NC Small Business Capital & Jobs Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 1056

Short Title: NC Small Business Capital & Jobs Act. (Public)
Sponsors: Senators Garrett, Batch, and Salvador (Primary Sponsors).
Referred to: Rules and Operations of the Senate
May 4, 2026
*S1056-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO ENACT THE NC SMALL BUSINESS CAPITAL AND JOBS ACT. 2
The General Assembly of North Carolina enacts: 3
SECTION 1. Article 10 of Chapter 143B of the General Statutes is amended by 4
adding a new Part to read: 5
"Part 20A. Small Business Capital Access. 6
"§ 143B-271.113. Small Business Capital Access Act. 7
(a) Title. – This Part shall be known and may be cited as the "North Carolina Small 8
Business Capital Access Act." 9
(b) Findings. – The General Assembly finds as follows: 10
(1) Small businesses and businesses in underserved com munities are vital to 11
North Carolina's economy, creating jobs and driving innovation throughout 12
the State. 13
(2) Despite their importance, these businesses face persistent barriers to accessing 14
capital necessary for startup, operation, and growth. 15
(3) Existing capital access programs have gaps that leave many qualified 16
businesses unable to secure necessary financing. 17
(4) Targeted interventions have proven successful in other states and countries in 18
addressing these capital access disparities. 19
(5) North Carolina has an opportunity to strengthen its economy by implementing 20
a coordinated strategy to expand capital access for small businesses and 21
businesses in underserved communities. 22
(c) Purpose. – The purpose of this Act is to establish a comprehensive framework to 23
expand access to capital for small businesses and businesses in underserved communities, 24
disadvantaged areas, and census tracts with persistent poverty throughout North Carolina through 25
coordinated loan guarantees, direct investment, support for community lenders, technical 26
assistance, and incentives for private investment. 27
(d) Definitions. – The following definitions apply in this Act: 28
(1) Board. – The Small Business Capital Access Oversight Board established by 29
this Act. 30
(2) CDFI. – A Community Development Financial Institution certified by the 31
U.S. Department of the Treasury. 32
(3) Department. – The North Carolina Department of Commerce. 33
(4) Fund. – The North Carolina Small Business Capital Access Fund. 34
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 1056-First Edition
(5) Growth-stage business. – A business that has established a viable product or 1
service and is seeking capital to expand operations, market reach, or product 2
offerings. 3
(6) Office. – The Office of Small Business Capital Access. 4
(7) Program. – The North Carolina Small Business Capital Access Program. 5
(8) Qualifying business. – A business located in an underserved community. 6
(9) Small business. – A business that employs fewer than 500 full -time 7
employees. 8
(10) Technical assistance. – Professional guidance provided to business owners in 9
areas including but not limited to business planning, financial management, 10
marketing, operations, technology, and accessing capital. 11
(11) Underserved community. – A census tract that is designated as a low-income 12
community according to the most recent data from the U.S. Census Bureau or 13
is located in a rural area as defined by the North Carolina Rural Center. 14
(e) Office established, duties. – There is established within the Department of Commerce 15
the Office of Small Business Capital Access. The Office shall be headed by a Director appointed 16
by the Secretary of Commerce, who shall have substantial experience in small business financing, 17
economic development, or qualifying business support. The Office shall fulfil the following 18
duties: 19
(1) Administer all components of the North Carolina Small Business Capital 20
Access Program. 21
(2) Develop program guidelines, application procedures, and evaluation metrics. 22
(3) Coordinate with other state agencies providing services to small businesses 23
and qualifying businesses. 24
(4) Conduct outreach to ensure participation by businesses in all regions of the 25
State. 26
(5) Collect and analyze data on program outcomes. 27
(6) Submit annual reports to the General Assembly and the Governor. 28
(7) Seek additional funding through federal grants, philanthropic sources, and 29
other avenues. 30
(f) Board established, duties. – There is established the Sma ll Business Capital Access 31
Oversight Board to provide strategic guidance for the Program by (i) reviewing and approving 32
program guidelines developed by the Office; (ii) monitoring program performance and outcomes; 33
(iii)) advising on strategic priorities and capital deployment strategies; (iv) ensuring the Program 34
reaches underserved communities and populations; (v) meeting at least quarterly; and (vi) 35
submitting annual recommendations to the Governor and General Assembly. Board members 36
shall serve four-year terms; provided that, initial appointments, as determined by the Board, shall 37
be staggered to ensure at least two members are appointed annually. The Board shall consist of 38
11 members as follows: 39
(1) The Secretary of Commerce or the Secretary 's designee, who shall serve as 40
chair. 41
(2) The State Treasurer or the Treasurer's designee. 42
(3) The President of the North Carolina Rural Center or the President's designee. 43
(4) Two members appointed by the Governor, including one representative of a 44
qualifying business and one representative of a financial institution active in 45
small business lending. 46
(5) Two members appointed by the General Assembly upon the recommendation 47
of President Pro Tempore of the Senate, including one representative of a 48
CDFI operating in North Carolina and one small business owner from a rural 49
county. 50
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 3
(6) Two members appointed by the General Assembly upon recommendation of 1
the Speaker of the House of Representatives, including one representative of 2
a chamber of commerce or business association; and one small business owner 3
from an urban county. 4
(7) One member appointed by the North Carolina Black Entrepreneurship 5
Council. 6
(8) One member appointed by the North Carolina Hispanic Chamber of 7
Commerce. 8
(g) North Carolina Small Business Capita l Access Program. – There is established the 9
North Carolina Small Business Capital Access Program, which shall consist of the elements 10
listed in this subsection. The Office shall develop an application process and detailed guidelines 11
in compliance with the provisions of this section for each program component in consultation 12
