Incentives - State of North Carolina
In July 2006, the NC General Assembly passed legislation that created a new tax credit program, Article 3J Credits. This program provide 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). North Carolina offers a variety of incentives to firms relocating or expanding in the State. Many of these credits are affected by the tier, or economic status, of the county in which the investment will take place.
Harnett County is a tier 2 county, where tier 1 is the most economically distressed and tier 3 is the least economically distressed.
To qualify for Article 3J credits, the following eligibility requirements must be met:
1. The primary business of the taxpayer and/or establishment must be an eligible business type.
2. The average wage of the establishment, the new jobs, and the workers trained must meet or exceed the applicable wage standard of the county in which the establishment is located.
3. The taxpayer must provide health insurance for all fulltime positions at the location and pay at least fifty percent (50%) of the premiums.
4. The taxpayer must certify that it has not received any significant environmental violations with the North Carolina Department of Environment and Natural Resources within the prior five years.
5. The taxpayer must certify that it has not received any “willful” or “failure to abate” serious OSHA violations at the location within the prior three years.
Additional information is available through the North Carolina Department of Commerce
Web Site: NC Department of Commerce
Several types of tax credits are available, including the following:
Jobs Creation Tax Credit
An eligible business with 10 or more new full-time jobs created during the taxable year may claim a credit for each new job created. The amount of the credit is based on the tier area (see below) where the job is located.
Harnett County (tier 2).............................................................................................$5,000 *
* Jobs must meet an average weekly wage standard that is at least equal to $473 per week.
Business Property Investment Tax Credit
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. The following investment thresholds apply:
Harnett County (tier 2) ............................................................$1,000,000
Harnett County (tier 2) Credit Percentage................................................5%
Research and Development Tax Credit
Taxpayers that have qualified for North Carolina research expenses during a taxable year are allowed a credit equal to a percentage of those expenses, determined in the following manner:
1. Small business - If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is 3%.
2. Low-tier research - For expenses with respect to research performed in a development tier 1 county, the applicable percentage is 3%.
3. Other research - For expenses not covered under items (1) or (2) above, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:
• $0-$50 million 1%
• $50-$200 million 2%
• Over $200 million 3%
Only one credit is allowed with respect to the same expenses, and then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer’s qualified North Carolina research expenses qualifies under item (2) and the remainder qualifies under item (3), the applicable percentages apply separately to each part of the expenses.
Note: 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.