New tax reform law reduces North Carolina corporate tax rate to 5% over 2 years and provides fiscally-responsible tax relief to all state taxpayers.
The new tax reform:
- Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 a 29% rate reduction.
- If the state meets revenue targets (i.e. if there is additional tax revenue growth due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.
- North Carolina counties are annually ranked based on economic well being by the Department of Commerce. Each of the one hundred counties are given a designation of Tier 1 (most distressed), Tier 2, or Tier 3 (least distressed) that signifies the county’s eligibility for various incentive packages. The Southeast Region has:
- 8 Tier 1 counties: Anson, Bladen, Columbus, Hoke, Montgomery, Richmond, Robeson and Scotland
- 2 Tier 2 counties: Cumberland and Sampson
- 3 Tier 3 counties: Brunswick, Pender and New Hanover
- North Carolina's Southeast has 6 counties designated as HUBZones: Bladen, Columbus, Montgomery, Richmond, Robeson, and Scotland.
The program’s benefits for HUBZone-certified companies include:
- Competitive and sole source contracting
- 10% price evaluation preference in full and open contract competitions, as well as subcontracting opportunities.
The federal government has a goal of awarding 3% of all dollars for federal prime contracts to HUBZone-certified small business concerns.
The New Market Tax Credit program was enacted to promote community investment from individuals and companies. The credit is provided to the company or individual that makes a qualified investment with a Community Development Entity (CDE). The invested money must be used by the CDE to provide low interest loans to new business ventures within a qualified census tract.
Port Enhancement Zones (PEZ):
- The North Carolina General Assembly recently passed legislation that gives an addition $1,000 tax credit per job created and provides some Tier 1 level incentive packages available to industrial parks within 25 miles of the Port of Wilmington that meet designated per capita income thresholds. All three of the region’s Tier 3 counties, Brunswick, Pender, and New Hanover, have available sites that meet these criteria.
Agrarian Growth Zones (AGZ) and Urban Progress Zones (UPZ):
- Counties in NC that do not have a municipality with a population of at least 10,000 can be designated Agrarian Growth Zones (AGZ) and are allowed special consideration for Article 3J Tax Credits. Columbus and Sampson counties have been designated AGZs in our region.
- Municipalities that have a population of at least 10,000 can have areas of poverty designated as Urban Progress Zones (UPZ) and are also allowed special consideration for Article 3J Tax Credits. Wilmington and Fayetteville both have areas designated as UPZs in our region.
Renewable Energy Tax Credits:
- 35% of cost of equipment and design, construction cost and installation for solar, wind, hydro and biomass applications up to $2,500,000.
Qualified Business Investment Tax Credits:
- Available tax credit against individual income tax for qualified investments in the equity securities or subordinated debt of a qualified business. The credit is 25% of the amount invested or $50,000 whichever is less.
- Eligibility requirements:
- Must be a Qualified Business Venture (QVB) or a Qualified Grantee Business (QGB) registered with the Secretary of State’s Securities Division.
- Sales and use tax is waived, refunded, or discounted for qualifying business activities.
Job Development Investment Grant (JDIG):
- A discretionary incentive program of cash grants for new and expanding businesses based on job and investment commitments made by companies in their formal applications to the state prior to a location decision; not to exceed $15 million in any single calendar year.
One North Carolina Fund:
- A discretionary incentives tool to enable job creation or retention of competitive projects. Awards are based on jobs created, economic impact, importance to the state, quality of the industry, and environmental impact.
- Local governments are required to match One NC awards with cash, fee waivers, in-kind services, donations of land and/or buildings, or provisions of infrastructure.
- Company must agree to meet or exceed 100% of the average county wage.
One North Carolina Small Business Program:
- For companies with fewer than 100 employees the One NC Small Business Program reimburses for costs in preparing and submitting Phase I proposals for federal SBIR and STTR programs.
- One NC Phase I Matching Funds match funds awarded by grantees of federal SBIR and STTR programs.
Community Development Block Grant:
- Grants for infrastructure based on federal allocation to the state from the US Department of Housing and Urban Development that may be applied for by local governments for economic development projects.
Industrial Development Fund:
- Grants and loans for infrastructure in Tier 1 and Tier 2 counties. Local government may apply for the funds in conjunction with a company that commits to create or retain jobs in North Carolina.
- Eligibility requirements are the same as those for Article 3J Tax Credits.
- Funding cannot exceed $10,000 per new job or retained job up to a maximum of $500,000.
- Local government may grant a 4% fixed interest loan to the company for machinery, equipment, or building renovations.
Water and Sewer Economic Infrastructure Program:
- Administered by the Rural Center of North Carolina and provides funding for water and sewer facilities that result in private-sector jobs up to $1 million or one half of the project costs whichever is less at $10,000 per job created.
- Grants offered to encourage economic growth through the productive reuse of vacant buildings.
Access Road Improvements:
- Funds available through the NC Board of Transportation to construct roads to provide access to new or expanding industrial or manufacturing facilities based on a comparison of the initial number of jobs gained with the cost of the improvements.
Rail Access Program:
- Grants provided to aid in financing construction or rehabilitation of railroad access for new or expanding industry based on number of jobs and capital investment.
- North Carolina bond programs allow tax-exempt bonds at 1.5-2.5 percentage points below corporate bond rates.
Foreign Trade Zones (FTZ):
- Foreign Trade Zone 66 is located in the region at the Port of Wilmington. An FTZ is a secured, neutral area outside of US customs territory. Items imported into an FTZ are exempt from duties and excise taxes. Merchandise may be manipulated, used in manufacturing, inspected, combined, displayed for sale, or re-exported without payment of duty. Customs duties and excise taxes are only applied on the final product if/when the product is imported into the US.