Article 3B.

Business And Energy Tax Credits.

§ 105‑129.15.  Definitions.

The following definitions apply in this Article:

(1)       Business property. – Tangible personal property that is used by the taxpayer in connection with a business or for the production of income and is capitalized by the taxpayer for tax purposes under the Code. The term does not include, however, a luxury passenger automobile taxable under section 4001 of the Code or a watercraft used principally for entertainment and pleasure outings for which no admission is charged.

(2)       Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code, subject to the limitation on cost provided in section 179 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).

(3)       Recodified as § 105‑129.15(5).

(4)       Hydroelectric generator. – A machine that produces electricity by water power or by the friction of water or steam.

(4a)     Repealed by Session Laws 2002‑87, s. 3, effective August 22, 2002.

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

(6)       Renewable biomass resources. – Organic matter produced by terrestrial and aquatic plants and animals, such as standing vegetation, aquatic crops, forestry and agricultural residues, spent pulping liquor, landfill wastes, and animal wastes.

(7)       Renewable energy property. – Any of the following machinery and equipment or real property:

a.         Biomass equipment that uses renewable biomass resources for biofuel production of ethanol, methanol, and biodiesel; anaerobic biogas production of methane utilizing agricultural and animal waste or garbage; or commercial thermal or electrical generation. The term also includes related devices for converting, conditioning, and storing the liquid fuels, gas, and electricity produced with biomass equipment.

b.         Hydroelectric generators located at existing dams or in free‑flowing waterways, and related devices for water supply and control, and converting, conditioning, and storing the electricity generated.

c.         Solar energy equipment that uses solar radiation as a substitute for traditional energy for water heating, active space heating and cooling, passive heating, daylighting, generating electricity, distillation, desalination, detoxification, or the production of industrial or commercial process heat. The term also includes related devices necessary for collecting, storing, exchanging, conditioning, or converting solar energy to other useful forms of energy.

d.         Wind equipment required to capture and convert wind energy into electricity or mechanical power, and related devices for converting, conditioning, and storing the electricity produced.

(8)       Renewable fuel. – Either of the following:

a.         Biodiesel, as defined in G.S. 105‑449.60.

b.         Ethanol either unmixed or in mixtures with gasoline that are seventy percent (70%) or more ethanol by volume. (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1998‑55, s. 2; 1999‑342, s. 2; 1999‑360, s. 1; 2000‑173, s. 1(a); 2001‑431, s. 1; 2002‑87, s. 3; 2004‑153, s. 1; 2005‑413, s. 4; 2006‑162, s. 23.)

§§ 105‑129.15A, 105‑129.16: Repealed by Session Laws 2005‑413, ss. 6 and 7, effective September 20, 2005.

§ 105‑129.16A.  Credit for investing in renewable energy property.

(a)       Credit. – If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State during the taxable year, the taxpayer is allowed a credit equal to thirty‑five percent (35%) of the cost of the property. In the case of renewable energy property that serves a single‑family dwelling, the credit must be taken for the taxable year in which the property is placed in service. For all other renewable energy property, the entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service.

(b)       Expiration. – If, in one of the years in which the installment of a credit accrues, the renewable energy property with respect to which the credit was claimed is disposed of, taken out of service, or moved out of State, 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. 105‑129.17. No credit is allowed under this section to the extent the cost of the renewable energy property was provided by public funds.

(c)       Ceilings. – The credit allowed by this section may not exceed the applicable ceilings provided in this subsection.

(1)       Nonresidential Property. – A ceiling of two million five hundred thousand dollars ($2,500,000) per installation applies to renewable energy property placed in service for any purpose other than residential.

(2)       Residential Property. – The following ceilings apply to renewable energy property placed in service for residential purposes:

a.         One thousand four hundred dollars ($1,400) per dwelling unit for solar energy equipment for domestic water heating, including pool heating.

b.         Three thousand five hundred dollars ($3,500) per dwelling unit for solar energy equipment for active space heating, combined active space and domestic hot water systems, and passive space heating.

c.         Ten thousand five hundred dollars ($10,500) per installation for any other renewable energy property for residential purposes.

