Read more about the tax incentives North Dakota has to offer in the North Dakota Tax Incentives for Business brochure from the Office of the State Tax Commissioner.
Automation Tax Credit application period opens August 1, 2024
Purpose
A taxpayer is allowed an income tax credit for the purchase or capital lease of machinery and equipment to automate a manufacturing or animal agricultural process in North Dakota. To qualify, the business must be certified as a primary sector business and the machinery and equipment must be approved by the Department of Commerce Division of Economic Development and Finance. The credit is equal to up to 15 percent of the cost of the machinery and equipment. For a capital lease, the credit would be equal to up to 15 percent of the fair market value of the machinery and equipment at the inception of the lease. Please note that if the approved requests for tax credits is greater than the $3,000,000 per year set aside for the program, requests will be prorated. $500,000 will be designated to first-time claimants for animal agricultural machinery and equipment for the purpose of automating animal agricultural processes; and an additional $500,000 for first-time claimants for manufacturing machinery and equipment for the purpose of automating manufacturing processes. An unused credit may be carried forward up to five tax years. If the taxpayer is a passthrough entity, such as a partnership or S corporation, the credit is passed through to its owners in proportion to their respective interests in the entity. The credit allowed to a corporation included in a consolidated North Dakota income tax return may be used to reduce the aggregate tax liability of all corporations in the return.
Incomplete applications may be deemed ineligible and not processed. Completed applications including Supplement A and supporting documentation must be submitted by January 31st, of the year following the purchase of the equipment. (For example, an application for equipment purchased in 2023 must be submitted by January 31, 2024.) Please keep in mind, you will need to allow up to three (3) working days to receive the portal invitation to complete your application.
If you have any questions or wish to withdraw an application, Call: 701-328-5300 or Email: NDEDF@nd.gov.
For more information on the Automation Tax Credit, click here.
*Taxpayers choosing to pursue other income tax deductions or credits for the approved equipment must withdraw their automation income tax application before January 31. (For example, an application for equipment purchased in 2023 must be withdrawn before January 31, 2024.) If an application is not withdrawn, the equipment purchases resulting in a credit will be ineligible for any other income tax incentives. (Please note that accessing the automation credit does not prohibit taxpayers from also applying for sales tax exemptions.)
To assist you with filling out your application, we have provided this worksheet to gather the information required for the application. DO NOT INCLUDE THIS WORKSHEET when you submit your online application. Click here to access application instructions.
Qualifications:
To be eligible for the credit, the following requirements must be met:
- The business must be certified as a “primary sector” business:
- A primary sector business means a business certified by the Department of Commerce which, through the employment of knowledge or labor, adds value to a product, process or service that results in the creation of new wealth.
- The business must be certified as a “primary sector” business through the North Dakota Department of Commerce when taking title to the equipment as well as at the time of application.
- The business must purchase animal agricultural or manufacturing machinery and equipment for the purpose of automating animal agricultural or manufacturing processes in North Dakota, which is approved by the Department of Commerce. “Animal agricultural or manufacturing machinery and equipment for the purpose of automating animal agricultural or manufacturing processes” means new or used automation and robotic equipment.
- The automation of the manufacturing or animal agricultural processes must improve job quality or increase output, which is reported to the Office of State Tax Commissioner. See the definitions for Supplement A below.
Definitions:
"Manufacturing machinery and equipment" means new or used automation and robotic equipment used to upgrade or advance a manufacturing process. The term does not include replacement automation and robotic equipment that does not upgrade or advance a manufacturing process.
“Animal Agricultural Process” means the breeding, raising, harvesting, or processing of animals for producing meat, dairy, or eggs, or meat, dairy, or egg products. For purposes of this subdivision, "animal" means beef or dairy cattle, swine, sheep, goats, bison, farmed elk, or poultry.
"First-time claimant" means a taxpayer that has not previously claimed a credit against the tax imposed under section 57 - 38 - 30 or 57 - 38 - 30.3 for purchases of animal agricultural machinery and equipment or manufacturing machinery and equipment for the purpose of automating manufacturing or animal agricultural processes.
Qualifying Invoice Line Item – Document each invoice line item that qualifies for the tax credit (see list of non-qualifying costs below).
Delivery Date – A delivery is considered to be made on the date on which title to the property transfers to the taxpayer. If no title transfer is applicable, utilize the delivery date (provide proof of title transfer or equipment delivery). The following documents are acceptable means of proving delivery date:
- Shipping documents that show actual delivery date.
- Proof of payment for delivery/installation.
- Title transfer.
- Other documents showing delivery during applicable calendar year.
North Dakota has allotted $3 million in credits for deliveries made in each calendar year. If total credits based on purchases made by all taxpayers delivered in a calendar year exceed the credit limit, the credits will be prorated among all claimants. If the maximum amount of allowed credits is not claimed in any calendar year, any remaining unclaimed credits may be carried forward and made available in the next succeeding calendar year.
A taxpayer must claim an allowable credit in the taxpayer’s tax year (which could be a calendar or fiscal year) in which the delivery date falls.
Invoice Amount – Must include all invoices for qualifying equipment.
Amount Paid – Must include proof of purchase or receipt for qualifying equipment.
Non-qualifying Cost – Delivery, training, assembly, installation costs, interest on financing, training, sales tax and other costs incidental to the machinery or equipment purchase are considered the non-qualifying portion of your invoice costs and are not eligible for the credit. Optional warranties are also not eligible for the credit.
