S748 [Edition 2]

The General Assembly of North Carolina enacts:

SECTION 1.(a) G.S. 105‑129.2 reads as rewritten:

"§ 105‑129.2. Definitions.

The following definitions apply in this Article:

(1) Air courier services. – A ~~person~~ taxpayer is engaged in the air courier services business if the ~~person's~~ taxpayer's primary business is furnishing air delivery of individually addressed letters and packages for compensation, except by the United States Postal Service.

(2) Central office or aircraft facility. – Any of the following:

a. A corporate, subsidiary, or regional managing office, as defined by NAICS.

b. An auxiliary subdivision of an interstate passenger air carrier engaged primarily in centralized training for the carrier at its hub.

c. An auxiliary subdivision of an interstate passenger air carrier engaged primarily in aircraft maintenance and repair services or aircraft rebuilding as defined by NAICS.

(3) Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105‑130.4(j)(2).

(3a) Customer service center. – An auxiliary subdivision of a telecommunications or financial services company, as defined by NAICS, that is primarily engaged in providing support services to the company's customers by telephone to support products or services of the company. For the purpose of this definition, a subdivision is primarily engaged in providing support services by telephone if at least sixty percent (60%) of its calls are incoming.

(4) Data processing. – A taxpayer is engaged in data processing if the taxpayer's primary business is any ~~Any~~ of the following industries, as defined by NAICS:

a. Computer systems design and related services.

b. Software publishers.

c. Software reproducing.

d. Data processing services.

e. On‑line information services.

(5) Development zone. – An area designated as a development zone pursuant to G.S. 105‑129.3A.

(5a) Electronic mail order house. – A taxpayer is engaged in business as an electronic mail order house if the taxpayer's primary business is an An electronic shopping and mail order house, as defined by NAICS.

(6) Enterprise tier. – The classification assigned to an area pursuant to G.S. 105‑129.3.

(7) Full‑time job. – A position that requires at least 1,600 hours of work per year and is intended to be held by one employee during the entire year. A full‑time employee is an employee who holds a full‑time job.

(8) Hub. – Defined in G.S. 105‑164.3.

(8a) Interstate passenger air carrier. – Defined in G.S. 105‑164.3.

(9) Large investment. – Defined in G.S. 105‑129.4(b1).

(10) Machinery and equipment. – Engines, machinery, equipment, tools, and implements used or designed to be used in the business for which the credit is claimed. The term does not include real property as defined in G.S. 105‑273 or rolling stock as defined in G.S. 105‑333.

(11) Manufacturing. – A taxpayer is engaged in manufacturing if the taxpayer's primary business is an industry ~~Industries~~ in manufacturing sectors 31 through 33, as defined by NAICS, but not including quick printing or retail bakeries.

(11a) NAICS. – The North American Industry Classification System adopted by the United States Office of Management and Budget.

(12) Purchase. – Defined in section 179 of the Code.

(13) Warehousing. – A taxpayer is engaged in warehousing if the taxpayer's primary business is an industry ~~Industries~~ in warehousing and storage subsector 493 as defined by NAICS.

(14) Wholesale trade. – A taxpayer is engaged in wholesale trade if the taxpayer's primary business is an industry ~~Industries~~ in wholesale trade sector 42 as defined by NAICS."

SECTION 1.(b) G.S. 105‑129.2(4), (5a), and (13), as amended by Section 1(a) of this act, read as rewritten:

"§ 105‑129.2. Definitions.

The following definitions apply in this Article:

…

(4) Data processing. – A taxpayer is engaged in data processing if ~~the taxpayer's primary business is any of the following industries, as defined by NAICS:~~ the applicable activity described below is provided primarily to persons that are not related entities and either of the following conditions is met:

a. The taxpayer's primary business is data processing services, as defined by NAICS.

b. The primary business of the taxpayer or the primary activity of an auxiliary subdivision of the taxpayer is in any of the following, as defined by NAICS:

a.1. Computer systems design and related services.

b.2. Software publishers.

c.3. Software reproducing.

d. ~~Data processing services.~~

e.4. On‑line information services.

…

(5a) Electronic mail order house. – A taxpayer is engaged in business as an electronic mail order house if the ~~taxpayer's~~ primary business of the taxpayer or the primary activity of an auxiliary subdivision of the taxpayer is an electronic shopping and mail order house, as defined by NAICS.

