Article 3A.

Tax Incentives For New And Expanding Businesses.

(See note for repeal of this Article.)

§ 105‑129.2.  (See note for repeal) Definitions.

The following definitions apply in this Article:

(1)       Agrarian growth zone. – An area designated as an agrarian growth zone pursuant to G.S. 105‑129.3B.

(1a)     Air courier services. – The furnishing of air delivery of individually addressed letters and packages for compensation, except by the United States Postal Service.

(2)       Central office or aircraft facility. – Any of the following:

a.         A corporate, subsidiary, or regional managing office, as defined by NAICS.

b.         An auxiliary subdivision of an interstate passenger air carrier engaged primarily in centralized training for the carrier at its hub.

c.         An auxiliary subdivision of an interstate passenger air carrier engaged primarily in aircraft maintenance and repair services or aircraft rebuilding as defined by NAICS.

(3)       Computer services. – Any of the following industries or industry groups, as defined by NAICS, if the taxpayer provides the services primarily to persons who are not related entities with respect to the taxpayer:

a.         Computer systems design and related services.

b.         Software publishing.

c.         Software reproducing.

d.         On‑line information services.

(4)       Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105‑130.4(j)(2).

(5)       Customer service center. – An establishment of a telecommunications or financial services company, as defined by NAICS, that is primarily engaged in providing support services to the company's customers by telephone to support products or services of the company. For the purpose of this definition, an establishment is primarily engaged in providing support services by telephone if at least sixty percent (60%) of its calls are incoming.

(6)       Data processing. – Any combination of the services listed in this subdivision, if the taxpayer provides the services primarily to persons who are not related entities with respect to the taxpayer. The term does not include payroll services, text processing, desktop publishing, or financial transaction processing.

a.         Data entry and preparation.

b.         Database creation, conversion, and management, including warehousing, retrieval, and utilization of data in databases.

c.         Data capture and imaging, including optical scanning and microfilm recording and imaging.

d.         Computer processing time rental.

e.         Data storage media conversion.

f.          Data file format conversion.

(7)       Development zone. – An area designated as a development zone pursuant to G.S. 105‑129.3A.

(8)       Electronic mail order house. – An electronic shopping and mail order house, as defined by NAICS.

(8a)     Eligible major industry. – A taxpayer is an eligible major industry for the purposes of this Article if the taxpayer is primarily engaged in one of the industries listed in G.S. 105‑164.14(j)(3) and the Secretary of Commerce has certified that the owner of the facility will invest at least one hundred million dollars ($100,000,000) of private funds to acquire, construct, and equip a facility in this State to engage in one or more of those industries.

(9)       Enterprise tier. – The classification assigned to an area pursuant to G.S. 105‑129.3.

(10)     Establishment. – Defined by NAICS.

(11)     Full‑time job. – A position that requires at least 1,600 hours of work per year and is intended to be held by one employee during the entire year. A full‑time employee is an employee who holds a full‑time job.

(12)     Hub. – Defined in G.S. 105‑164.3.

(12a)   Interstate air courier. – Defined in G.S. 105‑164.3.

(13)     Interstate passenger air carrier. – Defined in G.S. 105‑164.3.

(14)     Large investment. – Defined in G.S. 105‑129.4(b1).

(15)     Machinery and equipment. – Engines, machinery, equipment, tools, and implements used or designed to be used in the business for which the credit is claimed. The term does not include real property as defined in G.S. 105‑273 or rolling stock as defined in G.S. 105‑333.

(16)     Manufacturing. – An industry in manufacturing sectors 31 through 33, as defined by NAICS, but not including quick printing or retail bakeries.

(17)     NAICS. – The North American Industry Classification System adopted by the United States Office of Management and Budget as of December 31, 1997.

(17a)   Overdue tax debt. – Defined in G.S. 105‑243.1.

(18)     Purchase. – Defined in section 179 of the Code.

(19)     Related entity. – Defined in G.S. 105‑130.7A.

(20)     Warehousing. – An industry in warehousing and storage subsector 493 as defined by NAICS.

(21)     Wholesale trade. – An industry in wholesale trade sector 42 as defined by NAICS. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, ss. 1, 2; 2000‑56, ss. 5(a), 5(b); 2000‑173, s. 1(a); 2001‑476, s. 1(a), (b); 2002‑172, s. 1.5; 2003‑416, s. 2; 2003‑435, 2nd Ex. Sess., s. 3.1; 2004‑170, s. 9; 2006‑66, s. 24.16(b).)

§ 105‑129.2A.  Sunset; studies.

(a)       Sunset. – This Article is repealed for business activities that occur in taxable years beginning on or after January 1, 2007.

(a1)     Sunset for Interstate Air Couriers. – Notwithstanding subsection (a) of this section, in the case of an interstate air courier that enters into a real estate lease on or before January 1, 2006, with an airport authority that provides for the lease of at least 100 acres of real property with a lease term in excess of 15 years, this Article is repealed effective for business activities that occur on or after January 1, 2010.

(a2)     Sunset for Eligible Major Industries. – Notwithstanding subsection (a) of this section, in the case of a taxpayer that qualifies as an eligible major industry on or before January 1, 2008, this Article is repealed effective for business activities that occur on or after January 1, 2010.

(a3)     Sunset for Certain Taxpayers Located in Development Zones. – Notwithstanding subsection (a) of this section, in the case of a taxpayer that satisfies all of the conditions of this subsection, this Article is repealed effective for business activities that occur on or after January 1, 2010.

(1)       Before January 1, 2006, the taxpayer signs a letter of commitment with the Department of Commerce describing a proposed new or expanding project and specifying the amount to be invested in real property and machinery and equipment, the number of new jobs to be created, and a proposed timetable for making the investment and creating the jobs.

(2)       Before January 1, 2006, the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase, lease, or construct and place in service in an eligible business at a location within a development zone within a three‑year period at least ten million dollars ($10,000,000) of real property and machinery and equipment and that the taxpayer will create at least 300 new jobs at the location within a three‑year period beginning when the property is first placed in service in an eligible business.

(3)       Before January 1, 2006, the taxpayer places at least four million dollars ($4,000,000) of real property and machinery and equipment in service at the location and creates at least 20 new jobs at the location.

(a4)     Sunset for Taxpayers That Sign a Letter of Commitment. – Notwithstanding subsection (a) of this section, in the case of a taxpayer that signs a letter of commitment with the Department of Commerce on or before December 31, 2006, stating the taxpayer's intent to create new jobs or make new investments with respect to machinery and equipment, central office or aircraft facility property, or substantial investments in other real property at a specific site in this State, this Article is repealed effective for business activities that occur on or after January 1, 2008. If a taxpayer elects to take any credit under the provisions of this subsection for activities occurring in the 2007 taxable year, the taxpayer may not take any credit under Article 3J of this Chapter with respect to the same establishment for activities occurring in the 2007 taxable year.

(b)       Equity Study. – The Department of Commerce shall study the effect of the tax incentives provided in this Article on tax equity. This study shall include the following:

(1)       Reexamining the formula in G.S. 105‑129.3(b) used to define enterprise tiers, to include consideration of alternative measures for more equitable treatment of counties in similar economic circumstances.

(2)       Considering whether the assignment of tiers and the applicable thresholds are equitable for smaller counties, for example those under 50,000 in population.

(3)       Compiling any available data on whether expanding North Carolina businesses receive fewer benefits than out‑of‑State businesses that locate to North Carolina.

(c)       Impact Study. – The Department of Commerce shall study the effectiveness of the tax incentives provided in this Article. This study shall include:

(1)       Study of the distribution of tax incentives across new and expanding industries.

(2)       Examination of data on economic recruitment for the period from 1994 through the most recent year for which data are available by county, by industry type, by size of investment, and by number of jobs, and other relevant information to determine the pattern of business locations and expansions before and after the enactment of the William S. Lee Act incentives.

(3)       Measuring the direct costs and benefits of the tax incentives.

(4)       Compiling available information on the current use of incentives by other states and whether that use is increasing or declining.

(d)       Report. – The Department of Commerce shall report the results of these studies and its recommendations to the General Assembly biennially with the first report due by April 1, 2001, and the last report due by June 1, 2007.  (1997‑277, s. 4; 1999‑360, s. 18.1; 2000‑173, ss. 1(b), 1(c); 2001‑476, s. 2(a); 2002‑146, s. 2; 2003‑435, 2nd Ex. Sess., s. 3.2; 2005‑241, ss. 1(a), 1(b); 2006‑168, s. 2.1; 2006‑252, s. 1.3; 2007‑515, ss. 4, 5; 2008‑134, s. 69.)

