2014 North Dakota Century Code Title 54 State Government Chapter 54-60.1 Business Incentives, Agreements, and Reports
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CHAPTER 54-60.1
BUSINESS INCENTIVES, AGREEMENTS, AND REPORTS
54-60.1-01. (Effective through July 31, 2015) Definitions.
As used in this chapter, unless the context otherwise requires:
1. "Benefit date" means the date on which the recipient receives the business incentive.
If the business incentive involves the purchase, lease, or donation of physical
equipment, the benefit date is the date when the recipient puts the equipment into
service. If the business incentive is for improvements to property, the benefit date is
the earlier of either when the improvements are finished for the entire project or when
a business occupies the property. If a business occupies the property and the business
incentive grantor expects that other businesses will also occupy the same property, the
grantor may assign a separate benefit date for each subsequent business when that
subsequent business first occupies the property.
2. "Business incentive" means a state or political subdivision direct cash transfer, loan, or
equity investment; contribution of property or infrastructure; reduction or deferral of any
tax or any fee; guarantee of any payment under any loan, lease, or other obligation; or
preferential use of government facilities given to a business. To be considered a
business incentive, the total assistance in all forms must be valued at twenty-five
thousand dollars or more committed within a year. Unless specifically provided
otherwise, the term does not include:
a. Assistance that is generally available to all businesses or to a general class of
similar businesses, such as a line of business, size, or similar criteria.
b. Incentives resulting from Bank of North Dakota programs unless the incentive is a
direct interest rate buydown or is an investment made pursuant to the North
Dakota alternative and venture capital investments and early-stage capital funds
program. An entrepreneurial center award under section 10-30.5-12 is not a
business incentive.
c. Public improvements to buildings or lands owned by the state or political
subdivision which serve a public purpose and do not principally benefit a single
business or defined group of businesses at the time the improvements are made.
d. Assistance provided for the sole purpose of renovating old or decaying building
stock or bringing such building stock up to code and assistance provided for
designated historic preservation districts, provided that the assistance does not
exceed seventy-five percent of the total cost.
e. Assistance to provide job-readiness and training services if the sole purpose of
the assistance is to provide those services.
f. Assistance for housing.
g. Assistance for pollution control or abatement.
h. Assistance for energy conservation.
i. Tax reductions resulting from conformity with federal tax law.
j. Benefits derived from regulation.
k. Indirect benefits derived from assistance to educational institutions.
l. Assistance for a collaboration between a North Dakota institution of higher
education and a business.
m. Redevelopment if the recipient's investment in the purchase of the site and in site
preparation is seventy percent or more of the assessor's current year's estimated
market value.
n. General changes in tax increment financing law and other general tax law
changes of a principally technical nature.
o. Federal assistance provided through the state or a political subdivision until the
assistance has been repaid to, and reinvested by, the state or political
subdivision.
p. Federal or state assistance for the lignite research, development, and marketing
program under chapter 54-17.5.
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q.
Federal or state assistance for the oil and gas research, development, and
marketing program under chapter 54-17.6.
r. Federal or state assistance for the renewable energy program under chapter
54-63.
3. "Compensation" means the value of an employee's:
a. Earnings, including wages, salary, bonus, and commissions; and
b. Benefits, including:
(1) Health, disability, life, and retirement benefits or insurance premium paid by
the employer;
(2) An employee's share of payroll taxes paid by the employer; and
(3) Other fringe benefits such as housing allowance and transportation
expenses.
4. "Department" means the department of commerce.
5. "Grantor" means the state or any political subdivision that directly or indirectly grants a
business incentive to a recipient.
6. "Political subdivision" means a unit of local government in this state which has direct or
indirect authority to grant a business incentive. The term includes any authority,
agency, special district, or entity created by, authorized by, under the jurisdiction of, or
contracting with a political subdivision.
7. "Public purpose" includes assisting community development, increasing the tax base,
directly creating employment opportunities, or indirectly creating employment
opportunities through increased economic activity. Job retention is only a public
purpose in cases in which job loss is specific and demonstrable.
8. "Recipient" means any individual or business entity that receives a business incentive.
9. "State" means any North Dakota state government agency that has the authority to
directly or indirectly award business incentives.