…

(13) Warehousing. – A taxpayer is engaged in warehousing if ~~the~~ any of the following conditions is met:

a. The taxpayer's primary business is an industry in warehousing and storage subsector 493 as defined by NAICS.

b. The primary business of the taxpayer is another eligible industry under this Article, and the primary activity of an auxiliary subdivision of the taxpayer is in warehousing and storage subsector 493 as defined by NAICS.

c. The primary activity of an auxiliary subdivision of the taxpayer is in warehousing and storage subsection 493 as defined by NAICS and the auxiliary subdivision is located in an enterprise tier one, two, or three area, is at a site separate from other subdivisions of the taxpayer, and serves 25 or more establishments of the taxpayer in at least five different counties in one or more states."

SECTION 1.(c) G.S. 105‑129.2, as amended by this section, is amended by adding the following new subdivisions to read:

"(6a) Establishment. – Defined by NAICS.

(12a) Related entity. – Defined in G.S. 105-130.7A."

SECTION 1.(d) Subsection (a) of this section is effective when it becomes law. The General Assembly finds that the amendments to G.S. 105‑129.2 made by subsection (a) of this section clarify the intent of the existing law and do not represent a change in the law. Subsections (b) and (c) of this section are effective for taxable years beginning on or after January 1, 2001.

SECTION 2.(a) G.S. 105‑129.2A(a) reads as rewritten:

"(a) Sunset. – This Article is repealed effective for ~~applications for credits filed under G.S. 105-129.6~~ business activities that occur on or after January 1, 2006."

SECTION 2.(b) This section is effective when it becomes law.

SECTION 3.(a) G.S. 105‑129.3(b) and (e) read as rewritten:

"(b) Annual Designation. – Each year, on or before December 31, the Secretary of Commerce shall assign to each county in the State an enterprise factor that is the sum of the following:

(1) The county's rank in a ranking of counties by average rate of unemployment from lowest to highest, for the preceding three years.

(2) The county's rank in a ranking of counties by average per capita income from highest to lowest, for the preceding three years.

(3) The county's rank in a ranking of counties by percentage growth in population from highest to lowest.

The Secretary of Commerce shall then rank all the counties within the State according to their enterprise factor from highest to lowest, identify all the areas of the State by enterprise tier, and publish this information. ~~provide this information to the Secretary of Revenue.~~ An enterprise tier designation is effective only for the calendar year following the designation.

…

(e) Exceptions for Certain Small Counties. – The following exceptions to the provisions of this section apply to small counties:

(1) A county that meets both of the conditions set out below is designated an enterprise tier one area:

a. Its population is less than ~~10,000.~~12,000.

b. More than sixteen percent (16%) of its population is below the federal poverty level according to the most recent federal decennial census.

(2) A county that meets both of the conditions set out below has an enterprise tier designation one level below the designation it would otherwise have under subsection (a) of this section:

a. Its population is less than 50,000.

b. More than eighteen percent (18%) of its population is below the federal poverty level according to the most recent federal decennial census.

(3) A county that has a population of less than ~~25,000~~35,000 and that would otherwise be designated an enterprise tier four or five area under this section must be designated an enterprise tier three area."

SECTION 3.(b) This section is effective when it becomes law and applies to tier designations made on or after that date.

SECTION 4.(a) G.S. 105‑129.3A(b) reads as rewritten:

"(b) Designation. – Upon request of a taxpayer or a local government, the Secretary of Commerce shall designate whether an area is a development zone that meets the conditions of subsection (a) of this section. If the applicant is a taxpayer, it must notify each city in which part of the zone is located. A development zone designation is effective for 24 months following the designation. The Department of Commerce must publish annually a list of all development zones with a description of their boundaries."

SECTION 4.(b) This section is effective when it becomes law.

SECTION 5.(a) G.S. 105‑129.4(b4) reads as rewritten:

"(b4) Safety and Health Programs. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, as of the time the taxpayer applies for the credit, at the business location with respect to which the credit is claimed, the taxpayer has no ~~outstanding~~ citations under the Occupational Safety and Health Act ~~and has had no serious violation as defined in G.S. 95-127 within the last three years.~~that have become a final order within the past three years for willful serious violations or for failing to abate serious violations. For the purposes of this subsection, 'serious violation' has the same meaning as in G.S. 95-127. The Secretary of Commerce will provide the Department of Labor a list of all taxpayers making this certification. The Department of Labor may conduct random audit checks to verify taxpayers' certifications. The Department of Labor must notify the Department of Revenue of any taxpayer certifications it determines are not accurate."

