State of NC Tax Incentives

Article 3 J Credits

July 2006, the NC General Assembly passed the Article 3 J Credits as a new incentive program for economic development in North Carolina. The previous William S. Lee Quality Jobs & Expansion Act expired 12-31-06.

Article 3J provides three types of tax credits to eligible taxpayers that undertake qualifying activities in North Carolina: 1)Credit for Creating Jobs, 2) Credit for Investing in Business Property, and 3) Credit for Investment in Real Property (tier 1 only). These credits may be combined to offset up to 50% of the taxpayer's state income and franchise tax liability, and unused
credits may be carried forward for up to five years (15-year carryforwards apply to the Credit for Investing in Real Property and 20-year carry-forwards exist for taxpayers that invest at least $150 million over a two-year period).
Eligibility (§105-129.83)

To qualify for Article 3J Credits, the following eligibility requirements must be met:

1. The primary activity at the business establishment must be an eligible type of business, which includes:
aircraft maintenance and repair; air courier services hub; company headquarters that creates at least 75 new headquarters jobs; customer service call centers; electronic shopping and mail order houses; information technology and services; manufacturing; motorsports facility; motorsports racing team; research and development; warehousing; and wholesale trade.
2. The average wage of all full-time workers employed by the taxpayer at the establishment during the taxable year must meet or exceed the applicable wage standard of the county in which the establishment is located.
3. The taxpayer must offer qualifying health insurance for all full-time positions at the establishment and pay at least fifty percent (50%) of employee premiums.
4. The taxpayer must not have received any significant environmental violations with the North Carolina Department of Environment and Natural Resources within the prior five years.
5. The taxpayer must not have received any "willful" or "failure to abate" serious OSHA violations at the establishment within the prior three years.
6. The taxpayer may not have overdue taxes.

CUMBERLAND COUNTY IS NOW A TIER ONE COUNTY.

Credit for Creating Jobs (§105-129.87)
Eligible taxpayers that meet a minimum threshold of new full-time jobs created during the taxable year may claim a credit for each new job created. The credit is taken in equal installments over four years following the year the jobs are created. The job threshold and the credit amount per job are determined by the tier designation of the county in which the jobs are created.

Credit for Investing in Business Property (§105-129.88)
Eligible taxpayers may claim a credit based on a percentage of the cost of capitalized tangible personal property that is placed in service during the taxable year, in excess of an applicable threshold. This credit is taken in equal installments over four years, beginning the year after the property is first placed in service. The credit percentage and threshold are based on the tier designation of the county where the property is placed in service.

Credit for Investment in Real Property (§105-129.89)
Eligible taxpayers that invest at least $10 million in real property within a three-year period and create at least 200 new jobs within two years at an establishment located in a tier 1 county are allowed a credit equal to 30% of the eligible real property investment. This credit is taken in equal installments over seven years, beginning the year after the property is used in an eligible business. To qualify for this credit, the taxpayer must obtain a written determination from the Department of Commerce.
This summary is not meant to be exhaustive. Taxpayers should review the Article 3J statutes prior to claiming credits. Taxpayers that are uncertain about their eligibility or ineligibility to claim credits after reviewing the Article 3J statutes should consult with the Department of Revenue. No application is required to claim Article 3J credits.

http://www.nccommerce.com/finance/incentives/tax/

ONE NORTH CAROLINA FUND
PURPOSE OF FUND
The One North Carolina Fund (formerly the Governor's Industrial Recruitment Competitiveness Fund) was created in 1993 to help North Carolina achieve its stated goal of economic growth through uniform regional prosperity. The fund helps the state achieve this goal by recruiting and expanding quality jobs in high value-added, knowledge-driven industries, and by providing "financial assistance to those businesses or industries deemed by the Governor to be vital to a healthy and growing State economy and that are making significant efforts to expand in North Carolina."
The fund currently consists of nonrecurring appropriations made by the General Assembly, intended to be immediately available for companies seeking to undertake new expansion or locate new operations in the state. The immediacy of the fund allows the Governor to distribute grants on an "as-needed" basis, which ensures the Fund's flexible application and speedy distribution.

