Income Tax Incentives
Microbusiness Investment and Employment Credit
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for new investment and new employment in a microbusiness in North Dakota that creates new income or jobs. A microbusiness is a business with up to 5 employees that is located in a community of 100 to 2,000 people having an active economic development organization, a relationship with a regional or urban economic development organization, or a city sales tax of which part or all is dedicated to economic development. The business may not compete with other established businesses within 15 miles of the business, and may not be located within 15 miles of a city with a population of 2,000 or more. The business must be certified by the Commerce Department’s Division of Economic Development and Finance, and no more than 200 businesses may be certified as a microbusiness.
The credit is equal to 20% of the amount of new investment and new employment during the tax year. “New investment” means an increase in the buildings and depreciable personal property (except vehicles registered for road use) acquired through purchase or lease in the current year as compared to the previous year. “New employment” means the increase in compensation paid to North Dakota resident employees in the current year as compared to the previous year. It does not include merit- or equity-based salary increases, cost of living adjustments, or any increase in compensation unrelated to the hiring of new employees in the current year.
A taxpayer is allowed no more than $10,000 of credits for all years. An unused credit may be carried forward up to 5 years. In the case of a passthrough entity, such as a partnership or S corporation, the credit is passed through to its owners in proportion to their ownership interests.