SECTION 5.(b) This section is effective for taxable years beginning on or after January 1, 2000.

SECTION 6.(a) G.S. 105‑129.4, as amended by this act, reads as rewritten:

"§ 105‑129.4. Eligibility; forfeiture.

(a) Type of Business. – A taxpayer is eligible for a credit allowed by G.S. 105‑129.12 if the real property for which the credit is claimed is used for a central office or aircraft facility that creates at least 40 new jobs. A taxpayer is eligible for the other credits allowed by this Article if the taxpayer engages in one of the following types of businesses and the jobs with respect to which a credit is claimed are created in that business, the machinery and equipment with respect to which a credit is claimed are used in that business, and the research and development for which a credit is claimed are carried out as part of that business:

(1) Air courier services.

(2) Central office or aircraft facility that creates at least 40 new jobs.

(2a) Customer service center located in an enterprise tier ~~one or two~~ one, two, or three area.

(3) Data processing.

(3a) Electronic mail order house that creates at least 250 new jobs and is located in an enterprise tier ~~one or two~~one, two, or three area.

(4) Manufacturing.

(5) Warehousing.

(6) Wholesale trade.

(a1) New Jobs Defined. – A central office or aircraft facility creates at least 40 new jobs if the taxpayer hires at least 40 additional full‑time employees to fill new positions at the office either in the year the taxpayer first uses the property as a central office or aircraft facility or in the preceding 24 months while using temporary space for the central office or aircraft facility functions during completion of the central office or aircraft facility property. Other property creates at least 200 new jobs if the taxpayer hires at least 200 additional full-time employees to fill new positions at the location in a two-year period beginning when the property is first used in an eligible business. An electronic mail order house creates at least 250 new jobs if the taxpayer hires at least 250 additional full‑time employees to fill new positions at the house in the two‑year period ending on the last day of the taxable year the taxpayer first claims a credit under this Article. Jobs transferred from one area in the State to another area in the State are not considered new jobs for purposes of this subsection.

(a2) Expiration. – If, during the period that installments of a credit under this Article accrue, the taxpayer is no longer engaged in one of the types of business described in subsection (a) of this section, the credit expires. ~~expires and the taxpayer may not take any remaining installments of the credit. The~~ If, during the period that installments of a credit under this Article accrue, the number of jobs of an eligible business falls below the minimum number required under subsection (a) of this section, any credit associated with that business expires. When a credit expires, the taxpayer may not take any remaining installments of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5. A change in the enterprise tier designation of the location of an establishment does not result in expiration of a credit under this Article.

(b) Wage Standard. – A taxpayer is eligible for the credit for creating jobs or the credit for worker training if if, for the calendar year the jobs are created or the worker training is provided, the average wage of the jobs for which the credit is claimed ~~meet~~ meets the wage standard ~~at the time the taxpayer applies for the credit.~~ and the average wage of all jobs at the location with respect to which the credit is claimed meets the wage standard. A taxpayer is eligible for the credit for investing in machinery and equipment, the credit for research and development, or the credit for investing in real property for a central office or aircraft ~~facility if the~~ facility, or the credit for substantial investment in other property if, for the calendar year the taxpayer engages in the activity that qualifies for the credit, the average wage of all jobs at the location with respect to which the credit is claimed ~~meet~~ meets the wage standard. ~~standard at the time the taxpayer applies for the credit.~~ Jobs meet the wage standard if they pay an average weekly wage that is at least equal to the applicable percentage times the applicable average weekly wage for the county in which the jobs will be located, as computed by the Secretary of Commerce from data compiled by the Employment Security Commission for the most recent period for which data are available. The applicable percentage for jobs located in an enterprise tier one area is one hundred percent (100%). The applicable percentage for all other jobs is one hundred ten percent (110%). The applicable average weekly wage is the lowest of the following: (i) the average wage for all insured private employers in the county, (ii) the average wage for all insured private employers in the State, and (iii) the average wage for all insured private employers in the county multiplied by the county income/wage adjustment factor. The county income/wage adjustment factor is the county income/wage ratio divided by the State income/wage ratio. The county income/wage ratio is average per capita income in the county divided by the annualized average wage for all insured private employers in the county. The State income/wage ratio is the average per capita income in the State divided by the annualized average wage for all insured private employers in the State. The Department of Commerce must annually publish the applicable average weekly wage for each county and for the State.

