Corporate Income Tax History

Medium

2023 Session

  • Changes were made to the existing automation tax credit program, which provides an income tax credit based on the cost of equipment purchased to automate a manufacturing process, as certified by the North Dakota Department of Commerce. The credit rate was lowered from 20% to 15% of the cost of the equipment and the annual statewide limit on credits was increased to $3 million. The program was expanded to also include automation or robotic equipment purchased to upgrade or advance an animal agricultural process. If the annual limit is exceeded, $500,000 of credits was reserved for first-time claimants for each category. The program was also made permanent.
  • A new income tax credit was created for contributions to the following organizations: (1) a child placing agency licensed by the North Dakota Department of Health and Human Services (DHS), (2) a nonprofit maternity home located in North Dakota, or (3) a pregnancy help center recognized by DHS.
  • The existing income tax credit related to the employment of an individual with developmental disabilities or severe mental illness was reenacted and made permanent. The existing provisions of the tax credit were unchanged, except the statewide limitation on the number of eligible employees was removed and there is no limit.
  • A new income tax credit was created for the employment of an apprentice. The credit allowed against income tax is 10% of the qualified compensation paid to an apprentice employed in North Dakota.
  • Certain changes were made to the Renaissance Zone program. One of the changes provides for the income tax incentive period to be up to eight years for certain projects. Prior law limited the incentive period to five years.

2021 Session

  • Reinstated the changes made by the 2019 North Dakota legislature to the law governing the income tax credits for contributing to nonprofit private primary schools, high schools, and colleges in North Dakota. The 2019 changes, which made the credits available to individuals for direct contributions and increased the limit on how much tax could be offset by a credit from 20% to 25%, expired at the end of the 2020 tax year. In addition to reinstating the 2019 changes, the 2021 legislation increased the tax liability limit from 25% to 50% and made the changes effective for tax years 2021 and after.
  • Reinstated the changes made by the 2019 North Dakota legislature to the law governing the existing income tax credit related to the employment of an individual with developmental disabilities or severe mental illness. The tax credit’s provisions will continue to be applicable for tax years 2021 and 2022, after which they will revert back to pre-2019 provisions, unless otherwise extended or changed by the 2023 legislature.

2019 Session

  • The existing limitation on tax credits earned for contributions to nonprofit private elementary schools, high schools, and colleges was changed from 20% of tax to 25% of tax. This change is only effective for tax years 2019 and 2020, unless extended.
  • The existing tax credit for employing an individual who is developmentally disabled or chronically mentally ill was modified. The credit is 25% of the wages paid, up to a maximum of $1,500 credit per employer and is limited statewide to employment of one hundred individuals. The credit was also expanded to be allowed against individual income tax. The changes are effective for tax years 2019 and 2020.
  • The existing tax credit for increased qualified research and experimental expenditures was expanded to provide for the Alternative Simplified Method for computing the credit.
  • The automation income tax credit that existed for tax years 2013 through 2017 was reinstated for years 2019 through 2022. A credit is allowed for the purchase or lease of equipment for the purpose of automating a manufacturing process. The amount of credits earned statewide is limited to $1 million per year. The program also includes the requirement of increased job quality or productivity by a company which earns the credit. 

2017 Session

  • The following three tax credits were repealed: credit for a portion of wages paid for certain new industries, credit for investments in a certified nonprofit development corporation, and investment and employment in a microbusiness.
  • Legislation was passed to provide a single, uniform definition of the term “primary sector business”.
  • Significant changes were made to the Angel Fund investment tax credit program, and the credit was renamed the Angel Investor tax credit, which may only be claimed against individual income tax. The reporting requirements for Angel Funds organized prior to July 1, 2017, were slightly modified.
  • The law pertaining to the legislature’s requirement to study all tax incentives during legislative interims was modified to allow the Tax Commissioner, upon request from Legislative Management or a legislative committee, to disclose certain tax incentive data even though only few taxpayers may have claimed the incentive. Specific taxpayer identification information would remain confidential.
  • Legislation was passed to allow a temporary exemption to a business and its employees from income taxes (and certain sales and use taxes) in situations where the business or employees enter the state to perform work related to repairing critical infrastructure for a declared disaster. Included in the exemption are all income taxes and employer’s income tax withholding from wages. The provision exempts the business and its employees from requirements for filing returns and paying tax related to activities during the exemption period.
  • Legislation was passed to require denial of a tax incentive if a taxpayer is delinquent on a state or local tax. If a state tax incentive is claimed, the taxpayer must certify it is not delinquent on any property tax to any county in which it owns property. If a local tax incentive is applied for or claimed, the taxpayer must certify it is not delinquent on any property taxes or state taxes. The requirement applies to the tax incentives listed in N.D.C.C. § 57-35-26.
  • The credit for investment in a Housing Incentive Fund was allowed to sunset, making year 2016 the final year available to be earned. The credit for purchases of equipment to automate a manufacturing process was allowed to sunset, making 2017 the final year available to be earned. The carryover provisions for both credits were not affected.

