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Operating Costs & Incentives

Operating Costs & Incentives

Construction
Incentives

Local Community Incentives:

The local communities within the Alliance offer their own specific incentives related to economic development projects, on top of the state programs.  Examples of these incentives include, reduced or free real estate costs, support services, discretionary grants (performance grants  based on taxes paid and paid out by counties/cities over several years), site preparation grants, expedited permitting, support for relocation of key employees, and utility assistance.  All these are generally based on jobs and investment planned over a 3-5 year period.

The new North Carolina tax reform:

  • Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 a 29% rate reduction.  
  • If the state meets revenue targets (i.e. if there is additional tax revenue growth due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017. 

New Market Tax Credits:

  • The New Market Tax Credit program was enacted to promote community investment from individuals and companies. The credit is provided to the company or individual that makes a qualified investment with a Community Development Entity (CDE) in a qualified census tract (one defined by the federal government as low income which can exist in otherwise growing metropolitan areas). The invested money must be used by the CDE to provide low interest loans to new business ventures within a qualified census tract.  Tax credits amount to a total of 39%, so a $20 million investment would result in a ‘discount’ of $7.8 million – which translates into a capital savings of $7.8 million. For more information of NMTCs, go to:  http://www.rejournals.com/2011/03/09/new-market-tax-credits-separating-fact-from-fiction

Renewable Energy Tax Credits:

  • 35% of cost of equipment and design, construction cost and installation for solar, wind, hydro and biomass applications up to $2,500,000.

Sales and Use Tax Exemptions, Refunds and Discounts:

  • Sales and use tax is waived, refunded, or discounted for qualifying business activities.

Job Development Investment Grant (JDIG):

  • A discretionary incentive program of cash grants for new and expanding businesses based on job and investment commitments made by companies in their formal applications to the state prior to a location decision; not to exceed $15 million in any single calendar year.  To qualify, a project must be significant; the NC Department of Commerce will perform an economic impact analysis to determine whether a project will qualify for a JDIG.  The JDIG is a ‘performance’ grant paid out as a percentage of the company’s payroll taxes and varies depending upon county in which the project will locate (more distressed locations qualify a project for a higher percentage payout).

One North Carolina Fund (not available if JDIG is offered):

  • A discretionary incentives tool to enable job creation or retention of competitive projects. Awards are based on jobs created, economic impact, importance to the state, quality of the industry, and environmental impact.
  • Local governments are required to match One NC awards with cash, fee waivers, in-kind services, donations of land and/or buildings, or provisions of infrastructure.
  • Company must agree to meet or exceed 100% of the average county wage and provide a healthcare insurance plan for employees.

 One North Carolina Small Business Program:

  • For companies with fewer than 100 employees the One NC Small Business Program reimburses for costs in preparing and submitting Phase I proposals for federal SBIR and STTR programs.
  • One NC Phase I Matching Funds match funds awarded by grantees of federal SBIR and STTR programs.

 Community Development Block Grant:

  • Grants for infrastructure based on federal allocation to the state from the US Department of Housing and Urban Development that may be applied for by local governments for economic development projects.  Funds may be used to improve public infrastructure services to industrial sites – road, water, sewer, natural gas, etc.

 Industrial Development Fund:

  • Grants and loans for infrastructure in Tier 1 and Tier 2 counties. Local government may apply for the funds in conjunction with a company that commits to create or retain jobs in North Carolina.
  • Eligibility requirements are the same as those for.
  • Funding cannot exceed $10,000 per new job or retained job up to a maximum of $500,000.
  • Local government may grant a 4% fixed interest loan to the company for machinery, equipment, or building renovations.

 Water and Sewer Economic Infrastructure Program:

  • Administered by the Rural Division of  the North Carolina Department of Commerce;  provides funding for water and sewer facilities that result in private-sector jobs up to $1 million or one half of the project costs whichever is less at $10,000 per job created.
 
