Tax Exemptions & Credits
It makes economic sense to do business here.
Taxes
Cost Competitive Environment
It is cost-competitive to do business here. The Greater Fargo-Moorhead area cost of living index generally hovers right around 100, meaning it is around the national average for cost of living for a U.S. metro. You’ll benefit from reasonable commercial and industrial real estate and low utility costs. And that’s before you start adding in savings from local, county and state incentives.
Tax Exemptions
The Greater Fargo-Moorhead region offers many tax advantages for businesses, such as property tax exemptions, the lowest worker’s compensation premiums in the United States and the nation’s most generous R&D tax credit.
No Personal Property Tax
North Dakota exempts all personal property from property taxation. In general, most personal property is exempt from property tax in Minnesota.
Property Tax Exemption
A qualifying project may receive a complete or partial exemption from ad valorem taxation for up to 10 years on new or existing buildings or structures used in the qualifying project; with the typical exemption of 5 years. Land is not exempted. Buildings in a Tax Increment Financing district are not eligible for the property tax exemption.
It is cost-competitive to do business here. The Greater Fargo-Moorhead area cost of living index generally hovers right around 100, meaning it is around the national average for cost of living for a U.S. metro. You’ll benefit from reasonable commercial and industrial real estate and low utility costs. And that’s before you start adding in savings from local, county and state incentives.
Tax Exemptions & Credits
North Dakota Programs
The Greater Fargo-Moorhead region offers many tax advantages for businesses, such as property tax exemptions, the lowest worker’s compensation premiums in the United States and the nation’s most generous R&D tax credit.
North Dakota exempts all personal property from property taxation. In general, most personal property is exempt from property tax in Minnesota.
A qualifying project may receive a complete or partial exemption from ad valorem taxation for up to 10 years on new or existing buildings or structures used in the qualifying project; with the typical exemption of 5 years. Land is not exempted. Buildings in a Tax Increment Financing district are not eligible for the property tax exemption.
Businesses that locate in Renaissance Zones may be eligible for tax credits to encourage investment and development in RZ corridors through the use of tax credits and incentives. The program is unique in that cities develop handcrafted development plans that address each city's specific goals. RZ Cities within Cass County include Fargo, West Fargo, Casselton, Kindred and Buffalo. The RZ Program includes two primary incentives, which included the possibility of a 5-year property tax and State income tax exemption for qualified projects.
Newly established or expanding primary sector businesses are eligible for a five-year exemption from North Dakota state corporate income taxes. For business expansion, the exemption applies to the increase in corporate income attributable to the expansion project and related to North Dakota revenues.
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, ag commodity processing or recycling.
- An expanding primary sector business may also be eligible for an exemption for purchases of computer and telecommunications equipment that is an integral part of the business. The exemption does not extend to the purchase of replacement equipment.
- Other exemptions narrower in scope are also available including the construction of ag processing or energy generating facilities as well as coal mine and biodiesel fuel equipment.
A taxpayer is allowed an income tax credit (up to 15% of the cost) for the purchase or capital lease of machinery and equipment to automate a manufacturing or animal agricultural process in North Dakota. An eligible company must be Primary Sector Certified at the time of taking title of the equipment. The project must also improve job quality by 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; or improve 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.
An income tax credit for investing in an agricultural commodity processing facility certified by the ND Dept of Commerce - includes a livestock feeding, handling, milking, or holding operation that uses as part of its operation a by-product produced at a biofuels production facility. The credit is equal to 30% of the investment. No more than $50,000 of credits may be used in any year. An unused credit may be carried forward up to 10 years. A taxpayer is allowed no more than $250,000 of credits for all tax years.
This is an income tax credit for investing in a qualified primary sector business as certified by the ND Dept of Commerce. The credit is equal to 45% of the investment. No more than $112,500 of credits may be used in any tax year. An unused credit may be carried forward up to 4 tax years. If the taxpayer is a passthrough entity or an angel fund, the credit is passed through to the entity’s owners or the fund’s members based on their respective interests in the entity. Because of changes in the law, the applicable rate, limitations, and other features of the tax credit have changed over the years. For a summary of the applicable rates, limitations, and other features on a year-by-year basis, see Seed Capital Investment Tax Credit Program – Rates, limitations, and other features of the tax credit by tax year.
