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North Dakota Office of State Tax Commissioner

2003 Schedule RZ instructions

•

Qualified rehabilitation

•

Lease

Property is used for investment purposes if

—The

—For a lease transaction, the 60-

the property is not part of or used in the

taxpayer makes a qualified rehabilitation

month exemption period begins with the

regular course of any trade or business of

to residential or commercial real property

month in which the lease agreement

the taxpayer. Unless a taxpayer can show

in a zone for business or investment

takes effect.

otherwise, any property that is purchased,

purposes. A qualified rehabilitation

•

Qualified rehabilitation

—For a

leased, or rehabilitated by a sole

means the repair or remodeling of the

qualified rehabilitation, the 60-month

proprietorship, partnership, C corporation,

property at a cost that equals or exceeds

exemption period begins with the month

S corporation, or limited liability company

50 percent of the current true and full

in which the rehabilitation work is

will be deemed to be used for business

value of the property for property tax

completed, as determined by the local

purposes.

zone authority.

Depending on the facts and circumstances,

This income exemption may be claimed by

Once the 60-month exemption period

the distinction between business-use and

the following taxpayers:

begins to run, it runs uninterrupted through

investment-use may not always be clear. If

•

An individual (on Form ND-1 or

the end of the 60-month exemption period.

in doubt as to whether zone project

Form ND-2).

The exemption is allowed over the entire

property is used for business or investment

•

An estate or trust (on Form 38,

60-month exemption period even if the

purposes, the local zone authority or

Schedule 1 or 2).

renaissance zone itself expires before the

taxpayer is advised to submit a written

•

A corporation (on Form 40).

end of the 60-month exemption period.

request for an opinion to the Office of

•

A financial institution (on Form 35).

Change in qualifying use. If the zone

State Tax Commissioner prior to entering

project property is withdrawn from its

the transaction

If the taxpayer is a partnership, S

qualifying business or investment use, the

corporation, or other pass-through entity,

Business use property. If the zone

taxpayer is ineligible for the exemption

Pass-through entity

see

on page 2.

project property is an integral part of or

starting with the first day of the month in

used in a business, the amount of income

One exemption per zone project

which the property is withdrawn from its

that may be exempted is determined in the

property. The business or investment

qualifying use.

following two steps:

income exemption is allowed only one

Transfer of zone project property. The

1. The amount of business income

time with respect to a particular zone

business or investment income exemption

attributable to the zone project property

project property over the life of the zone.

and its 60-month exemption period attach

must be determined by multiplying the

Elective tax credit. An individual who

to the zone project property. If the zone

taxpayer’s total North Dakota income

qualifies for an income exemption under

project property is transferred to another

derived from the business as a whole by

N.D.C.C. § 40-63-04(2) for the purchase

taxpayer before the property’s 60-month

a zone apportionment factor.

of a new business, or for the expansion of

exemption period expires, the exemption

The application of the zone

an existing business already owned by the

and the unused portion of the 60-month

apportionment factor depends on the

individual, may elect to take an income tax

exemption period transfer with the

portion of the North Dakota real

credit in lieu of the exemption if certain

property.

property used in the business that is

Part 2

conditions are met—see

on page 7

located at the zone project location. If

for more information.

The taxpayer who transfers the property is

all of the North Dakota real property

ineligible for the exemption starting with

Five-year exemption period

used in the business is located at the

the month of disposition. If the property is

zone project location, the factor will be

transferred to a taxpayer who also qualifies

The exemption is allowed in each year of a

100 percent. If only a portion of the

for the business or investment income

five-year exemption period. For purposes

North Dakota real property used in the

exemption with respect to the property, the

of the Act, the five-year exemption period

business is located at the zone project

taxpayer acquiring the property is eligible

is deemed to be a period of sixty

location, the factor will be less than 100

for the exemption for the unexpired

consecutive months that begins as follows:

percent. The calculation of the zone

portion of the 60-month exemption period

•

Purchase

—For a purchase, the 60-

apportionment factor is explained on

starting with the month of acquisition.

month exemption period begins with the

page 13 of these instructions.

month in which title to the property

Amount of income

2. The amount of business income

transfers to the taxpayer.

exemption

attributable to the zone project property

•

Purchase with major

(determined in step 1 above) must then

The amount of income that may be

improvements

—For a purchase with

be multiplied by a ratio equal to the

exempted is dependent on whether the

major improvements, the 60-month

number of months of exemption

zone project property is used for business

exemption period begins with the month

eligibility during the tax year divided by

or investment purposes. The property is

in which the improvement work is

the number of months in the tax year.

considered used for business purposes if it

completed, as determined by the local

is used in an occupation, trade, profession,

The amount of business income that may

zone authority.

or commercial or mercantile enterprise.

be exempted is calculated in Part 1, lines 9

through 13, of Schedule RZ.

Log - Schedule Rz Instructions Renaissance Zone Act Exemptions And Tax Credits - North Dakota Office Of State Tax Commissioner - 2003 Page 6

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