(d)       No Double Credit. – A taxpayer that claims any other credit allowed under this Chapter with respect to renewable energy property may not take the credit allowed in this section with respect to the same property. A taxpayer may not take the credit allowed in this section for renewable energy property the taxpayer leases from another unless the taxpayer obtains the lessor's written certification that the lessor will not claim a credit under this Chapter with respect to the property.

(e)       Sunset. – This section is repealed effective for renewable energy property placed into service on or after January 1, 2011. (1999‑342, s. 2; 2005‑413, s. 5.)

§ 105‑129.16B: Recodified as G.S. 105‑129.41 by Session Laws 2002‑87, s. 2, as amended by Session Laws 2003‑416, s. 1, effective August 22, 2002, and applicable to credits for buildings for which a federal tax credit is first claimed for a taxable year beginning on or after January 1, 2002.

§ 105‑129.16C:  Repealed effective for taxable years beginning on or after January 1, 2006.

§ 105‑129.16D.  (Repealed effective for facilities placed in service on or after January 1, 2011) Credit for constructing renewable fuel facilities.

(a)       Dispensing Credit. – A taxpayer that constructs and installs and places in service in this State a qualified commercial facility for dispensing renewable fuel is allowed a credit equal to fifteen percent (15%) of the cost to the taxpayer of constructing and installing the part of the dispensing facility, including pumps, storage tanks, and related equipment, that is directly and exclusively used for dispensing or storing renewable fuel. A facility is qualified if the equipment used to store or dispense renewable fuel is labeled for this purpose and clearly identified as associated with renewable fuel.

The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in three equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the portion of the facility directly and exclusively used for dispensing or storing renewable fuel is disposed of or taken out of service, 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. 105‑129.17.

(b)       Production Credit. – A taxpayer that constructs and places in service in this State a commercial facility for processing renewable fuel is allowed a credit equal to twenty‑five percent (25%) of the cost to the taxpayer of constructing and equipping the facility. The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in seven equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the facility with respect to which the credit was claimed is disposed of or taken out of service, 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. 105‑129.17.

(b1)     Alternative Production Credit. – In lieu of the credit allowed under subsection (b) of this section, a taxpayer that constructs and places in service in this State three or more commercial facilities for processing renewable fuel and that invests a total amount of at least four hundred million dollars ($400,000,000) in the facilities is allowed a credit equal to thirty‑five percent (35%) of the cost to the taxpayer of constructing and equipping the facilities. In order to claim the credit, the taxpayer must obtain a written determination from the Secretary of Commerce that the taxpayer is expected to invest within a five‑year period a total amount of at least four hundred million dollars ($400,000,000) in three or more facilities. The credit must be taken in seven equal annual installments beginning with the taxable year in which the first facility is placed in service. If, in one of the years in which the installment of credit accrues, a facility with respect to which the credit was claimed is disposed of or taken out of service and the investment requirements of this subsection are no longer satisfied, the credit expires and the taxpayer may take any remaining installment of the credit only to the extent allowed under subsection (b) of this section. The taxpayer may, however, take the portion of an installment under this subsection that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17. Notwithstanding the provisions of G.S. 105‑129.17, a taxpayer may carry forward unused portions of the credit allowed under this subsection for the succeeding 10 years.

If a taxpayer that claimed a credit under this subsection fails to meet the requirements of this subsection but meets the requirements of subsection (b) of this section, the taxpayer forfeits the difference between the alternative credit claimed under this subsection and the credit allowed under subsection (b) of this section. A taxpayer that forfeits part of the alternative credit under this subsection is liable for the additional taxes avoided plus interest at the rate established under G.S. 105‑241.1(i), computed from the date the additional taxes would have been due if the credit had not been allowed. The additional taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the additional taxes and interest by the due date is subject to penalties provided in G.S. 105‑236.