with the Board and shall ensure coordination among program components to create a 13
comprehensive capital access ecosystem. The North Carolina Small Business Capital Access 14
Program includes the following components: 15
(1) The Small Business Loan Guarantee Program to increase lending to small 16
businesses and qualifying businesses by reducing risk for private lenders. 17
Required guidelines for the Small Business Loan Guarantee Program include, 18
but are not limited to, the following: 19
a. The Small Business Loan Guarantee Program shall function to (i) 20
provide guarantees for loans made by qualified lenders to eligible 21
small businesses and qualifying businesses ; (ii) cover up to ninety 22
percent (90%) of the loan amount for such businesses located in 23
development tier one area, as defined in G.S. 143B-437.08 or in a 24
persistent poverty census tract and up to eighty percent (80%) for other 25
small businesses; (iii) prioritize businesses that have been denied 26
traditional financing despite viable business models; (iv) establish 27
maximum guarantee amounts based on available funding; and (v) 28
Require reasonable fees to support program sustainability. 29
b. Eligible lenders are limited to (i) community banks; (ii) credit unions; 30
(iii) certified CDFIs; (iv) minority depository institutions; and (v) 31
other regulated financial institutions with small business lending 32
experience. 33
c. Eligible borro wers shall include small businesses and qualifying 34
businesses that meet all of the following requirements: 35
1. Are headquartered and operating in North Carolina. 36
2. Have been in operation for at least one year. 37
3. Demonstrate, to the satisfaction of the Of fice, sound business 38
practices and growth potential. 39
4. Have been unable to secure adequate financing through 40
conventional channels. 41
5. Will use loan proceeds for business purposes approved by the 42
Office, including working capital, equipment, inventory, or 43
expansion. 44
d. The Office shall develop a streamlined application process for lenders 45
and borrowers. 46
e. The Office shall establish a loan loss reserve to cover potential 47
defaults. 48
(2) The North Carolina Qualifying Business Growth Fund shall function to 49
provide equity and near-equity capital to growth-stage qualifying businesses. 50
Required guidelines for the Fund include, but are not limited to, the following: 51
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 1056-First Edition
a. The Fund shall function to (i) make direct investments in qualif ying 1
busineses; (ii) focus on as sisting businesses with proven business 2
models seeking growth capital; (iii) structure investments as equity, 3
convertible debt, revenue -based financing, or other flexible 4
instruments; (iv) make investments ranging from two hundred fifty 5
thousand dollars ($ 250,000) to two million dollars ($2,000,000); (v) 6
require co -investment from private investors on terms to be 7
determined by the Office; (vi) prioritize investments that will create 8
quality jobs in North Carolina; and ( vii) reinvest returns from 9
successful investments to ensure Fund sustainability. 10
b. The Office shall contract with an experienced fund manager selected 11
through a competitive process to manage the Fund, with oversight 12
from the Board. 13
c. The fund manager shall meet all of the following requirements: 14
1. Have demonstrated experience in qualifying business 15
investment. 16
2. Have a track record of successful investments in growth-stage 17
businesses. 18
3. Reflect the diversity of North Carolina in its leadership and 19
team. 20
4. Provide regular reports to the Office and Board on Fund 21
performance. 22
5. Provide post-investment support to portfolio companies. 23
(3) The CDFI Support Initiative to strengthen the capacity of Community 24
Development Financial Institutions serving North Carolina communities. 25
Required guideli nes for the Initiative include, but are not limited to, the 26
following: 27
a. The Initiative shall function to (i) provide direct grants to certified 28
CDFIs operating in North Carolina; (ii) offer low-cost loan capital for 29
CDFI relending programs; (iii) support capacity building for CDFI 30
operations; and (iv) facilitate partnerships between CDFIs and 31
traditional financial institutions. 32
b. Grant funds may be used for (i) loan loss reserves; (ii) operating 33
support; (iii) technology improvements; (iv) product develo pment; 34
and (v) technical assistance capacity. 35
c. Priority shall be given to CDFIs that (i) primarily serve rural areas or 36
underserved urban communities; (ii) demonstrate strong performance 37
and financial management; (iii) show substantial lending impact in 38
target communities; and (iv) leverage additional private capital. 39
d. Reporting on performance and grant funds shall be provided by 40
certified CDFIs as required by the Office. 41
(4) The Small Business Technical Assistance Network to ensure businesses 42
receiving capital are prepared to use it effectively. Required guidelines for the 43
Network include, but are not limited to, the following: 44
a. The Initiative shall function to (i) provide business development 45
services to participants in all Program components; (ii) c oordinate 46
existing technical assistance providers throughout the State; (iii) fund 47
expanded capacity for high -performing providers; (iv) develop 48
specialized assistance for specific industries or business needs; and (v) 49
ensure services are accessible in all regions of the State. 50
b. Services provided shall include all of the following: 51
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 5
1. Business planning and financial management. 1
2. Market analysis and marketing strategy. 2
3. Operations and human resources support. 3
4. Technology adoption assistance. 4
5. Certification preparation for government contracting. 5
6. Capital readiness preparation. 6
c. The Office shall develop a simplified referral system to connect 7
businesses to appropriate services. 8
d. The Office shall track technical assistance outcomes and their 9
correlation with capital access program success. 10
(6) The State Procurement Financing Initiative to help small businesses and 11
qualifying businesses access the capital necessary to fulfill State contracts. 12
Required guidelines for the Initiative include, but are not limited to, the 13
following: 14
a. The Initiative shall consist of the following: 15
1. A mobilization capital program providing short -term loans to 16
cover upfront costs of contract performance. 17
2. A factoring program allowing businesses to obtain immediate 18
payment on state contract invoices at favorable rates. 19
3. A bonding assistance program to help contractors secure 20
required performance and payment bonds. 21