§ 105‑129.3.  (See note for repeal) Enterprise tier designation.

(a)       Tiers Defined. – An enterprise tier one area is a county whose enterprise factor is one of the 10 highest in the State. An enterprise tier two area is a county whose enterprise factor is one of the next 15 highest in the State. An enterprise tier three area is a county whose enterprise factor is one of the next 25 highest in the State. An enterprise tier four area is a county whose enterprise factor is one of the next 25 highest in the State. An enterprise tier five area is any area that is not in a lower‑numbered enterprise tier.

(b)       Annual Designation. – Each year, on or before December 31, the Secretary of Commerce shall assign to each county in the State an enterprise factor that is the sum of the following:

(1)       The county's rank in a ranking of counties by average rate of unemployment from lowest to highest, for the preceding 12 months.

(2)       The county's rank in a ranking of counties by average per capita income from highest to lowest, for the preceding 12 months.

(3)       The county's rank in a ranking of counties by percentage growth in population from highest to lowest, for the preceding 12 months.

The Secretary of Commerce shall then rank all the counties within the State according to their enterprise factor from highest to lowest, identify all the areas of the State by enterprise tier, and publish this information. An enterprise tier designation is effective only for the calendar year following the designation.

(b1)     Data. – In measuring rates of unemployment and per capita income, the Secretary shall use the latest available data published by a State or federal agency generally recognized as having expertise concerning the data. In measuring population and population growth, the Secretary shall use the most recent estimates of population certified by the State Budget Officer.

(c)       Exception for Enterprise Tier One and Two Areas. – Notwithstanding the provisions of this section, a county designated as an enterprise tier one area or an enterprise tier two area may not be redesignated as a higher‑numbered enterprise tier area until it has been in its enterprise tier area for at least two consecutive years.

(d)       Exception for Two‑County Industrial Park. – For the purpose of this Article, an eligible two‑county industrial park has the lower enterprise tier designation of the designations of the two counties in which it is located if it meets all of the following conditions:

(1)       It is located in two contiguous counties, one of which has a lower enterprise tier designation than the other.

(2)       At least one‑third of the park is located in the county with the lower tier designation.

(3)       It is owned by the two counties or a joint agency of the counties.

(4)       The county with the lower tier designation contributed at least the lesser of one‑half of the cost of developing the park or a proportion of the cost of developing the park equal to the proportion of land in the park located in the county with the lower tier designation.

(d1)     (Effective for taxable years beginning on or after January 1, 2005.) Exception for Certain Multi‑Jurisdictional Industrial Park. – For the purpose of this Article, an eligible industrial park created by interlocal agreement under G.S. 158‑7.4 has the lowest enterprise tier designation of the designations of the counties in which it is located if all of the following conditions are satisfied:

(1)       The industrial park is located, at one or more sites, in four or more contiguous counties.

(2)       At least two of the counties in which the industrial park is located are enterprise tier one areas.

(3)       The industrial park is owned by four or more units of local government or a nonprofit corporation owned or controlled by four or more units of local government.

(4)       In each county in which the industrial park is located, the park has at least 300 developable acres. For the purposes of this subdivision, "developable acres" includes acreage that is owned directly by the industrial park or its owners or that is the subject of a development agreement between the industrial park or its owners and a third‑party owner.

(5)       The total population of all of the counties in which the industrial park is located is less than 200,000.

(6)       In each county in which the industrial park is located, at least sixteen and eight‑tenths percent (16.8%) of the population was Medicaid eligible for the 2003‑2004 fiscal year based on 2003 population estimates.

(e)       Exceptions for Certain Small Counties. – The following exceptions to the provisions of this section apply to small counties:

(1)       A county that has a population of less than 12,000 is designated an enterprise tier one area.

(2)       A county that meets both of the conditions set out below has an enterprise tier designation one level below the designation it would otherwise have under subsection (a) of this section:

a.         Its population is less than 50,000.

b.         More than eighteen percent (18%) of its population is below the federal poverty level according to the most recent federal decennial census.

(3)       A county that has a population of less than 35,000 and that would otherwise be designated an enterprise tier four or five area under this section must be designated an enterprise tier three area.

(f)        Exceptions for Certain Counties with High Unemployment. – Notwithstanding the provisions of this section, a county whose rank in a ranking of counties by average rate of unemployment for the preceding 12 months, from highest to lowest, is one of the 10 highest in the State is designated an enterprise tier one area. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, ss. 1, 2; 1999‑456, s. 64; 2000‑73, s. 1; 2001‑94, s. 1; 2001‑476, s. 3(a); 2004‑202, s. 10; 2004‑203, s. 5(e); 2005‑241, ss. 4, 6; 2005‑406, s. 1.)

§ 105‑129.3A.  (See note for repeal) Development zone designation.

(a)       Development Zone Defined. – A development zone is an area comprised of either an economic development and training district as defined by G.S. 153A‑317.12 or one or more contiguous census tracts, census block groups, or both in the most recent federal decennial census that meets all of the following conditions:

(1)       Every census tract and census block group in the zone is located in whole or in part within the primary corporate limits of a city with a population of more than 5,000 according to the most recent annual population estimates certified by the State Budget Officer.

(2)       It has a population of 1,000 or more according to the most recent annual population estimates certified by the State Budget Officer.

(3)       More than twenty percent (20%) of its population is below the poverty level according to the most recent federal decennial census.

(4)       Every census tract and census block group in the zone meets at least one of the following conditions:

a.         More than ten percent (10%) of its population is below the poverty level according to the most recent federal decennial census.

b.         It is immediately adjacent to another census tract or census block group that is in the same zone and has more than twenty percent (20%) of its population below the poverty level according to the most recent federal decennial census.

(5)       None of the census tracts or census block groups in the zone is located in another development zone designated by the Secretary of Commerce.

(b)       Designation. – Upon request of a taxpayer or a local government, the Secretary of Commerce shall designate whether an area is a development zone that meets the conditions of subsection (a) of this section. If the applicant is a taxpayer, it must notify each city in which part of the zone is located. A development zone designation is effective for 24 months following the designation. The Department of Commerce must publish annually a list of all development zones with a description of their boundaries.

(c)       Relationship With Enterprise Tiers. – For the purpose of the wage standard requirement of G.S. 105‑129.4, the credit for investing in machinery and equipment allowed in G.S. 105‑129.9, and the credit for worker training allowed in G.S. 105‑129.11, a development zone is considered an enterprise tier one area. For all other purposes, a development zone has the same enterprise tier designation as the county in which it is located.

(d)       Parcel of Property Partially in a Development Zone. – For the purposes of this section, a parcel of property that is located partially within a development zone is considered entirely within the development zone if all of the following conditions are satisfied:

(1)       At least fifty percent (50%) of the parcel is located within the development zone.

(2)       The parcel was in existence and under common ownership prior to the most recent federal decennial census.

(3)       The parcel is a portion of land made up of one or more tracts or tax parcels of land that is surrounded by a continuous perimeter boundary. (1998‑55, s. 1; 1999‑360, ss. 1, 2; 2001‑414, s. 6; 2001‑476, s. 4(a); 2002‑172, s. 1.4; 2003‑416, s. 2; 2004‑203, s. 5(f); 2006‑66, s. 24.5(a).)

§ 105‑129.3B.  Agrarian growth zone designation.

(a)       Agrarian Growth Zone Defined. – An agrarian growth zone is an area comprised of one or more contiguous census tracts, census block groups, or both, in the most recent federal decennial census that meets all conditions in this subsection. A county may have no more than one agrarian growth zone.

(1)       All land within the zone is located in whole within a county that has no municipality with a population in excess of 10,000.

(2)       Every census tract and census block group that composes part of the zone has more than twenty percent (20%) of its population below the poverty level according to the most recent federal decennial census.

(3)       The area of the zone less the smallest census tract included in the zone does not exceed five percent (5%) of the total area of the county in which the zone is located.

(b)       Designation. – Upon request of a local government, the Secretary of Commerce shall make a written determination whether an area is an agrarian growth zone that meets the conditions of subsection (a) of this section. A determination under this section is effective until December 31 of the year following the year in which the determination is made. The Department of Commerce shall publish annually a list of all agrarian growth zones with a description of their boundaries.

(c)       Parcel of Property Partially in Agrarian Growth Zone. – For the purposes of this section, a parcel of property that is located partially within an agrarian growth zone is considered entirely within the zone if all of the following conditions are satisfied:

(1)       At least fifty percent (50%) of the parcel is located within the zone.

