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North Dakota Office of State Tax Commissioner

2003 Schedule RZ instructions

Pass-through entity owner

3. Subtract the amount of the first

If you own an interest in a partnership, S

exemption (determined in step 2 above)

Instructions for

corporation, or other pass-through entity

from the total North Dakota net income

Part 1

that qualifies for an income or financial

of the business to determine the amount

institution tax incentive under the Act, the

of the North Dakota net income that

Business or

pass-through entity must provide you with

remains.

a notice showing your share of the income

4. Calculate the amount of the exemption

investment

Pass-

exemption or tax credit—see

to be applied second by multiplying the

through member notice

on page 2. If

remaining North Dakota net income

income

you own an interest in a pass-through

(determined in step 3 above) by the

entity that is subject to the North Dakota

exemption

second exemption’s apportionment

financial institution tax under N.D.C.C.

factor (see below).

ch. 57-35.3 (Form 35 filer), you will

Apportionment factor. For purposes of

receive a pass-through member notice only

General instructions

steps 2 and 4, the “apportionment factor”

if an income exemption is passed through

means the:

to you.

Eligibility

• Zone apportionment factor in the case

If you receive a pass-through member

of the business income exemption under

A five-year income exemption is allowed

notice, you may claim your share of the

the Renaissance Zone Act. See page 13

for income tax purposes (under N.D.C.C.

income exemption or tax credit on your

for details.

ch. 57-38) or financial institution tax

North Dakota tax return as follows:

• Apportionment factor prescribed under

purposes (under N.D.C.C. ch. 57-35.3) for

1. Enter your share of the exemption or

N.D. Admin. Code § 81-03-01.1-06 in the

any of the following qualifying

credit shown on the Renaissance Zone

case of the new or expanding business

transactions, provided the transaction is

Pass-Through Member Notice on the

industry income exemption under

approved as a zone project:

applicable line of Schedule RZ. A

N.D.C.C. ch. 40-57.1.

•

Purchase

—The taxpayer purchases

separate line is provided in Parts 1, 4,

residential or commercial real property

Multiple tax credits

and 5 of Schedule RZ for this purpose.

in a zone for business or investment

Also be sure to complete Part 6.

If you qualify for more than one tax credit

use. This includes the construction of

under North Dakota law (including the

2. Attach Schedule RZ (all three pages)

new residential or commercial real

Act), the credits must be applied in the

and a copy of the Renaissance Zone

property.

following order:

Pass-Through Member Notice to your

•

Purchase with major

1. Tax credits that may not be carried back

North Dakota tax return.

improvements

—The taxpayer

or carried forward to another tax year.

purchases existing residential or

Priority of exemptions

2. Tax credits that may be carried back.

commercial real property in a zone for

and credits

3. Tax credits that may be carried forward.

business or investment use to which

A taxpayer may qualify for more than one

major improvements must be made

tax incentive under the Act. If a taxpayer

Note: In the case of an individual, the

before the taxpayer can begin any

qualifies for both an income exemption

credit for income tax paid to another state

income-producing activity.

and a tax credit under the Act, the income

must be applied first in all cases.

•

Lease

—The taxpayer leases residential

exemption must be applied first to

or commercial real property in a zone

Financial institution

determine North Dakota taxable income.

for business use only. For this purpose,

minimum payment

Then the tax credit must be subtracted

a lease qualifies if:

from the tax calculated on North Dakota

The tax incentives under the Act do not

® The taxpayer moves an existing

taxable income.

affect the $50.00 minimum payment

business into, or establishes a new

required of a financial institution under

Multiple income exemptions

business in, the leased space.

N.D.C.C. § 57-35.3-03.

If a business qualifies for both the business

® The taxpayer’s business is already

income exemption under the Act and the

located in the zone and the lease is

new and expanding industry income

for additional space to

exemption under N.D.C.C. ch. 40-57.1, the

accommodate an expansion of the

following steps apply:

business.

1. Choose which of the two exemptions to

® The taxpayer is renewing or

apply first.

continuing a lease for the same

space already occupied by the

2. Calculate the amount of the exemption

taxpayer’s business, provided the

to be applied first by multiplying the

building in which the leased space

total North Dakota net income of the

is located has already qualified as a

business by the first exemption’s

rehabilitation zone project.

apportionment factor (see below).

Log - Schedule Rz Instructions Renaissance Zone Act Exemptions And Tax Credits - North Dakota Office Of State Tax Commissioner - 2003 Page 5

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