(c)       No Double Credit. – A taxpayer may not claim the credits allowed under subsections (b) and (b1) of this section with respect to the same facility. A taxpayer that claims any other credit allowed under this Chapter with respect to the costs of constructing and installing a facility may not take the credit allowed in this section with respect to the same costs.

(d)       Sunset. – This section is repealed effective for facilities placed in service on or after January 1, 2011. (2004‑153, s. 2; 2006‑66, s. 24.7(a); 2006‑259, s. 19.5(a); 2007‑323, s. 31.9(a).)

§ 105‑129.16E.  (Effective for taxable years beginning on or after January 1, 2007, and expires for taxable years beginning on or after January 1, 2010) Credit for small business employee health benefits.

(a)       Credit. – A small business that provides health benefits for all of its eligible employees during the taxable year is allowed a credit to offset its costs in providing health benefits for its eligible employees. For the purposes of this subsection, a taxpayer provides health benefits 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 or if its employees have qualifying existing coverage.

The credit is equal to a dollar amount per eligible employee whose total wages or salary received from the business does not exceed forty thousand dollars ($40,000) on an annual basis. The dollar amount is two hundred fifty dollars ($250.00), not to exceed the taxpayer's costs of providing health benefits for the employee during the taxable year.

(b)       Allocation. – If the taxpayer is an individual who is a nonresident or a part‑year resident, the taxpayer must reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate. If the taxpayer is not an individual and is required to apportion its multistate business income to this State, the taxpayer must reduce the amount of the credit by multiplying it by the apportionment fraction used to apportion its apportionable income to this State.

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

(1)       Eligible employee. – Defined in G.S. 58‑50‑110.

(2)       Qualifying existing coverage. – Defined in G.S. 58‑50‑130(a)(4a).

(3)       Small business. – A taxpayer that employs no more than 25 eligible employees throughout the taxable year.

(d)       Sunset. – This section expires for taxable years beginning on or after January 1, 2010.  (2006‑66, s. 24.4(a); 2007‑527, s. 5; 2008‑107, s. 28.9A(a).)

§ 105‑129.16F.  (Effective for taxable years beginning on or after January 1, 2008, and repealed for taxable years beginning on or after January 1, 2010) Credit for biodiesel producers.

(a)       Credit. – A biodiesel provider that produces at least 100,000 gallons of biodiesel during the taxable year is allowed a credit equal to the per gallon excise tax the producer paid under Article 36C of this Chapter on the biodiesel. For the purposes of this section, "biodiesel" is liquid fuel derived in whole from agricultural products, animal fats, or wastes from agricultural products or animal fats. The credit does not apply to tax paid on diesel fuel included in a biodiesel blend. The credit may not exceed five hundred thousand dollars ($500,000) and is subject to the limitations of G.S. 105‑129.17.

(b)       Sunset. – This section is repealed for taxable years beginning on or after January 1, 2010. (2006‑66, s. 24.8(a).)

§ 105‑129.16G.  (Effective for taxable years prior to January 1, 2008, and after January 1, 2012) Work Opportunity Tax Credit.

A taxpayer who is allowed a federal tax credit under Part IV, Subpart F of the Code for the taxable year is allowed a credit against the tax imposed by this Part. The credit is equal to six percent (6%) of the amount of credit allowed under the Code. (2007‑323, s. 31.21(a).)

§ 105‑129.16G.  (Effective for taxable years beginning on or after January 1, 2008, and expires for taxable years beginning on or after January 1, 2012) Work Opportunity Tax Credit.

(a)       Credit. – A taxpayer who is allowed a federal tax credit under Part IV, Subpart F of the Code for the taxable year is allowed a credit against the tax imposed by this Part. The credit is equal to six percent (6%) of the amount of credit allowed under the Code for wages paid during the taxable year for positions located in this State. A position is located in this State if more than fifty percent (50%) of the employee's duties are performed in the State.