2015 Session 

  • The tax rates were reduced approximately 5%. Beginning with 2015, the new rates range from 1.41% to 4.31%
  • Beginning with 2016, a corporation may make an election to more heavily weight the sales factor component of its apportionment factor. The election is binding for five years. If elected, the weightings apply to each tax year as follows:

                 2016 & 2017           25% property, 25% payroll, and 50% sales

                 2018                       12.5% property, 12.5% payroll, and 75% sales

                 2019 & after           100% sales

  • A new tax credit was created for making charitable contributions to nonprofit private grade schools (grades K through 8). Similar to the existing credits for contributions to nonprofit private high schools and colleges, the credit is 50% of the amount contributed and limited to the lesser of 20% of the tax on the return, or $2,500.
  • The tax credit for contributions to the Housing Incentive Fund was extended to the 2015 and 2016 tax years. A ceiling of $30 million of credits was set on the total amount of all income tax credits available under the program for the two years.
  • The income tax credit for purchasing machinery and equipment to automate a manufacturing process was extended two years, through 2017. For years 2016 and 2017, the maximum statewide amount of credits for all taxpayers was set at $500,000 per year. Starting with year 2015, if the maximum amount is not earned for any year, the unused amount is added to the annual limit for the subsequent year. If the total credits attributable to all qualifying equipment purchases exceed the annual maximum amount, a change was made to prorate the maximum amount among all qualifying purchases. The credit was also changed to allow qualified purchases of equipment made by means of a capital lease.
  • The tax credit for the installation of a biomass, geothermal, solar or wind energy device expired January 1, 2015. However, in the case of a wind energy device that was under construction as of December 31, 2014, the credit may be earned if the device is completed prior to January 1, 2017. 
  • For a wind energy device that was installed after September 30, 2008, and before January 1, 2012, the carryover period for an unused tax credit was increased from 20 to 30 years.
  • A change was made to the income tax credit for contributions to endowment funds to allow qualifying contributions to certain charitable organizations in a city bordering North Dakota.
  • Two changes were made to the Renaissance Zone program incentives. The maximum size of a zone was increased to 34 blocks for cities below 5,000 population and to 49 blocks for cities above 5,000. The cumulative maximum amount of credits available for investments made in renaissance fund organizations was increased from $8.5 million to $10.5 million.

