§ 105-129.4. (See note for repeal) Eligibility; forfeiture. - North Carolina Statutes

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

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

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

(2)        Single business. – Ataxpayer 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 thefollowing types of businesses and the jobs, investment, and activity withrespect to which a credit is claimed are used in that business:

a.         Air courierservices.

b.         Data processing.

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

a.         Manufacturing.

b.         Warehousing.

c.         Wholesale trade.

(4)        Singleestablishment. – A taxpayer is eligible for the credits allowed by this Articleother than by G.S. 105‑129.12 if the primary business of the taxpayer orthe primary activity of an establishment of the taxpayer is one of thefollowing types of businesses and the jobs, investment, and activity withrespect to which a credit is claimed are used in that business:

a.         Computer services.

b.         An electronic mailorder house that creates at least 250 new jobs and is located in an enterprisetier one, two, or three area.

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

a.         The taxpayer'sprimary business is as a telecommunications or financial services company, asdefined by NAICS.

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

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

(6)        Warehousing. – Ataxpayer 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 activityof an establishment of the taxpayer is in warehousing.

b.         The warehousing establishmentis located in an enterprise tier one, two, or three area and serves 25 or moreestablishments of the taxpayer in at least five different counties in one ormore states.

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

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

a.         If the primaryactivity of an establishment of the taxpayer in this State is computerservices, the taxpayer's qualified research expenditures in this State areconsidered to be used in computer services.

b.         For all othertaxpayers, the taxpayer's qualified research expenditures in this State areconsidered to be used in the primary business of the taxpayer.

(a1)      New Jobs Defined. – Acentral office or aircraft facility creates at least 40 new jobs if thetaxpayer hires at least 40 additional full‑time employees to fill newpositions at the office either (i) within 12 months immediately following thedate the taxpayer first uses the property as a central office or aircraftfacility or (ii) within a 36‑month period that includes the 24 monthsthat immediately precede and the 12 months that immediately follow the firstuse of the property as a central office or aircraft facility property when thetaxpayer uses temporary space for the central office or aircraft facilityfunctions during completion of the central office or aircraft facilityproperty. Other property creates at least 200 new jobs if the taxpayer hires atleast 200 additional full‑time employees to fill new positions at thelocation in a two‑year period beginning when the property is first usedin an eligible business. An electronic mail order house creates at least 250 newjobs if the taxpayer hires at least 250 additional full‑time employees tofill new positions at the house in the two‑year period ending on the lastday 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 arenot considered new jobs for purposes of this subsection.

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

(b)        Wage Standard. – Ataxpayer is eligible for the credit for creating jobs in an enterprise tierthree, four, or five area if, for the calendar year the jobs are created, theaverage wage of the jobs for which the credit is claimed meets the wagestandard and the average wage of all jobs at the location with respect to whichthe credit is claimed meets the wage standard. No credit is allowed for jobsnot included in the wage calculation. A taxpayer is eligible for the credit forinvesting in machinery and equipment, the credit for research and development,or the credit for investing in real property for a central office or aircraftfacility in a tier three, four, or five area if, for the calendar year thetaxpayer engages in the activity that qualifies for the credit, the averagewage of all jobs at the location with respect to which the credit is claimedmeets the wage standard. In making the wage calculation, the taxpayer mustinclude any positions that were filled for at least 1,600 hours during thecalendar year the taxpayer engages in the activity that qualifies for thecredit even if those positions are not filled at the time the taxpayer claimsthe credit. For a taxpayer with a taxable year other than a calendar year, thetaxpayer must use the wage standard for the calendar year in which the taxableyear begins. No wage standard applies to credits for activities in anenterprise tier one or two area. For the purposes of this subsection, for afiber, yarn, or thread mill that uses a sequential manufacturing process inwhich separate parts of the sequential manufacturing process are performed indifferent facilities within the same county, the term "location" maymean either the specific establishment or all facilities in the county in whichparts of the process are performed.

