Article 3F.

Research and Development.

§ 105‑129.50.  (See note for effective date and repeal)  Definitions.

The definitions in section 41 of the Code apply in this Article. In addition, the following definitions apply in this Article:

(1)       through (3): Reserved.

(4)       North Carolina university research expenses. – Any amount the taxpayer paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.

(5)       Period of measurement. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(6)       Qualified North Carolina research expenses. – Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.

(7)       Receipts. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(8)       Related person. – Defined in G.S. 105‑163.010.

(9)       Research university. – An institution of higher education that meets one or both of the following conditions:

a.         It is classified as one of the following 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:

1.         Doctoral/Research Universities, Extensive or Intensive.

2.         Masters Colleges and Universities, I or II.

3.         Baccalaureate Colleges, Liberal Arts or General.

b.         It is a constituent institution of The University of North Carolina.

(10)     Small business. – A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000). (2004‑124, s. 32D.2.)

§ 105‑129.51.  (See notes) Administration; sunset.

(a)       A taxpayer is eligible for the credit allowed in this Article if it satisfies the requirements of G.S. 105‑129.83(c), (d), (e), and (f) relating to wage standard, health insurance, environmental impact, and safety and health programs, respectively.

(b)       This Article is repealed for taxable years beginning on or after January 1, 2014.

(c)       Repealed by Session Laws 2004‑124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006.  (2004‑124, ss. 32D.2, s. 32D.4; 2006‑252, s. 2.20; 2008‑107, s. 28.2(a).)

§ 105‑129.52.  (See notes) Tax election; cap.

(a)       Tax Election. – The credit allowed in this Article is 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 credit is first claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.

(b)       Cap. – A credit allowed in this Article may not exceed fifty percent (50%) of the amount of tax against which it is 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 a credit allowed in this Article may be carried forward for the succeeding 15 years. (2004‑124, s. 32D.2.)

§ 105‑129.53.  (See notes) Substantiation.

To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary. Every taxpayer claiming a credit under this Article must maintain and make available for inspection by the Secretary 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. (2004‑124, s. 32D.2.)

§ 105‑129.54.  (See notes) Reports.

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

(1)       The number of taxpayers that took a credit allowed in this Article, itemized by the categories of small business, low‑tier, other, and university research.

(2)       The amount of each credit taken in each category.

(3)       The total cost to the General Fund of the credits taken. (2005‑429, s. 2.7.)

§ 105‑129.55.  (See notes) Credit for North Carolina research and development.

(a)       Qualified North Carolina Research Expenses. – A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this subsection. Only one credit is allowed under this subsection with respect to the same expenses. If more than one subdivision of this subsection applies to the same expenses, then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer's qualified North Carolina research expenses qualifies under subdivision (2) of this subsection and the remainder qualifies under subdivision (3) of this subsection, the applicable percentages apply separately to each part of the expenses.

(1)       Small business. – If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three and one‑quarter percent (3.25%).

(2)       Low‑tier research. – For expenses with respect to research performed in a development tier one area, the applicable percentage is three and one‑quarter percent (3.25%).

(3)       Other research. – For expenses not covered under subdivision (1) or (2) of this subsection, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:

Expenses Over                 Up To                              Rate

-0-                                  $50 million                     1.25%

$50 million                           $200 million                     2.25%

$200 million                             –                                3.25%

(b)       North Carolina University Research Expenses. – A taxpayer that has North Carolina university research expenses for the taxable year is allowed a credit equal to twenty percent (20%) of the expenses. (2004‑124, s. 32D.2; 2006‑252, s. 2.1; 2007‑323, s. 31.8(a).)

§ 105‑129.56.  Reserved for future codification purposes.

§ 105‑129.57.  Reserved for future codification purposes.

§ 105‑129.58.  Reserved for future codification purposes.

§ 105‑129.59.  Reserved for future codification purposes.