§ 105-129.9. (See note for repeal) Credit for investing in machinery and equipment. - North Carolina Statutes

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

(a)        General Credit. – Ifa taxpayer that has purchased or leased eligible machinery and equipment placesthem in service in this State during the taxable year, the taxpayer is alloweda credit equal to the applicable percentage of the excess of the eligibleinvestment amount over the applicable threshold. Machinery and equipment areeligible if they are capitalized by the taxpayer for tax purposes under theCode and not leased to another party. In addition, in the case of a largeinvestment, machinery and equipment that are not capitalized by the taxpayerare eligible if the taxpayer leases them from another party. The credit may notbe taken for the taxable year in which the machinery and equipment are placedin service but shall be taken in equal installments over the seven yearsfollowing the taxable year in which they are placed in service. The applicablepercentage is as follows:

AreaEnterprise Tier                                    Applicable Percentage

TierOne                                                             7%

TierTwo                                                             7%

TierThree                                                           6%

TierFour                                                             5%

TierFive                                                             4%

(a1)      TechnologyCommercialization Credit. – If a taxpayer is eligible for the credit allowed inthis section with respect to eligible machinery and equipment and qualifies forone of the credits allowed in G.S. 105‑129.9A with respect to the samemachinery and equipment, the taxpayer may choose to take one of those creditsinstead of the credit allowed in this section. A taxpayer may take the creditallowed in this section or one of the credits allowed in G.S. 105‑129.9Aduring a taxable year with respect to eligible machinery and equipment, but maynot take more than one of these credits with respect to the same machinery andequipment.

(b)        Eligible InvestmentAmount. – The eligible investment amount is the lesser of (i) the cost of theeligible machinery and equipment and (ii) the amount by which the cost of allof the taxpayer's eligible machinery and equipment that are in service in thisState on the last day of the taxable year exceeds the cost of all of thetaxpayer's eligible machinery and equipment that were in service in this Stateon the last day of the base year. The base year is that year, of the threeimmediately preceding taxable years, in which the taxpayer had the most eligiblemachinery and equipment in service in this State.

(c)        Threshold. – Theapplicable threshold is the appropriate amount set out in the following tablebased on the enterprise tier where the eligible machinery and equipment areplaced in service during the taxable year. If the taxpayer places eligiblemachinery and equipment in service at more than one establishment in anenterprise tier during the taxable year, the threshold applies separately tothe eligible machinery and equipment placed in service at each establishment.If the taxpayer places eligible machinery and equipment in service at anestablishment over the course of a two‑year period, the applicablethreshold for the second taxable year is reduced by the eligible investmentamount for the previous taxable year.

AreaEnterprise Tier                                     Threshold

TierOne                                             $             -0-

TierTwo                                                  100,000

TierThree                                                200,000

TierFour                                               1,000,000

TierFive                                               2,000,000

(d)        Expiration. – Asused 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 yearsin which the installment of a credit accrues, the machinery and equipment withrespect to which the credit was claimed are disposed of, the credit expires andthe taxpayer may not take any remaining installment of the credit for thatmachinery and equipment unless the cost of that machinery and equipment isoffset in the same taxable year by the taxpayer's new investment in eligiblemachinery and equipment placed in service in the same enterprise tier, asprovided in this subsection. If, during the taxable year the taxpayer disposedof the machinery and equipment for which installments remain, there has been anet reduction in the cost of all the taxpayer's eligible machinery andequipment that are in service in the same enterprise tier as the machinery andequipment that were disposed of, and the amount of this reduction is greaterthan twenty percent (20%) of the cost of the machinery and equipment that weredisposed of, then the taxpayer forfeits the remaining installments of thecredit for the machinery and equipment that were disposed of. If the amount ofthe net reduction is equal to twenty percent (20%) or less of the cost of themachinery and equipment that were disposed of, or if there is no net reduction,then the taxpayer does not forfeit the remaining installments of the expiredcredit. In determining the amount of any net reduction during the taxable year,the cost of machinery and equipment the taxpayer placed in service during thetaxable year and for which the taxpayer claims a credit under Article 3B ofthis Chapter may not be included in the cost of all the taxpayer's eligiblemachinery and equipment that are in service. If in a single taxable yearmachinery and equipment with respect to two or more credits in the same tierare disposed of, the net reduction in the cost of all the taxpayer's eligiblemachinery and equipment that are in service in the same tier is compared to thetotal cost of all the machinery and equipment for which credits expired inorder to determine whether the remaining installments of the credits areforfeited.

The expiration of a creditdoes not prevent the taxpayer from taking the portion of an installment thataccrued in a previous year and was carried forward to the extent permittedunder G.S. 105‑129.5.

If, in one of the seven yearsin which the installment of a credit accrues, the machinery and equipment withrespect to which the credit was claimed are moved to an area in a higher‑numberedenterprise tier, or are moved from a development zone or agrarian growth zoneto an area that is not a development zone or agrarian growth zone, theremaining installments of the credit are allowed only to the extent they wouldhave been allowed if the machinery and equipment had been placed in serviceinitially in the area to which they were moved.

(e)        Planned Expansion. –A taxpayer that signs a letter of commitment with the Department of Commerce toplace specific eligible machinery and equipment in service in an area within twoyears after the date the letter is signed may, in the year the eligiblemachinery and equipment are placed in service in that area, calculate thecredit for which the taxpayer qualifies based on the area's enterprise tier anddevelopment zone or agrarian growth zone designation for the year the letterwas signed. In the case of an interstate air courier that has or isconstructing 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 thecredit, but if the area has been redesignated to a higher‑numberedenterprise tier or has lost its development zone or agrarian growth zonedesignation after the year the letter of commitment was signed, the credit isallowed based on the area's enterprise tier and development zone or agrariangrowth zone designation for the year the letter was signed. If the taxpayerdoes not place part or all of the specified eligible machinery and equipment inservice within the applicable period, the taxpayer does not qualify for thebenefit of this subsection with respect to the machinery and equipment notplaced in service within the applicable period. However, if the taxpayerqualifies for a credit in the year the eligible machinery and equipment areplaced in service, the taxpayer may take the credit for that year as if noletter 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).)