(Effective after July 31, 2015) Definitions. As used in this chapter, unless the context
otherwise requires:
1. "Benefit date" means the date on which the recipient receives the business incentive.
If the business incentive involves the purchase, lease, or donation of physical
equipment, the benefit date is the date when the recipient puts the equipment into
service. If the business incentive is for improvements to property, the benefit date is
the earlier of either when the improvements are finished for the entire project or when
a business occupies the property. If a business occupies the property and the business
incentive grantor expects that other businesses will also occupy the same property, the
grantor may assign a separate benefit date for each subsequent business when that
subsequent business first occupies the property.
2. "Business incentive" means a state or political subdivision direct cash transfer, loan, or
equity investment; contribution of property or infrastructure; reduction or deferral of any
tax or any fee; guarantee of any payment under any loan, lease, or other obligation; or
preferential use of government facilities given to a business. To be considered a
business incentive, the total assistance in all forms must be valued at twenty-five
thousand dollars or more committed within a year. Unless specifically provided
otherwise, the term does not include:
a. Assistance that is generally available to all businesses or to a general class of
similar businesses, such as a line of business, size, or similar criteria.
b. Incentives resulting from Bank of North Dakota programs unless the incentive is a
direct interest rate buydown or is an investment made pursuant to the North
Dakota alternative and venture capital investments and early-stage capital funds
program.
c. Public improvements to buildings or lands owned by the state or political
subdivision which serve a public purpose and do not principally benefit a single
business or defined group of businesses at the time the improvements are made.
d. Assistance provided for the sole purpose of renovating old or decaying building
stock or bringing such building stock up to code and assistance provided for
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3.
4.
5.
6.
7.
8.
9.
designated historic preservation districts, provided that the assistance does not
exceed seventy-five percent of the total cost.
e. Assistance to provide job-readiness and training services if the sole purpose of
the assistance is to provide those services.
f. Assistance for housing.
g. Assistance for pollution control or abatement.
h. Assistance for energy conservation.
i. Tax reductions resulting from conformity with federal tax law.
j. Benefits derived from regulation.
k. Indirect benefits derived from assistance to educational institutions.
l. Assistance for a collaboration between a North Dakota institution of higher
education and a business.
m. Redevelopment if the recipient's investment in the purchase of the site and in site
preparation is seventy percent or more of the assessor's current year's estimated
market value.
n. General changes in tax increment financing law and other general tax law
changes of a principally technical nature.
o. Federal assistance provided through the state or a political subdivision until the
assistance has been repaid to, and reinvested by, the state or political
subdivision.
p. Federal or state assistance for the lignite research, development, and marketing
program under chapter 54-17.5.
q. Federal or state assistance for the oil and gas research, development, and
marketing program under chapter 54-17.6.
r. Federal or state assistance for the renewable energy program under chapter
54-63.
"Compensation" means the value of an employee's:
a. Earnings, including wages, salary, bonus, and commissions; and
b. Benefits, including:
(1) Health, disability, life, and retirement benefits or insurance premium paid by
the employer;
(2) An employee's share of payroll taxes paid by the employer; and
(3) Other fringe benefits such as housing allowance and transportation
expenses.
"Department" means the department of commerce.
"Grantor" means the state or any political subdivision that directly or indirectly grants a
business incentive to a recipient.
"Political subdivision" means a unit of local government in this state which has direct or
indirect authority to grant a business incentive. The term includes any authority,
agency, special district, or entity created by, authorized by, under the jurisdiction of, or
contracting with a political subdivision.
"Public purpose" includes assisting community development, increasing the tax base,
directly creating employment opportunities, or indirectly creating employment
opportunities through increased economic activity. Job retention is only a public
purpose in cases in which job loss is specific and demonstrable.
"Recipient" means any individual or business entity that receives a business incentive.
"State" means any North Dakota state government agency that has the authority to
directly or indirectly award business incentives.
54-60.1-02. Scope - Public purpose - Notice.
1. The application of this chapter is limited to business incentives provided by grantors to
recipients, unless otherwise provided.
2. A grantor may not grant a business incentive to a recipient unless that business
incentive meets a public purpose.
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3.
4.