An income tax credit is available to individuals who set up a North Dakota angel fund for the purpose of pooling their monies to make qualified investments in qualified businesses. The amount of the credit depends on whether the qualified investment is made in an in-state or out-of-state qualified/certified business. The applicable credit rate is 35% for an in-state qualified business and 25% for an out-of-state qualified business. The maximum credit allowed to an angel investor for all qualified investments made in a tax year is $45,000. An unused credit may be carried forward up to 5 tax years.
An income tax credit for conducting research in North Dakota: 25 percent of the first $100,000 of qualified research expenses in North Dakota over the base period research expenses in North Dakota, and eight percent of any amount above $100,000. If a credit exceeds a taxpayer’s tax liability, the unused portion of the credit must be carried back 3 tax years and carried forward up to 15 tax years.
Owners, operators, and tenants of a qualified data center may be granted a sales tax exemption on information technology equipment and computer software, including replacement equipment and software, purchased after December 31, 2020. To qualify, a data center must be a newly constructed or substantially refurbished facility located in North Dakota of at least 15,000 square feet of which 50% is used for data processing.
Minnesota Programs
Property tax exemption for 5, 10, or 15 years for new or rehabilitated commercial, residential or mixed-use projects located within the MRZ.
Provides incentives for business investments in targeted cities on Minnesota’s western border and includes Moorhead and Dilworth, MN.
- Workers’ Compensation Rebate – income tax credit to businesses to rebate a portion of workers' compensation expense, up to $25,000 per business per year.
- Target Area Credit – in Moorhead, employee tax credits given to new or expanding primary sector businesses within a target up to $3,000 per employee.
- Sales Tax Credit – in Moorhead, sales tax credit to new or expanding primary sector businesses up to $25,000.
- Seed Capital Investment Credit – for investments in a MN DEED-certified business located in Dilworth or Moorhead, an income tax credit equal to 45% of your amount invested in the business, up to $112,500 a year. You may carry the credit forward up to four years.
Provides a 25% credit to investors or investment funds that make equity investments in startup companies focused on high technology, new proprietary technology, or a new proprietary product, process or service in specified fields. The maximum credit is $125,000 per person, per year ($250,000 if filing jointly). The credit is refundable. Residents of other states and foreign countries are eligible.
The Minnesota State Legislature allocates a limited amount of credits, and available credits.
For 2023, $5 million in credits is available, $2.5 million of which is reserved for minority- and women-owned businesses, as well as businesses located in Greater Minnesota ("targeted businesses"), until 9/30/23, at which time an unused reserved credits become available for investment in any qualified business.
As of August 7, 2023, $2 million in general credits and $2 million in targeted credits remain available for allocation.
The R&D credit is equal to 10% of qualifying expenses up to $2 million, and 4% for expenses above that level. Qualifying expenses are the same as for the federal R&D credit – defined in Section 41 of the Internal Revenue Code – but must be for research done in Minnesota. Examples include R&D-related wages, supplies and research contracted outside your business. Contributions to qualified nonprofit organizations that make grants to early-stage technology businesses in Minnesota also may qualify.
Provides tax benefits to businesses located in Greater Minnesota that increase employment. Qualifying businesses that meet job-growth goals may receive sales tax refunds for purchases made during a seven-year period.
An up-front sales tax exemption on eligible capital equipment purchases. To qualify for the exemption, the equipment must be used for one of the following: To manufacture, fabricate, mine, or refine products that are ultimately sold at retail; To electronically transmit information sold to retail customers from an online database; To generate electricity or steam to sell at retail.
Companies that build data or network operation centers of at least 25,000 square feet and invest at least $30 million within 48 months may qualify for a sales tax exemption for 20 years on enterprise information technology equipment, software, and electricity used to operate the data centers.
