department of Commerce, provides grants to local governments to assist with public infrastructure projects that will lead to the creation of new, full-time jobs.
Foreign Trade Zones (FTZ): Foreign Trade Zones, sometimes known as Free Trade Zones, are geographically designated and secured areas that for legal purposes are considered outside of U.S. Customs territory. FTZs offer several economic advantages for businesses involved in international trade. There are four general-purpose FTZs in North Carolina, and 18 active sub-zones approved for use by individual companies. In addition, three of the zones have successfully transitioned to the Alternative Site Framework, which greatly simplifies services to users.
Foreign or domestic merchandise may enter the zone without a formal customs entry or the payment of customs duties or government excise taxes and without a thorough examination. If the final product is exported from the U.S., no customs duty is levied. If the final product is imported into the U.S., duty and excise taxes are due at the time of transfer from the foreign trade zone and formal entry is made into the U.S. Duty is paid on the product itself or its imported parts, whichever is lower.
Joint Economic Development Program with N.C. Dept. of Transportation: The North Carolina Department of Transportation works closely with the North Carolina Department of Commerce to provide transportation improvements and infrastructure that will expedite industrial/commercial growth and provide new jobs or retain existing ones. Projects must be jointly approved by the Secretary of Transportation and the Secretary of Commerce. Funds awarded are up to $2,500 per new job, with a $400,000 limit per project. Funds may be used to pay for highway projects, or supplement grant funding for aviation projects at publicly owned airports, rail or marine public access projects that contribute to economic growth and development by attracting new and expanding companies that will increase employment opportunities for North Carolina residents.
N.C. Department of Transportation Rail Industrial Access Program: The N.C. Department of Transportation’s Rail Industrial Access Program uses state funds to help construct or refurbish railroad spurs required by a new or expanding company. Program funding is intended to modernize railroad tracks to ensure efficient freight delivery. Funding for the projects is contingent upon application approval prior to the company deciding to locate or expand its facility in North Carolina. In addition, the award cannot be made until confirmation of the availability of private and/or local matching funds.
Local governments, community development agencies, railroads and companies themselves are eligible for funds to improve rail access. Approval depends on various economic factors, including the number of potential new jobs that will be created, the amount of capital investment, rail use and local economic conditions. Program funding is an incentive to encourage firms to choose a location or expand in North Carolina as opposed to another state.
The Utility Account: North Carolina’s Utility Account provides infrastructure grants to local governments in Tier 1 and Tier 2 counties in the State. The North Carolina Department of Commerce administers the Utility Account. All applications are reviewed and approved by the Secretary of Commerce.
Awards are based on the availability of funds and the merits of a project. Grants are awarded to local governments for infrastructure improvements that are publicly owned and maintained. The applicant must demonstrate that the project is expected to lead to job creation in the near future. The grant amount depends on the number of new, full-time jobs created and cannot exceed $10,000 per job created or $500,000 per project.
Tax Reform: North Carolina lawmakers recently decided to reduce the state’s 3% corporate income tax rate—already the lowest among the 44 states that levy the tax—to 2.5% in 2019. In addition, the state’s flat 5.49% individual income tax rate will drop to 5.25% in 2019.
Single-Sales Factor Apportionment: In 2017, the state of North Carolina entered its second year of -a full transition to single sales factor apportionment for multistate corporations. Effective Jan. 1, 2018, the state will determine how much of a corporation’s income is subject to state tax based solely on its revenue from sales located in or sourced to North Carolina. It will no longer factor in a company’s property and payroll in the state.
The single sales factor approach encourages corporate expansion and job creation because it doesn’t penalize companies for hiring or investing in facilities. Details of remaining years of the phase-in are below:
- 2017: Four times sales – All apportionable income of corporations shall be apportioned by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus four times the sales factor, and the denominator of which is six. If the sales factor does not exist, the denominator of the fraction is the number of existing factors and if the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction is the number of existing factors plus three.
- 2018: Single sales factor – All apportionable income of corporations shall be apportioned by multiplying the income by the sales factor.
TAX EXEMPTIONS AND EXCLUSIONS
Data Center Sales and Use Tax Exemptions: North Carolina provides three different exemptions related to data centers and their operations, outlined below.
- Exemption for a qualifying data center. Sales of electricity for use at a qualifying data center and the purchase of data center support equipment to be located and used at the qualifying data center is exempt from sales tax. A “qualifying data center” must meet two conditions:
- The state Secretary of Commerce must have made a written determination that at least $75 million in private funds has been or will be invested by one or more owners, users or tenants of the data center. Such funds must have been invested within five years of the first real or tangible property investment in the facility. Real and tangible investments in the data center that were made prior to Jan. 1, 2012 may not be included in the investment required.
- The data center must meet county wage standard and health insurance requirements.
- Exemption for computer software. Computer software that is sold to a person who operates a data center and is used within the data center is exempt from sales tax. Computer software is defined as a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task.