(b1) Large Investment. – A taxpayer who is otherwise eligible for a tax credit under this Article becomes eligible for the large investment enhancements provided for credits under this Article if the Secretary of Commerce certifies that the taxpayer will purchase or lease, and place in service in connection with the eligible business within a two‑year period, at least one hundred fifty million dollars ($150,000,000) worth of one or more of the following: real property, machinery and equipment, or central office or aircraft facility property. If the taxpayer fails to make the level of investment certified within this two‑year period, the taxpayer forfeits the large investment enhancements as provided in subsection (d) of this section.

(b2) Health Insurance. – A taxpayer is eligible for a credit for creating jobs or for worker training under this Article if the taxpayer provides health insurance for the positions for which the credit is claimed ~~at the time the taxpayer applies for~~ each year it claims an installment or carryforward of the credit. A taxpayer is eligible for the other credits under this Article if the taxpayer provides health insurance for all of the full‑time positions at the location with respect to which the credit is claimed ~~at the time the taxpayer applies for~~ each year it claims an installment or carryforward of the credit. For the purposes of this subsection, a taxpayer provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125.

Each year that a taxpayer claims an installment or carryforward of a credit allowed under this Article, the taxpayer must provide with the tax return the taxpayer's certification that the taxpayer continues to provide health insurance for the jobs for which the credit was claimed or the full‑time jobs at the location with respect to which the credit was claimed. If the taxpayer ceases to provide health insurance for the jobs during a taxable year, the credit expires and the taxpayer may not take any remaining installment or carryforward of the credit.

(b3) Environmental Impact. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, at the time the taxpayer ~~applies for~~first claims the credit, the taxpayer has no pending administrative, civil, or criminal enforcement action based on alleged significant violations of any program implemented by an agency of the Department of Environment and Natural Resources, and has had no final determination of responsibility for any significant administrative, civil, or criminal violation of any program implemented by an agency of the Department of Environment and Natural Resources within the last five years. A significant violation is a violation or alleged violation that does not satisfy any of the conditions of G.S. 143‑215.6B(d). The Secretary of Commerce will provide the Department of Environment and Natural Resources a list of all taxpayers making this certification. The Department of Environment and Natural Resources may conduct random audit checks to verify taxpayers' certifications. The Department of Environment and Natural Resources must notify the Department of Revenue annually of every person that currently has any of these pending actions and every person that has had any of these final determinations within this last five years. ~~of any taxpayer certifications it determines are not accurate.~~

(b4) Safety and Health Programs. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, as of the time the taxpayer ~~applies for~~ first claims the credit, at the business location with respect to which the credit is claimed, the taxpayer has no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations. For the purposes of this subsection, 'serious violation' has the same meaning as in G.S. 95‑127. The Secretary of Commerce will provide the Department of Labor a list of all taxpayers making this certification. The Department of Labor may conduct random audit checks to verify taxpayers' certifications. The Department of Labor must notify the Department of Revenue annually of all employers who have had these citations become final orders within the past three years. ~~of any taxpayer certifications it determines are not accurate.~~

(b5) Substantial Investment in Other Property. – A taxpayer is eligible for the credit for substantial investment in other property under G.S. 105-129.12A with respect to a location only if the Secretary of Commerce certifies that the taxpayer will purchase or lease and use in an eligible business at that location within a three-year period at least ten million dollars ($10,000,000) of real property and that the location that is the subject of the credit will create at least 200 new jobs within two years of the time that the property is first used in an eligible business. If the taxpayer fails to make the required level of investment certified within this three-year period or fails to create the required number of new jobs, the taxpayer forfeits the credit as provided in subsection (d) of this section.

(d) Forfeiture. – A taxpayer forfeits a credit allowed under this Article if the taxpayer was not eligible for the credit for the period for which the credit was claimed. ~~credit at the time the taxpayer applied for the credit.~~ In addition, a taxpayer forfeits a large investment enhancement of a tax credit if the taxpayer fails to make the level of investment certified by the Secretary of Commerce under subsection (b1) of this section within the required two‑year period. A taxpayer forfeits the credit for substantial investment in other property allowed under G.S. 105‑129.12A if the taxpayer fails to create the number of required new jobs or to timely make the required level of investment certified by the Secretary of Commerce under subsection (b5) of this section. A taxpayer forfeits the technology commercialization credit allowed under G.S. 105‑129.9A if the taxpayer fails to make the level of investment required by subsection (e) of that section within the required period or if the taxpayer fails to meet the terms of its licensing agreement with a research university. If a taxpayer claimed a twenty percent (20%) technology commercialization credit under G.S. 105‑129.9A(d) and fails to make the level of investment required under that subsection within the required period, but does make the level of investment required under subsection (e) of that section within the required period, the taxpayer forfeits one‑fourth of the twenty percent (20%) credit.