The Work Opportunity Tax Credit (“WOTC”)
  • The WOTC is a non-refundable wage credit intended to increase job opportunities for certain categories of disadvantaged individuals. WOTC-eligible hires include certain welfare recipients, ex-felons and veterans.
  • For most eligible hires that remain on a company’s payroll for at least 400 hours, an employer can claim an income tax credit equal to 40 percent of wages paid during the worker’s first year of employment up to a certain wage maximum. For example, the wage maximum for most WOTC-eligible hires is $6,000, for a total credit of $2,400, but the wage maximum can be much higher for certain veteran workers.
  • Recent studies have shown that the WOTC increased wage income of disabled veterans and increased employment among long-term welfare recipients overall.
Section 179 Expensing Limitations
  • Section 179 is a mechanism by which smaller companies are able to expense (deduct immediately) the cost of investments in equipment rather than depreciate them over time. The Section 179 provision in this year’s package permanently extends the 2010-2014 small business expensing limitations and phase-out amounts.
  • Many had debated whether the stimulus was necessary to keep around. Small businesses can breathe a sigh of relief now that the higher thresholds, at $500,000 and $2 million, have been made permanent.
  • Once a company’s investment reaches at least $2 million, the amount eligible is reduced dollar-for-dollar for investments in equipment over $2 million, up to the investment amount of $500,000. Thus, once a company’s investment reaches $2.5 million, no deduction is allowed.
  • Previously, the threshold had been $25,000 with a phase-out beginning at $200,000 (i.e., no deduction would be allowed when investment is over $225,000).
Research and Development Credit (“R&D Credit”)
  • Generally, the R&D Credit provides an income tax credit for a certain amount by which qualified research expenses exceed a base amount.
  • There are typically two different methods for calculating the R&D Credit: one determines the base amount using gross receipts and the other determines the base amount using a three-year lookback for average R&D spending.
  • Qualified research expenses must be experimental for the purpose of discovering information that is technological in nature and used in the development of a new or improved product, process, computer software technique, formula or invention that is to be leased, licensed or used by the company.
  • The only thing holding the R&D credit back from a permanent extension had been its hefty price tag of nearly $180 billion. Both parties, as well as most economists, agree that there is an economic justification for subsidizing R&D spending. Studies show that not only does R&D spending benefit the private firm in terms of return from innovation but it also seems to benefit society as a whole. From the perspective of a private firm, there is no way to capture the entire return from innovation because such innovation will provide valuable information to others in the marketplace who will exploit it, regardless of patents and secrecy. The R&D Credit seems to compensate innovative taxpayers for the loss of that return.
  • Looking forward, with the credit’s annual uncertainty gone, companies will be able to engage in better long-term planning for research projects, which can only increase the credit’s effectiveness.

Building Reuse and Restoration Grants:

  • Grants offered to encourage economic growth through the productive reuse of vacant buildings; also administered by the Rural Division of NC Commerce. 
  • Access Road Improvements:
  • Funds available through the NC Board of Transportation to construct roads to provide access to new or expanding industrial or manufacturing facilities based on a comparison of the initial number of jobs gained with the cost of the improvements.

 Rail Access Program:

  • Grants provided to aid in financing construction or rehabilitation of railroad access for new or expanding industry based on number of jobs and capital investment.

 Industrial Revenue Bonds (IRB):

  • North Carolina bond programs allow tax-exempt bonds at 1.5-2.5 percentage points below corporate bond rates.

Foreign Trade Zones (FTZ):

  • Foreign Trade Zone 214 is located in the region incorporates the geography of the Global TransPark and the Ports of Morehead City and Wilmington (the entire area of the NC East Alliance).   An FTZ is a secured, neutral area outside of US customs territory. Items imported into an FTZ are exempt from duties and excise taxes. Merchandise may be manipulated, used in manufacturing, inspected, combined, displayed for sale, or re-exported without payment of duty. Customs duties and excise taxes are only applied on the final product if/when the product is imported into the US.  A company can also apply to have its facility declared a ‘subzone’ of FTZ 214.

Golden Leaf Job Creation Grants-Economic Catalyst Grants

Golden LEAF will consider applications to assist eligible state, regional and local economic development entities with grants to support permissible activities that lead to job creation in tobacco-dependent or economically distressed areas.  The Alliance will work with projects to apply for this incentive grant program.  These grants are scalable based on the magnitude of the project (jobs and investment).