- Exemption for eligible Internet data center. Sales of electricity for use at an eligible Internet data center and eligible business property to be located and used at an eligible Internet data center are exempt from sales tax.
Manufacturing Tax Exemptions: North Carolina offers a variety of tax exemptions related to manufacturing.
- Machinery and equipment, sales and use tax exemption. Mill (generally manufacturing) machinery, including parts or accessories as well as specialized equipment for loading or processing, is exempt from sales and use tax, but is subject to a 1% privilege tax, capped at a maximum of $80 per article. North Carolina does not levy a sales and use tax on repairs to industrial machinery or service contracts for mill machinery.
- Electricity, fuel and natural gas, sales and use tax exemption. Retail sales, as well as the use, storage or consumption of electricity, fuel and piped natural gas sold to a manufacturer are exempt from sales and use tax for use in a manufacturing operation. This exemption does not apply to electricity used at a facility at which the primary activity is not manufacturing. For purposes of the exemption, a “facility” is (1) a single building or (2) a group of buildings that are located on a single parcel of land or on contiguous parcels of land under common ownership. “Facility” also refers to any other related real property contained on the parcel(s) where manufacturing activity occurs.
- Raw materials, sales and use tax exemption. Purchases of ingredients or component parts of a manufactured product that become an ingredient or component part of tangible personal property are exempt from sales and use tax. In addition, packaging items that constitute a part of the sale (retail or wholesale) and are delivered with the product to the customer are exempt from sales and use tax.
- Inventory, property tax exclusion. North Carolina and its local governments do not levy a property tax on inventories. Inventories owned by contractors, manufacturers and merchants (retail and wholesale) are excluded from property tax. Inventories are defined as goods held for sale in the regular course of business by manufacturers, retail and wholesale merchants and construction contractors. For manufacturers, the term inventory includes raw materials, goods in process and finished goods, as well as other materials or supplies that are consumed in manufacturing or processing. Inventory also refers to any commodity or part thereof that accompanies and becomes part of the property being sold.
- Historic rehabilitation tax credits. Owners or lessees of a “certified historic structure,” as designated by the State Historic Preservation Office or U.S. Department of the Interior’s National Park Service, are eligible for historic preservation tax credits. Credits are available for the rehabilitation of income-producing historic properties and owner-occupied historic residences. A 15% state tax credit for rehabilitation of income-producing certified historic structures is awarded to rehabilitations that qualify for the federal tax credit and spend up to $10 million. A 10% state tax credit for rehabilitation of income-producing certified historic structures is awarded to rehabilitations that qualify for the federal tax credit and are for expenses from $10 million to $20 million. There is also a 5% bonus if the development is within a Tier 1 or Tier 2 county or is located in an eligible targeted investment site. This bonus may be applied for expenses up to $20 million.
N.C. Community College Customized Training Program: North Carolina pioneered free, customized job training for businesses experiencing job growth and continues to provide the nation’s most recognized customized training program. A training plan will be developed in collaboration with the company. Using the training plan, customized training programs can be designed and instruction for these programs can be provided through instructors from North Carolina’s community colleges and individuals that are part of the statewide network of technical training experts. Company trainers can also be reimbursed for training activities consistent with the training plan and delivery schedules. For a defined number of instructors and for a designated instructional period, North Carolina’s community colleges can reimburse the company for instructor wages up to $30 per hour. Instructor travel can also be supported for a defined number of instructors. All training supported through the customized training program is coordinated through the local community college, but can include college and third-party instructors. The college is the responsible party for all contractual agreements and payments. The customized training program is a very customer-friendly process for the client.
The customized training program provides education, training and support services for new, expanding and existing business and industry in North Carolina. The goal of the program is to foster and support three key aspects of a company’s well-being:
- Job growth
- Technology investment
- Productivity enhancement
The purpose of the customized training program is to provide customized training assistance in support of full-time production and direct customer service positions created in the state of North Carolina, thereby enhancing the growth potential of companies located in the state while simultaneously preparing North Carolina’s workforce with the skills essential to successful employment in emerging industries. Those businesses and industries eligible for support through the customized training program include Manufacturing, Technology Intensive (i.e., Information Technology, Life Sciences), Regional or National Warehousing and Distribution Centers, Customer Support Centers, Air Courier Services, National Headquarters with operations outside North Carolina, and Civil Service employees providing technical support to U.S. military installations located in North Carolina.
Workforce Development Network: Through a professional team representing the N.C. Department of Commerce, N.C.’s Community Colleges, the Division of Employment Security (DES), the University of North Carolina system and private colleges and universities, the North Carolina provides recruiting, screening and training services through a coordinated network of nationally recognized economic and workforce development agencies. This team also has the capacity and flexibility to customize any aspect of this process, from initial recruitment to personalized screening to pre-employment training to client specific training. These organizations will work to develop a customized plan and provide an extensive array of services to recruit, screen and train its workforce to allow companies to compete in a global market.