2013 Session 

  • The tax rates were reduced, ranging from 1.48% to 4.53%.
  • The tax credit for contributions to the Housing Incentive Fund was extended for the 2013 and 2014 tax years. A ceiling of $20 million is set on the total credits allowed under the program for the 2013 and 2014 tax years.
  • New Renaissance Zone projects approved on or after August 1, 2013, have the following new limitations.
    • Expansion project limitation – If a zone project consists of a physical expansion of an existing building, the amount of the exemption for the tax year is limited to an amount equal to the income otherwise eligible for the exemption multiplied by an expansion ratio. The expansion ratio is equal to the square footage added by the expansion divided by the total square footage of the building after expansion.
    • Per taxpayer limitation – The maximum amount of eligible income that a taxpayer may exempt from income tax for any taxable year is $500,000. This limitation applies to the total eligible income that a taxpayer derives from all business and investment interests held during the tax year.
  • Beginning with the 2014 calendar year, a remitter of oil and gas royalty payments must withhold North Dakota income tax from payments made to nonresident royalty owners with a nonworking interest in the production. Nonresident royalty owners include corporations that are domiciled outside North Dakota. Any amount withheld is claimed as a payment when the corporation files its tax return.
  • A new income tax credit is allowed to a corporation that makes a contribution to the Rural Leadership North Dakota Program conducted by the North Dakota State University Extension Service. The credit is equal to 50% of the total contributions made during the tax year. There is no carryover of an unused credit, and the contributions may be designated for a specific individual. 
  • The North Dakota financial institution tax was repealed. A financial institution that was previously subject to the financial institution tax will be subject to income tax beginning January 1, 2013.
  • The Angel Fund Investment tax credit program was changed to prohibit an Angel Fund from investing in real estate or a real estate holding company. Any Angel Fund that was certified prior to January 1, 2013, that made an investment in real estate is not eligible for recertification by the North Dakota Department of Commerce. Also, the lifetime limit of credits allowed to any taxpayer was increased from $150,000 to $500,000.

2011 Session 

  • The tax rates were reduced, ranging from 1.68% to 5.15%. 
  • A new tax credit was created for contributions to the Housing Incentive Fund administered by the North Dakota Housing Finance Agency. The credit is equal to 100% of the amount contributed to the fund and applies only to 2011 and 2012 tax years. The credit has a cumulative statewide limit of $15 million dollars of credits. (Expired December 31, 2016.)
  • Changes were made to the Angel Fund investment credit to allow passthrough entities to pass the credit through to its owners and establish a lifetime limit of $150,000 of credits per taxpayer. The carryover term for excess credits was changed from four years to seven years. An additional change was made for tax years 2011 and 2012 to allow the sale or transfer of credits to another taxpayer.
  • A new credit was created effective for future tax years of 2013 through 2015 related to the purchase of machinery and equipment for the purpose of automating a manufacturing process. (Expired December 31, 2017.)
  • For the ‘water’s edge’ filing method, the requirement to file a domestic disclosure spreadsheet was repealed, for tax years after 2010.

2009 Session 

  • The taxable income brackets were reduced from five to three, and tax rates were reduced from a range of 2.60% - 6.50%, to 2.10% to 6.40%. 
  • A requirement was enacted for tax credits earned after December 31, 2008. A claim for refund based on a credit carryback must be filed within three years of the due date, or extended due date, of the return for the tax year in which the credit was claimed.
  • Changes were made to how North Dakota taxable income is computed in certain instances:
    • A new deduction from federal taxable income was enacted for certain corporations that elect to be an IC-DISC (interest-charge domestic international sales corporation). The deduction is available for actual distributions if the IC-DISC elects to use certain IRS intercompany pricing rules and is owned by one or more individuals or passthrough entities.
    • Corporations that own a captive real estate investment trust (REIT) must add back to federal taxable income the amount of the dividends paid deduction allowed to the captive REIT on its federal income tax return.
    • For cooperatives for taxable years ended after April 30, 2009, if the cooperative elects to pass through the deduction to its patrons under IRC § 199, the amount passed through is not added back to federal taxable income.
  • Changes were made to the following tax incentive and credit programs:
    • Renaissance Zone Program - Qualifying projects were expanded to include leasehold improvements and rehabilitation of public utility infrastructure. A new tax credit was created for non-participating property owners who must make required changes to utility services or building structure as a result of another taxpayer's zone project.
    • Credit for Geothermal, Solar, Wind or Biomass Energy Device - The sunset date of the credit was extended from January 1, 2011 to January 1, 2015. For devices installed after September 30, 2008, the carryover period was extended from five to ten years. For a wind energy device only that is installed after September 30, 2008, and before January 1, 2012, the carryover period was extended to 20 years.The provision for the sale, assignment or transfer of credits to an unrelated taxpayer was repealed.
    • Credit for Biodiesel Fuel Production - The credit was expanded to apply to facilities used to crush soybeans or canola.
    • Credit for Investment in an Angel Fund - Clarification was added to the definition of an Angel Fund and to the criteria for certification as an Angel Fund. Additionally, a lifetime maximum of $5 million in credits was set for all investments made in a single Angel Fund.
    • A new credit was created based on wages paid or a reduction in compensation for employees mobilized for National Guard or U.S. Armed Forces reserve duty. The credit is limited to $1,000 per eligible employee. An unused credit may be carried forward for up to five tax years.

