11.23.15 |
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North Carolina Enacts North Carolina Competes Act

Grunge state of North Carolina flag map

On September 30, 2015, North Carolina Governor Pat McCrory signed into law the North Carolina Competes Act (HB 117)1  (the “Act”), which the governor has identified as a key component of his comprehensive strategy to build and strengthen North Carolina’s economy and help more residents find employment.2

The centerpiece of the legislation is increased funding for the Job Development Investment Grant (JDIG) Program. The Act increases the annual funding maximum for the JDIG Program from $15 million to $20 million per calendar year.3 The Act also establishes criteria for a “high-yield project4” (defined as a project creating at least 1,750 new jobs and requiring a minimum investment of $500 million), and increases the funding maximum to $35 million for any year in which a grant is awarded to a high-yield project.5

The Act modifies the minimum number of eligible positions that must be established in a Development Tier Three Area to 507 (the previous requirement was 20 in Tier Three). Requirements for Tier One (10 positions) and Tier Two (20 positions) remain unchanged.8

The amount the JDIG grant is awarded for is generally a percentage of withholdings of eligible positions over an incentive period.  The Act increases the withholding percentage for Development Tier One from up to 75 percent of withholdings to up to 80 percent of withholdings.9  The withholding percentages for Tiers Two and Three remain at up to 75 percent.10  For the newly-designated high-yield projects, the available withholding percentage is up to 100 percent of withholdings.11

The duration of a JDIG grant remains at up to 12 years. A high-yield project, however, can have a grant period of up to 20 years total.  The term of the grant begins the first year a grant payment is made.12

At the time a JDIG grant is paid by the Department of Commerce to a recipient, a percentage of the grant is required to be paid to an Industrial Development Fund Utility Account,13 which is used by local governments to fund improvements to infrastructure, utilities, and telecommunications.  The Act revises the percentages payable to the Utility Account as follows:

  • Development Tier Two – The percentage payable to the Utility Account is 10 percent of the total grant amount.14
  • Development Tier Three – The percentage payable to the Utility Account is 25 percent of the total grant amount.15
  • No payments to the Utility Account are required for Development Tier One projects or high-yield projects.

The Act extends the authority to award new JDIG grants through January 1, 2019.16

Other notable new provisions include:

  • With respect to the One North Carolina Fund, the Act codifies local government matching fund requirements based on development tier. For a Tier One location, the maximum the state may provide is three dollars for every dollar provided by the local government.  For a Tier Two location, the maximum ratio is two state dollars for each local government dollar.  For a Tier Three location, the maximum ratio is dollar-for-dollar.17
  • The Act adds a sales tax exemption on sales of electricity to be used by a qualifying datacenter.18
  • Sales tax exemptions for motorsports parts and fuel are extended.19

 

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The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.

 

1 North Carolina H.B. 117; http://www.ncleg.net/Sessions/2015/Bills/House/PDF/H117v7.pdf

2 North Carolina Governor’s Office Press Release, http://governor.nc.gov/press-release/governor-mccrory-signs-nc-competes-jobs-plan

3 H.B. 117 Section 1.(b) amends North Carolina Statute Section 143B-437.52(c)

4 H.B. 117 Section 1.(a) adds North Carolina Statute Section 143B-437.51(6a).

5 H.B. 117 Section 1.(b) amends North Carolina Statute Section 143B-437.52(c)

6 H.B. 117 Section 1.(h) amends Section 15.19(a1) of S.L. 2013-360

7 H.B. 117 Section 1.(c) amends North Carolina Statute Section 143B-437.53(a)

8 The process for assigning developmental tier rankings is governed by North Carolina Statute Section 143B-437.08.  Criteria include unemployment rate, median household income, population growth, and assessed property value per capita.  Tier One counties are the 40 highest ranked in terms of economic development needs.  Tier Two counties are the next 40 highest ranked counties.  The remaining counties fall into Tier Three.

9,10 H.B. 117 Section 1.(e) amends North Carolina Statute Section 143B-437.56(a)

11 H.B. 117 Section 1.(e) amends North Carolina Statute Section 143B-437.56(a1)

12 H.B. 117 Section 1.(e) amends North Carolina Statute Section 143B-437.56(b)

13 North Carolina Statute Section 143B-437.61

14,15 H.B. 117 Section 1.(e) amends North Carolina Statute Section 143B-437.56(d)

16 H.B. 117 Section 1.(g) amends North Carolina Statute Section 143B-437.62

17 H.B. 117 Section 2.(a) amends North Carolina Statute Section 143B-437.72(c)

18 H.B. 117 Section 3.(a) adds North Carolina Statute Section 105-164.13(55a)

19 H.B. 117 Section 6.(a)

 

 

 


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