(2)       The parcel was in existence and under common ownership prior to the most recent federal decennial census.

(3)       The parcel is a portion of land made up of one or more tracts or tax parcels of land that is surrounded by a continuous perimeter boundary.

(d)       Relationship With Enterprise Tiers. – For the purpose of the wage standard requirement of G.S. 105‑129.4, the credit for investing in machinery and equipment allowed in G.S. 105‑129.9, and the credit for worker training allowed in G.S. 105‑129.11, an agrarian growth zone is considered an enterprise tier one area. For all other purposes, an agrarian growth zone has the same enterprise tier designation as the county in which it is located. (2006‑66, s. 24.16(a).)

§ 105‑129.4.  (See note for repeal) Eligibility; forfeiture.

(a)       Type of Business. – The following conditions apply in determining a taxpayer's eligibility for the credits in this Article:

(1)       Central office or aircraft facility. – A taxpayer is eligible for the credits allowed by this Article if it operates a central office or aircraft facility that creates at least 40 new jobs and the jobs, investment, and activity with respect to which a credit is claimed are used in that office or facility.

(2)       Single business. – A taxpayer is eligible for the credits allowed by this Article other than by G.S. 105‑129.12 if the primary business of the taxpayer is one of the following types of businesses and the jobs, investment, and activity with respect to which a credit is claimed are used in that business:

a.         Air courier services.

b.         Data processing.

(3)       Multiple business. – A taxpayer is eligible for the credits allowed by this Article other than by G.S. 105‑129.12 if the primary business of the taxpayer is one of the following types of businesses and the jobs, investment, and activity with respect to which a credit is claimed are used in any of the following types of businesses:

a.         Manufacturing.

b.         Warehousing.

c.         Wholesale trade.

(4)       Single establishment. – A taxpayer is eligible for the credits allowed by this Article other than by G.S. 105‑129.12 if the primary business of the taxpayer or the primary activity of an establishment of the taxpayer is one of the following types of businesses and the jobs, investment, and activity with respect to which a credit is claimed are used in that business:

a.         Computer services.

b.         An electronic mail order house that creates at least 250 new jobs and is located in an enterprise tier one, two, or three area.

(5)       Customer service center. – A taxpayer is eligible for the credits allowed by this Article other than by G.S. 105‑129.12 if all of the following conditions are met:

a.         The taxpayer's primary business is as a telecommunications or financial services company, as defined by NAICS.

b.         The primary activity of an establishment of the taxpayer is a customer service center located in an enterprise tier one, two, or three area.

c.         The jobs, investment, and activity with respect to which a credit is claimed are used in that activity.

(6)       Warehousing. – A taxpayer is eligible for the credits allowed by this Article other than by G.S. 105‑129.12 if all of the following conditions are met:

a.         The primary activity of an establishment of the taxpayer is in warehousing.

b.         The warehousing establishment is located in an enterprise tier one, two, or three area and serves 25 or more establishments of the taxpayer in at least five different counties in one or more states.

c.         The jobs, investment, and activity with respect to which a credit is claimed are used in the warehousing establishment.

(7)       Research and development. – For the purpose of determining eligibility under this subsection for the credit for research and development in G.S. 105‑129.10, the following special rules apply:

a.         If the primary activity of an establishment of the taxpayer in this State is computer services, the taxpayer's qualified research expenditures in this State are considered to be used in computer services.

b.         For all other taxpayers, the taxpayer's qualified research expenditures in this State are considered to be used in the primary business of the taxpayer.

(a1)     New Jobs Defined. – A central office or aircraft facility creates at least 40 new jobs if the taxpayer hires at least 40 additional full‑time employees to fill new positions at the office either (i) within 12 months immediately following the date the taxpayer first uses the property as a central office or aircraft facility or (ii) within a 36‑month period that includes the 24 months that immediately precede and the 12 months that immediately follow the first use of the property as a central office or aircraft facility property when the taxpayer uses temporary space for the central office or aircraft facility functions during completion of the central office or aircraft facility property. Other property creates at least 200 new jobs if the taxpayer hires at least 200 additional full‑time employees to fill new positions at the location in a two‑year period beginning when the property is first used in an eligible business. An electronic mail order house creates at least 250 new jobs if the taxpayer hires at least 250 additional full‑time employees to fill new positions at the house in the two‑year period ending on the last day of the taxable year the taxpayer first claims a credit under this Article. Jobs transferred from one area in the State to another area in the State are not considered new jobs for purposes of this subsection.

(a2)     Expiration. – If, during the period that installments of a credit under this Article accrue, the taxpayer is no longer engaged in one of the types of business described in subsection (a) of this section, the credit expires. If, during the period that installments of a credit under this Article accrue, the number of jobs of an eligible business falls below the minimum number required under subsection (a) of this section, any credit associated with that business expires. When a credit expires, the taxpayer may not take any remaining installments of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5. A change in the enterprise tier designation of the location of an establishment does not result in expiration of a credit under this Article.

(b)       Wage Standard. – A taxpayer is eligible for the credit for creating jobs in an enterprise tier three, four, or five area if, for the calendar year the jobs are created, the average wage of the jobs for which the credit is claimed meets the wage standard and the average wage of all jobs at the location with respect to which the credit is claimed meets the wage standard. No credit is allowed for jobs not included in the wage calculation. A taxpayer is eligible for the credit for investing in machinery and equipment, the credit for research and development, or the credit for investing in real property for a central office or aircraft facility in a tier three, four, or five area if, for the calendar year the taxpayer engages in the activity that qualifies for the credit, the average wage of all jobs at the location with respect to which the credit is claimed meets the wage standard. In making the wage calculation, the taxpayer must include any positions that were filled for at least 1,600 hours during the calendar year the taxpayer engages in the activity that qualifies for the credit even if those positions are not filled at the time the taxpayer claims the credit. For a taxpayer with a taxable year other than a calendar year, the taxpayer must use the wage standard for the calendar year in which the taxable year begins. No wage standard applies to credits for activities in an enterprise tier one or two area. For the purposes of this subsection, for a fiber, yarn, or thread mill that uses a sequential manufacturing process in which separate parts of the sequential manufacturing process are performed in different facilities within the same county, the term "location" may mean either the specific establishment or all facilities in the county in which parts of the process are performed.

Part‑time jobs for which the taxpayer provides health insurance as provided in subsection (b2) of this section are considered to have an average weekly wage at least equal to the applicable percentage times the applicable average weekly wage for the county in which the jobs will be located. There may be a period of up to 100 days between the time at which an employee begins a part‑time job and the time at which the taxpayer begins to provide health insurance for that employee.

Jobs meet the wage standard if they pay an average weekly wage that is at least equal to one hundred ten percent (110%) of the applicable average weekly wage for the county in which the jobs will be located, as computed by the Secretary of Commerce from data compiled by the Employment Security Commission for the most recent period for which data are available. The applicable average weekly wage is the lowest of the following: (i) the average wage for all insured private employers in the county, (ii) the average wage for all insured private employers in the State, and (iii) the average wage for all insured private employers in the county multiplied by the county income/wage adjustment factor. The county income/wage adjustment factor is the county income/wage ratio divided by the State income/wage ratio. The county income/wage ratio is average per capita income in the county divided by the annualized average wage for all insured private employers in the county. The State income/wage ratio is the average per capita income in the State divided by the annualized average wage for all insured private employers in the State. The Department of Commerce must annually publish the wage standard for each county.

(b1)     Large Investment. – A taxpayer who is otherwise eligible for a tax credit under this Article becomes eligible for the large investment enhancements provided for credits under this Article if the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase or lease, and place in service in connection with the eligible business within a two‑year period, at least one hundred fifty million dollars ($150,000,000) worth of one or more of the following: real property, machinery and equipment, or central office or aircraft facility property. In the case of an interstate air courier that has or is constructing a hub in this State and in the case of an eligible major industry, this investment may be placed in service in connection with the eligible business within a seven‑year period. If the taxpayer fails to make the required level of investment within the applicable period, the taxpayer forfeits the large investment enhancements as provided in subsection (d) of this section.

(b2)     Health Insurance. – A taxpayer is eligible for a credit for creating jobs or for worker training under this Article if the taxpayer provides health insurance for the positions for which the credit is claimed when the jobs are created and each year it claims an installment or carryforward of the credit. A taxpayer is eligible for the other credits under this Article if the taxpayer provides health insurance for all of the full‑time positions at the location with respect to which the credit is claimed when the taxpayer engages in the activity that qualifies for the credit and each year it claims an installment or carryforward of the credit. For the purposes of this subsection, a taxpayer provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125.