(b)       Sunset. – This section expires for taxable years beginning on or after January 1, 2012.  (2007‑323, s. 31.21(a); 2008‑134, s. 2(a).)

§ 105‑129.16H.  Credit for donating funds to a nonprofit organization or unit of State or local government to enable the nonprofit or government unit to acquire renewable energy property.

(a)       Credit. – A taxpayer who donates money to a tax‑exempt nonprofit organization or a unit of State or local government for the purpose of providing funds for the organization or government unit to construct, purchase, or lease renewable energy property is allowed a credit under this section if the donation is used for its intended purpose. A tax‑exempt nonprofit organization is an organization that is exempt from tax under section 501(c)(3) of the Code.

The amount of the credit allowed in this section is the taxpayer's share of the credit the nonprofit organization or the unit of State or local government could claim under G.S. 105‑129.16A if the nonprofit organization or government unit were subject to tax. The taxpayer's share of the credit is calculated by dividing the taxpayer's donation by the cost of the renewable energy property constructed, purchased, or leased by the nonprofit organization or government unit and placed in service during the taxable year and then multiplying this percentage by the amount of the credit the nonprofit organization or government unit could claim if it were subject to tax. A taxpayer must take the credit allowed by this section for the taxable year in which the property is placed in service. The installment requirements in G.S. 105‑129.16A for nonresidential property do not apply to the credit allowed in this section.

(b)       Records. – A nonprofit organization or a unit of State or local government must keep a record of all donations it receives for the purpose of providing funds for the organization to construct, purchase, or lease renewable energy property and of the amount of the donations used for this purpose. If a nonprofit organization or government unit places renewable energy property in service that is purchased in whole or in part from donations made for this purpose, the nonprofit organization or government unit must give each taxpayer who made a donation a statement setting out the amount of the credit for which the taxpayer qualifies under this section. The statement must describe the renewable energy property placed in service and state the cost of the property, the amount of the credit the nonprofit organization or government unit could claim under G.S. 105‑129.16A if it were subject to tax, and the taxpayer's share of the credit allowed in this section. If the donations made for the renewable energy property exceed the cost of the property, the nonprofit organization or government unit must prorate each taxpayer's share of the credit. The sum of the credits allowed under this section to taxpayers who make donations to a nonprofit organization or a government unit may not exceed the amount of the credit the nonprofit organization or government unit could claim under G.S. 105‑129.16A if it were subject to tax.

(c)       No Double Benefit. – A taxpayer who claims a credit under this section based on a donation to a nonprofit organization or a unit of State or local government is not allowed to deduct this donation as a charitable contribution.  (2007‑397, s. 13(a); 2008‑107, s. 28.25(a); 2008‑134, s. 70.)

§ 105‑129.17.  (See Editor's note for repeal) Tax election; cap.

(a)       Tax Election. – The credits allowed in this Article are allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must 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 a credit must be claimed against the same tax.

(b)       Cap. – The credits allowed in 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. Any unused portion of the credits may be carried forward for the succeeding five years. (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 13; 2000‑140, ss. 63(a), 88; 2001‑431, s. 3; 2002‑87, s. 5.)

§ 105‑129.18. (See Editor's note for repeal) Substantiation.

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 must 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 a credit and the amount of the credit rests upon the taxpayer, and no credit may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection. (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 14; 2000‑140, ss. 63(b), 88.)

§ 105‑129.19.  Reports.

The Department of Revenue must publish by May 1 of each year the following information for the 12‑month period ending the preceding December 31:

(1)       The number of taxpayers that took the credits allowed in this Article.

(2)       The cost of business property and renewable energy property with respect to which credits were taken.

(2a)     Repealed by Session Laws 2002‑87, s. 6, effective August 22, 2002.

(3)       The total cost to the General Fund of the credits taken. (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 15; 2000‑140, ss. 63(c), 88; 2001‑414, s. 10; 2002‑87, s. 6; 2005‑429, s. 2.3.)

§§ 105‑129.20 through 105‑129.24.  Reserved for future codification purposes.