A state business incentive in the form of a direct cash transfer that is not a structured
grant under state or federal law must be structured as a loan, a forgivable loan, or as a
preferred share that includes provisions for surrender.
A political subdivision business incentive in the form of a cash transfer of money may
be structured as a loan, a forgivable loan, or as a preferred share that includes
provisions for surrender.
54-60.1-03. Business incentive agreement.
1. A recipient must enter a business incentive agreement with each grantor of a business
incentive. The grantor and the recipient shall sign the agreement.
2. If a business incentive benefits more than one recipient, the grantor shall assign a
proportion of the business incentive to each recipient that signs a business incentive
agreement. The proportion assessed to each recipient must reflect a reasonable
estimate of the recipient's share of the total benefits of the project.
3. A business incentive agreement must include:
a. A description of the business incentive, including the value of the business
incentive, which may be the amount of the incentive, the fair market value of the
property conveyed to the recipient, or the fair market value of other in-kind
benefits provided to the recipient; the type of incentive; and the type of district if
the incentive is tax increment financing.
b. A statement of the public purposes of the business incentive.
c. Goals for the business incentive. The goals must include the number of jobs to be
created and the average compensation of the new jobs created. The information
on average compensation must include identification of the average benefits and
the average earnings to be provided by the employer on all jobs to be created or
retained in association with the incentive. The job and average compensation
goals may include separate goals for the number of part-time or full-time jobs to
be created or, in cases in which potential job loss is specific and demonstrable,
goals for the number of jobs to be retained. In addition to other specific goal
timeframes, the job and average compensation goals must contain specific goals
to be attained within two years of the benefit date.
d. A description of the financial obligation of the recipient if the goals are not met.
This financial obligation must include an exception for any unmet goal that results
from an act of God or terrorism.
e. A commitment by the recipient to continue operations in the jurisdiction in which
the business incentive is used for five years or more after the benefit date.
f. The name and address of the parent company of the recipient, if any.
g. A list of all financial assistance by all grantors for the project.
h. The recipient's obligation if the recipient does not fulfill the business incentive
agreement.
54-60.1-04. Failure to meet goals - Modification of goals.
1. At a minimum, the financial obligation provision of a business incentive agreement
must require a recipient that fails to meet business incentive agreement goals to pay
back to the grantor the assistance, prorated to reflect any partial fulfillment of goals. A
grantor may extend for up to one year the period for meeting the business incentive
agreement goals if the grantor determines that circumstances have made it impossible
for the recipient to achieve the required goals. A grantor may extend the period for
meeting business incentive agreement goals by another additional year by
documenting in writing the reason for the extension and attaching a copy of the
documentation to the grantor's next annual report. Notwithstanding the five-year
commitment in the business incentive agreement, a grantor may authorize a recipient
to move from the jurisdiction in which the business incentive is used within the
five-year period after the benefit date if, after a public hearing, the grantor approves
the recipient's request to move. If after extending the period for achieving the goals of
the business incentive agreement for two years a grantor determines that a business
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2.
incentive agreement goal of creation or retention of jobs has changed and justifies a
decrease, after a public hearing, the grantor may decrease the job goals in the
agreement to a lesser number or to zero and may adjust the average compensation
goals to reflect changed circumstances. Justification for decreasing job goals may
include that other public benefits adequately offset the failure to meet the initial job
goals.
A recipient that fails to meet the terms of a business incentive agreement may not
receive a business incentive from any grantor for a period of five years from the date
of failure or until a recipient satisfies the repayment obligation under this section,
whichever occurs first. For purposes of this subsection, if the recipient is an individual,
the disqualification attaches to the individual and if the recipient is a business entity,
the disqualification attaches to the business and to each owner or shareholder of
twenty percent or more of the business.
54-60.1-05. State grantor recipient reports.
