Income Tax Incentives
Microbusiness Investment and Employment Credit
An income tax credit is allowed to an individual, estate, trust, partnership, corporation, or limited liability company certified as a microbusiness by the Department of Commerce Division of Economic Development and Finance. A microbusiness is a business with up to five employees located in a community with a population under 2,000 that is actively involved in economic development. Other conditions also apply to 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 cost of 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 a new employee in the current year.
A taxpayer is allowed no more than $10,000 of credits for all tax years. An unused credit may be carried forward up to five tax 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.