North Carolina 2025-2026 Regular Session

North Carolina Senate Bill S354 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		GENERAL ASSEMBLY OF NORTH CAROLINA
2	2		SESSION 2025
3		-	S 1
4		-	SENATE BILL 354
	3	+	S D
	4	+	SENATE BILL DRS45207-NIf-69
	5	+
5	6
6	7
7	8		Short Title: NC Breakthrough Act. (Public)
8	9		Sponsors: Senators Theodros and Blue (Primary Sponsors).
9		-	Referred to: ~~Rules and Operations of the Senate~~
10		-	~~March 20, 2025~~
11		-	~~S354 -v-1~~
	10	+	Referred to:
	11	+
	12	+	DRS45207 -NIf-69
12	13		A BILL TO BE ENTITLED 1
13	14		AN ACT TO REENACT AND MODIFY THE RESEARCH AND DEVELOPMENT TAX 2
14	15		CREDIT. 3
15	16		The General Assembly of North Carolina enacts: 4
16	17		SECTION 1. Article 3F of Chapter 105 of the General Statutes is reenacted as it 5
17	18		existed immediately before its repeal and reads as rewritten: 6
18	19		"Article 3F. 7
19	20		"Research and Development. 8
20	21		"§ 105-129.50. Definitions. 9
21	22		The definitions in section 41 of the Code apply in this Article. In addition, the following 10
22	23		definitions apply in this Article: 11
23	24		(1) Development tier one area. – Defined in G.S. 143B-437.08. 12
24	25		(2) Full-time job. – Defined in G.S. 105-129.81. 13
25	26		… 14
26	27		(4) North Carolina university research expenses. – Any amount the taxpayer paid 15
27	28		or incurred to a research university for qualified research performed in this 16
28	29		State or basic research performed in this State. 17
29	30		… 18
30	31		(5) Period of measurement. – Defined in the Small Business Size Regulations of 19
31	32		the federal Small Business Administration. 20
32	33		(6) Qualified North Carolina research expenses. – Qualified research expenses, 21
33	34		other than North Carolina university research expenses, for research 22
34	35		performed in this State. 23
35	36		(7) Receipts. – Defined in the Small Business Size Regulations of the federal 24
36	37		Small Business Administration. 25
37	38		(8) Related person. – Defined in G.S. 105-163.010.A person described in one of 26
38	39		the relationships set forth in section 267(b) or 707(b) of the Code. 27
39	40		(9) Research university. – An institution of higher education that meets one or 28
40	41		both of the following conditions: 29
41	42		a. It is classified as one of the following in the most recent edition of "A 30
42	43		Classification of Institutions of Higher Education", the official report 31
43	44		of The Carnegie Foundation for the Advancement of Teaching: 32
44	45		1. Doctoral/Research Universities, Extensive or Intensive. 33
45	46		2. Masters Colleges and Universities, I or II. 34
46	47		3. Baccalaureate Colleges, Liberal Arts or General. 35
47		-	b. It is a constituent institution of The University of North Carolina. 36 General Assembly Of North Carolina Session 2025
48		-	Page 2 Senate Bill 354-First Edition
	48	+	b. It is a constituent institution of The University of North Carolina. 36
	49	+	FILED SENATE
	50	+	Mar 19, 2025
	51	+	S.B. 354
	52	+	PRINCIPAL CLERK General Assembly Of North Carolina Session 2025
	53	+	Page 2 DRS45207-NIf-69
49	54		(10) Small business. – A business whose annual receipts, combined with the annual 1
50	55		receipts of all related persons, for the applicable period of measurement did 2
51	56		not exceed one million dollars ($1,000,000). 3
52	57		"§ 105-129.51. Taxpayer standards and sunset. 4
53	58		(a) Taxpayer Standards. – A taxpayer is eligible for a credit allowed in this Article if it 5
54	59		satisfies the requirements of G.S. 105-129.83(c), subsections (d), (e), (f), and (g) and (h) of this 6
55	60		section relating to wage standard, health insurance, environmental impact, safety and health 7
56	61		programs, and overdue tax debts, respectively. 8
57	62		(b) Sunset. – This Article is repealed for taxable years beginning on or after January 1, 9
58	63		2016.2040. 10
59	64		(c) Repealed by Session Laws 2004-124, s. 32D.4, effective for taxable years beginning 11
60	65		on or after January 1, 2006. 12
61	66		(d) Wage Standard. – A taxpayer is eligible for a credit under this Article in a 13
62	67		development tier two or three area only if the taxpayer satisfies a wage standard. The taxpayer is 14
63	68		not required to satisfy a wage standard if the activity occurs in a development tier one area. Jobs 15
64	69		that are located within an urban progress zone, a port enhancement zone, or an agrarian growth 16
65	70		zone but not in a development tier one area satisfy the wage standard if they pay an average 17
66	71		weekly wage that is at least equal to ninety percent (90%) of the lesser of the average wage for 18
67	72		all insured private employers in the State and the average wage for all insured private employers 19