A taxpayer that forfeits a credit under this Article is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.1(i), computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer that fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236. If a taxpayer forfeits the credit for creating jobs, the technology commercialization credit, or the credit for investing in machinery and equipment, the taxpayer also forfeits any credit for worker training claimed for the jobs for which the credit for creating jobs was claimed or the jobs at the location with respect to which the technology commercialization credit or the credit for investing in machinery and equipment was claimed.

(e) Change in Ownership of Business. – The sale, merger, consolidation, conversion, acquisition, or bankruptcy of a business, or any transaction by which an existing business reformulates itself as another business, does not create new eligibility in a succeeding business with respect to credits for which the predecessor was not eligible under this Article. A successor business may, however, take any installment of or carried‑over portion of a credit that its predecessor could have taken if it had a tax liability. The acquisition of a business is a new investment that creates new eligibility in the acquiring taxpayer under this Article if any of the following conditions are met:

(1) The business closed before it was acquired.

(2) The business was required to file a notice of plant closing or mass layoff under the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2102, before it was acquired.

(3) The business was acquired by its employees directly or indirectly through an acquisition company under an employee stock option transaction or another similar mechanism. For the purpose of this subdivision, "acquired" means that as part of the initial purchase of a business by the employees, the purchase included an agreement for the employees through the employee stock option transaction or another similar mechanism to obtain one of the following:

a. Ownership of more than fifty percent (50%) of the business.

b. Ownership of not less than forty percent (40%) of the business within seven years if the business has tangible assets with a net book value in excess of one hundred million dollars ($100,000,000) and has the majority of its operations located in an enterprise tier one, two, or three area.

(f) Development Zone Project Credit. – Subsections (a) through (b4) of this section do not apply to the credit for development zone projects provided in G.S. 105‑129.13.

(g) Advisory Ruling. – A taxpayer may request in writing from the Secretary of Revenue specific advice regarding eligibility for a credit under this Article. G.S. 105‑264 governs the effect of this advice."

SECTION 6.(b) The amendments to G.S. 105‑129.4(a2) in this section and the enactment of G.S. 105‑129.4(g) in this section are effective when this act becomes law. The remainder of this section is effective for taxable years beginning on or after January 1, 2002.

SECTION 7.(a) G.S. 105‑129.5(c) reads as rewritten:

"(c) Carryforward. – Any unused portion of a credit with respect to a large ~~investment or~~ investment, with respect to the technology commercialization credit allowed in G.S. ~~105‑129.9A~~ 105‑129.9A, or with respect to substantial investment in other property under G.S. 105-129.12A may be carried forward for the succeeding 20 years. Any unused portion of a credit with respect to research and development activities under G.S. 105‑129.10 may be carried forward for the succeeding 15 years. Any unused portion of a credit may be carried forward for the succeeding 10 years if if, before the taxpayer claims the credit, the Secretary of Commerce certifies ~~when an application for the credit is first made~~ that the taxpayer will purchase or lease, and place in service in connection with the eligible business within a two‑year period, at least fifty million dollars ($50,000,000) worth of one or more of the following: real property, machinery and equipment, or central office or aircraft facility property. If the taxpayer fails to make the level of investment certified within this two‑year period, the taxpayer forfeits this enhanced carryforward period. Any unused portion of any other credit may be carried forward for the succeeding five years."

SECTION 7.(b) This section is effective for taxable years beginning on or after January 1, 2002, and applies to credits that are first claimed on or after that date.

SECTION 8.(a) G.S. 105‑129.6 reads as rewritten:

"§ 105‑129.6. ~~Application;~~ Fees and reports.