Each year that a taxpayer claims a credit or an installment or carryforward of a credit allowed under this Article, the taxpayer must provide with the tax return the taxpayer's certification that the taxpayer continues to provide health insurance for the jobs for which the credit was claimed or the full‑time jobs at the location with respect to which the credit was claimed. If the taxpayer ceases to provide health insurance for the jobs during a taxable year, the credit expires and the taxpayer may not take any remaining installment or carryforward of the credit.

(b3)     Environmental Impact. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, at the time the taxpayer first claims the credit, the taxpayer has no pending administrative, civil, or criminal enforcement action based on alleged significant violations of any program implemented by an agency of the Department of Environment and Natural Resources, and has had no final determination of responsibility for any significant administrative, civil, or criminal violation of any program implemented by an agency of the Department of Environment and Natural Resources within the last five years. A significant violation is a violation or alleged violation that does not satisfy any of the conditions of G.S. 143‑215.6B(d). The Secretary of Environment and Natural Resources must notify the Department of Revenue annually of every person that currently has any of these pending actions and every person that has had any of these final determinations within the last five years.

(b4)     Safety and Health Programs. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, as of the time the taxpayer first claims the credit, at the business location with respect to which the credit is claimed, the taxpayer has no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations. For the purposes of this subsection, "serious violation" has the same meaning as in G.S. 95‑127. The Secretary of Labor must notify the Department of Revenue annually of all employers who have had these citations become final orders within the past three years.

(b5)     Substantial Investment in Other Property. – A taxpayer is eligible for the credit for substantial investment in other property under G.S. 105‑129.12A with respect to a location only if the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase or lease and use in an eligible business at that location within a three‑year period at least ten million dollars ($10,000,000) of real property and that the location that is the subject of the credit will create at least 200 new jobs within two years of the time that the property is first used in an eligible business. If the taxpayer fails to timely make the required level of investment or fails to timely create the required number of new jobs, the taxpayer forfeits the credit as provided in subsection (d) of this section.

(b6)     Overdue Tax Debts. – A taxpayer is not eligible for a credit allowed under this Article if, at the time the taxpayer claims the credit or an installment or carryforward of the credit, the taxpayer has received a notice of an overdue tax debt and that overdue tax debt has not been satisfied or otherwise resolved.

(b7)     Major Computer Facilities. – A taxpayer that is otherwise eligible for a tax credit under this Article and who satisfies the conditions of G.S. 105‑129.62 is eligible for the major computer facility enhancements provided for credits under this Article. The major computer facility enhancements are the following:

(1)       The wage standard requirement does not apply to the activities of the taxpayer at the major computer facility.

(2)       For the credit for creating jobs under G.S. 105‑129.8, the amount of the credit is increased by four thousand dollars ($4,000) per job for jobs at the major computer facility.

(3)       For the credit for investment in machinery and equipment under G.S. 105‑129.9, the applicable percentage is seven percent (7%) and the applicable threshold is zero dollars ($0.00) regardless of the enterprise tier designation of the county in which the major computer facility is located.

(4)       For the credit for worker training under G.S. 105‑129.11, the maximum amount of the credit per worker trained is one thousand dollars ($1,000) regardless of the enterprise tier designation of the county in which the major computer facility is located.

(5)       For the credit for substantial investment in other property under G.S. 105‑129.12A, the taxpayer is eligible for the credit regardless of the enterprise tier designation of the county in which the major computer facility is located.

(c)       Repealed by Session Laws 1998‑55, s. 1, effective for taxable years beginning on or after January 1, 1999.

(d)       Forfeiture. – A taxpayer forfeits a credit allowed under this Article if the taxpayer was not eligible for the credit for the calendar year in which the taxpayer engaged in the activity for which the credit was claimed. In addition, a taxpayer forfeits a large investment enhancement of a tax credit if the taxpayer fails to timely make the required level of investment under subsection (b1) of this section. If an eligible major industry fails to timely make the required level of investment under G.S. 105‑129.2(8a), the taxpayer forfeits all credits allowed under this Article that it would not otherwise have been eligible for if it were not an eligible major industry. If a taxpayer that is subject to the later repeal date of this Article under G.S. 105‑129.2A(a3) fails to timely make the required level of investment or to timely create the required number of new jobs, the taxpayer forfeits all credits allowed under this Article that it would not otherwise have been eligible for if it were not subject to the later repeal date under G.S. 105‑129.2A(a3). A taxpayer forfeits the credit for substantial investment in other property allowed under G.S. 105‑129.12A if the taxpayer fails to timely create the number of required new jobs or to timely make the required level of investment under subsection (b5) of this section. A taxpayer forfeits the technology commercialization credit allowed under G.S. 105‑129.9A if the taxpayer fails to make the level of investment required by subsection (e) of that section within the required period or if the taxpayer fails to meet the terms of its licensing agreement with a research university. If a taxpayer claimed a twenty percent (20%) technology commercialization credit under G.S. 105‑129.9A(d) and fails to make the level of investment required under that subsection within the required period, but does make the level of investment required under subsection (e) of that section within the required period, the taxpayer forfeits one‑fourth of the twenty percent (20%) credit.

A taxpayer that forfeits a credit under this Article is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer that fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236. If a taxpayer forfeits the credit for creating jobs, the technology commercialization credit, or the credit for investing in machinery and equipment, the taxpayer also forfeits any credit for worker training claimed for the jobs for which the credit for creating jobs was claimed or the jobs at the location with respect to which the technology commercialization credit or the credit for investing in machinery and equipment was claimed.

(e)       Change in Ownership of Business. – As used in this subsection, the term "business" means a taxpayer or an establishment. The sale, merger, consolidation, conversion, acquisition, or bankruptcy of a business, or any transaction by which an existing business reformulates itself as another business, does not create new eligibility in a succeeding business with respect to credits for which the predecessor was not eligible under this Article. A successor business may, however, take any installment of or carried‑over portion of a credit that its predecessor could have taken if it had a tax liability. The acquisition of a business is a new investment that creates new eligibility in the acquiring taxpayer under this Article if any of the following conditions are met:

(1)       The business closed before it was acquired.

(2)       The business was required to file a notice of plant closing or mass layoff under the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2102, before it was acquired.

(3)       The business was acquired by its employees directly or indirectly through an acquisition company under an employee stock option transaction or another similar mechanism. For the purpose of this subdivision, "acquired" means that as part of the initial purchase of a business by the employees, the purchase included an agreement for the employees through the employee stock option transaction or another similar mechanism to obtain one of the following:

a.         Ownership of more than fifty percent (50%) of the business.

b.         Ownership of not less than forty percent (40%) of the business within seven years if the business has tangible assets with a net book value in excess of one hundred million dollars ($100,000,000) and has the majority of its operations located in an enterprise tier one, two, or three area.

(f)        Development Zone Project Credit. – Subsections (a) through (b4) of this section do not apply to the credit for development zone projects provided in G.S. 105‑129.13.

(g)       Advisory Ruling. – A taxpayer may request in writing from the Secretary of Revenue specific advice regarding eligibility for a credit under this Article. G.S. 105‑264 governs the effect of this advice. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, ss. 1, 2; 1998‑55, s. 1; 1999‑305, s. 3; 1999‑360, ss. 1, 2; 1999‑369, s. 5.2; 2000‑56, ss. 5(c), 6, 8(c); 2000‑140, ss. 92.A(a),(b); 2001‑414, s. 7; 2001‑476, ss. 5(a), 6(a); 2002‑72, s. 12; 2002‑146, ss. 3, 4; 2002‑172, ss. 1.2, 1.3(b); 2003‑349, s. 8.1; 2003‑416, s. 2; 2003‑435, 2nd Ex. Sess., ss. 3.3, 3.4; 2004‑170, ss. 10, 11; 2004‑204, 1st Ex. Sess., s. 2; 2005‑241, s. 2; 2006‑66, s. 24.14(a); 2007‑491, s. 44(1)a.)

§ 105‑129.5.  (See note for repeal) Tax election; cap; carryforwards; limitations.

(a)       Tax Election. – The credits provided in this Article are allowed against the franchise tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, and the gross premiums tax levied in Article 8B of this Chapter. The taxpayer may divide the technology commercialization credit allowed in G.S. 105‑129.9A between the taxes against which it is allowed. The taxpayer shall elect the percentage of the credit that will be taken against each tax when filing the return on which the credit is first taken. This election is binding. The percentage of the credit elected to be taken against each tax may be carried forward only against the same tax.