Qualifying Purchase Cost – The qualifying purchase cost means the full* purchase price of the machinery or equipment item itself and any items, such as computer software, that are necessary to the operation of the machinery or equipment item. If the transaction includes a trade-in of other property, the purchase costs means the otherwise eligible cost of the acquired machinery or equipment item less the trade-in value of the other property. To calculate the qualifying purchase costs, subtract non-qualifying costs (described above) from the invoice amounts.
- Enter the full qualifying purchase price even if paid in installments that are made in more than one calendar year. For example, if you purchase equipment costing $100,000 that is delivered in 2023 (that is, you acquire title to the equipment in 2023), enter $100,000 as the purchase cost on the application filed for the 2023 calendar year, even though the payment schedule calls for payments of $25,000 in 2024, $50,000 in 2025, and $25,000 in 2026. The timing of the payments has no effect on either the purchase date or the purchase cost.
Qualifying purchases also include equipment acquired under a capital lease and only for the taxable year in which the lease is executed. A capital lease is a lease which meets generally accepted accounting principles. The qualifying cost of the equipment acquired under a capital lease is the fair market value of the equipment at the inception of the lease rather than the individual lease payments as they are made over the years. For equipment acquired under a capital lease, also include a copy of the lease agreement.
Improved Job Quality means a 5% increase in average wages or a 5% improvement in workplace safety as documented through participation in Workforce Safety and Insurance safety incentive programs.
Improved output means no less than a 5% increase in output or 5% increase in the number of units produced per automated line per time period.
North Dakota offers many finance programs and tax incentives which benefit primary sector businesses and other corporations. The Department of Commerce is responsible for certifying primary sector businesses and this certification is required for several tax incentives.
The business incentive area has now been upgraded to allow you to search our database. You will find information in three categories: Financing, Tax Incentives and Training. Information is available on the local, state and federal level. Please note that each incentive has its own specific set of requirements so not every option will meet the needs of your project.
If you need immediate assistance with your project, please call our Business Development Team at 701-328-5300.
New corporations that qualify as primary sector businesses may pay $0 in corporate income taxes for the first five years of their existence in North Dakota, if they apply for and are granted an exemption through the State Board of Equalization. Significant expansions beyond the initial location of a primary sector business may apply for an additional five-year corporate income tax exemption.
Learn more about corporate tax incentives from the Office of State Tax Commissioner.
Personal property is exempt from taxation with the exception of certain oil and gas refineries and utilities in North Dakota. This means there is no property tax on items such as office equipment, inventory, accounts receivable or materials.
Local taxing authorities in North Dakota control property tax rates and exemptions. Any new or expanding business project may be granted a property tax exemption for up to five years. Two extensions are available:
- Agricultural processors may be granted a partial or full exemption for up to five additional years.
- A project located on property leased from a government entity qualifies for an exemption for up to five additional years upon annual application by the project operator.
In addition to or in lieu of a property tax exemption, a company may negotiate payments in lieu of taxes for up to 20 years from the date of commencement of project operations.
North Dakota property tax is determined by multiplying the taxable value of real property -- land and buildings -- by the local mill rate. North Dakota commercial property tax is calculated by multiplying true and full value of commercial property, which the local assessor establishes, by 50 percent to reach assessed value; then multiplying assessed value by 10 percent to reach taxable value; and then multiplying taxable value by the local mill rate.
Learn more about property tax rates and exemptions from the Office of the State Tax Commissioner.
North Dakota provides sales tax exemptions for equipment and materials used in manufacturing and other targeted industries. A new or expanding plant may be exempt from sales and use tax on purchases of machinery or equipment used for manufacturing, agricultural commodity processing or recycling.
Other exemptions available include:
- Sales and use tax exemption for purchases of computer and telecommunications equipment that is part of a primary sector business or a physical or economic expansion of a primary sector business. The exemption does not extend to the purchase of replacement equipment.
- Sales tax exemption for owners, operators, and tenants on the information technology equipment and computer software, including replacement equipment and software, of a qualified data center. (Limited to the first four qualified data centers approved by the Tax Commissioner.)
- Construction materials used to construct an agricultural processing facility may be exempt from sales and use taxes.
- Additional exemptions for all businesses include electricity, interstate communications over phone lines and natural gas.
Applications for sales tax exemptions are made through the State Tax Commissioner. If the exemption is not approved prior to purchase, the manufacturer, recycler, agricultural commodity processor or other primary sector business must pay the tax and apply for a refund.
Learn more about sales and use tax exemptions from the Office of State Tax Commissioner.
The Renaissance Zone program is to revitalize communities in our state and encourage development through tax incentives. It is a tool to help cities revitalize their communities. By offering both state and local tax incentives for 5 years, both residents and business owners are provided with an incentive to invest in the community.
Learn more about the Renaissance Zone Program.
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for conducting research in North Dakota. The credit is equal to a percentage of the excess of qualified research expenses in North Dakota over the base period research expenses.
For more details see N.D.C.C. 57-38-30.5.
A business must be certified as a "qualified research and development company" before a taxpayer can elect to sell, transfer, or assign all or part of its unused Research and Experimental Expenditure Tax Credit. To apply for certification please complete the application for Research and Development Company Certification.
Research & Development Company Certification - SFN58638