~~(a)~~ Application. – To claim the credits allowed by this Article, the taxpayer must provide with the tax return the certification of the Secretary of Commerce that the taxpayer meets all of the eligibility requirements of G.S. 105-129.4 or G.S. 105-129.13, as applicable, with respect to each credit. A taxpayer shall apply to the Secretary of Commerce for certification of eligibility. The application must be on a form provided by the Secretary of Commerce and must contain any information necessary for the Secretary of Commerce to determine whether the taxpayer meets the eligibility requirements. In addition, the application must state the number of full-time jobs to be created that are located within a development zone, the number of full-time jobs to be created that are expected to be filled by employees residing within the development zone, and the number of full-time jobs to be created that are expected to be filled by employees residing within a census tract or census block group that has more than twenty percent (20%) of its population below the poverty level according to the most recent federal decennial census.

If the Secretary of Commerce determines that the taxpayer meets all of the eligibility requirements of G.S. 105-129.4 or G.S. 105-129.13, as applicable, with respect to a credit, the Secretary shall issue a certificate describing the location with respect to which the credit is claimed, outlining the eligibility requirements for the credit, and stating that the taxpayer meets the eligibility requirements. If the Secretary of Commerce determines that the taxpayer does not meet all of the eligibility requirements of G.S. 105-129.4 or G.S. 105-129.13, as applicable, with respect to a credit, the Secretary must advise the taxpayer in writing of the eligibility requirements the taxpayer fails to meet. The Secretary of Commerce may adopt rules in accordance with Chapter 150B of the General Statutes that are needed to carry out the Secretary of Commerce's responsibilities under this section.

(a1) Fee. – When filing ~~an application for certification~~ a return on which the taxpayer first claims a credit under this ~~section,~~ Article, the taxpayer must pay the Department of ~~Commerce~~ Revenue a fee of five hundred dollars ($500.00) for each credit the taxpayer ~~intends to claim~~ claims with respect to a location that is in an enterprise tier three, four, or five area, subject to a maximum fee of one thousand five hundred dollars ($1,500) per taxpayer per taxable year. This fee does not apply to any credit the taxpayer ~~intends to claim~~ claims with respect to a location that is in a development zone as defined in G.S. 105‑129.3A. If the taxpayer ~~applies for certification for~~ claims a credit that relates to locations in more than one enterprise tier area, the fee is based on the highest‑numbered enterprise tier area.

The Secretary of ~~Commerce~~ Revenue shall retain ~~one-fourth~~ three‑fourths of the proceeds of the fee imposed in this section for the costs ~~of administering this section. The Secretary of Commerce shall credit the remaining proceeds of the fee imposed in this section to the Department of Revenue for the costs~~ of administering and auditing the credits allowed in this Article. The Secretary of Revenue shall credit the remaining proceeds of the fee imposed in this section to the Department of Commerce for the costs of administering this Article. The proceeds of the fee are receipts of the Department to which they are credited.

(b) Reports. – The Department of ~~Commerce~~ Revenue shall report to the Department of ~~Revenue~~ Commerce and to the Fiscal Research Division of the General Assembly by May 1 of each year the following information for the 12‑month period ending the preceding April 1:

(1) The number of ~~applications~~ claims for each credit allowed in this Article.

(2) The number and enterprise tier area of new jobs with respect to which credits were ~~applied for.~~ claimed.

(3) The cost of machinery and equipment with respect to which credits were ~~applied for.~~ claimed.

(4) The number of new jobs created by businesses located in ~~within~~ development zones, and the percentage of ~~those~~ jobs at those locations that were filled by residents of the zones."

SECTION 8.(b) This section is effective for taxable years beginning on or after January 1, 2002.

SECTION 9.(a) G.S. 105‑129.7 reads as rewritten:

"§ 105‑129.7. Substantiation.

(a) To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary of Revenue. Every taxpayer claiming a credit under this Article shall maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for the credit and the amount of the credit shall rest upon the taxpayer, and no credit shall be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection.

(b) Each taxpayer must provide with the tax return qualifying information for each credit claimed under this Article for the first taxable year the credit is claimed and for every year in which a subsequent installment or a carryforward of that credit is claimed. The qualifying information must be in the form prescribed by the Secretary, must cover each taxable year beginning with the first taxable year the credit is claimed, and must be signed and affirmed by the individual who signs the taxpayer's tax return. The information required by this subsection is information demonstrating that the taxpayer has met the conditions for qualifying for an initial credit and any installments and carryforwards, and includes the following:

(1) The physical location of the jobs and investment with respect to which the credit is claimed, including the enterprise tier designation of the location and whether it is in a development zone. In addition, for each individual who fills a job at a location with respect to which a credit is claimed, the place where the individual resided before taking the job, including any enterprise tier ~~or development zone~~ designation of that place. In addition, for jobs that are located in a development zone, the number of those jobs that are filled by residents of the development zone.