The taxpayer must take any other credit allowed in this Article against only one of the taxes against which it is allowed. The taxpayer shall elect the tax against which a credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax.

(b)       Cap. – The credits allowed under this Article may not exceed fifty percent (50%) of the tax against which they are claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year.

(c)       Carryforward. – Any unused portion of a credit with respect to a large investment, with respect to the technology commercialization credit allowed in G.S. 105‑129.9A, or with respect to substantial investment in other property under G.S. 105‑129.12A may be carried forward for the succeeding 20 years. Any unused portion of a credit with respect to research and development activities under G.S. 105‑129.10 may be carried forward for the succeeding 15 years. Any unused portion of a credit may be carried forward for the succeeding 10 years if, before the taxpayer claims the credit, the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase or lease, and place in service in connection with the eligible business within a two‑year period, at least fifty million dollars ($50,000,000) worth of one or more of the following: real property, machinery and equipment, or central office or aircraft facility property. In the case of an interstate air courier that has or is constructing a hub in this State and in the case of an eligible major industry, this investment may be placed in service in connection with the eligible business within a seven‑year period. If the taxpayer fails to make the required level of investment within the applicable period, the taxpayer forfeits this enhanced carryforward period. Any unused portion of any other credit may be carried forward for the succeeding five years.

(d)       Statute of Limitations. – Notwithstanding Article 9 of this Chapter, a taxpayer must claim a credit under this Article within six months after the date set by statute for the filing of the return, including any extensions of that date. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑305, s. 4; 1999‑360, ss. 1, 2; 2000‑56, s. 2; 2001‑476, s. 7(b); 2002‑146, s. 5; 2003‑435, 2nd Ex. Sess., s. 3.5.)

§ 105‑129.6.  (See note for repeal) Fees and reports.

(a)       Repealed by Session Laws 2001‑476, s. 8(a), effective November 29, 2001.

(a1)     Fee. – When filing a return for a taxable year in which the taxpayer engaged in activity for which the taxpayer is eligible for a credit under this Article, the taxpayer must pay the Department of Revenue a fee of five hundred dollars ($500.00) for each credit the taxpayer claims or intends to claim with respect to a location that is in an enterprise tier three, four, or five area, subject to a maximum fee of one thousand five hundred dollars ($1,500) per taxpayer per taxable year. This fee does not apply to any credit the taxpayer claims or intends to claim with respect to a location that is in a development zone or agrarian growth zone. If the taxpayer claims or intends to claim a credit that relates to locations in more than one enterprise tier area, the fee is based on the highest‑numbered enterprise tier area.

The fee is due at the time the return is due for the taxable year in which the taxpayer engaged in the activity for which the taxpayer is eligible for a credit. No credit is allowed under this Article for a taxable year until all outstanding fees have been paid.

The Secretary of Revenue shall retain three‑fourths of the proceeds of the fee imposed in this section for the costs of administering and auditing the credits allowed in this Article. The Secretary of Revenue shall credit the remaining proceeds of the fee imposed in this section to the Department of Commerce for the costs of administering this Article. The proceeds of the fee are receipts of the Department to which they are credited.

(b)       Reports. – The Department of Revenue shall publish by May 1 of each year the following information itemized by credit and by taxpayer for the 12‑month period ending the preceding December 31:

(1)       The number of credits taken for each credit allowed in this Article.

(2)       The number and enterprise tier area of new jobs with respect to which credits were generated and to which credits were taken.

(3)       The cost and enterprise tier area of machinery and equipment with respect to which credits were generated and to which credits were taken.

(4)       The number of new jobs created by businesses located in development zones, and the percentage of jobs at those locations that were filled by residents of the zones.

(5)       The amount and enterprise tier area of worker training expenditures with respect to which credits were generated and to which credits were taken.

(6)       The amount and enterprise tier area of new research and development expenditures with respect to which credits were generated and to which credits were taken.

(7)       The cost and enterprise tier area of real property investment with respect to which credits were generated and to which credits were taken. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, ss. 1, 2; 2000‑56, s. 1(a); 2001‑476, s. 8(a); 2001‑487, s. 123; 2004‑170, s. 12; 2004‑203, s. 40; 2005‑429, s. 2.2; 2006‑66, s. 24.16(c).)

§ 105‑129.7.  (See note for repeal) Substantiation.

(a)       To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary of Revenue. Every taxpayer claiming a credit under this Article shall maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for the credit and the amount of the credit shall rest upon the taxpayer, and no credit shall be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection.

(b)       Each taxpayer must provide with the tax return qualifying information for each credit claimed under this Article for the first taxable year the credit is claimed and for every year in which a subsequent installment or a carryforward of that credit is claimed. The qualifying information must be in the form prescribed by the Secretary, must cover each taxable year beginning with the first taxable year the credit is claimed, and must be signed and affirmed by the individual who signs the taxpayer's tax return. The information required by this subsection is information demonstrating that the taxpayer has met the conditions for qualifying for an initial credit and any installments and carryforwards, and includes the following:

(1)       The physical location of the jobs and investment with respect to which the credit is claimed, including the enterprise tier designation of the location and whether it is in a development zone or agrarian growth zone. In addition, for each individual who fills a job at a location with respect to which a credit is claimed, the place where the individual resided before taking the job, including any enterprise tier designation of that place. In addition, for jobs that are located in a development zone, the number of those jobs that are filled by residents of the development zone.

(2)       The type of business with respect to which the credit is claimed, as required by G.S. 105‑129.4(a), and wage information described in G.S. 105‑129.4(b).

(3)       If the credit is claimed with respect to a large investment under G.S. 105‑129.4(b1), is a credit with a carryforward period of 10 years under G.S. 105‑129.5(c), or is a credit claimed under G.S. 105‑129.12A, the amount of the investment requirement under those subsections that has been met to date.

(4)       Qualifying information required for the credit for creating jobs allowed under G.S. 105‑129.8, the credit for investing in machinery and equipment allowed under G.S. 105‑129.9, the credit for worker training allowed under G.S. 105‑129.11, the credit for investing in central office or aircraft facility property allowed in G.S. 105‑129.12, the credit for substantial investment in other property under G.S. 105‑129.12A, and any other credits allowed under this Article. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1999‑360, ss. 1, 2; 2000‑56, s. 5(d); 2001‑476, s. 9(a); 2006‑66, s. 24.16(d).)

§ 105‑129.8.  (See note for repeal) Credit for creating jobs.

(a)       Credit. – A taxpayer that meets the eligibility requirements set out in G.S. 105‑129.4, has five or more full‑time employees, and hires an additional full‑time employee during the taxable year to fill a new position located in this State is allowed a credit for creating a new full‑time job. The amount of the credit for each new full‑time job created is set out in the table below and is based on the enterprise tier of the area in which the position is located. In addition, if the position is located in a development zone or agrarian growth zone, the amount of the credit is increased by four thousand dollars ($4,000) per job.

Area Enterprise Tier                        Amount of Credit

Tier One                                        $12,500

Tier Two                                            4,000

Tier Three                                          3,000

Tier Four                                            1,000

Tier Five                                               500

(a1)     Positions. – A position is located in an area if more than fifty percent (50%) of the employee's duties are performed in the area. The number of new positions a taxpayer fills during the taxable year is determined by subtracting the highest number of full‑time employees the taxpayer had in this State at any time during the 12‑month period preceding the beginning of the taxable year from the number of full‑time employees the taxpayer has in this State at the end of the taxable year.

(a2)     Installments. – The credit may not be taken in the taxable year in which the additional employee is hired. Instead, the credit must be taken in equal installments over the four years following the taxable year in which the additional employee was hired and is conditioned on the taxpayer's continued employment in this State of the number of full‑time employees the taxpayer had upon hiring the employee that caused the taxpayer to qualify for the credit.

If, in one of the four years in which the installment of a credit accrues, the number of the taxpayer's full‑time employees in this State falls below the number of full‑time employees the taxpayer had in this State in the year in which the taxpayer qualified for the credit, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5.

(a3)     Transferred Jobs. – Jobs transferred from one area in the State to another area in the State are not considered new jobs for purposes of this section. If, in one of the four years in which the installment of a credit accrues, the position filled by the employee is moved to an area in a higher‑ or lower‑numbered enterprise tier, or is moved from a development zone or agrarian growth zone to an area that is not a development zone or agrarian growth zone, the remaining installments of the credit must be calculated as if the position had been created initially in the area to which it was moved.

