North Carolina is known for having one of the best business tax environments. In addition to having one of the lowest corporate tax rates in the country at 2.5%, the state also has a handful of business incentive programs and tax exemptions.
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Are you a business owner in the Tar Heel State? Here’s what you need to know.
North Carolina business tax incentives
Historic Preservation Tax Credit
North Carolina businesses that own or lease certified historic structures might qualify for the Historic Preservation Tax Credit. Businesses that rehabilitate certified historic structures for income-producing purposes—and spend up to $10 million on the project—can qualify for a credit equal to 15% of their rehabilitation costs.
Businesses that spend between $10 and $20 million on a historic rehabilitation project can qualify for a 10% state tax credit. If the historic structure is located within a Tier 1 or 2 county, businesses can get a 5% bonus credit.
To qualify for the credit, your business must own or lease a property that’s been certified as historic by either North Carolina’s Historic Preservation Office or the US Department of the Interior’s National Park Service. Your business also has to qualify for the federal Historic Preservation Tax Incentives program first.
Learn more about North Carolina’s historic preservation program here.
Film and Entertainment Grant Program
North Carolina’s Film and Entertainment Grant Program offers production companies a financial rebate of up to 25% of qualified production expenses incurred on entertainment projects in the state.
The eligibility requirements for the grant vary depending on the specific project:
- For TV series, production companies have to spend an average of at least $500,000 per episode on in-state expenses.
- For a feature-length film, production companies have to spend at least $1.5 million on in-state expenses.
- For a made-for-TV movie, production companies have to spend at least $500,000 on in-state expenses.
- For a commercial, production companies have to spend at least $250,000 on in-state expenses.
Learn more about the film credit and how to apply here.
Job Development Investment Grant
The Job Development Investment Grant (JDIG) is a job creation and investment incentive program. Qualified businesses don’t get tax credits under the program, but they do get direct cash grants they can use to offset their taxes.
The grant amount depends on which tier a business is located in. In Tier 1 counties, businesses can get a grant equal to 80% of the tax withholdings of their new jobs. In Tier 2 counties, businesses can get a grant equal to 75% of the tax withholdings of their new jobs.
To qualify for the grant, businesses in Tier 1 have to create at least 10 new jobs, while Tier 2 businesses have to create at least 20 new jobs. Businesses also have to pay those new jobs compensation that’s 3.5 times the annualized average state wage, and provide health insurance that covers at least 50% of the cost of premiums.
Get more information on the JDIG here.
North Carolina business tax exemptions
North Carolina has a slew of business tax exemptions for companies in all kinds of industries. Check out the list below:
- Machinery and Equipment, Sales and Use Tax Exemption: Businesses don’t have to pay sales and use tax on their mill machinery and equipment purchases
- Electricity, Fuel and Natural Gas, Sales and Use Tax Exemption: Manufacturing businesses don’t have to pay sales and use tax on the electricity, fuel, and natural gas they purchase and store.
- Raw Materials, Sales and Use Tax Exemption: Businesses don’t have to pay sales and use tax on purchases of ingredients or component parts of a manufactured product that becomes an ingredient or component part of tangible personal property.
- Inventory, Property Tax Exclusion: Contractors, manufacturers, and retail and wholesale merchants don’t have to pay property tax on their inventories.
- Data Centers Sales and Use Tax Exemptions: Data centers don’t have to pay sales and use tax on their electricity and support equipment, certain business property, and computer software.
- Large Fulfillment Facilities Sales and Use Tax Exemption: Large fulfillment facilities don’t have to pay sales and use tax on equipment, accessories, attachment, or repair parts they purchase for their facilities.
- Research and Development Activities for Physical, Engineering and Life Science Companies Sales and Use Tax Exemption: Companies engaging primarily in research and development activities in the physical, engineering, or life sciences industries don’t have to pay sales and use tax on equipment or attachment and repair parts for equipment.
- Software Publishing Activities for Software Publishers Sales and Use Tax Exemption: Companies engaged primarily in software publishing activities don’t have to pay sales and use tax on equipment or attachment and repair parts for equipment they purchase.
- Pollution Abatement Equipment Tax Exemption: Companies that purchase pollution abatement equipment for manufacturing don’t have to pay sales and use tax on their purchases. They also don’t have to pay sales and use tax on the chemicals they buy to use in pollution abatement equipment.
- Property Tax Exemption: Companies that use real property exclusively for air cleaning, waste disposal, or water/air pollution abatement don’t have to pay property taxes.
North Carolina city and county business tax credits
Tax credits aren’t just available at the state level—many regional governments create them, too. It’s a good idea to contact your city to find out if they offer local business tax credits or incentive programs you can qualify for. Here’s a list of North Carolina county websites.
North Carolina business financing resources
North Carolina has a handful of helpful business grant and loan opportunities for both new and established operations. Read through Gusto’s guide to grants and loans in the Tar Heel State to get started.
Want more resources? Bookmark these blog posts for actionable advice on building a thriving business in North Carolina:
