This North Carolina bill establishes a $250 million grant program to help small businesses recover from financial losses caused by the COVID-19 pandemic. To qualify, businesses must have had annual receipts of $8 million or less in 2019 and experienced at least a 25% drop in sales tax collections in 2020 compared to the previous year. Eligible recipients can receive a one-time payment of up to $250,000, which is capped at the amount of their verified sales tax reduction. The law requires businesses to remain open for at least six months after receiving the funds, with any unspent portion subject to repayment if operations cease prematurely.
This bill creates a tax incentive for small businesses in North Carolina by allowing them to deduct contributions made to a special savings account designated for property improvements. To qualify, a business must have gross receipts under $10 million and deposit funds into a federally insured bank account specifically for projects that add value to real estate, extend its useful life by at least 10 years, or adapt it for new uses. The deduction is calculated as a percentage of the business's income, ranging from 5% for deposits up to $1 million down to 1% for amounts up to $3 million, and the benefit is only available for taxable years starting on or after January 1, 2026. If any money withdrawn from this account is not used for the specified improvements, the amount must be added back to the business's taxable income in the year of withdrawal.
This North Carolina bill establishes the COVID-19 Small Business Recovery Program to provide financial assistance to small businesses that suffered significant economic losses due to the pandemic. To qualify, a business must have had annual receipts of $8 million or less in 2019 and experienced at least a 25% drop in sales tax collections in 2020 compared to 2019. The program offers one-time grants of up to $250,000, with the total funding capped at $250 million, and requires recipients to keep their operations running for six months to avoid having to repay a portion of the grant.
House Bill 283 establishes the Small Business Investment Grant (SBIG) Program within the One North Carolina Fund, designed to provide financial assistance to eligible small businesses looking to establish or expand facilities in the state. The bill allocates up to $10 million from the Fund to this new account. Through the SBIG Program, competitive grants are offered to businesses meeting specific criteria, such as having 250 or fewer employees or less than $5 million in annual revenue, investing $10-$30 million, and creating new jobs with competitive wages. Grants are capped at $500,000 annually per recipient, up to $2.5 million total, over a maximum of five years. Additionally, the bill renames the "One North Carolina Small Business Account" to the "Small Business Research and Technology Account," which continues to support federal SBIR/STTR grant incentive and matching programs.
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SB 354 reenacts North Carolina’s Research and Development (R&D) tax credit with updated eligibility rules, primarily affecting small businesses conducting qualified research in the state. To qualify, businesses must meet specific wage standards (e.g., paying at least 90% of county average wages in certain areas), provide health insurance covering 50% of premiums for full-time employees, maintain environmental and safety compliance, and have no overdue tax debts. The credit applies to expenses for research performed in North Carolina, including costs paid to state universities for research. This bill modifies existing rules to tighten eligibility while maintaining the credit for qualifying small businesses through 2040.
SB 351, the Right to Start Act, allows new businesses (corporations, S corporations, LLCs, partnerships, and other entities) less than five years old with under $5,000 in net income to defer their state income tax payment for one year. It also requires state agencies to prioritize contracting with businesses operating under five years and mandates the Department of Administration to collect and report annual data on these contracts, including demographic and geographic breakdowns. The bill directly affects small, newly formed businesses seeking tax relief and state procurement decisions. Key provisions include the tax deferral eligibility criteria and the data collection/reporting requirements for state contracts.
SB 521 creates a 35% nonrefundable income tax credit for investment entities (like partnerships or S-corps) that fund small, newly formed businesses focused on community infrastructure and resilience. Eligible businesses must be under five years old, employ 25 or fewer people in North Carolina, generate $2 million or less in annual revenue, and primarily work on projects like improving roads, utilities, disaster preparedness, or sustainable energy. The credit limits total annual state spending to $5 million and caps individual credits at $100,000 per year, with unused credits carryable for up to 10 years. This policy aims to incentivize private investment in community-focused small businesses through tax benefits, not direct government funding.
SB 455, the Main Street Resilience Act, provides North Carolina small businesses with a new income tax deduction starting in 2026. It allows eligible small businesses to deduct up to $75,000 of their net business income from taxable income each year, with married couples filing jointly able to deduct up to $150,000 total. To qualify, a business must have fewer than 50 total employees (including related entities) and annual revenue under $5 million, excluding passive income. This deduction directly reduces tax liability for qualifying small businesses operating in North Carolina.
SB 627 allows North Carolina small businesses with annual gross receipts under $10 million to reduce their state income tax by deducting funds deposited into a special capital improvement account. Businesses can deduct up to 5% of their adjusted gross income (capped at $1 million), 2% (up to $2 million), or 1% (up to $3 million) for qualifying property improvements like upgrades that add value, extend property life by 10+ years, or adapt property for new business uses. Funds must be deposited into a federally insured bank account and used solely for these improvements; unused funds must be added back to taxable income. The bill takes effect for tax years beginning January 1, 2025, and directly affects small businesses making eligible capital investments.