 

 Golden LEAF may require the applicant to demonstrate that the business is committed to create the promised jobs and/or obligated to repay a pro rata amount of the grant if there are job creation shortfalls. Examples of eligible projects include: 

  • Assistance with the delivery of training programs offered by eligible entities, such as a community college, and made available to the public, for the development of transferable skills required by industries or companies that will increase the number of jobs available to the public. In projects such as these, prior to release of funds, Golden LEAF will typically require evidence of an inducement agreement demonstrating that the company is obligated to meet the job creation projections and wage standards, and providing appropriate consequences should the company fail to satisfy its obligations. In addition, Golden LEAF may release some or all of the funds awarded on a pro rata basis as training is provided.

 

  • Assistance to a governmental unit to help fund pre-development costs associated with public infrastructure improvements, such as water and sewer, which would result in job creation. In projects such as these, prior to release of funds, Golden LEAF will typically require evidence of an inducement agreement demonstrating that the company is obligated to meet the job creation projections and wage standards, and providing appropriate consequences should the company fail to satisfy its obligations.

 

  • Renovation or improvement of an industrial facility owned by an eligible entity, which will be sold or leased at fair market value to a business locating or remaining in a high-priority area of North Carolina, or for purchase of equipment or other assets owned by eligible entities and leased or sold to for-profit entities at fair market value. Priority will be given only when evidence shows that practical lease or financing options are not available from traditional sources of capital. In projects such as these, Golden LEAF will typically require the grantee to enter a clawback agreement with the business requiring the business to repay a pro rata amount of the grant award if the company fails to create the projected jobs. Where the project involves the sale or lease of equipment to a company, Golden LEAF may require that the sale or lease agreement restrict the company from moving the equipment out of North Carolina.
Insurance
Labor Costs

The Eastern North Carolina Workforce: Productive and Profitable

The people of the eastern North Carolina exemplify hardworking and they're ready to go to work for your company. Highly motivated and well-educated, they provide a solid base of employees for just about any kind of organization. What's more, there's an unsurpassed educational and training infrastructure to make sure that whatever the future holds, the Region workforce will be ready to help ensure your success.

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DISTRIBUTION OF EMPLOYMENT AND WAGES BY INDUSTRY

INDUSTRY EMPLOYMENT AVG. ANNUAL WAGE
Goods Producing 83,098 $34,354
Natural Resources & Mining 10,172 $25,836
Construction 23,229 $32,241
Manufacturing 49,697 $37,085
Services 297,723 $29,332
Trade, Transportation, Utilities 74,114 $28,109
Information 5,992 $39,064
Financial Activities 11,868 $36,477
Professional and Business 34,853 $29,360
Education and Health 94,664 $33,813
Leisure and Hospitality 37,146 $11,268
Other Services 8,819 $19,735
Public Administration 28,994 $39,457

Employment/Wages by Sector

Labor Market Data

Unemployment Insurance Rates

North Carolina ranks among the top states in the U.S. for the fiscal soundness of its unemployment insurance program, and has one of the lowest minimum unemployment insurance tax rates in the nation.

Under the state's experience rating system, reductions of the standard tax rate are permitted as an incentive to employers who provide steady work for their employees. An employer's experience rating is based on the relationship between the contributions credited to the employer's account and the benefits charged against it. Tax rates have been reduced under all of the rate schedules for employers who maintain a positive balance.

For a more comprehensive discussion of the North Carolina unemployment insurance program, along with specific rate information, visit the state's Employment Security Commission web site.

Workers Compensation Rates

North Carolina employers enjoy some of the lowest Worker’s Compensation Rates in the nation. Key features of the state’s Worker’s Compensation program include:

  • Self-insurance is permitted
  • Insurance rates lower than standard industry rates are allowed
  • A clear-cut accident on the job is a condition for benefit compensation
  • Free accident prevention workshops are offered

Click here for a PDF file that ranks states based on workers’ compensation rates.

