For the past several years, North Carolina has had a 25% tax credit for investments in North Carolina small businesses. This credit has been via the Qualified Business Venture tax credit. The credit allows investors of qualified businesses to potentially receive a 25% return on their investment via tax credits. This tax credit is expiring (as part of the 2013 business friendly tax reform) at the end of 2013 so investors have a small window within which to take advantage of it.
So what defines a qualified business venture? The business venture must go through an application process with the secretary of state in order to get qualified. The business must engage primarily in manufacturing, processing, warehousing, wholesaling, research and development, or service-related industry. The business must have under $5 million in revenue in the previous fiscal year or apply in the year that the business starts.
Another way to obtain the credit is by making the investment via a Qualified Grantee Business, such as the IMAF Cape Fear Fund. Such Grantee Businesses have gone through the certification processes and any investments made in or via the way of such a fund qualifies for the credit.
The taxpayer needs to be sure to file NC D-499 separate from their tax return in order to qualify for the credit. However, the credit is still reported and applied to your individual tax return. Let us know if you need further information on this topic.
By Adam Shay
Wilmington, NC CPA