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D. Tax Incentives for Recycling Facilities (Article 3C of Chapter
105)
- General Information
- Eligibility
In order for a manufacturing plant to be considered a recycling
facility at least seventy-five percent (75%) of its products
must be made from materials that consist of at least fifty
percent (50%) post-consumer waste material measured by weight
or volume. The term "recycling facility" includes
real and personal property located at or on land in the same
county and reasonably near the plant site that are used to
perform business functions related to the plant or to transport
materials and products to or from the plant. A plant may qualify
as either a major recycling facility or a large recycling
facility.
- Major Recycling Facility (G.S. 105-129.26(a))
A recycling facility qualifies for the tax credits provided
under Article 3C for major recycling facilities if it
meets all of the following conditions:
- The facility is located in an area that was an enterprise
tier one area at the time the owner began construction
of the facility.
- The Secretary of Commerce has certified that the
owner will, by the end of the fourth year after the
year the owner begins construction of the recycling
facility, invest at least three hundred million dollars
($300,000,000) in the facility and create at least
250 new, full-time jobs at the facility.
- The jobs at the recycling facility meet the wage
standard in effect as of the date the owner begins
construction of the facility.
- Large Recycling Facility (G.S. 105-129.26(b))
A recycling facility qualifies for the tax credit provided
in G.S. 105-129.27 for large recycling facilities if it
meets all of the following conditions:
- The facility is located in an area that was an enterprise
tier one area at the time the owner began construction
of the facility.
- The Secretary of Commerce has certified that the
owner will, by the end of the second year after the
year the owner begins construction of the recycling
facility, invest at least one hundred fifty million
dollars ($150,000,000) in the facility and creates
at least 155 new, full-time jobs at the facility.
- The jobs at the recycling facility meet the wage
standard in effect as of the date the owner begins
construction of the facility.
- Forms
Form CD-425 is used to report any tax credits claimed under
this article. This form must be filed for any taxable year
in which a credit or a carryforward of a credit against the
taxpayer's tax liability for that year is claimed.
- Substantiation (G.S. 105-129.26(d))
The burden of proving eligibility for any credit under this
article rests upon the taxpayer. Every taxpayer claiming a
credit under this article must 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. No
credit may be allowed to any taxpayer that fails to maintain
adequate records or to make them available for inspection.
- Forfeiture (G.S. 105-129.26(c))
If the owner of a large or major recycling facility fails
to make the required minimum investment or create the required
number of new jobs within the period certified by the Secretary
of Commerce, the recycling facility forfeits all tax credits
previously received under this Article. Forfeiture does not
occur, however if the failure was due to events beyond the
owner's control.
Upon forfeiture, the owner is liable for a tax equal to the
amount of all past taxes avoided as a result of the tax credits
claimed plus interest at the rate established in G. S. 105-241.1(i),
computed from the date the taxes would have been due if the
tax benefits had not been received. The tax and interest are
due 30 days after the date of the forfeiture. An owner that
fails to pay the tax and interest is subject to the penalties
provided in G.S. 105-236.
- Credit for investing in large or major recycling facility
(G.S. 105-129.27)
- Credit
An owner that purchases or leases machinery and equipment
for a major recycling facility in this State during the taxable
year is allowed a credit equal to fifty percent (50%) of the
amount payable by the owner during the taxable year to purchase
or lease the machinery and equipment.
An owner that purchases or leases machinery and equipment
for a large recycling facility in this State during the taxable
year is allowed a credit equal to twenty percent (20%) of
the amount payable by the owner during the taxable year to
purchase or lease the machinery and equipment.
- Taxes Credited (G.S. 105-129.27(b))
The credit provided in this section is allowed against franchise
and income tax. Any other nonrefundable credits allowed the
owner are subtracted before the credit allowed by this section.
The taxpayer must elect the tax against which a credit will
be claimed when filing the return on which the credit is first
claimed. All carryforwards of a credit must be claimed against
the same tax.
