An act to create and enact a new section to chapter 57-38 and a new subdivision to subsection 7 of section 57-38-30.3 of the North Dakota Century Code, relating to a prison industries workforce development income tax cre, the official text

Sixty-ninth Legislative Assembly of North Dakota In Regular Session Commencing Tuesday, January 7, 2025
SENATE BILL NO. 2261 (Senators Klein, Barta, Kessel) (Representatives Nelson, Schauer)
AN ACT to create and enact a new section to chapter 57-38 and a new subdivision to subsection 7 of section 57-38-30.3 of the North Dakota Century Code, relating to a prison industries workforce development income tax credit; to provide for a legislative management study; and to provide an effective date.
BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA: SECTION 1. A new section to chapter 57-38 of the North Dakota Century Code is created and
enacted as follows: Prison industries workforce development credit. 1. A taxpayer that is a primary sector business, as defined in section 1-01-49, is allowed a nonrefundable credit against the tax imposed under section 57-38-30 or 57-38-30.3 for the cost of purchased components of final manufactured products or labor from prison industries. The amount of the credit under this section is ten percent of the cost of components and labor from prison industries purchased by the taxpayer in the calendar year. The credit must be claimed for the taxable year in which the components or labor are purchased. 2. The credit under this section may not exceed the taxpayer's liability as determined under this chapter for any taxable year. If the amount of the credit determined under this section exceeds the liability for tax under this chapter, the excess may be carried forward to each of the next five succeeding taxable years. 3. The aggregate amount of credits allowed each calendar year under this section may not exceed forty-five thousand dollars. If the aggregate amount of credits claimed under this section: a. Is less than the limit under this subsection, any remaining unclaimed credits may be carried forward and made available in the succeeding calendar year. b. Exceeds the limit under this subsection, the tax commissioner shall prorate the credits among the claimants. 4. If a taxpayer entitled to the credit provided by this section is a member of a group of corporations filing a North Dakota consolidated tax return using the combined reporting method, the credit may be claimed against the aggregate North Dakota tax liability of all of the corporations included in the North Dakota consolidated return. 5. A passthrough entity entitled to the credit under this section must be considered to be the taxpayer for purposes of this section and the amount of the credit allowed must be determined at the passthrough entity level. The amount of the total credit determined at the passthrough entity level must be allowed to the partners, shareholders, or members in proportion to their respective interests in the passthrough entity. An individual taxpayer may claim the credit passed through under this section against the individual's state income tax liability under section 57-38-30.3. 6. A taxpayer applying for a tax credit under this section for purchases in the preceding calendar year shall provide the following information to the tax commissioner by January thirty-first of each calendar year:

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a. The name, address, and federal identification number or social security number of the taxpayer that made the purchase.
b. Substantiation of primary sector designation from the department of commerce division of economic development and finance as of the date of the purchase or payment.
c. A copy of the paid invoice that identifies the components or labor purchased. d. A description of the components or labor purchased. 7. After January thirty-first, the tax commissioner shall notify each applicant of the amount of tax credit earned or allocated to the tax payer under subdivision b of subsection 3. Purchases resulting in tax credits under this section may not be used in the calculation of any other income tax deduction or credit allowed under this chapter. 8. The tax commissioner shall proscribe forms for the administration of this section. SECTION 2. A new subdivision to subsection 7 of section 57-38-30.3 of the North Dakota Century Code is created and enacted as follows:
Prison industries workforce development credit under section 1 of this Act. SECTION 3. LEGISLATIVE MANAGEMENT STUDY - PRISON INDUSTRIES WORKFORCE DEVELOPMENT. During the 2025-26 interim, the legislative management shall consider studying prison industries and workforce development programs for incarcerated individuals in the state, including how prison industries can work in alignment with the manufacturing industry and other private sector industries to further the mission of workforce development for incarcerated individuals and to encourage positive outcomes for individuals exiting the criminal justice system. The legislative management shall report its findings and recommendations, together with any legislation required to implement the recommendations, to the seventieth legislative assembly. SECTION 4. EFFECTIVE DATE. Sections 1 and 2 of this Act are effective for taxable years beginning after December 31, 2024.

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____________________________ President of the Senate

____________________________ Speaker of the House

____________________________ Secretary of the Senate

____________________________ Chief Clerk of the House

This certifies that the within bill originated in the Senate of the Sixty-ninth Legislative Assembly of North Dakota and is known on the records of that body as Senate Bill No. 2261.

Senate Vote: House Vote:

Yeas 43 Yeas 56

Nays 3 Nays 33

Absent 1 Absent 5

____________________________ Secretary of the Senate
Received by the Governor at ________M. on _____________________________________, 2025. Approved at ________M. on __________________________________________________, 2025.

____________________________ Governor
Filed in this office this ___________day of _______________________________________, 2025, at ________ o’clock ________M.

____________________________ Secretary of State

S. B. NO. 2261 - PAGE 4

Honorable Michael Howe Secretary of State Bismarck, North Dakota

I certify this Act, Senate Bill No. 2261, together with the objections of Governor Armstrong, was returned to the Senate, being the body in which it originated, on March 24, 2025; that the objections of the Governor were entered upon the Journal on March 24, 2025, and read at length; that the Bill was taken up for reconsideration; that the motion for reconsideration prevailed on March 27, 2025, at 2:01 p.m.; and the roll was called and the Bill did pass, with more than two-thirds of the members-elect voting in the affirmative.

Vote:

Yeas

45

Nays

2

Absent and

not voting

0

____________________________ President of the Senate

____________________________ Secretary of the Senate

S. B. NO. 2261 - PAGE 5

Honorable Michael Howe Secretary of State Bismarck, North Dakota

I certify this Act, Senate Bill No. 2261, together with the objections of Governor Armstrong, was received from the Senate, being the body in which it originated, on March 27, 2025; that the objections of the Governor were read at length on April 2, 2025; that the Bill was taken up for reconsideration; that the motion for reconsideration failed on April 3, 2025, at 3:05 p.m.; and the roll was called and the Bill failed to pass, with less than two-thirds of the members-elect voting in the affirmative.

Vote:

Yeas

15

Nays

78

Absent and

not voting

1

____________________________ Speaker of the House

____________________________ Chief Clerk of the House