(b)       Repealed by Session Laws 1989, c. 111, s. 1.

(b1),    (c)  Repealed by Session Laws 1996, Second Extra Session, c. 13, s. 3.3.

(d)       Planned Expansion. – A taxpayer that signs a letter of commitment with the Department of Commerce to create at least twenty new full‑time jobs in a specific area within two years of the date the letter is signed qualifies for the credit in the amount allowed by this section based on the area's enterprise tier and development zone or agrarian growth zone designation for that year even though the employees are not hired that year. In the case of an interstate air courier that has or is constructing a hub in this State and in the case of an eligible major industry, the applicable time period is seven years. The credit shall be available in the taxable year after at least twenty employees have been hired if the hirings are within the applicable commitment period. The conditions outlined in subsection (a) apply to a credit taken under this subsection except that if the area is redesignated to a higher‑numbered enterprise tier or loses its development zone or agrarian growth zone designation after the year the letter of commitment was signed, the credit is allowed based on the area's enterprise tier and development zone or agrarian growth zone designation for the year the letter was signed. If the taxpayer does not hire the employees within the applicable period, the taxpayer does not qualify for the credit. However, if the taxpayer qualifies for a credit under subsection (a) in the year any new employees are hired, the taxpayer may take the credit under that subsection.

(e),      (f)  Repealed by Session Laws 1996, Second Extra Session, c. 13, s. 3.3. (1987, c. 568, ss. 1, 2; 1989, c. 111, ss. 1, 2; c. 751, ss. 7(6), 7(7), 8(10), 8(11); c. 753, s. 4.1(a)‑(d); 1989 (Reg. Sess., 1990), c. 814, s. 14; 1991, c. 517, ss. 1‑3; 1991 (Reg. Sess., 1992), c. 959, ss. 20, 21; 1993, c. 45, ss. 1, 2; c. 485, ss. 7, 11; 1995, c. 370, ss. 5, 6; 1996, 2nd Ex. Sess., c. 13, ss. 3.2‑3.4; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, s. 1; 2000‑56, s. 8(a); 2000‑140, s. 92.A(b); 2001‑414, s. 8; 2002‑146, s. 6; 2003‑435, 2nd Ex. Sess., s. 3.6; 2004‑170, s. 43(a); 2005‑435, s. 28; 2006‑66, s. 24.16(e).)

§ 105‑129.9.  (See note for repeal) Credit for investing in machinery and equipment.

(a)       General Credit. – If a taxpayer that has purchased or leased eligible machinery and equipment places them in service in this State during the taxable year, the taxpayer is allowed a credit equal to the applicable percentage of the excess of the eligible investment amount over the applicable threshold. Machinery and equipment are eligible if they are capitalized by the taxpayer for tax purposes under the Code and not leased to another party. In addition, in the case of a large investment, machinery and equipment that are not capitalized by the taxpayer are eligible if the taxpayer leases them from another party. The credit may not be taken for the taxable year in which the machinery and equipment are placed in service but shall be taken in equal installments over the seven years following the taxable year in which they are placed in service. The applicable percentage is as follows:

Area Enterprise Tier                                    Applicable Percentage

Tier One                                                             7%

Tier Two                                                             7%

Tier Three                                                           6%

Tier Four                                                             5%

Tier Five                                                             4%

(a1)     Technology Commercialization Credit. – If a taxpayer is eligible for the credit allowed in this section with respect to eligible machinery and equipment and qualifies for one of the credits allowed in G.S. 105‑129.9A with respect to the same machinery and equipment, the taxpayer may choose to take one of those credits instead of the credit allowed in this section. A taxpayer may take the credit allowed in this section or one of the credits allowed in G.S. 105‑129.9A during a taxable year with respect to eligible machinery and equipment, but may not take more than one of these credits with respect to the same machinery and equipment.

(b)       Eligible Investment Amount. – The eligible investment amount is the lesser of (i) the cost of the eligible machinery and equipment and (ii) the amount by which the cost of all of the taxpayer's eligible machinery and equipment that are in service in this State on the last day of the taxable year exceeds the cost of all of the taxpayer's eligible machinery and equipment that were in service in this State on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer had the most eligible machinery and equipment in service in this State.

(c)       Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the enterprise tier where the eligible machinery and equipment are placed in service during the taxable year. If the taxpayer places eligible machinery and equipment in service at more than one establishment in an enterprise tier during the taxable year, the threshold applies separately to the eligible machinery and equipment placed in service at each establishment. If the taxpayer places eligible machinery and equipment in service at an establishment over the course of a two‑year period, the applicable threshold for the second taxable year is reduced by the eligible investment amount for the previous taxable year.

Area Enterprise Tier                                     Threshold

Tier One                                             $             -0-

Tier Two                                                  100,000

Tier Three                                                200,000

Tier Four                                               1,000,000

Tier Five                                               2,000,000

(d)       Expiration. – As used in this subsection, the term "disposed of" means disposed of, taken out of service, or moved out of State.

If, in one of the seven years in which the installment of a credit accrues, the machinery and equipment with respect to which the credit was claimed are disposed of, the credit expires and the taxpayer may not take any remaining installment of the credit for that machinery and equipment unless the cost of that machinery and equipment is offset in the same taxable year by the taxpayer's new investment in eligible machinery and equipment placed in service in the same enterprise tier, as provided in this subsection. If, during the taxable year the taxpayer disposed of the machinery and equipment for which installments remain, there has been a net reduction in the cost of all the taxpayer's eligible machinery and equipment that are in service in the same enterprise tier as the machinery and equipment that were disposed of, and the amount of this reduction is greater than twenty percent (20%) of the cost of the machinery and equipment that were disposed of, then the taxpayer forfeits the remaining installments of the credit for the machinery and equipment that were disposed of. If the amount of the net reduction is equal to twenty percent (20%) or less of the cost of the machinery and equipment that were disposed of, or if there is no net reduction, then the taxpayer does not forfeit the remaining installments of the expired credit. In determining the amount of any net reduction during the taxable year, the cost of machinery and equipment the taxpayer placed in service during the taxable year and for which the taxpayer claims a credit under Article 3B of this Chapter may not be included in the cost of all the taxpayer's eligible machinery and equipment that are in service. If in a single taxable year machinery and equipment with respect to two or more credits in the same tier are disposed of, the net reduction in the cost of all the taxpayer's eligible machinery and equipment that are in service in the same tier is compared to the total cost of all the machinery and equipment for which credits expired in order to determine whether the remaining installments of the credits are forfeited.

The expiration of a credit does not prevent the taxpayer from taking the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5.

If, in one of the seven years in which the installment of a credit accrues, the machinery and equipment with respect to which the credit was claimed are moved to an area in a higher‑numbered enterprise tier, or are moved from a development zone or agrarian growth zone to an area that is not a development zone or agrarian growth zone, the remaining installments of the credit are allowed only to the extent they would have been allowed if the machinery and equipment had been placed in service initially in the area to which they were moved.

(e)       Planned Expansion. – A taxpayer that signs a letter of commitment with the Department of Commerce to place specific eligible machinery and equipment in service in an area within two years after the date the letter is signed may, in the year the eligible machinery and equipment are placed in service in that area, calculate the credit for which the taxpayer qualifies based on the area's enterprise tier and development zone or agrarian growth zone designation for the year the letter was signed. In the case of an interstate air courier that has or is constructing a hub in this State and in the case of an eligible major industry, the applicable time period is seven years. All other conditions apply to the credit, but if the area has been redesignated to a higher‑numbered enterprise tier or has lost its development zone or agrarian growth zone designation after the year the letter of commitment was signed, the credit is allowed based on the area's enterprise tier and development zone or agrarian growth zone designation for the year the letter was signed. If the taxpayer does not place part or all of the specified eligible machinery and equipment in service within the applicable period, the taxpayer does not qualify for the benefit of this subsection with respect to the machinery and equipment not placed in service within the applicable period. However, if the taxpayer qualifies for a credit in the year the eligible machinery and equipment are placed in service, the taxpayer may take the credit for that year as if no letter of commitment had been signed pursuant to this subsection. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑305, s. 1; 1999‑360, ss. 1, 2; 2000‑56, s. 8(b); 2000‑140, s. 92.A(b); 2000‑173, s. 1(a); 2001‑476, s. 10(a); 2002‑146, s. 7; 2002‑172, s. 1.1; 2003‑416, s. 2; 2003‑435, 2nd Ex. Sess., s. 3.7; 2004‑170, s. 13; 2006‑66, s. 24.16(f).)