4. A quickpay requirement mandating that all State agencies pay 22
approved invoices from small business es and qualifying 23
businesses within 15 days. 24
b. Eligible businesses must (i) be certified as a qualifying business or a 25
small business; (ii) have been awarded a contract with a State agency 26
or institution; and (iii) demonstrate the capacity to successfully 27
complete the contract with appropriate financial support. 28
c. The Office shall coordinate with the Division of Purchase and Contract 29
and other State contracting entities to implement the Initiative. 30
d. The guidelines created by the Office shall, for each p rogram 31
component, including application procedures, maximum assistance 32
amounts, terms, and fees. 33
(7) The Small Business Innovation Fund to support innovative small businesses 34
with high growth potential. Required guidelines for the Fund include, but are 35
not limited to, the following: 36
a. The Fund shall function to (i) provide matching grants for recipients 37
of federal Small Business Innovation Research (SBIR) and Small 38
Business Technology Transfer (STTR) awards; (ii) support university 39
technology commercialization partnerships with small businesses; (iii) 40
fund regional innovation hubs in different parts of the state; and ( iv) 41
provide proof -of-concept grants for promising innovations with 42
commercial potential. 43
b. The matching grant program shall do the following : ( i) provide 44
supplemental funding of up to 50 percent of the federal award amount, 45
not to exceed $100,000; ( ii) be available to North Carolina -based 46
recipients of Phase I SBIR or STTR awards; and (iii) include technical 47
assistance to support successful Phase II applications. 48
c. Regional innovation hubs shall comply with the following : ( i) be 49
established in partnership with universities, community colleges, and 50
private sector entities; ( ii) provide physical space, equipment, and 51
General Assembly Of North Carolina Session 2025
Page 6 Senate Bill 1056-First Edition
resources for entrepreneurs; (iii) offer specialized programming for 1
innovative businesses; and ( iv) connect entrepreneurs with capital 2
sources and business development resources. 3
d. The Office shall establish guidelines for each program component in 4
consultation with the North Carolina Board of Science, Technology & 5
Innovation. 6
(h) The North Carolina Small Business Capital Access Fund is established as a special 7
revenue fund in the Department of Commerce. The Fund shall consist of (i) appropriations by 8
the General Assembly; (ii) federal grant funds; (iii) private contributions and donations; (iv) loan 9
repayments and investment returns; (v) fees collected from program participants; and (vi) interest 10
earnings. The Fund shall be used exclusively for the purposes set forth in this section, including 11
reasonable administrative expenses. The Office shall establish separate accounts within the Fund 12
for different program components as necessary for proper financial management. 13
(i) The Office shall develop and implement a comprehensive evalu ation framework to 14
measure the impact and effectiveness of the Program. Performance metrics shall include at least 15
(i) the number and demographics of businesses served by each program component; (ii) the 16
amount of capital deployed, by program component, ge ographic region, industry, and business 17
demographics; (iii) the number of jobs created and retained as a result of Program assistance; (iv) 18
business revenue growth following program participation; (v) the amount of follow -on capital 19
secured by participants; (vi) default rates and program sustainability; (vii) return on investment 20
of public funds; and (viii) the economic impact in underserved communities. The Office shall 21
contract for and procure an independent evaluation by a qualified external entity every three years 22
and shall submit an annual report to the Governor and General Assembly by October 1, which 23
shall include all of the following: 24
(1) Detailed information on program activities and outcomes. 25
(2) Financial statements for the Fund. 26
(3) Analysis of program effectiveness. 27
(4) Recommendations for program improvements. 28
(5) Other information requested by the Board. 29
(6) A copy of the report produced as a result of the independent evaluation 30
required by this subsection in years in which it is produced." 31
SECTION 2. Tax Credit. – Part 5 of Article 4 of Subchapter I of Chapter 105 of the 32
General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten: 33
"Part 5. Tax Credits for Qualified Certain Business Investments. 34
"§ 105-163.010. Definitions. 35
The following definitions apply in this Part: 36
(1) Affiliate. – An individual or business that controls, is controlled by, or is under 37
common control with another individual or business. 38
(2) Business. – A corporation, partnership, limited liability company, association, 39
or sole proprietorship operated for profit. 40
(3) Control. – A person controls an entity if the person owns, directly or 41
indirectly, more than ten percent (10%) of the voting securities of that entity. 42
As used in this sub division, the term "voting security" means a security that 43
(i) confers upon the holder the right to vote for the election of members of the 44
board of directors or similar governing body of the business or (ii) is 45
convertible into, or entitles the holder to receive upon its exercise, a security 46
that confers such a right to vote. A general partnership interest is a voting 47
security. 48
(3a) Eligible investor. – A person subject to one or more of the following: 49
a. The franchise tax levied in Article 3 of this Chapter. 50
b. The income taxes levied in Article 4 of this Chapter. 51
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 7
c. The gross premiums tax levied in Article 8B of this Chapter. 1
(3b) Eligible business. – A business that (i) is registered with the Secretary of State 2
under G.S. 105-163.013, (ii) has received during the current year or any of the 3
preceding three years assistance from the Office of Small Business Capital 4
Access pursuant to G.S. 143B-271.113, (iii) is headquartered and primarily 5
operating in this State, (iv) has been in operation at least one year, (v) during 6
its most recent fiscal year before filing an application for registration under 7
G.S. 105 163.013, it had gross revenues, as determined in accordance with 8
generally accepted accounting principles, of five million dollars ($5,000,000) 9
or less on a consolidated basis, (vi) has 100 or fewer full-time employees and 10
(vii) at least X number of its full-time employees are new employees, as those 11