2007 Session 

  • For a short period that is less than 120 days, no estimated payment of tax is required.
  • Revisions were made to the following tax credits:
    • Seed capital investment tax credit - The calculation of the allowable tax credit was changed to be 45% of investments made in a tax year, with no limitation of the amount of investment or credit. The limitation on the amount of tax credit that can be used in any tax year was changed to $112,500. (Credits in excess of $112,500 may be carried over.) Angel Funds were added as eligible for the tax credit. The credit based on the Angel Fund's investment is passed through to the Angel Fund investors who claim the credit on their own respective returns.
    • Agricultural commodity processing facility investment tax credit - The calculation of the allowable credit was changed to be 30% of investments made in a tax year, with no limitation of the amount of investment or credit. The limitation on the amount of tax credit that can be used in any tax year was changed to $112,500. "Qualified investment" was redefined to include cash or transfer of interest in real property in North Dakota, subject to certain conditions.
    • Credit for research and experimental expenditures - The calculation of the credit was changed. For tax years beginning after December 31, 2006, the calculation begins with 25% of the first $100,000 of eligible expenses. For eligible expenses over $100,000 in a tax year, the applicable percentage for tax years 2007 through 2016 varies based on when qualified research in North Dakota began.

      For tax years after 2016, for eligible expenses over $100,000, the applicable percentage for all taxpayers is 8%.

      For taxpayers who began qualified research in North Dakota before January 1, 2007, the maximum credit allowed in any year is $2 million; any credit over this amount is not allowed in any year.

      For tax years after December 31, 2006, credits earned by any corporation in a consolidated corporation income tax return may be used to reduce the aggregate tax liability of all corporations in the return.
    • Credit for installation of geothermal, solar or wind energy devices - The credit was expanded to include devices that use biomass as the renewable energy source. For all eligible devices installed on or after January 1, 2007, if ownership of an eligible device is sold at the time the installation is completed, and the device is fully operational, the tax credit allowed to the installer transfers with the device to the purchaser.
  • Saleable Tax Credits
    • Credit for research and experimental expenditures - Subject to certain conditions, a taxpayer may sell, transfer, or assign up to $100,000 of unused credit to another taxpayer if the selling taxpayer is certified by the Department of Commerce.
    • Credit for installation of biomass, geothermal, solar or wind energy devices - Subject to certain conditions, for devices installed on or after January 1, 2007, a taxpayer may sell, transfer or assign an unused credit to another taxpayer. This provision was repealed in the 2009 Legislative Session.

      The following new tax credits were authorized:
      • Angel Fund investment tax credit - Corporations may receive a credit equal to 45% of the total investments made in Angel Funds in a tax year, up to a maximum credit of $45,000 per tax year. An unused credit in the year of the investment may be carried forward for up to 4 years. To qualify, the Angel Fund must be incorporated in North Dakota and be in compliance with North Dakota securities laws. (A taxpayer claiming this credit may not also claim an income tax credit passed through by an angel fund resulting from the Angel Fund's own investment under the tax credit programs for seed capital investment or investment in an agricultural commodity processing facility.) (Repealed June 30, 2017 - 2017 session.)
      • Internship employment tax credit - Corporations may receive a credit equal to 10% of the compensation paid to up to 5 interns at a time. The intern and internship must meet certain qualifications. An employer is allowed a maximum of $3,000 in credits for all taxable years combined.
      • Workforce recruitment tax credit - Corporations may receive a credit for employing extraordinary recruitment methods that result in the hiring of employees for hard-to-fill positions in North Dakota. The credit is equal to 5% of the compensation paid during the first 12 consecutive months such an employee is hired and is allowed in the first tax year following the completion of those twelve months. Any unused credit may be carried forward for up to 4 years. To be eligible, the annual salary for the position must be at least 125% of North Dakota's average wage (as published by Job Service North Dakota). Also, an employer must have used certain prescribed recruitment methods for at least six months to fill the position.
      • Microbusiness income tax credit - A corporation is allowed a credit for new investment and new employment in a microbusiness in North Dakota that creates new income or jobs. A microbusiness must be certified by the Department of Commerce and no more than 200 microbusinesses may be certified. The credit is equal to 20% of the new investment (increase) in buildings and depreciable property and new employment (increased compensation for new employees). An unused credit may be carried forward for up to 5 years. (Repealed December 31, 2016 - 2017 session.)
      • Property tax relief credit - For tax years 2007 and 2008 only, corporations that own property in North Dakota that is classified as commercial property may claim a credit of 10% of the property tax or mobile home tax levied on the property, up to a maximum of $1,000. For this credit, this means property taxes before any discount and before any special assessments.
      • Credit for contributions to a qualified endowment - Corporations may claim a credit for making a charitable contribution to a qualified endowment of a qualified nonprofit organization in North Dakota. The tax credit is equal to 40% of the contributions made in a tax year, up to a maximum of $10,000. An unused credit may be carried forward for up to 3 years.

