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The Article 3A tax credits are designed to attract certain types of new businesses to North Carolina and to foster expansions of certain types of businesses in North Carolina. The credits are based on a system that divides the State into five enterprise tiers, with tier one being the most economically distressed and tier five being the least economically distressed. Eligibility requirements are easier to meet and credits are increased for business expansion occurring in the lower tiers. Each county is assigned a tier designation by the Secretary of Commerce on or before December 31st of each year. Generally, a designation applies only to the calendar year following the designation. A tier one or tier two area, however, may not be redesignated as a higher-numbered enterprise tier area until it has been in its designated enterprise tier area for at least two consecutive years. The Department of Commerce publishes a list of the counties and their respective tier designations.
Within each tier, there may be designated development zones. These designations recognize defined areas of economic need within a tier. For purposes of the wage standard requirement, the credit for investing in machinery and equipment, and the credit for worker training, a development zone is considered an enterprise tier one area. Additionally, credits for creating jobs are increased by $4,000 per job for jobs located within a development zone. Upon the request of a taxpayer or a local government, the Secretary of Commerce will determine whether an area is in a development zone. The determination is based on various economic factors. If an area is designated as a development zone, the designation is effective for 24 months following the date of the designation. The Department of Commerce publishes annually a list of all development zones with a description of their boundaries. For tax years beginning on or after January 1, 2002, credits are available for:
The taxpayer must submit a portion of the qualifying information with the tax return. That information is reported on the Department of Revenue NC-478 form series. The taxpayer must maintain additional documentation needed to substantiate the credit and make it available for inspection by the Secretary of Revenue.
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