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INCENTIVES <br />35 <br />NORTH CAROLINA <br />the state of minds " <br />The state's bond program presents new and <br />expanding industry with flexibility in securing <br />financing and added tax benefits. North Carolina <br />is one of the few states virtually unaffected . <br />by the state volume cap, and its anticipated <br />annual volume of tax exempt bonds forirdustria) <br />purposes subject to the cap is less than the <br />allowance of approximately $500 million. <br />Unlike most conventional;loans, industrial revenue <br />bonds (IRBs) can offe ` usmesses a convenient, <br />ft <br />long -term, and oerr'fixed -rate financing package. <br />In additiona;t!he interest earned on IRBs is exempt <br />from federal'income taxes. As a result, the bond <br />buyer is willing to accept a lower rate of interest <br />exchange for tax -free income. Typically, <br />4 t <br />interest rates on IRBs range between 1.5 and 2.5 <br />below corporate bonds. Terms <br />percentage points p <br />of; the bond issue are negotiable; and the costs of <br />issuing bori -M can`be'spread out over the term of <br />the bond issue. <br />Eligibility & Statutory Requirements <br />Only companies engaged in some type of <br />manufacturing can use IRB funds. The proceeds of <br />the bond issue may be used to finance the entire <br />project, including the cost of land, construction of <br />new or expanded facilities, purchase of equipment, <br />and the payment of certain costs incurred in the <br />issuance of the bonds. <br />The regulations governing bond issuance are a <br />combination of federal regulations and North <br />Carolina statutes, and dictate several requirements <br />be met before the issuance of IRBs: <br />Bond programs offer new <br />and expanding industry <br />with financing flexibility <br />and added tax benefits. <br />North Carolina Department of Commerce <br />• jobs Test The business must create or retain a <br />certain number of jobs based on the size of the <br />financing currently, one job is required for every <br />$250,000 in financing. <br />• Abandonment The business must certify that in <br />building the facility, it is not abandoning another <br />facility in North Carolina (or, if it is, that it is <br />impossible for it to remain at its present location <br />because of limitations on land use, etc). <br />• No "junk Bonds: Bonds must be sold to a <br />sophisticated investor (i.e., a bank) or be <br />backed by a letter of credit or other credit <br />enhancement Therefore, the Company must be <br />able to borrow on its own credit <br />• Environmental Approval: The business must <br />secure any required environmental certifications <br />or permits. <br />Limitations <br />Federal tax law imposes some limitations on IRBs. <br />Capital expenditures at the business' location(s) <br />in the municipality during the three years before <br />and after the date the bonds are issued cannot <br />exceed $20 million. The total amount of IRBs <br />outstanding at all related operations of the <br />business, in all states, may_not exceed $40 million. <br />Incentives I 18 <br />