68	73		in the county. All other jobs satisfy the wage standard if they pay an average weekly wage that 20
69	74		is at least equal to the lesser of one hundred ten percent (110%) of the average wage for all 21
70	75		insured private employers in the State and ninety percent (90%) of the average wage for all 22
71	76		insured private employers in the county. The Department of Commerce shall annually publish 23
72	77		the wage standard for each county. 24
73	78		In making the wage calculation, the taxpayer shall include any jobs that were filled for at 25
74	79		least 1,600 hours during the calendar year the taxpayer engages in the activity that qualifies for 26
75	80		the credit even if those jobs are not filled at the time the taxpayer claims the credit. For a taxpayer 27
76	81		with a taxable year other than a calendar year, the taxpayer shall use the wage standard for the 28
77	82		calendar year in which the taxable year begins. Only full-time jobs are included when making 29
78	83		the wage calculation. 30
79	84		(e) Health Insurance. – A taxpayer is eligible for a credit under this Article only if the 31
80	85		taxpayer provides health insurance for all of the full-time jobs at the establishment with respect 32
81	86		to which the credit is claimed when the taxpayer engages in the activity that qualifies for the 33
82	87		credit. For the purposes of this subsection, a taxpayer provides health insurance if it pays at least 34
83	88		fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum 35
84	89		provisions of the basic health care plan of coverage recommended by the Small Employer Carrier 36
85	90		Committee pursuant to G.S. 58-50-125. 37
86	91		Each year that a taxpayer claims a credit or carryforward of a credit allowed under this 38
87	92		Article, the taxpayer shall provide with the tax return the taxpayer's certification that the taxpayer 39
88	93		continues to provide health insurance for all of the jobs at the establishment with respect to which 40
89	94		the credit was claimed. If the taxpayer ceases to provide health insurance for the jobs during a 41
90	95		taxable year, the credit expires and the taxpayer may not take any remaining installment or 42
91	96		carryforward of the credit. 43
92	97		(f) Environmental Impact. – A taxpayer is eligible for a credit allowed under this Article 44
93	98		only if the taxpayer certifies that, at the time the taxpayer claims the credit, there has not been a 45
94	99		final determination unfavorable to the taxpayer with respect to an environmental disqualifying 46
95	100		event. For the purposes of this section, a "final determination unfavorable to the taxpayer" occurs 47
96	101		when there is no further opportunity for the taxpayer to seek administrative or judicial appeal, 48
97	102		review, certiorari, or rehearing of the environmental disqualifying event and the disqualifying 49
98	103		event has not been reversed or withdrawn. No later than January 31 of each year, the Secretary 50
99	104		of Environmental Quality shall provide an annual report to the Department listing all 51 General Assembly Of North Carolina Session 2025
100		-	~~Senate Bill 354-First Edition~~ Page 3
	105	+	DRS45207-NIf-69 Page 3
101	106		environmental disqualifying events for which a final determination unfavorable to the taxpayer 1
102	107		was made in the prior calendar year and shall provide the name of the taxpayer involved and the 2
103	108		date that the disqualifying event occurred. 3
104	109		(g) Safety and Health Programs. – A taxpayer is eligible for a credit allowed under this 4
105	110		Article only if the taxpayer certifies that, as of the time the taxpayer claims the credit, at the 5
106	111		establishment with respect to which the credit is claimed, the taxpayer has no citations under the 6
107	112		Occupational Safety and Health Act that have become a final order within the past three years 7
108	113		for willful serious violations or for failing to abate serious violations. For the purposes of this 8
109	114		subsection, "serious violation" has the same meaning as in G.S. 95-127. The Commissioner of 9
110	115		Labor shall notify the Department of Revenue annually of all employers who have had these 10
111	116		citations become final orders within the past three years. 11
112	117		(h) Overdue Tax Debts. – A taxpayer is not eligible for a credit allowed under this Article 12
113	118		if, at the time the taxpayer claims the credit or an installment or carryforward of the credit, the 13
114	119		taxpayer has received a notice of an overdue tax debt and that overdue tax debt has not been 14
115	120		satisfied or otherwise resolved. 15
116	121		"§ 105-129.52. Tax election; cap. 16
117	122		(a) Tax Election. – A credit allowed in this Article is allowed against the franchise tax 17