2005 Session 

  • Two new addition adjustments to federal taxable income were authorized effective for taxable years beginning after December 31, 2004:
    • U.S. production activities income deducted to compute federal taxable income.
    • Extraterritorial income excluded from the computation of federal taxable income (for tax years 2005 and 2006 only).
  • The highest tax rate was reduced from 7% to 6.5%, effective for taxable years beginning after December 31, 2006.
  • The credit for installing a geothermal, solar, or wind energy device may be offset against the consolidated tax liability (as opposed to just the tax liability of the corporation eligible for the credit).
  • Eligibility for the seed capital and agricultural commodity processing facility investment tax credits was expanded to include regular corporations, trusts and passthrough entities (such as S corporations and partnerships). 
  • The amount of investment eligible for the seed capital investment tax credit was limited to $500,000 per qualified business over the business' lifetime.
  • The amount of credit for an investment in an agricultural commodity processing facility was limited to $50,000. The total credit a taxpayer is eligible for in all tax years was limited to $250,000.
  • For tax payments (other than property taxes), made after December 31, 2004, a claim for credit or refund based on a claim that the tax or the law is unconstitutional must be made within 180 days of the due date of the return or payment of the tax, whichever occurs first.
  • Two new credits related to biodiesel fuel were authorized for (1) fuel sellers who adapt or add equipment to their facilities to enable the sales of at least 2% biodiesel blends and (2) licensed fuel suppliers who blend fuel containing at least 5% biodiesel fuel.

2003 Session 

  • The federal income tax deduction was repealed for tax years beginning after December 31, 2003. 
  • The tax rates were reduced, ranging from 2.6 to 7.0%. Corporations electing the water's edge filing method are subject to an additional 3.5% surtax on North Dakota taxable income. 
  • North Dakota net operating losses in tax years beginning after December 31, 2002, cannot be carried back to a previous tax year. 
  • The North Dakota domestic dividend exclusion was repealed, effective for tax years beginning after December 31, 1999.
  • A credit was created for costs incurred to retrofit an existing facility or adapt a new facility to produce or blend biodiesel fuel.

2001 Session 

  • For tax-exempt organizations, the due date to file returns reporting unrelated business taxable income was changed to the 15th day of the fifth month following the tax year end. 
  • A change was made to extend the time period to assess tax when a 25% understatement of taxable income or income tax exists.
  • The tax credit for geothermal, solar or wind energy devices was changed. Property leased in North Dakota became eligible. For devices installed after December 31, 2001, the credit is 3% of acquisition and installation cost, in each of the first 5 tax years. Passthrough entity owners claim the entities' credit in proportion to the ownership interest. The credit is available for devices installed before January 1, 2011.
  • For tax assessments made after December 31, 2000, a regulated investment company is allowed a deduction for dividends paid to the shareholders or to a fund of a regulated investment company.
  • Under the Renaissance Zone Program, the business or investment income deduction was expanded to include rehabilitations of residential or commercial property. Also, the tax credit for investing in the preservation or renovation of historic property was reduced to 25% of the investment, not to exceed $250,000. 

