The North Dakota Guide to State Tax Incentives

As a business owner, one of the best ways to reduce your tax liability is to take advantage of tax credits and incentives. Fortunately, most states have at least a handful of business tax credit programs available.

If you own a business in North Dakota, there are investment, employment, and industry-specific tax credits you can apply for. Take a look at our full list below.

Quick Links

North Dakota business tax incentives

Industry-specific tax credits

Automation Tax Credit

With the Automation Tax Credit, North Dakota businesses can get an income tax credit for purchasing or leasing equipment or machinery that helps automate manufacturing or animal agricultural processes within the state.

The credit amount is equal to up to 15% of the cost of the machinery and equipment or up to 15% of the fair market value of the machinery and equipment at the time a business leases it.

To qualify for the credit, a business must be certified as a primary sector business, and the state’s Department of Commerce Division of Economic Development and Finance must approve the purchases of machinery and equipment.

Learn more about the credit and how to apply here.

Tax Credits for Producing or Blending Biodiesel or Green Diesel and for Crushing Soybeans or Canola

North Dakota C corporations can get an income tax credit for adding equipment to update an existing facility or constructing a new facility that either produces or blends biodiesel fuel or green diesel fuel or crushes soybeans or canola.

The credit is equal to 10% of the direct costs incurred, with a lifetime maximum of $250,000. Get more details on the credit here.

Investment, development, and growth tax credits

Renaissance Zone Program

The Renaissance Zone Program gives businesses tax incentives for investing in economic development projects in designated communities, also known as Renaissance Zones. Businesses that start qualified projects in Renaissance Zones can take advantage of the following tax benefits:

Up to $500,000 of income exempted annually on income derived at an approved zone business project
Property tax exemptions for commercial property
A 25% tax credit (up to $250,000) for restoring or rehabilitating a historic property in a Renaissance Zone

Learn more about the program and how to apply here.

Research Expense Credit

Businesses that conduct qualified research in North Dakota can qualify for the Research Expense Credit. The credit is equal to 17.5% of the first $100,000 of excess qualified research expenses plus 5.6% of the excess qualified research expenses over $100,000.

Qualified research includes any activities that meet the four federal R&D requirements:

Technological in nature;
used to improve the functionality, performance, reliability, or quality of a new or existing business component;
used to gather information that will help eliminate uncertainty around the development of a product;
And involve a process of experimentation, such as testing or modeling.

See the state’s Research Expense Credit here.

Agricultural Commodity Processing Facility Investment Credit

Businesses can get income tax credits for investing in a qualified agricultural commodity processing facility that’s certified by the North Dakota Department of Commerce Division of Economic Development and Finance.

An agricultural commodity processing facility is a livestock feeding, handling, milking, or holding operation that uses a by-product produced at a biofuels production facility. The credit is equal to 30% of the investment, up to $50,000 a year.

Learn more about the credit here.

Angel Investor Investment Tax Credit

Individual angel investors can get this tax credit for setting up an angel investment fund for the purpose of investing in qualified North Dakota businesses. Qualified businesses need to have annual revenues of $10 million or less and be engaged in the research and development of new products or processes.

The amount of credit is 35% of the investment amount for an in-state qualified business and 25% for an out-of-state qualified business, up to $45,000 in a single tax year. Learn more about the credit here.

Seed Capital Investment Credit

Businesses can get a tax credit for investing in qualified businesses in North Dakota. A qualified business has to be certified by the North Dakota Department of Commerce Division of Economic Development and Finance and needs to meet the following criteria:

The principal office is located in North Dakota, and the majority of business activity takes place within the state
A majority of employees in the principal office must be North Dakota residents
The business relies on innovation, research, or the development of new products and processes as part of its growth plan

The credit is equal to 45% of the investment amount, up to $112,500 in a single tax year. Get more information on the credit here.

Hiring tax credits

Internship Employment Credit

This program gives business owners a credit for hiring interns who are enrolled in a college or vocational-technical education program related to their role. The amount of credit is 10% of the intern’s compensation and can be applied to up to five interns employed simultaneously.

The maximum lifetime credit is $3,000 for any employer. Learn more about the credit here.

Pro tip: Make sure you’re taking the right steps to hire interns legally.

Apprentice Employment Credit

Businesses in North Dakota that hire apprentices can get an income tax credit equal to 10% of the apprentice’s compensation. Qualified apprentices must be in an apprenticeship program certified by the US Department of Labor—or be an electrical apprentice registered in the state.

Get more information on the credit here.

Need more hiring tips? Here’s a step-by-step guide to hiring employees in North Dakota.

Workforce Recruitment Credit

The Workforce Recruitment Credit is an income tax credit available to businesses in North Dakota that take major strides to recruit and hire new employees for hard-to-fill roles. The credit is equal to 5% of the employee’s compensation for their first 12 consecutive months.

To qualify, businesses have to meet all of the following criteria:

Have tried all the below recruitment methods for at least six months without success:
- Hired a contracted professional recruiter
- Advertised in a professional trade journal, magazine, or other publication
- Posted job listings on a paid website
- Gave a new hire a signing bonus, covered moving expenses, or provided unique fringe benefits
Pay an annual salary that’s at least 125% of North Dakota’s average wage

Get more details on the credit here.

It might be time to rethink your employee compensation. For pointers, start with our easy-to-follow guide to creating a compensation model.

North Dakota business tax exemptions

North Dakota also has a ton of business tax exemptions for eligible operations. Here are the main ones:

Property Tax Exemption: Businesses don’t have to pay property tax on personal property used for business purposes, like office equipment, inventory, or materials.
Corporate Income Tax Exemption: New corporations that qualify as primary sector businesses won’t have to pay state corporate income tax—which ranges from 1.41-4.31%—for their first five years in operation. To qualify, they need to apply for the exemption through the State Board of Equalization.
Sales and Use Tax Exemptions: Businesses in specific industries don’t have to pay sales and use tax on certain equipment and materials purchases. Think: manufacturing equipment, coal mine machinery, and computer and telecommunications equipment, to name a few. Here’s a full list of North Dakota’s sales tax exemptions.

North Dakota city and county business tax credits

Many cities in North Dakota offer their own business tax credits or incentives. Visit your city’s website to find out what your options are.

Business financing in North Dakota

Whether you need sizable capital for a construction project or your employee training costs reimbursed, state support can help. Check out Gusto’s guide to business grants and loans in North Dakota for a full breakdown of financing resources.