Do you ever read a news story about a new company locating to North Carolina and find yourself lost in all the acronyms? Do phrases like 3J, JDIG, JMAC and IDF make you wish you had an FAQ? Well here’s an FYI to help clear it up PDQ.
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3J (pronounced “three jay”). 3J refers to a collection of tax credits that were available in North Carolina from 2007 through 2013. The “3J” moniker is due to the placement of the credits in Article 3J of Chapter 105 of the North Carolina General Statutes. Article 3J provided tax credits for job creation, investment in business property, and certain investments in real property. The credits were taken in installments beginning in the year after the creditable activity occurred and were applied against the income, corporate franchise, or gross premiums tax. The credits were less generous in the more prosperous areas of the State, though a majority of the credits were claimed in those areas. The credits were a successor to a similar group of tax credits known as the Bill Lee Act that were in place from 1997 through 2007.
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JDIG (pronounced “jay dig”). JDIG is an acronym standing for Job Development and Investment Grant Program. While media reports often refer to it as a tax credit or tax incentive, JDIG is actually a discretionary grant program that was created in 2002. Some of the confusion lies in the fact that the amount of a grant is based on a percentage of personal income tax withholdings generated by new jobs created by the business that receives the grant. Under JDIG, a business enters into an agreement with the State with respect to an economic development project. The agreement specifies, among other things, the number of new jobs to be created, the salary ranges for those jobs, and the capital investment the business will make. Under the agreement, the State agrees to make grant payments to the business over a number of years (up to 12). Those grant payments are based on a percentage of personal income tax withholdings generated by the new positions created. The percentage used to determine the amount of the grant varies from project to project, but by statute must be between 10% and 75%. Should the business fail to fulfill its commitments, the Department of Commerce has the authority to modify or terminate the agreement.
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JMAC (pronounced “jay mac”). JMAC is an acronym standing for Job Maintenance and Capital Development Fund. JMAC was created in 2007 in order to provide a source of State funding to aid in the retention of certain large employers. Like JDIG, JMAC is a discretionary grant program, although it is also occasionally referred to as a tax incentive. Under JMAC, a business enters into an agreement with the State under which the State provides grant payments to the business if specific job maintenance requirements are met. In order to qualify for the program, a business must have made a substantial capital investment (at least $50 million or $200 million depending on the type of business) at the facility covered by the agreement, must agree to maintain a substantial number of jobs (the number varies from 320 full-time jobs to 2,000 full-time jobs depending on the type of business) at the facility, and the facility must not be located in one of the 20 most economically developed counties in the State. The amount of a grant allowed under the agreement is left to the discretion of the State, but the statute does mention specific items (such as a percentage of taxes, fees, or worker training expenses paid by the business with respect to the facility) that should be considered by the State in determining the appropriate amount of a grant.
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IDF is an acronym for the Industrial Development Fund. Prior to July 1, 2013, moneys within the Industrial Development Fund could be used to provide grants to local governments to assist in creating and retaining jobs in the State. The funds could be used for (i) installation of or purchases of equipment for eligible industries, (ii) structural repairs, improvements, or renovations of existing buildings to be used for expansion of eligible industries, or (iii) construction of or improvements to new or existing water, sewer, gas, telecommunications, high-speed broadband, electrical utility distribution lines or equipment, or transportation infrastructure for existing or new or proposed industrial buildings to be used for eligible industries. At that time, there were limits on the funds that could be used for a project – no more than $10,000/job with a maximum of $500,000 granted to specific project. As part of the Appropriations Act of 2013, several significant changes were made to IDF. First, the scope of IDF was limited to its Utility Account (in fact, the program has been renamed the Industrial Development Fund Utility Account). Now funds can only be provided for construction of or improvements to utility and transportation infrastructure. Second, the 2013 legislation restricted use of the funds to job creation activities, thereby excluding projects focused on job retention. Third, the 2013 legislation eliminated the maximum per-job and per-project amounts.
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One NC. Though less of a jumble of letters than the other programs, the One North Carolina Fund (One NC) rounds out the list of the major sources of State funding for economic development projects. As with JDIG and JMAC, One NC is often mistakenly referred to as a tax incentive, when in actuality it is a discretionary grant program. Moneys within the One North Carolina Fund are allocated to local governments for use in the recruitment, expansion or retention of new and existing businesses and may be used only for the following: (i) installation or purchase of equipment; (ii) structural repairs, improvements, or renovations to existing buildings to be used for expansion; (iii) construction of or improvements to new or existing water, sewer, gas, or electric utility distribution lines or equipment for existing buildings; (iv) construction of or improvements to new or existing water, sewer, gas, or electric utility distribution lines or equipment for new or proposed buildings to be used for manufacturing and industrial operations or (v) any other purposes specifically provided by an act of the General Assembly. Funds are granted from the local government to a private business. Both the allocation of State funds to the local government and the grant of funds from a local government to a business are governed by agreements that must satisfy specific statutory requirements. The local government must provide some form of local match for the State funds.