Taxes

Corporate Income Tax

Rate

6% - 2014 (The rate will fall to 5% in 2015). Further reductions are contingent upon state general fund revenues reaching certain targets. Source: G.S. 105-130.3  Contingent rate reduction at: G.S. 105.130.3C

Manufacturing Fuel - No

LIMITS: Sales of fuel to manufacturers and farmers are exempt from tax. Source: G.S. 105.164.13(1b) & (57)

Manufacturing Machinery & Equipment - No*

LIMITS: Under NC law, purchases of industrial machinery and equipment are exempt from sales and use tax (Source: G.S. 105-164.13(5a) and NC Department of Revenue Direction SD-05-1), but are subject to a 1% Privilege tax or maximum of $80 per item as an accessory to manufacturing machinery. Another 1% privilege tax with a maximum of $80 per article, also is imposed on purchasers of crane systems, port or dock facilities, rail equipment, and material handling equipment if they are used in connection with a major recycling facility in the state and on research and development companies in the physical, engineering, and life sciences, specified software publishing companies, industrial machinery refurbishing companies and eligible data centers that purchase certain capitalized equipment. Source: G.S. Chapter 105, Article 5F

Motor Vehicle/Highway Use - No*

LIMITS: Retail sales of Motor Vehicles are exempt from sales tax, but subject to a 3% highway use tax. There is a maximum ceiling of $1,000 for Class A or B commercial vehicles, and a maximum tax of $1,500 for a certificate of title issued for a recreational vehicle. Sources: G.S. 105-164.13 (32) and G.S. 105-187.3

Pollution Abatement Equipment - No*

LIMITS: Under NC law, pollution abatement equipment is exempt from sales and use tax, but subject to a 1% Privilege tax or maximum of $80 per item as an accessory to manufacturing machinery.  Source: G.S. Chapter 105, Article 5F and G.S. 105-164.13(5a)

Raw Materials for Manufacturing - No

LIMITS: Under NC law, ingredient or component materials or packaging materials that become part of the sale of a product are exempt from sales and use tax.  Source: G.S. 105-164.13(8) & (23)

Repair to Industrial Machinery

LIMITS: The state of NC does not levy sales and use tax on repairs to industrial machinery.  Source: G.S. 105-164.13(62). However, service contracts are now subject to privilege tax on a retailer at the 4.75 general State rate plus the local rate (Source: G.S. 105-164.4(a)(11), with Service Contract defined at G.S. 105-164.3(38b). However, service contracts for tangible personal property that are exempt from sales and use tax under Article SF (e.g. manufacturing machinery) are not subject to the service contract tax.  Source: G.S. 105-164.13(61)

Inventory Tax

Neither the State of North Carolina nor localities assess property tax on inventories. Source: G.S. 105-275(33). Inventories are defined in the previous section at G.S. 105-273(8a). In addition, raw materials are also defined as inventory, and are thus exempt from property tax.

LIMITS: Inventories owned by contractors, manufacturers, and merchants (retail and wholesale) are exempt from property tax. Inventories are defined as goods held for sale in the regular course of business by manufacturers, retail and wholesale merchants, and construction contractors. For manufacturers, the term inventory includes raw materials, goods in process, and finished goods, as well as other materials or supplies that are consumed in manufacturing or processing or that accompany and become part of the sale of the property being sold.

Payroll Taxes/Unemployment Insurance

Business entities are subject to a payroll tax under the North Carolina Employment Security Law if they have one or more employees for twenty different weeks during the calendar year or pay $1,500.00 in wages in any calendar quarter during a calendar year. The tax is payable quarterly and applies to wage payments up to $21,400 per employee per year in 2014. The employer's account is initially assigned a standard tax rate prescribed by law. After approximately two years, an employer's tax rate is determined annually based on experience. Experience rating is affected by payroll, tax paid, timeliness of payments and unemployment insurance benefits charged against the employer's account. Based on economic conditions, an employer's tax rate can be as low as 0.072% and as high as 6.912%.

The rate may be changed after the entity qualifies to become experience rated. New business entities commencing activity in North Carolina during the year 2014 are subject to Employment Security Tax of 1.2% of applicable wages. Key numbers include:

     New Employer Rate:                                    1.2%

     Average Rate Statewide:                             2.172% (2014)

     Taxable Wage Base:                                    $21,400 per employee, per year (2014)

     Time to Establish Experience Factor:         24 months

     Unemployment Compensation Benefits:  Minimum: $15/week

                                                                            Maximum: $350/week

                                                                            Average Benefit: $240.58/week (December 2013)

*Starting July 1, 2013 the number of weeks of state unemployment benefits will be cut and have a sliding-scale approach from 12 to 20 weeks. The number of weeks would be calculated twice a year and based on the state unemployment rate.