terms are defined in G.S. 143B-437.51 and were employed at least X weeks 12
of the year for which a credit is under this Part is allowed. 13
(4) Equity security. – Common stock, preferred stock, or an interest in a 14
partnership, or subordinated debt that is convertible into, or entitles the holder 15
to receive upon its exercise, common stock, preferred stock, or an interest in 16
a partnership. 17
(5) Financial institution. – A business that is (i) a bank holding company, as 18
defined in the Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841, et 19
seq., or its wholly owned subsidiary, (ii) registered as a broker -dealer under 20
the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a, et seq., or its wholly 21
owned subsidiary, (iii) an investment company as defined in the Investment 22
Company Act of 1940, 15 U.S.C. §§ 80a-1, et seq., whether or not it is required 23
to register under that act, (iv) a small business investment company as defined 24
in the Small Business Investment Act of 1958, 15 U.S.C. §§ 661, et seq., (v) 25
a pension or profit -sharing fund or trust, or (vi) a ba nk, savings institution, 26
trust company, financial services company, or insurance company. The term 27
does not include, however, a business, other than a small business investment 28
company, whose net worth, when added to the net worth of all of its affiliates, 29
is less than ten million dollars ($10,000,000). The term also does not include 30
a business that does not generally market its services to the public and is 31
controlled by a business that is not a financial institution. 32
(5a) Granting entity. – Any of the following: 33
a. A domestic or foreign corporation that (i) is tax -exempt pursuant to 34
section 501(c)(3) of the Code, (ii) has as its principal purpose the 35
stimulation of the development of the biotechnology industry, and (iii) 36
in furtherance of that purpose has received, or is a successor in interest 37
to an organization that has received, direct appropriations from the 38
State in at least three fiscal years. 39
b. A domestic or foreign corporation that meets the following three 40
conditions: 41
1. It is tax-exempt pursuant to section 501(c)(3) of the Code, is a 42
private foundation pursuant to section 509 of the Code, or is an 43
affiliate of either of the foregoing. 44
2. It has as its principal purpose one of the following: conducting 45
research and development in, or stimulating th e development 46
of, electronic, photonic, information, or other technologies, 47
which may include investing in companies that provide 48
research, development, products, or services in these 49
technologies. 50
3. It meets one of the following conditions: 51
General Assembly Of North Carolina Session 2025
Page 8 Senate Bill 1056-First Edition
I. It received direct appropriations in furtherance of one 1
of these purposes from the State in at least three fiscal 2
years. 3
II. It was organized to perform one of these purposes for 4
an organization that meets condition I of this 5
sub-subdivision. 6
III. It is an affiliate of an entity that meets condition II of 7
this sub-subdivision. 8
c. An institute that (i) is administratively located within a constituent 9
institution of The University of North Carolina, (ii) is financed in part 10
by a domestic or foreign corporation that is tax-exempt pursuant to 11
section 501(c)(3) of the Code, (iii) has as a principal purpose the 12
stimulation of economic development based on the advancement of 13
science, engineering, and technology, and (iv) funds, either directly or 14
in collaboration with other entities, small businesses engaging in 15
developing technology. 16
(6) North Carolina Enterprise Corporation. – A corporation established in 17
accordance with Article 3 of Chapter 53A of the General Statutes or a limited 18
partnership in which a North Carolina Enterprise Corporation is the only 19
general partner. 20
(7) Pass-through entity. – Defined in G.S. 105-228.90. 21
(7b) Qualified business. – A qualified business venture, a qualified grantee 22
business, or a qualified licensee business. 23
(8) Qualified business ventu re. – A business that (i) engages primarily in 24
manufacturing, processing, warehousing, wholesaling, research and 25
development, or a service -related industry, and (ii) is registered with the 26
Secretary of State under G.S. 105-163.013. 27
(9) Qualified grantee business. – A business that (i) is registered with the 28
Secretary of State under G.S. 105 -163.013, and (ii) has received during the 29
current year or any of the preceding three years a grant, an investment, or other 30
funding from a federal agency under the Small Business Innovation Research 31
Program administered by the United States Small Business Administration or 32
from a granting entity as defined in this section. 33
(9a) Qualified licensee business. – A business that meets all of the following 34
conditions: 35
a. It is registered with the Secretary of State under G.S. 105-163.013. 36
b. During its most recent fiscal year before filing an application for 37
registration under G.S. 105 -163.013, it had gross revenues, as 38
determined in accordance with generally accepted accounti ng 39
principles, of one million dollars ($1,000,000) or less on a 40
consolidated basis. 41
c. It has been certified by a constituent institution of The University of 42
North Carolina or a research university as currently performing under 43
a licensing agreement with the institution or university for the purpose 44
of commercializing technology developed at the institution or 45
university. For the purpose of this section, a research university is an 46
institution of higher education classified as a Doctoral/Research 47
University, Extensive or Intensive, in the most recent edition of "A 48
Classification of Institutions of Higher Education", the official report 49
of The Carnegie Foundation for the Advancement of Teaching. 50
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 9
(10) Real estate-related business. – A business that is involved in or related to the 1
brokerage, selling, purchasing, leasing, operating, or managing of hotels, 2
motels, nursing homes or other lodging facilities, golf courses, sports or social 3
clubs, restaurants, storage facilities, or commercial or residential lots or 4
buildings is a real estate -related business, except that a real estate -related 5
business does not include (i) a business that purchases or leases real estate 6
from others for the purpose of providing itself with facilities from which to 7
conduct a business t hat is not itself a real estate -related business or (ii) a 8
business that is not otherwise a real estate -related business but that leases, 9
subleases, or otherwise provides to one or more other persons a number of 10