1. The department shall create state grantor recipient report forms that include:
a. The name and address of the recipient;
b. The type, public purpose, and value of the business incentive;
c. The number of new jobs to be created or retained in association with the
business incentive;
d. The average compensation of all jobs to be created or retained in association
with the business incentive, including identification of the average benefits and
the average earnings provided by the employer on all jobs created or retained in
association with the business incentive;
e. The date the job and average compensation goals are expected to be reached;
f. A statement of goals identified in the business incentive agreement and an
update on achievement of these goals, including the actual number of jobs
created or retained and the average compensation of jobs created or retained at
that point, including identification of the average benefits actually provided and
the average earnings actually provided by the employer on all jobs created or
retained;
g. The location of the recipient prior to receiving the business incentive;
h. The name and address of the parent corporation of the recipient, if any;
i. A list of business incentives by all grantors for the project; and
j. Other information the department and grantor may request.
2. Each state grantor shall use recipient report forms created by the department to
monitor the progress by each state grantor recipient in achieving business incentive
agreement goals. At a minimum, each of these recipients shall provide the state
grantor with an annual recipient report for two years following the benefit date or until
the goals are met, whichever is later. If the business incentive agreement goals are not
met, the state grantor recipient shall continue to provide recipient reports to the state
grantor until the incentive is repaid. A state grantor shall file with the department a
copy of each completed recipient report.
3. Before March 1, 2007, and each March first thereafter, a state grantor recipient shall
file with the state grantor the recipient report for the previous calendar year. If a state
grantor recipient fails to file a recipient report before March eighth, the state grantor
shall mail the recipient a warning letter. If a noncompliant state grantor recipient fails to
file the recipient report within fourteen days of the postmarked date of the warning
letter, the recipient shall pay to the state grantor a penalty of one hundred dollars for
each subsequent day until the report is filed. The maximum penalty under this section
may not exceed one thousand dollars.
54-60.1-06. State grantor reports.
Before April 1, 2007, and each April first thereafter, each state agency that has granted a
business incentive within the last five calendar years shall file an annual state grantor report
with the department. The department shall create the state grantor report form required under
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this section. A state grantor report must include a list of all recipients, each recipient's business
incentive agreement goals, and a report on each recipient's progress toward the goals. If the
department does not receive a state grantor report before May first, the department shall issue a
warning letter to the noncompliant grantor. If the department has not received a state grantor
report from the noncompliant grantor before June first, that noncompliant grantor may not award
any business incentive until the past-due grantor report is filed with the department.
54-60.1-07. Compilation and summary - Report to legislative council.
1. Beginning in 2007 and annually thereafter, the department shall publish a compilation
and summary of the results of the state grantor reports for the previous calendar year.
Beginning in 2007 and annually thereafter, the department of commerce shall file the
reports of the state grantors and the compilation and summary with the legislative
council. The department shall organize the compilation and summary so that useful
comparisons across time periods and across grantors can be made. The department
may add other information to the compilation and summary as deemed necessary to
evaluate business incentives.
2. The compilation and summary must include:
a. The number of jobs targeted to be created or retained by each recipient receiving
a business incentive in that year.
b. The number of jobs achieved in comparison to the jobs targeted for each
business year by year.
c. The average compensation of jobs targeted to be created or retained by each
recipient that year, including identification of the average benefits and average
earnings to be provided by the employer for these jobs.
d. The average compensation of jobs created or retained compared to the targeted
average compensation for each business year by year.
e. A distribution of business incentives by type of business and by public purpose.
f. The percentage of business incentives that reached goals within two, three, four,
and five years from the benefit date.
g. The percentage of business incentives that did not meet goals and that did not
receive repayment.
54-60.1-08. Political subdivision grantor annual reports.
1. A political subdivision shall maintain records of business incentives provided to
recipients.
2. Before April 1, 2007, and each April first thereafter, each political subdivision that
granted a business incentive during the previous calendar year shall prepare an
annual political subdivision grantor report. This annual report must include:
a. The names of the businesses receiving business incentives during that year;
b. The number of jobs expected to be created or retained by each business as a
result of the business incentives;
c. The average compensation expected to be provided by the employer for the jobs
expected to be created or retained as a result of the business incentives,
including identification of the average benefits and average earnings to be
provided by the employer for these jobs; and
d. The total dollar value of all business incentives provided by the political
subdivision during that year.
54-60.1-09. Appropriation requests.
A state agency may not request an appropriation for the purpose of providing a business
incentive in the form of a direct cash transfer unless the agency includes with the request a
statement of the expected benefits associated with the direct cash transfer.
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