If you applied for a Qualified Business Investment Tax Credit you will receive a confirmation letter in the mail from the North Carolina Department of Revenue. These letters should be kept by investors as they provide important information on the limitation of that credit on 2014 North Carolina income taxes.
Qualified Business Tax Credit Program
Prior to January 1, 2014 the Department of the Secretary of State administered a Qualified Business Tax Credit Program. This allowed individuals to claim a tax credit for qualified business investments made in 2013 on their 2014 North Carolina tax returns. A “qualified business” was defined by statute and detailed information on which businesses qualified can be found here:
Qualified Business Investment Tax Credit
The Qualified Business Investment Tax Credit was allowed for pass-through entities up to 25% of the amount invested by an investor in 2013 or $750,000, whichever was less. The tax credit is reported on the investor’s Schedule K-1 and taken as a direct offset to 2014 North Carolina income taxes on the individual tax return. If the investor does not have a tax liability for 2014 or if the credit is more than their tax liability, they can carry the unused portion over for the next five years.
Tax Credit Reduction for 2014 Taxes
Since businesses and investors knew this program was not likely to renew for 2014, there was an abundance of investments and applications for credits by the October 15, 2014 deadline. As result, total credits claimed on applications filed for investments made in 2013 were $8,245,775. The maximum that the state budgeted to authorize was $7,500,000. These means that investors will only get 90.5557% of the credit they applied for. The exact amount allowed is stated on the confirmation letters from the North Carolina Department of Revenue. It is important to provide this letter to your tax preparer to ensure the proper amount is reported on the 2014 state income tax return.
The North Carolina Department of Revenue recognizes that there will be questions regarding this and suggest calling the Income Tax Division, Personal Taxes Section at 919-814-1066.