Renaissance Zone

About

The City of Cavalier is proud to have adopted a comprehensive, development plan to be a participant of the renaissance zone program in 2015. The renaissance zone program is designed to revitalize communities in the state and encourage development through tax incentives. It is an excellent tool to help cities revitalize their communities. By offering both state and local tax incentives for 5 years, both residents and business owners are provided with an incentive to invest in their community.

Several activities qualify as a project including:

Purchase

Rehabilitation

Purchase (new construction)

Purchase with major improvements

Historical

Lease

Leasehold improvements

Public utility infrastructure

Please review the information below and contact Casey Krieg at (701)265-8800 if you have any questions.

Before any purchases or work can begin, the renaissance zone project must be approved at the state level.

Income exemptions and tax credits

SINGLE-FAMILY RESIDENCE TAX CREDIT

An individual taxpayer who purchases or rehabilitates single-family residential property for the individual’s primary place of residence as a zone project is allowed a tax credit of up to $10,000 in each of 5 taxable years beginning with the date of occupancy or completion of rehabilitation.

BUSINESS PURCHASE, EXPANSION, OR LEASEHOLD IMPROVEMENT TAX CREDIT

If the cost of a new business purchase, expansion of an existing business, or leasehold improvement made to real property leased for use in an existing business, approved as a zone project, exceeds $75,000, and the business is located in a city with a population of not more than 2,500, an individual taxpayer may, in lieu of the income exemption, elect to claim an income tax credit of up to $2,000 in each of 5 taxable years, beginning with the date of purchase or the date of the expansion or leasehold improvement work is completed. The election must be made on the individual’s timely filed original income tax return. The election is irrevocable.

BUSINESS OR INVESTMENT INCOME EXEMPTION

A taxpayer that purchases, leases, rehabilitates or makes leasehold improvements to residential, public utility infrastructure, or commercial property for a business or investment purpose as a zone project is allowed to exempt part or all of the income derived from the business or investment location within the zone in each of 5 taxable years, beginning with the date of purchase, lease, or completion of rehabilitation.

The maximum amount of income that a taxpayer may exempt from tax under this subsection for any taxable year is $500,000. The limitation in this subdivision applies to the sum of the exempt income derived from the taxpayer’s business and investment interests in all zone projects.

If a zone project consists of a physical expansion of an existing building owned and used by the taxpayer for business or investment purposes, the amount of income exempt from tax under this subsection is limited to an amount equal to the income derived from the business, or from the investment use of the building, during the taxable year multiplied by a ratio equal to the square footage added by the expansion divided by the total square footage of the building after expansion.

NONPARTICIPATING PROPERTY OWNER TAX CREDIT

If a property owner not participating in a renaissance zone project is required to make changes in utility services or in a building structure because of changes made to property that is part of a zone project, the owner of the nonparticipating property is entitled to state income tax credits equal to the total amount of the investment necessary to complete the required changes. The credit must be approved by the local renaissance zone authority. The credit must be claimed in the taxable year in which the related project was completed. The credit may not exceed the taxpayer’s tax liability, and an unused credit may be carried forward up to 5 taxable years.

HISTORICAL PRESERVATION AND RENOVATION TAX CREDIT

A credit of 25% of an investment is allowed for the preservation and renovation of eligible historic property that is part of a zone project, up to a maximum credit of $250,000. The credit may be claimed in the taxable year in which the preservation or renovation is completed. Any excess credit may be carried forward for a period of up to 5 taxable years.