1999 Session 

  • The interest rate on refunds was increased from 10% per year to 1% per month (or a fraction of a month), which is the same rate charged on late payments or additional tax due. 
  • The Renaissance Zone Program was created.

1997 Session

  • The law was changed for a single member LLC. A single member LLC will be treated as a corporation for North Dakota purposes if treated as a corporation for federal income tax purposes; otherwise it must be disregarded as an entity separate from its owner.
  • A corporation may elect to apply an overpayment of estimated tax to a specific estimated installment other than the first quarter's installment.
  • A number of changes were made affecting the interest calculation provisions.

1995 Session 

  • Corporations with parent and subsidiaries operating totally in the state were required to file a state consolidated corporation income tax return using the combined reporting method.

1994 Special Session 

  • Project size limitations were removed as qualifications for the new or expanding business tax exemption, allowing large projects to qualify.

1993 Session 

  • Limited liability companies (LLC), a new form of business entity, were legalized. 
  • The requirement to file informational returns was removed for tax exempt organizations and insurance companies subject to the insurance premium tax. 
  • A credit was created for alternative fuel equipment installed on motor vehicles. (This credit expired December 31, 1997.)

1991 Session 

  • The AMT was repealed, but the remaining AMT credit was allowed to be carried over for up to four years. A deduction was added for certain federal AMT disallowed on previous state returns.
  • The legislature approved the Taxpayer Bill of Rights. 
  • The income tax exemption for new or expanding businesses was decoupled from the property tax exemption and was limited to value-added primary sector and tourism businesses.

1989 Session 

  • A credit was added for investment in a nonprofit development corporation. (Repealed December 31, 2016 - 2017 session.)
  • The alternative minimum tax (AMT) rate was changed from 5% to 6%. A credit was created for the amount the alternative minimum tax exceeds regular liability in past years.
  • The water’s edge election was made binding for five years instead of ten. The water's edge spreadsheet requirement was reduced from yearly to the first year and every third year thereafter. 
  • The Centennial Tree Trust Fund was added as an optional contribution. (Repealed in the 1991 Session.)

1987 Session

  • Corporations were allowed to choose the water’s edge method of apportioning income for tax years beginning after December 31, 1988. 
  • An alternative minimum tax (AMT) was enacted. (Repealed in the 1991 Session.)
  • A deduction was added for dividends from the Myron G. Nelson Fund, Inc., a state established venture capital corporation. (This was renamed the North Dakota Small Business Investment Company in the 1995 session and, in the 2005 Session, was repealed effective August 1, 2007.)
  • Credits were created for research expenditures, for investments in the Myron G. Nelson Fund, Inc., and for North Dakota wages paid to developmentally disabled or chronically mentally ill employees.
  • Income tax returns included a provision for optional contributions to the Nongame Wildlife Fund. (Repealed in the 1991 Session.)
  • Limitations were removed on the type of business qualifying for the new business exemption. The exemption was expanded to include service and retail industries, as well as assembling, fabricating, manufacturing, mixing, processing, storing, warehousing, or distributing any agricultural, mineral or manufactured product.

1985 Session

  • A tax credit was provided for investments made in a North Dakota venture capital corporation. (Repealed effective August 1, 2007, in the 2005 Session.)

1983 Session

  • Estimated tax payments were required for corporations with an estimated tax over $5,000. 
  • Tax rates were increased, ranging from 3% to 10.5%.

1981 Session

  • A tax credit for the installation of a geothermal energy device was created. (Expired December 31, 2014.)
  • A deduction was created for interest on bonds issued by a regional railway authority in North Dakota. 
  • The tax rates were reduced, ranging from 2% to 7%.

1979 Session

  • A tax credit for contributions to nonprofit private high schools was created. 
  • The 1% business privilege tax on business income was repealed.

Prior to 1979

  • The state's first income tax law enacted in 1919.
  • In 1923, the income tax law was revised and patterned after federal income tax law.
  • For 1919 through 1936, a flat tax rate of 3% applied.
  • In 1937, a graduated set of tax rates was adopted, with rates ranging from 3% to 6%.
  • In 1978, an initiated measure increased the tax rates, ranging from 3% to 8.5%.