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

Jobs meet the wage standard ifthey pay an average weekly wage that is at least equal to one hundred tenpercent (110%) of the applicable average weekly wage for the county in whichthe jobs will be located, as computed by the Secretary of Commerce from datacompiled by the Employment Security Commission for the most recent period forwhich data are available. The applicable average weekly wage is the lowest ofthe 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 bythe county income/wage adjustment factor. The county income/wage adjustmentfactor 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 dividedby 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 Statedivided by the annualized average wage for all insured private employers in theState. The Department of Commerce must annually publish the wage standard foreach county.

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

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

Each year that a taxpayerclaims a credit or an installment or carryforward of a credit allowed underthis Article, the taxpayer must provide with the tax return the taxpayer'scertification that the taxpayer continues to provide health insurance for thejobs for which the credit was claimed or the full‑time jobs at thelocation with respect to which the credit was claimed. If the taxpayer ceasesto provide health insurance for the jobs during a taxable year, the creditexpires and the taxpayer may not take any remaining installment or carryforwardof the credit.

(b3)      EnvironmentalImpact. – A taxpayer is eligible for a credit allowed under this Article onlyif the taxpayer certifies that, at the time the taxpayer first claims thecredit, the taxpayer has no pending administrative, civil, or criminalenforcement action based on alleged significant violations of any programimplemented by an agency of the Department of Environment and NaturalResources, and has had no final determination of responsibility for anysignificant administrative, civil, or criminal violation of any programimplemented by an agency of the Department of Environment and Natural Resourceswithin the last five years. A significant violation is a violation or allegedviolation 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 Departmentof Revenue annually of every person that currently has any of these pendingactions and every person that has had any of these final determinations withinthe last five years.

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

(b5)      SubstantialInvestment in Other Property. – A taxpayer is eligible for the credit forsubstantial investment in other property under G.S. 105‑129.12A withrespect to a location only if the Secretary of Commerce makes a writtendetermination that the taxpayer is expected to purchase or lease and use in aneligible business at that location within a three‑year period at leastten million dollars ($10,000,000) of real property and that the location thatis the subject of the credit will create at least 200 new jobs within two yearsof the time that the property is first used in an eligible business. If thetaxpayer fails to timely make the required level of investment or fails totimely create the required number of new jobs, the taxpayer forfeits the creditas 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 thetime the taxpayer claims the credit or an installment or carryforward of thecredit, the taxpayer has received a notice of an overdue tax debt and thatoverdue tax debt has not been satisfied or otherwise resolved.

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

(1)        The wage standardrequirement does not apply to the activities of the taxpayer at the majorcomputer facility.

(2)        For the credit forcreating jobs under G.S. 105‑129.8, the amount of the credit is increasedby four thousand dollars ($4,000) per job for jobs at the major computerfacility.

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

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

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

(c)        Repealed by SessionLaws 1998‑55, s. 1, effective for taxable years beginning on or afterJanuary 1, 1999.

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

A taxpayer that forfeits acredit under this Article is liable for all past taxes avoided as a result ofthe 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 beenallowed. The past taxes and interest are due 30 days after the date the creditis forfeited; a taxpayer that fails to pay the past taxes and interest by thedue date is subject to the penalties provided in G.S. 105‑236. If ataxpayer forfeits the credit for creating jobs, the technologycommercialization credit, or the credit for investing in machinery andequipment, the taxpayer also forfeits any credit for worker training claimedfor the jobs for which the credit for creating jobs was claimed or the jobs atthe location with respect to which the technology commercialization credit orthe credit for investing in machinery and equipment was claimed.

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

(1)        The business closedbefore it was acquired.

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

(3)        The business wasacquired by its employees directly or indirectly through an acquisition companyunder an employee stock option transaction or another similar mechanism. Forthe purpose of this subdivision, "acquired" means that as part of theinitial purchase of a business by the employees, the purchase included anagreement for the employees through the employee stock option transaction oranother similar mechanism to obtain one of the following:

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

b.         Ownership of notless than forty percent (40%) of the business within seven years if thebusiness has tangible assets with a net book value in excess of one hundredmillion dollars ($100,000,000) and has the majority of its operations locatedin an enterprise tier one, two, or three area.

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

(g)        Advisory Ruling. – Ataxpayer may request in writing from the Secretary of Revenue specific adviceregarding eligibility for a credit under this Article. G.S. 105‑264governs 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.)