North Carolina Incentives

William S. Lee Tax Credits

As part of the William S. Lee Act, North Carolina offers several types of tax credits to eligible taxpayers that undertake qualifying activities. These credits may be used to offset up to 50% of the taxpayer’s state income and/or franchise tax liability, and unused credits may be carried forward for up to five years (extended carry forwards exist for projects with large/substantial  investment).

back to toptop

Job Creation Tax Credit

Eligible taxpayers that create a minimum number of new full-time jobs during the year may claim a credit based on the number of net new jobs created.

  • The amount of the credit is determined by the location of the new jobs, ranging between $500 and $16,500 per job.
  • The credit is taken in equal installments over four years following the year the job is created.

back to toptop

Investment Tax Credit

Eligible taxpayers are allowed a credit based on a percentage of the cost of machinery and equipment placed in service during the year, in excess of the applicable threshold.

  • The credit percentage (between 4% and 7%) and the applicable threshold (between $0 and $2 million) are both based on the location where the machinery and equipment is placed in service.
  • The credit is taken in equal installments over seven years, beginning the year after the machinery and equipment is first placed in service.

back to toptop

Worker Training Tax Credit

Taxpayers that are eligible for the job creation credit or the investment tax credit may claim an additional credit for training at least five eligible employees.

  • The amount of credit is equal to the wages paid during the training, capped at either $500 or $1,000 per employee trained, again based on the location.
  • The credit is taken in the year the employees are trained.

back to toptop

Research and Development Tax Credit

Eligible taxpayers that claim the Federal Research and Experimentation Tax Credit may claim a state R&D tax credit for increasing research activities in North Carolina.

  • The credit is equal to 5% of the state’s apportioned share of the taxpayer’s expenditures for R&D or 25% of the state’s apportioned share of the federal credit claimed (for taxpayers claiming the Alternative Incremental Credit).
  • This credit will sunset on January 1, 2006 and has been replaced by the Research and Development Tax Credit under Article 3F

back to toptop

Central Administrative Office Credit

A taxpayer that has purchased or leased property and begins to use it as a Central Administrative Office (CAO) is allowed a credit equal to 7% of the real property investment.

  • In order to qualify, the taxpayer must hire at least 40 new office jobs during the taxable year the property is first placed in service.
  • The total credit is capped at $500,000 per taxpayer and is taken in equal installments over seven years following the year in which the real property is first placed in service.

back to toptop

Industrial Revenue Bonds

Industrial Revenue Bonds have a variety of names and purposes (industrial development bonds, IDB's, IRB's and qualified small issue bonds) but essentially are of three basic types. The State's principal interest in these bonds is assisting new and expanding industry while seeing that North Carolinians get good jobs at good wages. The regulations governing bond issuance are a combination of federal regulations and North Carolina statutes. The amount each state may issue annually is designated by population.

The 2004 session of General Assembly eliminated wage test.

There are three types of bond issuances as follows:

  • Tax Exempt - (Small Issue IDB's) Because the income derived by the bond holder is not subject to federal income tax, the maximum bond amount is $10 million in any given jurisdiction. According to federal regulations, the $10 million total includes the bond amount and capital expenditures over a six year period going both backwards and forwards three years. The maximum any company may have is $40 million nationwide outstanding at any given period.
  • Taxable - They are not exempt from federal tax (they are however exempt from North Carolina taxes). The essential difference is that the Taxable bond rate is more costly to the borrower and not being subject to the federal volume cap, may exceed $10 million in bond amount.
  • Exempt Facility/Solid Waste Disposal Bond - These bonds are subject to volume cap although there is no restriction on amount and the interest on these bonds is federally tax exempt.

All three bond types are processed and approved in the same manner. The State supervises, approves and guides bond applications. The County Bond Authority issues the bonds where the facility will be located. The County Authority may select Bond Counsel for the project.

Two of the more significant regulations are:

  • IRB funds can be used only by a company engaged in some manner of manufacturing,
  • IRB proceeds may be used only for land, building and equipment,

back to toptop

Community Development Block Grant (CDBG)

The Community Development Block Grant (CDBG) program has been administered by the State of North Carolina since 1982. The funds may be accessed by a local government applicant (municipal or county, excluding entitlement cities or designated urban counties).

  • Proposed projects will involve a specific business that will create new jobs (or sometimes retain existing jobs).
  • Assisted project activities must benefit persons (60% or more) who were previously (most recent 12 months) in a low or moderate family income (LMI) status, based on income levels published for the State annually by the U. S. Department of Housing and Urban Development (HUD).
  • Not likely to benefit most manufacturing facilities.

back to toptop

Industrial Development Fund (IDF)

The Industrial Development Fund (IDF) provides incentive industrial financing as grants or loans in the following ways:

  • Basic IDF (grants or loans)
    Basic IDF assists town, city or county governments with incentive industrial financing, for acquiring land or buildings or for constructing new buildings. The funding level of each project is determined by the Secretary of Commerce but cannot exceed $5,000 per job or $500,000 per project, as determined by the legislature.
  • Emergency Economic Development Assistance (loans)
    Emergency Economic Development Assistance, loans to local units of government that have experienced within the past 12 months either a loss of 500 or more manufacturing jobs in the county. The maximum amount of funds accessible for a project is set out by statute, and designation is at the discretion of the Secretary of Commerce.
  • Utility Account (grants)
    Utility Account, used for construction or improvements to water, sewer, gas, or electrical utility lines and for equipment for existing or proposed industrial buildings. Funding level of each project is determined by the Secretary of Commerce but can not exceed $500,000 per project.
  • Clean Water Bonds proceeds (grants)
    Clean Water Bonds Proceeds, used to provide grants (not loans) to local governments to encourage industry to locate to or expand in the State by assisting with the cost of clean water projects.

back to toptop

One North Carolina 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.

2004 session of General Assembly approved $20M allocation for the Fund.

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.
  • Construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines, or equipment for existing buildings.

back to toptop

Job Development Investment Grant Program (JDIG)

The Job Development Investment Grant (JDIG) is a discretionary incentive capable of providing sustained annual grants to new and expanding businesses measured against a percentage of withholding taxes paid by new 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.