square feet of space which in the aggregate does not exceed fifty percent 11
(50%) of the number of square feet of space occupied by the business for its 12
other activities. 13
(10a) Related person. – A person described in one of the relationships set forth in 14
section 267(b) or 707(b) of the Code. 15
(11) Security. – A security as defined in Section 2(1) of the Securities Act of 1933, 16
15 U.S.C. § 77b(1). 17
(12) Selling or leasing at retail. – A business is selling or leasing at retail if the 18
business either (i) sells or leases any product or service of any nature from a 19
store or other location open to the public generally or (ii) sells or leases 20
products or services of any nature by means other than to or through one or 21
more other businesses. 22
(13) Service-related industry. – A business is engaged in a service-related industry, 23
whether or not it also sells a product, if it provides services to customers or 24
clients and does not as a substantial part of its business engage in a business 25
described in G.S. 105 -163.013(b)(4). A business is engaged as a substantial 26
part of its business in an activity described in G.S. 105-163.013(b)(4) if (i) its 27
gross revenues derived from all activities described in that subdivision exceed 28
twenty-five percent (25%) of its gross revenues in any fiscal year or (ii) it is 29
established as one of its primary purposes to engage in any activities described 30
in that subdivision, whether or not its purposes were stated in its articles of 31
incorporation or similar organization documents. 32
(14) Subordinated debt. – Indebtedness that is not secured and i s subordinated to 33
all other indebtedness of the issuer issued or to be issued to a financial 34
institution other than a financial institution described in subdivisions (5)(ii) 35
through (5)(v) of this section. Except as provided in G.S. 105-163.014(d1), 36
any portion of indebtedness that matures earlier than five three years after its 37
issuance is not subordinated debt. 38
"§ 105-163.011. Tax credits allowed. 39
(a) No Credit for Brokered Investments. – No credit is allowed under this section for a 40
purchase of equity securities or subordinated debt if a broker's fee or commission or other similar 41
remuneration is paid or given directly or indirectly for soliciting the purchase. 42
(b) Individuals. –Eligible Investors. – Subject to the limitations contained in 43
G.S. 105-163.012, an individual eligible investor who purchases the equity securities or 44
subordinated debt of a qualified business an eligible business directly from that business is 45
allowed as a credit against the tax imposed by Part 2 of this Article for the taxable year an amount 46
equal to twenty -five percent (25%) of the amount invested. The aggregate amount of credit 47
allowed an individual eligible investor for one or more investments made in a single taxable year 48
under this Part, whether directly or indirectly as owner of a pass-through entity, may not be less 49
than t en thousand dollars ($10,000) and may not exceed fifty five hundred thousand dollars 50
($50,000).($500,000). The credit may not be taken for the year in which the investment is made 51
General Assembly Of North Carolina Session 2025
Page 10 Senate Bill 1056-First Edition
but may be taken for the taxable year beginning during the calendar year in which the application 1
for the credit becomes effective as provided in subsection (c) of this section. 2
(b1) Pass-Through Entities. – This subsection does not apply to a pass-through entity that 3
has committed capital under management in excess of five million dollars ($5,000,000) or to a 4
pass-through entity that is a qualified business or a North Carolina Enterprise Corporation. 5
Subject to the limitations provided in G.S. 105-163.012, a pass-through entity that purchases the 6
equity securities or subordinated debt of a qualified business directly from the business is eligible 7
for a tax credit equal to twenty-five percent (25%) of the amount invested. The aggregate amount 8
of credit allowed a pass-through entity for one or more investments made in a single taxable year 9
under this Part, whether directly or indirectly as owner of another pass -through entity, may not 10
exceed seven hundred fifty thousand dollars ($750,000). The pass -through entity is not eligible 11
for the credit for the year in which the investment by the pass -through entity is made but is 12
eligible for the credit for the taxable year beginning during the calendar year in which the 13
application for the credit becomes effective as provided in subsection (c) of this section. 14
Each individual who is an owner of a pass -through entity is allowed as a credit against the 15
tax imposed by Part 2 of this Article for the taxable year an amount equal to the owner's allocated 16
share of the credits for which the pass -through entity is eligible under this subsection. The 17
aggregate amount of credit allowed an individual for one or more investments made in a single 18
taxable year under this Part, whether directly or indirectly as owner of a pass-through entity, may 19
not exceed fifty thousand dollars ($50,000). 20
If an owner's share of the pass-through entity's credit is limited due to the maximum allowable 21
credit under this section for a taxable year, the pass -through entity and its owners may not 22
reallocate the unused credit among the other owners. 23
(b2) Credit Bonus. – The credit allowed under this Part shall be increased by ten percent 24
(10%) of the credit amount if the amount generating the credit is invested in an eligible business 25
that is (i) located in a development tier one area or development tier two area , as defined in 26
G.S. 143B-437.08, (ii) an MWBE, as defined in G.S. 143B-271.113, or (iii) both. 27
(c) Application. – To be eligible for the tax credit provided in this section, the taxpayer 28
eligible investor must file an application for the credit with the Secretary. The application should 29
be filed on or before April 15 of the year following the calendar year in which the investment 30
was made. The Secretary may not accept an application filed after October 15 of the year 31
following the calendar year in which the investment was made. An application is effective for 32
the year in which it is timely filed. The application must be on a form prescribed by the Secretary 33
and must include any supporting documentation that the Secretary may require. If an investment 34
for which a credit is applied for was paid for other than in money, the taxpayer must include with 35
the application a certified appraisal of the value of the property used to pay for the investment. 36
The application for a credit for an investment made by a pass-through entity must be filed by the 37
