It has been stated that the Embassy Foundation expects to use tax credits to fund part of the cost of the performance hall.
Since the application for the grant has not been made available for the public to read and study, the public can only guess how they plan to do this. In the mean time, we can educate ourselves a little about North Carolina tax credits.
North Carolina had a law called the William S. Lee Tax Credits Law. Generally this act has been repealed and replaced with Article 3J Tax Credits. The 3J tax credits take effect for taxable years beginning on or after January 1, 2007. These tax credits, which come from the state taxes paid from all North Carolinians, are tools for economic development.
What this act does is offer tax credits for creating jobs and investing in business property. There is also a credit for a business investing in real property in a Tier One County. This is a ranking done by the Department of Commerce that is based on economic well-being and Vance County is rated a Tier One County because it is so distressed. Article 3J Credits are given to Tier One counties to encourage economic activity in areas that are not prosperous.
One would assume that the tax credits that the Embassy Foundation is seeking is a credit for business investment as it is assumed that other tax credits for things such as renewable energy credits, historic preservation credits, conservation, recycling, and green building credits would not apply.
So, let’s look at the requirements for obtaining a tax credit for investment in real property in a Tier One County.
First, to be eligible for a 3J Tax Credit in a Tier One County, a business must invest at least $10 million in real property within a three-year period. The company must also create at least 200 new jobs within two years. When those two requirements are met, a credit equal to 30% of the eligible investment is allowed. This credit is taken in equal installments over seven years. To qualify for this credit, the taxpayer must obtain a written determination from the Department of Commerce. If the Embassy Foundation proposes to go this route, this documentation should be in the grant application as proof of financing.
What businesses are eligible for these 3J Tax Credits? Section 105-129.83 of the law spells this out. These are: aircraft maintenance and repair; air courier services hub; company headquarters; customer service call centers; electronic shopping and mail order houses; information technology; manufacturing; motor sports facility; motor sports racing team; research and development; warehousing; wholesale trade. These businesses then have additional requirements about the wages and health benefits they offer employees, as well as environmental concerns.
A taxpayer may request in writing from the Secretary of Revenue specific advice regarding eligibility for a credit under this Article. What happens if the tax credit is given and the terms of the law are not fulfilled? The law says if the taxpayer fails to timely make the required level of investment or fails to timely create the required number of new jobs, the taxpayer forfeits the credit as provided in G.S. 105-129.83.
Please remember that tax credits are incentives given by the NC Department of Commerce. The $1,000,000 grant that Henderson is applying for under CDBG is also administered by the NC Department of Commerce. If this is the tax credit that the Embassy Foundation is counting on, then the taxpayers in Henderson need to know how they are going to qualify since the Embassy is a non-profit- not a business, and creating 200 new jobs is a stretch as well as a $10 million investment in 3 years. How does a performance hall meet the requirements of the eligible businesses? And, what happens if they fail to meet the requirements….who will be picking up that cost?
This may be valuable information if the Embassy Foundation is planning to go this route or this may be of no concern to you if the Embassy Foundation is not planning to use this type of tax credit. But, how will we know until the application is available for public scrutiny?
Elissa Yount
Henderson