§ 105‑129.9A.  (See Editor's note for repeal) Technology commercialization credit.

(a)       Credit. – If a taxpayer that has purchased or leased eligible machinery and equipment places it in service in this State during the taxable year, the taxpayer may qualify for a credit as provided in this section. If the taxpayer is also eligible for the credit allowed under G.S. 105‑129.9 with respect to the eligible machinery and equipment, the taxpayer may choose instead of the credit allowed under G.S. 105‑129.9 with respect to the machinery and equipment to take one of the credits under this section for which the taxpayer qualifies. The twenty percent (20%) credit is a credit equal to twenty percent (20%) of the excess of the eligible investment amount over the applicable threshold for the taxable year. The fifteen percent (15%) credit is a credit equal to fifteen percent (15%) of the excess of the eligible investment amount over the applicable threshold for the taxable year.

Except as provided in this section, the provisions of G.S. 105‑129.9 apply to the credits allowed under this section. As used in this section, the term "research university" means an institution of higher education classified as a Research I university or a Research II university in the most recent edition of "A Classification of Institutions of Higher Education," the official report of The Carnegie Foundation for the Advancement of Teaching.

A credit allowed under this section must be taken for the taxable year in which the machinery and equipment are placed in service. A taxpayer may take the twenty percent (20%) credit allowed under this section, the fifteen percent (15%) credit allowed under this section, or the credit allowed in G.S. 105‑129.9 during a taxable year with respect to eligible machinery and equipment, but may not take more than one of these credits with respect to the same machinery and equipment.

(b)       Eligible Investment Amount. – In calculating the eligible investment amount under this section, for the purpose of determining the taxpayer's machinery and equipment in service in this State during the taxable year and the three immediately preceding taxable years, the following exceptions apply:

(1)       Machinery and equipment that were transferred to another taxpayer during the three‑year period are considered the taxpayer's machinery and equipment if they are still in service in this State during the taxable year, and the taxpayer to whom they were transferred is ineligible under G.S. 105‑129.4(e) to claim a new credit for the investment under this Article.

(2)       Machinery and equipment that were taken out of service during the three‑year period are considered the taxpayer's machinery and equipment in service if all of the following conditions are met:

a.         The machinery and equipment were taken out of service by the taxpayer or by the person to whom the taxpayer transferred them.

b.         The machinery and equipment were taken out of service at a location separate from any location with respect to which the taxpayer claims a credit under this section.

c.         The machinery and equipment were used in a business that was not and is not competitive with any business with respect to which the taxpayer claimed a credit under this section. For the purpose of this subdivision, two businesses are not competitive if both of the following conditions are met:

1.         Their products and services lack reasonable interchangeability of use by the customer, based on use but without regard to quality, price, condition, or availability.

2.         Their products and services lack reasonable interchangeability of production in that the businesses could not readily switch production capabilities from one product or service to the other.

(c)       Documentation. – If the taxpayer claims the exception provided in subdivision (b)(2) of this section, the taxpayer must first request a ruling by the Department of Revenue as to whether the taxpayer meets all of the conditions of subdivision (b)(2) of this section.

(d)       Twenty Percent Credit. – A taxpayer qualifies for a twenty percent (20%) credit under this section if it meets all of the following conditions:

(1)       The eligible machinery and equipment are directly related to production based on technology developed by and licensed from a research university or are used to produce resources essential to the taxpayer's production based on technology developed by and licensed from a research university.

(2)       The eligible machinery and equipment are placed in service in a tier one, two, or three enterprise area.

(3)       The eligible investment amount is at least ten million dollars ($10,000,000) for the taxable year.

(4)       The Secretary of Commerce has made a written determination that the taxpayer is expected to invest at least one hundred fifty million dollars ($150,000,000) in eligible machinery and equipment in a tier one, two, or three enterprise area by the end of the fourth year after the year in which the taxpayer first places eligible machinery and equipment in service in the enterprise area.

(5)       No more than nine years have passed since the first taxable year the taxpayer claimed a credit under this section with respect to the same location.

(e)       Fifteen Percent Credit. – A taxpayer qualifies for a fifteen percent (15%) credit under this section if it meets all of the following conditions:

(1)       The eligible machinery and equipment are directly related to production based on technology developed by and licensed from a research university, or are used to produce resources essential to the taxpayer's production based on technology developed by and licensed from a research university.

(2)       The eligible machinery and equipment are placed in service in a tier one, two, or three enterprise area.

(3)       The eligible investment amount is at least ten million dollars ($10,000,000) for the taxable year.

(4)       The Secretary of Commerce has made a written determination that the taxpayer is expected to invest at least one hundred million dollars ($100,000,000) in eligible machinery and equipment in a tier one, two, or three enterprise area by the end of the fourth year after the year in which the taxpayer first places eligible machinery and equipment in service in the enterprise area.

(5)       No more than nine years have passed since the first taxable year the taxpayer claimed a credit under this section with respect to the same location. (1999‑305, s. 2; 2001‑476, s. 11(a).)

§ 105‑129.10:  Repealed by S.L. 2004‑124, s. 32D.4, effective January 1, 2006.

§ 105‑129.11.  (See Editor's note for repeal) Credit for worker training.

(a)       Credit. – A taxpayer that provides worker training for five or more of its eligible employees during the taxable year is allowed a credit equal to the wages paid to the eligible employees during the training. Wages paid to an employee performing his or her job while being trained are not eligible for the credit. For positions located in an enterprise tier one area, the credit may not exceed one thousand dollars ($1,000) per employee trained during the taxable year. For other positions, the credit may not exceed five hundred dollars ($500.00) per employee trained during the taxable year. A position is located in an area if more than fifty percent (50%) of the employee's duties are performed in the area.

(b)       Eligibility. – An employee is eligible if the employee is in a full‑time position not classified as exempt under the Fair Labor Standards Act, 29 U.S.C. § 213(a)(1) and meets one or more of the following conditions:

(1)       The employee occupies a job for which the taxpayer is eligible to claim an installment of the credit for creating jobs.

(2)       The employee is being trained to operate machinery and equipment for which the taxpayer is eligible to claim an installment of the credit for investing in machinery and equipment. (1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, s. 1; 2000‑173, s. 1(a).)

§ 105‑129.12.  (See Editor's note for repeal) Credit for investing in central office or aircraft facility property.

(a)       Credit. – If a taxpayer that has purchased or leased real property in this State begins to use the property as a central office or aircraft facility during the taxable year, the taxpayer is allowed a credit equal to seven percent (7%) of the eligible investment amount. The eligible investment amount is the lesser of (i) the cost of the property and (ii) the amount by which the cost of all of the property the taxpayer is using in this State as central office or aircraft facilities on the last day of the taxable year exceeds the cost of all of the property the taxpayer was using in this State as central office or aircraft facilities on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer was using the most property in this State as central office or aircraft facilities. In the case of property that is leased, the cost of the property is not determined as provided in G.S. 105‑129.2 but is considered to be the taxpayer's lease payments over a seven‑year period, plus any expenditures made by the taxpayer to improve the property before it is used as the taxpayer's central office or aircraft facility if the expenditures are not reimbursed or credited by the lessor. The maximum credit allowed a taxpayer under this section for property used as a central office or aircraft facility is five hundred thousand dollars ($500,000). The entire credit may not be taken for the taxable year in which the property is first used as a central office or aircraft facility but shall be taken in equal installments over the seven years following the taxable year in which the property is first used as a central office or aircraft facility. The basis in any real property for which a credit is allowed under this section shall be reduced by the amount of credit allowable.

(b)       Mixed Use Property. – If the taxpayer uses only part of the property as the taxpayer's central office or aircraft facility, the amount of the credit allowed under this section is reduced by multiplying it by a fraction the numerator of which is the square footage of the property used as the taxpayer's central office or aircraft facility and the denominator of which is the total square footage of the property.

(c)       Expiration. – If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used as a central office or aircraft facility, the credit expires and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used as a central office or aircraft facility, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (b) of this section.

In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5. (1997‑277, s. 1; 1998‑55, s. 1; 1999‑360, s. 1; 2000‑56, s. 5(e); 2001‑476, s. 12(a).)

§ 105‑129.12A.  (See Editor's note for repeal) Credit for substantial investment in other property.