pass-through entity. 38
(d) Penalties. – The penalties provided in G.S. 105-236 apply in this Part. 39
"§ 105-163.012. Limit; carry-over; ceiling; reduction in basis. 40
(a) The credit allowed a taxpayer under G.S. 105-163.011 may not exceed the amount of 41
income tax imposed by Part 2 of this Article for the taxable year reduced by the sum of all other 42
credits allowable except tax payments made by or on behalf of the taxpayer. The amount of 43
unused credit allowed under G.S. 105-163.011 may be carried forward for the next five 44
succeeding years. 45
(b) The total amount of all tax credits allowed to taxpayers under G.S. 105-163.011 for 46
investments made in a calendar year may not exceed seven million five hundred thousandten 47
million dollars ($7,500,000).($10,000,000). The Secretary of Revenue shall calculate the total 48
amount of tax credits claimed from the applications filed pursuant to G.S. 105-163.011(c). If the 49
total amount of tax credits claimed for in vestments made in a calendar year exceeds this 50
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 11
maximum amount, the Secretary shall allow a portion of the credits claimed by allocating the 1
maximum amount in tax credits in proportion to the size of the credit claimed by each taxpayer. 2
(c) If a credit claimed under G.S. 105-163.011 is reduced as provided in this section, the 3
Secretary shall notify the taxpayer of the amount of the reduction of the credit on or before 4
December 31 of the year following the calendar year in which the investment was made. The 5
Secretary's allocations based on applications filed pursuant to G.S. 105-163.011(c) are final and 6
shall not be adjusted to account for credits applied for but not claimed. 7
(d) The taxpayer's basis in the equity securities or subordinated debt acquired as a result 8
of an investment in a qualifiedan eligible business shall be reduced for the purposes of this Article 9
by the amount of allowable credit. "Allowable credit" means the amount of credit allowed under 10
G.S. 105-163.011 reduced as provided in subsection (c) of this section. 11
"§ 105-163.013. Registration. 12
(a) Repealed by Session Laws 1993, c. 443, s. 4. 13
(b) Qualified Business Ventures. – In order to qualify as a qualified business venture 14
under this Part, a business must be registered with the Securities Division of the Department of 15
the Secretary of State. To register, the business must file with the Secretary of State an application 16
and any supporting documents the Secretary of State may require from time to time to determine 17
that the business meets the requirements for registration as a qualified business venture. A 18
business meets the requirements for registration as a qualified business venture if all of the 19
following are true as of the date the business files the required application: 20
(1) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 21
(1a) Reserved for future codification purposes. 22
(1b) Either (i) it was organized after January 1 of the calendar year in which its 23
application is filed or (ii) during its most recent fiscal year before f iling the 24
application, it had gross revenues, as determined in accordance with generally 25
accepted accounting principles, of five million dollars ($5,000,000) or less on 26
a consolidated basis. 27
(2) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 28
(3) It is organized to engage primarily in manufacturing, processing, 29
warehousing, wholesaling, research and development, or a service -related 30
industry. 31
(4) It does not engage as a substantial part of its business in any of the following: 32
a. Providing a professional service as defined in Chapter 55B of the 33
General Statutes. 34
b. Construction or contracting. 35
c. Selling or leasing at retail. 36
d. The purchase, sale, or development, or purchasing, selling, or holding 37
for investment of commercial paper, notes, other indebtedness, 38
financial instruments, securities, or real property, or otherwise make 39
investments. 40
e. Providing personal grooming or cosmetics services. 41
f. Offering any form of entertainment, amusement, recreation, or athletic 42
or fitness activity for which an admission or a membership is charged. 43
(5) It was not formed for the primary purpose of acquiring all or part of the stock 44
or assets of one or more existing businesses. 45
(6) It is not a real estate-related business. 46
The effective date of registration for a qualified business venture whose application is 47
accepted for registration is 60 days before the date its application is filed. No credit is allowed 48
under this Part for an investment made before the effective date of the registration or after the 49
registration is revoked. For the purpose of this Article, if a taxpayer's investment is placed 50
initially in escrow conditioned upon other investors' commitment of additional funds, the date of 51
General Assembly Of North Carolina Session 2025
Page 12 Senate Bill 1056-First Edition
the investment is the date escro wed funds are transferred to the qualified business venture free 1
of the condition. 2
To remain qualified as a qualified business venture, the business must renew its registration 3
annually as prescribed by rule by filing a financial statement for the most rec ent fiscal year 4
showing gross revenues, as determined in accordance with generally accepted accounting 5
principles, of five million dollars ($5,000,000) or less on a consolidated basis and an application 6
for renewal in which the business certifies the facts required in the original application. 7
Failure of a qualified business venture to renew its registration by the applicable deadline 8
shall result in revocation of its registration effective as of the next day after the renewal deadline, 9
but shall not result in forfeiture of tax credits previously allowed to taxpayers who invested in 10
the business except as provided in G.S. 105-163.014. The Secretary of State shall send the 11
qualified business venture notice of revocation within 60 days after the renewal deadli ne. A 12
qualified business venture may apply to have its registration reinstated by the Secretary of State 13
by filing an application for reinstatement, accompanied by the reinstatement application fee and 14
a late filing penalty of one thousand dollars ($1,000) , within 30 days after receipt of the 15
revocation notice from the Secretary of State. A business that seeks approval of a new application 16
for registration after its registration has been revoked must also pay a penalty of one thousand 17
dollars ($1,000). A registration that has been reinstated is treated as if it had not been revoked. 18