(2) The type of business with respect to which the credit is claimed, as required by G.S. 105‑129.4(a), and wage information described in G.S. 105‑129.4(b).

(3) If the credit is claimed with respect to a large investment certified under G.S. ~~105-129.4(b1) or~~ 105-129.4(b1), is a credit with a carryforward period of 10 years under G.S. 105‑129.5(c), or is a credit claimed under G.S. 105-129.12A, the amount of the investment requirement under those subsections that has been met to date.

(4) Qualifying information required for the credit for creating jobs allowed under G.S. 105‑129.8, the credit for investing in machinery and equipment allowed under G.S. 105‑129.9, the credit for worker training allowed under G.S. 105‑129.11, the credit for investing in central office or aircraft facility property allowed in G.S. 105‑129.12, the credit for substantial investment in other property under G.S. 105‑129.12A, and any other credits allowed under this Article."

SECTION 9.(b) This section is effective for taxable years beginning on or after January 1, 2002.

SECTION 10.(a) G.S. 105‑129.9(b) and (c) read as rewritten:

"(b) Eligible Investment Amount. – The eligible investment amount is the lesser of (i) the cost of the eligible machinery and equipment and (ii) the amount by which the cost of all of the taxpayer's eligible machinery and equipment that are in service in this State on the last day of the taxable year exceeds the cost of all of the taxpayer's eligible machinery and equipment that were in service in this State on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer had the most eligible machinery and equipment in service in this State. A taxpayer that claims a credit under this section must include with the application for certification required under G.S. 105-129.6(a) specific documentation supporting the taxpayer's calculation of the eligible investment amount under this subsection.

(c) Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the enterprise tier ~~of the area~~ where the eligible machinery and equipment are placed in service during the taxable year. If the taxpayer places eligible machinery and equipment in service in at more than one ~~area~~ establishment in an enterprise tier during the taxable year, the threshold applies separately to the eligible machinery and equipment placed in service in at each ~~area.~~establishment. If the taxpayer places eligible machinery and equipment in service ~~in an area~~ at an establishment over the course of a two‑year period, the applicable threshold for the second taxable year is reduced by the eligible investment amount for the previous taxable year.

Area Enterprise Tier Threshold

Tier One $ ‑0‑

Tier Two 100,000

Tier Three 200,000

Tier Four 500,000

Tier Five 1,000,000"

SECTION 10.(b) This section is effective for taxable years beginning on or after January 1, 2002, and applies to machinery and equipment first placed into service after that date.

SECTION 11.(a) G.S. 105‑129.9A(c) reads as rewritten:

"(c) Documentation. – If the taxpayer claims the exception provided in subdivision (b)(2) of this section, the Secretary of Commerce must obtain an opinion of the Attorney General that the taxpayer meets all of the conditions of subdivision (b)(2) before the Secretary certifies the application under G.S. 105-129.6(a). the taxpayer must first request a ruling by the Department of Revenue as to whether the taxpayer meets all of the conditions of subdivision (b)(2) of this section."

SECTION 11.(b) This section is effective for taxable years beginning on or after January 1, 2002.

SECTION 12.(a) G.S. 105‑129.12(c) reads as rewritten:

"(c) Expiration. – If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used as a central office or aircraft facility, the credit expires and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used as a central office or aircraft facility, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (b) of this section. If, in one of the seven years in which the installment of a credit accrues, the total number of employees the taxpayer employs at all of its central office or aircraft facilities in this State drops by 40 or more, the credit expires and the taxpayer may not take any remaining installment of the credit.

In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.5."

SECTION 12.(b) This section is effective for taxable years beginning on or after January 1, 2001.

SECTION 13.(a) Article 3A of Chapter 105 of the General Statutes is amended by adding a new section to read:

"§ 105-129.12A. Credit for substantial investment in other property.

