The Qualified Business Tax Credit Program administered by the Secretary of State offers investors in certain types of businesses a credit against state tax liability which can be as much as 25% of the amount invested. In order for the investor to be eligible for the credit, the investment must be made in a business registered with the Securities Division as a Qualified Business Venture, Qualified Grantee Business or a Qualified Licensee Business.

Qualified Business Venture (QBV) is a business organized to engage primarily in manufacturing, processing, warehousing, wholesaling, research and development, or a service-related industry. To be eligible for registration as a QBV, the business must have been organized in the same year as the year in which it applies for registration, or it must not have generated more than $5,000,000 (Five Million Dollars) in gross revenues during its last fiscal year. Furthermore, it cannot engage to any substantial degree in the following: providing professional services, contracting or construction, selling or leasing at retail, investing, entertainment or recreation, or managing or operating real estate.

Under current law, a Qualified Grantee Business (QGB) is a business which during the three years prior to registration as a QGB has received a grant or other funding from a federal agency under the Small Business Innovation Research Program administered by the United States Small Business Administration or from a granting entity. A "granting entity" is an organization that has as its principal purpose the stimulation of the development of the biotechnology industry or is conducting research and development in electronic, photonic, information, or other technologies or has as a principal purpose the stimulation of economic development based on the advancement of science, engineering, and technology.

A Qualified Licensee Business (QLB) is a business that has been certified by a constituent institution of The University of North Carolina or a research university as currently performing under a licensing agreement with the institution or university for the purpose of commercializing technology developed at the institution or university.

An individual investor is limited to $50,000 in tax credits for all "qualified" investments he or she makes in a calendar year. The credit is first applied against his tax liability for the year following the year of the investment, and unused credits can be carried forward for five additional years. The investor can claim credits for investments made directly in qualified businesses, and can also claim his allocable share of credits for investments in qualified businesses made by "pass-through entities" (e.g., S corporations, limited partnerships, and limited liability companies) of which he or she is an owner.

To be eligible for the tax credit, an individual investor must file Form D-499, Application for Tax Credit for Qualified Business Investments, with the Department of Revenue on or before April 15 of the year following the calendar year in which the investment was made. An investor should contact the Department of Revenue for additional application requirements.

Under current law, for investments made on or after January 1, 2008, up to $7,500,000 (Seven Million Five Hundred Thousand Dollars) of credits are available annually for investments in "qualified businesses".

You should understand that the details of the Qualified Business Tax Credit Program are intricate and complicated, and you are advised to consult an experienced accountant or tax attorney before structuring a business transaction intended to be eligible for the benefits of the program. Details on the Qualified Business Tax Credit Program may be found at Sections 105-163.010 through 105-163.015 of the North Carolina General Statutes and Rules 06A.1601-06A.1606 of the North Carolina Administrative Code. Click here to view the statutes. Click here to view the rules.

For more information, please contact us at:

The Qualified Business Investment Tax Credit Program
Department of the Secretary of State
Securities Division
P.O. Box 29622
Raleigh, NC 27626-0622

Telephone: (919) 733-3924
Facsimile: (919) 807-2183
E-mail: secdiv@sosnc.com