If the gross revenues of a qualified business venture exceed five million dollars ($5,000,000) 19
in a fiscal year, the business must notify the Secretary of State in writing of thi s fact by filing a 20
financial statement showing the revenues of the business for that year. 21
(b1) Qualified Licensee Businesses. – In order to qualify as a qualified licensee business 22
under this Part, a business must be registered with the Securities Divisio n of the Department of 23
the Secretary of State. To register, the business must file with the Secretary of State an application 24
and any supporting documents the Secretary of State may require from time to time to determine 25
that the business meets the require ments for registration as a qualified licensee business. The 26
requirements for registration as a qualified licensee business are set out in G.S. 105-163.010. 27
The effective date of registration for a qualified licensee business whose application is 28
accepted for registration is the filing date of its application. No credit is allowed under this Part 29
for an investment made before the effective date of the registration or after the registration is 30
revoked. 31
To remain qualified as a qualified licensee business, the business must renew its registration 32
annually as prescribed by rule by filing a financial statement for the most recent fiscal year 33
showing gross revenues, as determined in accordance with generally accepted accounting 34
principles, of one million dollars ($1,000,000) or less on a consolidated basis and an application 35
for renewal in which the business certifies the facts required in the original application. 36
Failure of a qualified licensee venture to renew its registration by the applicable deadline 37
results in revocation of its registration effective as of the next day after the renewal deadline, but 38
does not result in forfeiture of tax credits previously allowed to taxpayers who invested in the 39
business except as provided in G.S. 105-163.014. The Secretary of State shall send the qualified 40
licensee business notice of revocation within 60 days after the renewal deadline. A qualified 41
licensee business may apply to have its registration reinstated by the Secretary of State by filing 42
an application for reinstate ment, accompanied by the reinstatement application fee and a late 43
filing penalty of one thousand dollars ($1,000), within 30 days after receipt of the revocation 44
notice from the Secretary of State. A business that seeks approval of a new application for 45
registration after its registration has been revoked must also pay a penalty of one thousand dollars 46
($1,000). A registration that has been reinstated is treated as if it had not been revoked. 47
If the gross revenues of a qualified business venture exceed one million dollars ($1,000,000) 48
in a fiscal year, the business must notify the Secretary of State in writing of this fact by filing a 49
financial statement showing the revenues of the business for that year. 50
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 13
(c) Qualified Grantee Businesses. – In order to quali fy as a qualified grantee business 1
under this Part, a business must be registered with the Securities Division of the Department of 2
the Secretary of State. To register, the business must file with the Secretary of State an application 3
and any supporting documents the Secretary of State may require from time to time to determine 4
that the business meets the requirements for registration as a qualified grantee business. The 5
requirements for registration as a qualified grantee business are set out in G.S. 105-163.010. 6
The effective date of registration for a qualified grantee business whose application is 7
accepted for registration is the filing date of its application. No credit is allowed under this Part 8
for an investment made before the effective date of the r egistration or after the registration is 9
revoked. 10
To remain qualified as a qualified grantee business, the business must renew its registration 11
annually as prescribed by rule by filing an application for renewal in which the business certifies 12
the facts demonstrating that it continues to meet the applicable requirements for qualification. 13
(d) Application Forms; Rules; Fees. – Applications for registration, renewal of 14
registration, and reinstatement of registration under this section shall be in the form req uired by 15
the Secretary of State. The Secretary of State may, by rule, require applicants to furnish 16
supporting information in addition to the information required by subsections (b), (b1), and (c) 17
of this section. The Secretary of State may adopt rules in accordance with Chapter 150B of the 18
General Statutes that are needed to carry out the Secretary's responsibilities under this Part. The 19
Secretary of State shall prepare blank forms for the applications and shall distribute them 20
throughout the State and furnish them on request. Each application shall be signed by the owners 21
of the business or, in the case of a corporation, by its president, vice -president, treasurer, or 22
secretary. There shall be annexed to the application the affirmation of the person making the 23
application in the following form: "Under penalties prescribed by law, I certify and affirm that 24
to the best of my knowledge and belief this application is true and complete." A person who 25
submits a false application is guilty of a Class 1 misdemeanor. 26
The fee for filing an application for registration under this section is one hundred dollars 27
($100.00). The fee for filing an application for renewal of registration under this section is fifty 28
dollars ($50.00). The fee for filing an application for reinstatement of registration under this 29
section is fifty dollars ($50.00). 30
An application for renewal of registration under this section must indicate whether the 31
applicant is a minority business, as defined in G.S. 143-128, and include a report of the number 32
of jobs the business created during the preceding year that are attributable to investments that 33
qualify under this section for a tax credit and the average wages paid by each job. An application 34
that does not contain this information is incomplete an d the applicant's registration may not be 35
renewed until the information is provided. 36
(e) Revocation of Registration. – If the Securities Division of the Department of the 37
Secretary of State finds that any of the information contained in an application of a business 38
registered under this section is false, it shall revoke the registration of the business. The Secretary 39
of State shall not revoke the registration of a business solely because it ceases business operations 40