For more information, please consult the North Carolina Division of Employment Security. For dates related to unemployment insurance activity, please consult the Labor and Economic Analysis Division in the NC Department of Commerce. 

Tax Extenders Approved By Congress for 2016

The Work Opportunity Tax Credit (“WOTC”)

  • The WOTC is a non-refundable wage credit intended to increase job opportunities for certain categories of disadvantaged individuals. WOTC-eligible hires include certain welfare recipients, ex-felons and veterans.
  • For most eligible hires that remain on a company’s payroll for at least 400 hours, an employer can claim an income tax credit equal to 40 percent of wages paid during the worker’s first year of employment up to a certain wage maximum. For example, the wage maximum for most WOTC-eligible hires is $6,000, for a total credit of $2,400, but the wage maximum can be much higher for certain veteran workers.
  • Recent studies have shown that the WOTC increased wage income of disabled veterans and increased employment among long-term welfare recipients overall.
Section 179 Expensing Limitations
  • Section 179 is a mechanism by which smaller companies are able to expense (deduct immediately) the cost of investments in equipment rather than depreciate them over time. The Section 179 provision in this year’s package permanently extends the 2010-2014 small business expensing limitations and phase-out amounts.
  • Many had debated whether the stimulus was necessary to keep around. Small businesses can breathe a sigh of relief now that the higher thresholds, at $500,000 and $2 million, have been made permanent.
  • Once a company’s investment reaches at least $2 million, the amount eligible is reduced dollar-for-dollar for investments in equipment over $2 million, up to the investment amount of $500,000. Thus, once a company’s investment reaches $2.5 million, no deduction is allowed.
  • Previously, the threshold had been $25,000 with a phase-out beginning at $200,000 (i.e., no deduction would be allowed when investment is over $225,000).
Research and Development Credit (“R&D Credit”)
  • Generally, the R&D Credit provides an income tax credit for a certain amount by which qualified research expenses exceed a base amount.
  • There are typically two different methods for calculating the R&D Credit: one determines the base amount using gross receipts and the other determines the base amount using a three-year lookback for average R&D spending.
  • Qualified research expenses must be experimental for the purpose of discovering information that is technological in nature and used in the development of a new or improved product, process, computer software technique, formula or invention that is to be leased, licensed or used by the company.
  • The only thing holding the R&D credit back from a permanent extension had been its hefty price tag of nearly $180 billion. Both parties, as well as most economists, agree that there is an economic justification for subsidizing R&D spending. Studies show that not only does R&D spending benefit the private firm in terms of return from innovation but it also seems to benefit society as a whole. From the perspective of a private firm, there is no way to capture the entire return from innovation because such innovation will provide valuable information to others in the marketplace who will exploit it, regardless of patents and secrecy. The R&D Credit seems to compensate innovative taxpayers for the loss of that return.
  • Looking forward, with the credit’s annual uncertainty gone, companies will be able to engage in better long-term planning for research projects, which can only increase the credit’s effectiveness.

 

Utilities

Eastern North Carolina offers a well-developed utility infrastructure, with capacities to handle just about any manufacturing application.

Electric suppliers serving the region include Progress Energy, ElectriCities of North Carolina, Inc., Dominion North Carolina Power, Dominion Virginia Power, and the NC Electric Membership Corporation.

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Piedmont Natural Gas is the primary natural gas provider to the Region, although certain cities such as Rocky Mount, Greenville and Wilson also provide natural gas to users within their service areas.

Telecommunication services are provided by AT&T, Century Link and all other major national providers.

e-NC is a grass roots initiative to link all North Carolinians - especially those in rural areas - to the Internet.

Water and sewer infrastructure is well established throughout the Region, and most of the larger cities have significant capacities to meet the demands of a wide range of industrial operations.

List of Utility Providers by County

Utility Providers