- Credit Carryforward (G.S. 105-129.27(c))
The credit may not exceed the amount of tax against which
it is claimed for the taxable year, reduced by the sum of
all other credits allowed against that tax, except tax payments
made by or on behalf of the owner. Any unused portion of the
credit may be carried forward for the succeeding 25 years.
- Change in Ownership of Facility (G.S. 105-129.27(d))
The sale, merger, consolidation, conversion, acquisition,
or bankruptcy of a recycling facility, or any transaction
by which the facility is reformulated as another business,
does not create new eligibility in a succeeding owner with
respect to a credit for which the predecessor was not eligible
under this section. A successor business may, however, take
any carried-over portion of a credit that its predecessor
could have taken if it had a tax liability.
- Forfeiture (G.S 105-129.27(e))
If any machinery or equipment for which a credit was allowed
under this section is not placed in service within 30 months
after the credit was allowed, the credit is forfeited. A taxpayer
that forfeits a credit 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.
- Limitations (G.S. 105-129.27(f))
A recycling facility that is eligible for the credit allowed
in this section is not allowed the credit for investing in
machinery and equipment provided in G.S. 105-129.9.
- Credit for Reinvestment (G.S. 105-129.28) (Repealed effective
for taxable years beginning on or after January 1, 2008)
- Credit (G.S. 1105-129.28(a))
A major recycling facility that is not accessible by ocean
barge or ship and that transports materials to the facility
or products away from the facility is allowed a credit against
corporate income tax. The credit is equal to the additional
transportation and transloading expenses incurred by the facility
with respect to the materials and products due to its inability
to use ocean barges or ships.
The additional expenses for which credit is allowed are expenses
due to using river barges and expenses due to having to use
another mode of transportation because the quantity that is
transported by river barge is insufficient to meet the facility's
needs.
To claim the credit allowed by this section, the facility
must provide the Secretary of Commerce audited documentation
of the amount of its additional transportation and transloading
expenses incurred during the taxable year.
- Cap on Credit (G.S. 105-129.28(b))
The credit allowed to a major recycling facility may not exceed
the applicable annual cap provided in the following table:
| Taxable Year |
Cap |
| 1998 |
$ 150,000 |
| 1999 |
640,000 |
| 2000 |
3,860,000 |
| 2001 |
8,050,000 |
| 2002 |
9,550,000 |
| 2003 |
10,100,000 |
| 2004-2007 |
10,400,000 |
- Reduction in Credit (G.S. 105-129.28(c))
For the first ten taxable years after the owner begins transporting
materials and products to and from the major recycling facility,
the credit allowed must be reduced by the amount of credit
allowed in previous years that was used for a purpose other
than an allowable purpose under G.S.105-129.28(d), as certified
by the Secretary of Commerce.
- Use of Credited Amount (G.S. 105-129.28(d))
For the first 10 taxable years after the owner begins construction
of the major recycling facility, the owner must use the credit
allowed to pay for
- Investment in rail or roads associated with the facility.
- Investment in water system infrastructure designed
to reduce the expense of transporting materials and products
to and from the recycling facility.
- Investment at or in connection with the recycling facility
above the required investment of three hundred million
dollars ($300,000,000), if the owner determines that there
are no reasonable economic opportunities for the expenditures
described above.
Expenses incurred for the purposes allowed in this subsection
during a taxable year in the 10-year period may be counted
toward a credit allowed in a later taxable year in the 10-year
period. If the owner is not able to use the entire credit
during the taxable year, the excess may be used in subsequent
taxable years. After the end of the ten-year period, any unused
credit may be used for investment at or in connection with
the recycling facility above the $300,000,000 initial investment.
- Refundable Credit (G.S. 105-129.28(e))
If the credit allowed by this section exceeds the corporate
income tax liability for the taxable year reduced by the sum
of all credits allowable, a refund of the excess will be made
to the taxpayer. In computing the amount of tax against which
multiple credits are allowed, nonrefundable credits are subtracted
before refundable credits.
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