(a)       Credit. – If a taxpayer that has purchased or leased real property in an enterprise tier one or two area begins to use the property in an eligible business during the taxable year, the taxpayer is allowed a credit equal to thirty percent (30%) of the eligible investment amount if all of the eligibility requirements of G.S. 105‑129.4 are met. For the purposes of this section, property is located in an enterprise tier one or two area if the area the property is located in was an enterprise tier one or two area at the time the taxpayer applied for the determination required under G.S. 105‑129.4(b5). The eligible investment amount is the lesser of (i) the cost of the property and (ii) the amount by which the cost of all of the real property the taxpayer is using in this State in an eligible business on the last day of the taxable year exceeds the cost of all of the real property the taxpayer was using in this State in an eligible business on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer was using the most real property in this State in an eligible business. In the case of property that is leased, the cost of the property is not determined as provided in G.S. 105‑129.2 but is considered to be the taxpayer's lease payments over a seven‑year period, plus any expenditures made by the taxpayer to improve the property before it is used by the taxpayer if the expenditures are not reimbursed or credited by the lessor. The entire credit may not be taken for the taxable year in which the property is first used in an eligible business but shall be taken in equal installments over the seven years following the taxable year in which the property is first used in an eligible business. When part of the property is first used in an eligible business in one year and part is first used in an eligible business in a later year, separate credits may be claimed for the amount of property first used in an eligible business in each year. The basis in any real property for which a credit is allowed under this section shall be reduced by the amount of credit allowable.

(b)       Mixed Use Property. – If the taxpayer uses only part of the property in an eligible business, the amount of the credit allowed under this section is reduced by multiplying it by a fraction, the numerator of which is the square footage of the property used in an eligible business and the denominator of which is the total square footage of the property.

(c)       Expiration. – If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used in an eligible business, the credit expires and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used in an eligible business, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (b) of this section. If, in one of the years in which the installment of a credit accrues and by which the taxpayer is required to have created 200 new jobs at the property, the total number of employees the taxpayer employs at the property with respect to which the credit is claimed is less than 200, the credit expires and the taxpayer may not take any remaining installment of the credit.

In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5.

(d)       No Double Credit. – A taxpayer may not claim a credit under this section with respect to real property for which a credit is claimed under G.S. 105‑129.12. (2001‑476, s. 13(a); 2002‑72, s. 13.)

§ 105‑129.13.  (See Editor's note for repeal) Credit for development zone projects.

(a)       Credit. – A taxpayer who contributes cash or property to a development zone agency for an improvement project in a development zone is allowed a credit equal to twenty‑five percent (25%) of the value of the contribution. A contribution is for an improvement project for the purposes of this section if the agency receiving the contribution contracts in writing to use the contribution for the project and agrees in the contract to repay to the taxpayer, with interest, any part of the contribution not used for the project. The credit may not be taken for the year in which the contribution is made but must be taken for the taxable year beginning during the calendar year in which the application for the credit becomes effective as provided in this section.

(b)       Definitions. – The following definitions apply in this section:

(1)       Community development corporation. – A nonprofit corporation that meets all of the following conditions:

a.         It is chartered pursuant to Chapter 55A of the General Statutes and is tax‑exempt pursuant to section 501(c)(3) of the Code.

b.         Its primary mission is to develop and improve low‑income communities and neighborhoods through economic and related development.

c.         Its activities and decisions are initiated, managed, and controlled by the constituents of those local communities.

d.         Its primary function is to act as deal maker and packager of projects and activities that will increase its constituency's opportunities to become owners, managers, and producers of small businesses, to obtain affordable housing, and to obtain jobs designed to produce positive cash flow and curb blight in the targeted community.

(2)       Community development purpose. – A purpose for which a city is authorized to expend funds under G.S. 160A‑456, 160A‑457, and 160A‑457.2.

(3)       Control. – A person controls an entity if the person owns, directly or indirectly, more than ten percent (10%) of the voting securities of that entity. As used in this subdivision, the term "voting security" means a security that (i) confers upon the holder the right to vote for the election of members of the board of directors or similar governing body of the business or (ii) is convertible into, or entitles the holder to receive upon its exercise, a security that confers such a right to vote. A general partnership interest is a voting security.

(4)       Development zone agency. – Any of the following agencies that the Department of Commerce certifies will undertake an improvement project in a development zone:

a.         A community‑based development organization qualified under 24 C.F.R. § 570.204 to receive community development block grant funds under the Housing and Community Development Act of 1974, as amended, 42 U.S.C. § 5301, et seq., to carry out a neighborhood revitalization project, a community economic development project, or an energy conservation project.

b.         A community action agency that has been officially designated as such pursuant to section 210 of the Economic Opportunity Act of 1964, Public Law 88‑452, 78 Stat. 508 and which has not lost its designation as a result of a failure to comply with the provisions of that act.

c.         A community development corporation.

d.         A community development financial institution certified by the United States Department of the Treasury under the Community Development Banking and Financial Institutions Act of 1994, 12 U.S.C. § 4701, et seq.

e.         A community housing development organization qualified under the HOME Investment Partnerships Act, 42 U.S.C. §§ 12701, 12704, and 24 C.F.R. § 92.2.

f.          A local housing authority created under Article 1 of Chapter 157 of the General Statutes.

(5)       Improvement project. – A project to construct or improve real property for community development purposes or to acquire real property and convert it for community development purposes. Construction or improvement includes services provided by a development zone agency directly related to the construction or improvement, and project development fees charged by a developer for the construction or improvement.

(c)       Certification. – Before certifying that a development zone agency will undertake an improvement project in a development zone, the Secretary of Commerce must require the agency to provide sufficient documentation to establish the identity of the agency, the nature of the project, and that the project is for a community development purpose and is located in a development zone. The Secretary of Commerce shall not certify a development zone agency under this section if the agency, any of the agency's officers or directors, or any partner of the agency has ever used any part of a contribution made under this section for any purpose other than an improvement project.

(d)       Limitations. – A taxpayer who claims a credit under this subsection must identify in the application the development zone agencies to which the taxpayer made contributions and the amount contributed to each. No credit is allowed for a contribution if the taxpayer has one of the relationships defined in section 267(b) of the Code with the development zone agency or if the taxpayer controls, is controlled by, or is under common control with an affiliate of the development zone agency. No credit is allowed to the extent the taxpayer receives anything of value in exchange for the contribution.

(e)       Application. – To be eligible for the tax credit provided in this section, the taxpayer must file an application for the credit with the Secretary of Revenue on or before April 15 of the year following the calendar year in which the contribution was made. The Secretary may grant extensions of this deadline, as the Secretary finds appropriate, upon the request of the taxpayer, except that the application may not be filed after September 15 of the year following the calendar year in which the contribution was made. An application is effective for the year in which it is timely filed. The application must be on a form prescribed by the Secretary and must include any supporting documentation that the Secretary may require. If a contribution for which a credit is applied for was of property rather than cash, the taxpayer must include with the application a certified appraisal of the value of the property contributed. There is no fee for an application under this section.

(f)        Ceiling. – The total amount of all tax credits allowed to taxpayers under this section for contributions made in a calendar year may not exceed four million dollars ($4,000,000). The Secretary of Revenue must calculate the total amount of tax credits claimed from the applications filed under this section. If the total amount of tax credits claimed for contributions made in a calendar year exceeds four million dollars ($4,000,000), the Secretary must allow a portion of the credits claimed by allocating a total of four million dollars ($4,000,000) in tax credits in proportion to the size of the credit claimed by each taxpayer. If a credit is reduced pursuant to this subsection, the Secretary must notify the taxpayer of the amount of the reduction of the credit on or before December 31 of the year the application was filed. The Secretary's allocations based on applications filed pursuant to this section are final and will not be adjusted to account for credits applied for but not claimed.

(g)       Forfeiture. – A taxpayer forfeits a credit allowed under this section to the extent the development zone agency uses the taxpayer's contribution for any purpose other than an improvement project. Each development zone agency certified by the Department of Commerce must file with the Department of Commerce annual financial statements audited in accordance with generally accepted accounting principles and in accordance with Government Audit Standards developed by the Comptroller General of the United States. The annual statements are required each time the agency receives a contribution eligible for the credit allowed under this section until the entire contribution has been used for improvement projects. If the Department of Commerce determines that a development zone agency has used part or all of a contribution for any purpose other than an improvement project, the Department must notify the Secretary of Revenue of the forfeiture, the taxpayer who made the contribution, and the amount forfeited. (1999‑360, ss. 1, 2; 2000‑56, s. 1(b); 2001‑414, s. 9; 2001‑476, s. 14(a).)

§ 105‑129.14.  Reserved for future codification purposes.