FUND USAGE
Companies receive money from the Fund for the purposes of:
· Installation or purchase of equipment
· Structural repairs, improvements, or renovations of existing buildings to be used for expansion; an
· Construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines, or equipment for existing buildings

ELIGIBLE APPLICANTS
For a company to be considered for a grant from the Fund:

· The company must agree to meet the weighted hourly average wage test as required for the William Lee Act (Senate Bill 115 § 105-129.4).
· Local units of government (city or county) must have agreed to provide matching financial assistance to the company.

FACTORS TO BE CONSIDERED IN ALLOCATION AND AWARD DECISIONS
The following factors determine Fund allocation, with special consideration given to companies that locate or expand in areas that have experienced sudden and severe economic disruptions:

· Economic impact of project, including costs and benefits to the state
· Strategic importance of the project to the state, region, or locality
· Quality of jobs
· Quality of industry and project
· Environmental impact of project
· Project must be competitive with another state or country

Applications are accepted subject to availability of funds. After the application has been completed and reviewed, the Governor will convey the commitment to the Company. The jobs must be created and company must meet all criteria set out in the performance agreement before disbursement is made.
For more detailed information please contact Stewart Dickinson 919 715-6560 (sdickinson@nccommerce.com) at the Commerce Finance Center.

JOB DEVELOPMENT INVESTMENT GRANT PROGRAM
The Job Development Investment Grant (JDIG) is a discretionary incentive capable of providing sustained employees. In adopting JDIG, the GA intended "to stimulate the economic activity and to create new jobs for the citizens of the State by encouraging and promoting the expansion of existing business and industry within the State and by recruiting and attracting new business and industry to the State."
JDIG operates under an Economic Investment Committee (EIC), comprised of five members, the Secretary of Commerce, the Secretary of Revenue, the Director of the Office of State Budget and Management, and two private sector members appointed by the General Assembly. The Committee is authorized to award up to 25 grants in a single grant year. These grants can result in payments to a business for up to 12 years. The total amount paid out in any one of those years cannot exceed $15 million, meaning that the Committee has the ability to provide up to $180 million in benefits to the 25 businesses over a 12-year period.

A proposed project must meet a rigorous set of criteria. The Economic Investment Committee must find, for example, that the project will:

· Result in a net increase in employment in this State by the business.
· Benefit the people of the State by increasing the opportunities for employment and by strengthening the State's economy.
· Be consistent with the economic development goals of the State and of the area in which it is located.
· Be necessary for the completion of the project in the State.
· Be competitive with another state(s) or country.

A company applying for the JDIG also must meet certain State health insurance and workplace safety requirements.
The Committee must find that a proposed JDIG project's benefits outweigh its costs, thus rendering the grant appropriate. A cost benefit analysis is done for each project, and the Committee will seek to identify and select projects that are the most beneficial to the State, after considering a number of different evaluation factors.
The statute authorizes JDIG awards from 10% to 75% of withholdings for eligible positions. Similarly, the term of the grant may not exceed 12 years. Even with statutory requirements, the Committee has discretion in weighing factors to award JDIG projects and fix the amounts, terms and time periods of grants.
Statute requires that the JDIG agreement provide that the business must maintain operations at the project location, or at another approved site, for at least 150% of the term of the grant. Also, the agreement must include a claw-back provision to recapture all or part of the grant, at the Committee's discretion, if the business fails to remain at the site for the required years. The final Community Economic Development agreement must be reviewed and signed by the Attorney General.
The JDIG program became effective January 2003 and is currently set to sunset in January 2008.
For more detailed information please contact Stewart Dickinson 919 715-6560 (sdickinson@nccommerce.com) at the Commerce Finance Center
Sources: http://www.nccommerce.com/finance/incentives/