118	123		levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The 18
119	124		taxpayer must elect the tax against which a credit will be claimed when filing the return on which 19
120	125		the credit is first claimed. This election is binding. Any carryforwards of a credit must be claimed 20
121	126		against the same tax. 21
122	127		(b) Cap. – A credit allowed in this Article may not exceed fifty fifteen percent (50%) 22
123	128		(15%) of the amount of tax against which it is claimed for the taxable year, reduced by the sum 23
124	129		of all other credits allowed against that tax, except tax payments made by or on behalf of the 24
125	130		taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, 25
126	131		claimed by the taxpayer under this Article against each tax for the taxable year. Any unused 26
127	132		portion of a credit allowed in this Article may be carried forward for the succeeding 15 years. 27
128	133		"§ 105-129.53. Substantiation. 28
129	134		To claim a credit allowed by this Article, the taxpayer must provide any information required 29
130	135		by the Secretary. Every taxpayer claiming a credit under this Article must maintain and make 30
131	136		available for inspection by the Secretary any records the Secretary considers necessary to 31
132	137		determine and verify the amount of the credit to which the taxpayer is entitled. The burden of 32
133	138		proving eligibility for a credit and the amount of the credit rests upon the taxpayer, and no credit 33
134	139		may be allowed to a taxpayer that fails to maintain adequate records or to make them available 34
135	140		for inspection. 35
136	141		"§ 105-129.54. Report. 36
137	142		The Department must include in the economic incentives report required by G.S. 105-256 the 37
138	143		following information itemized by credit and by taxpayer: 38
139	144		(1) The number of taxpayers that took a credit allowed in this Article, itemized 39
140	145		by the categories of small business, low-tier, university research, 40
141	146		Eco-Industrial Park, and other. 41
142	147		(2) The amount of each credit taken in each category. 42
143	148		(3) The total cost to the General Fund of the credits taken. 43
144	149		"§ 105-129.55. Credit for North Carolina research and development. 44
145	150		(a) Qualified North Carolina Research Expenses. – A taxpayer that has qualified North 45
146	151		Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the 46
147	152		expenses, determined as provided in this section. Only one credit is allowed under this section 47
148	153		with respect to the same expenses. If more than one subdivision of this section applies to the 48
149	154		same expenses, then the credit is equal to the higher percentage, not both percentages combined. 49
150	155		If part of the taxpayer's qualified North Carolina research expenses qualifies under more than 50 General Assembly Of North Carolina Session 2025
151		-	Page 4 ~~Senate Bill 354-First Edition~~
	156	+	Page 4 DRS45207-NIf-69
152	157		one subdivision of this section, the applicable percentages apply separately to each part of the 1
153	158		expenses. 2
154	159		(1) Small business. – If the taxpayer was a small business as of the last day of the 3
155	160		taxable year, the applicable percentage is three and one-quarter percent 4
156	161		(3.25%). 5
157	162		(2) Low-tier research. – For expenses with respect to research performed in a 6
158	163		development tier one area, the applicable percentage is three and one-quarter 7
159	164		percent (3.25%). 8
160	165		(2a) University research. – For North Carolina university research expenses, the 9
161	166		applicable percentage is twenty percent (20%). 10
162	167		(2b) Eco-Industrial Park. – For expenses with respect to research performed in an 11
163	168		Eco-Industrial Park certified under G.S. 143B-437.08, the applicable 12
164	169		percentage is thirty-five percent (35%). 13
165	170		(3) Other research. – For expenses not covered under another subdivision of this 14
166	171		section, the percentages provided in the table below apply to the taxpayer's 15
167	172		qualified North Carolina research expenses during the taxable year at the 16
168	173		following levels: 17
169	174		Expenses Over Up To Rate 18
170	175		-0- $50 million 1.25% 19
171	176		$50 million $200 million 2.25% 20
172	177		$200 million – 3.25% 21
173	178		(b) North Carolina University Research Expenses. – A taxpayer that has North Carolina 22
174	179		university research expenses for the taxable year is allowed a credit equal to twenty percent 23
175	180		(20%) of the expenses. 24
176	181		…." 25
177	182		SECTION 2. This act is effective for taxable years beginning on or after January 1, 26
178	183		2025. 27