(a) Credit. – If a taxpayer that has purchased or leased real property in an enterprise tier one or two area begins to use the property in an eligible business during the taxable year, the taxpayer is allowed a credit equal to thirty percent (30%) of the eligible investment amount if all of the eligibility requirements of G.S. 105‑129.4 are met. For the purposes of this section, property is located in an enterprise tier one or two area if the area the property is located in was an enterprise tier one or two area at the time the taxpayer applied for the certification required under G.S. 105‑129.4(b5). The eligible investment amount is the lesser of (i) the cost of the property and (ii) the amount by which the cost of all of the real property the taxpayer is using in this State in an eligible business on the last day of the taxable year exceeds the cost of all of the real property the taxpayer was using in this State in an eligible business on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer was using the most real property in this State in an eligible business. In the case of property that is leased, the cost of the property is not determined as provided in G.S. 105-129.2 but is considered to be the taxpayer's lease payments over a seven-year period, plus any expenditures made by the taxpayer to improve the property before it is used by the taxpayer if the expenditures are not reimbursed or credited by the lessor. The entire credit may not be taken for the taxable year in which the property is first used in an eligible business but shall be taken in equal installments over the seven years following the taxable year in which the property is first used in an eligible business. When part of the property is first used in an eligible business in one year and part is first used in an eligible business in a later year, separate credits may be claimed for the amount of property first used in an eligible business in each year. The basis in any real property for which a credit is allowed under this section shall be reduced by the amount of credit allowable.

(b) Mixed Use Property. – If the taxpayer uses only part of the property in an eligible business, the amount of the credit allowed under this section is reduced by multiplying it by a fraction the numerator of which is the square footage of the property used in an eligible business and the denominator of which is the total square footage of the property.

(c) Expiration. – If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used in an eligible business, the credit expires and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used in an eligible business, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (b) of this section. If, in one of the years in which the installment of a credit accrues and by which the taxpayer is required to have created 200 new jobs at the property, the total number of employees the taxpayer employs at the property with respect to which the credit is claimed is less than 200, the credit expires and the taxpayer may not take any remaining installment of the credit.

In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105-129.5.

(d) No Double Credit. – A taxpayer may not claim a credit under this section with respect to real property for which a credit is claimed under G.S. 105-129.12."

SECTION 13.(b) This section is effective for taxable years beginning on or after January 1, 2002, and applies to property that is first used in an eligible business on or after that date.

SECTION 14.(a) G.S. 105‑129.13(e) reads as rewritten:

"(e) Application. – To be eligible for the tax credit provided in this section, ~~in addition to the application required under G.S. 105-129.6,~~ the taxpayer must file an application for the credit with the Secretary of Revenue on or before April 15 of the year following the calendar year in which the contribution was made. The Secretary may grant extensions of this deadline, as the Secretary finds appropriate, upon the request of the taxpayer, except that the application may not be filed after September 15 of the year following the calendar year in which the contribution was made. An application is effective for the year in which it is timely filed. The application must be on a form prescribed by the Secretary and must include any supporting documentation that the Secretary may require. If a contribution for which a credit is applied for was of property rather than cash, the taxpayer must include with the application a certified appraisal of the value of the property contributed. There is no fee for an application under this section."

SECTION 14.(b) This section is effective for taxable years beginning on or after January 1, 2002.

SECTION 15.(a) Section 22 of S.L. 1998‑55 reads as rewritten:

"Section 22. Section 10 of this act is effective for taxes imposed for taxable years beginning on or after July 1, 2001. Section 11 of this act becomes effective January 1, 1999, and expires ~~January 1, 2004.~~ July 1, 2007. The remainder of Part III of this act becomes effective January 1, 2001, and applies to sales made on or after that date."

SECTION 15.(b) This section is effective when it becomes law.

SECTION 16.(a) G.S. 105‑164.13 is amended by adding a new subdivision to read:

"(8b) Electricity that is separately metered or measured and is sold to a manufacturer for use in any of the following:

a. An arc furnace.

b. A furnace used to produce glass.

c. An aluminum smelting process.

d. To place an electrical charge in a new lead-acid battery manufactured for sale.

e. An electrolytic process used to produce chlorine gas or chemicals manufactured for sale.

f. A resistance welding process used to produce wire fabric.

The provisions of the exemption established by this subdivision are not severable. If any provision of this subdivision or its application is held invalid, the entire subdivision is repealed."

SECTION 16.(b) This section becomes effective November 1, 2001, and applies to sales made on or after that date.

SECTION 17. Except as otherwise provided in this act, this act is effective when it becomes law.

Short Title: Bill Lee Act Changes-AB.	()
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