for an indefinite period of time, as lon g as the business renews its registration each year as 41
required under this section. 42
(f) Transfer of Registration. – A registration as a qualified business may not be sold or 43
otherwise transferred, except that if a qualified business enters into a merger, c onversion, 44
consolidation, or other similar transaction with another business and the surviving company 45
would otherwise meet the criteria for being a qualified business, the surviving company retains 46
the registration without further application to the Secretary of State. In such a case, the qualified 47
business must provide the Secretary of State with written notice of the merger, conversion, 48
consolidation, or similar transaction and the name, address, and jurisdiction of incorporation or 49
organization of the surviving company. 50
General Assembly Of North Carolina Session 2025
Page 14 Senate Bill 1056-First Edition
(g) Report by Secretary of State. – The Secretary of State shall report to the Revenue 1
Laws Study Committee by October 1 of each year all of the businesses that have registered with 2
the Secretary of State as qualified business ventures, qualified licensee businesses, and qualified 3
grantee businesses. The report shall include the name and address of each business, the location 4
of its headquarters and principal place of business, a detailed description of the types of business 5
in which it engages, whether the business is a minority business as defined in G.S. 143-128, the 6
number of jobs created by the business during the period covered by the report, and the average 7
wages paid by these jobs. 8
"§ 105-163.014. Forfeiture of credit. 9
(a) Participation in Business. – A taxpayer who has received a credit under this Part for 10
an investment in a qualifiedan eligible business forfeits the credit if, within three years after the 11
investment was made, the taxpayer participates in the operation of the qualified eligible business. 12
For the purpose of this section, a taxpayer participates in the operation of a qualifiedan eligible 13
business if the taxpayer, the taxpayer's spouse, parent, sibling, or child, or an employee of any of 14
these individuals or of a business controlled by any of these individuals, provides services of any 15
nature to the qualified eligible business for compensation, whether as an employee, a contractor, 16
or otherwise. However, a person who provides services to a qualifiedan eligible business, whether 17
as an officer, a member of the board of directors, or otherwise does not participate in its operation 18
if the person receives as compensation only reasonable reimbursement of expenses incurred in 19
providing the services, participation in a stock option or stock bonus plan, or both. 20
(b) False Application. – A taxpayer who has received a credit under this Part for an 21
investment in a qualified an eligible business forfeits the credit if the registration of the qualified 22
business is revoked because information in the registration application was false at the time the 23
application was filed with the Secretary of State.eligible business received assistance pursuant to 24
G.S. 143B-271.113 as a result of providing false information to the Office and as sistance was 25
withdrawn as a result. 26
(c) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 27
(d) Transfer or Redemption of Investment. – A taxpayer who has received a credit under 28
this Part for an investment in a qualifiedan eligible business forfeits the credit in the following 29
cases: 30
(1) Within one year three years after the investment was made, the taxpayer 31
transfers any of the securities received in the investment that qualified for the 32
tax credit to another person or entity, other than in a transfer resulting from 33
one of the following: 34
a. The death of the taxpayer. 35
b. A final distribution in liquidation to the owners of a taxpayer that is a 36
corporation or other entity. 37
c. A merger, conversion, consolidation, or similar transaction requiring 38
approval by the owners of the qualified eligible business under 39
applicable State law, to the extent the taxpayer does not receive cash 40
or tangible property in the merger, conversion, consolidation, or other 41
similar transaction. 42
(2) Except as provided in subsection (d1) of this section, within five three years 43
after the investment was made, the qualified eligible business in which the 44
investment was made makes a redemption with respect to the securities 45
received in the investment. 46
In the event the taxpayer transfers fewer than all the securities in a manner that would result 47
in a forfeiture, the amount of the credit that is forfeited is the product obtained by multiplying 48
the aggregate credit attributable to the investment by a fractio n whose numerator equals the 49
number of securities transferred and whose denominator equals the number of securities received 50
on account of the investment to which the credit was attributable. In addition, if the redemption 51
General Assembly Of North Carolina Session 2025
Senate Bill 1056-First Edition Page 15
amount is less than the amount invested by the taxpayer in the securities to which the redemption 1
is attributable, the amount of the credit that is forfeited is further reduced by multiplying it by a 2
fraction whose numerator equals the redemption amount and whose denominator equals the 3
aggregate amount invested by the taxpayer in the securities involved in the redemption. The term 4
"redemption amount" means all amounts paid that are treated as a distribution in part or full 5
payment in exchange for securities under section 302(a) of the Code. 6
(d1) Certain Redemptions Allowed. – Forfeiture of a credit does not occur under this 7
section if a qualified business venture that engages primarily in motion picture film production 8
makes a redemption with respect to securities received in an investment and the following 9
conditions are met: 10
(1) The redemption occurred because the qualified business venture completed 11
production of a film, sold the film, and was liquidated. 12
(2) Neither the qualified business venture nor a related person continues to engage 13
in business with respect to the film produced by the qualified business venture. 14
(e) Effect of Forfeiture. – A taxpayer who forfeits a credit under this section is liable for 15
all past taxes avoided as a result of the credit plus interest at the rate establ ished under 16
G.S. 105-241.21, computed from the date the taxes would have been due if the credit had not 17
been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a 18
taxpayer who fails to pay the past taxes and interes t by the due date is subject to the penalties 19
provided in G.S. 105-236. 20
"§ 105-163.015. Sunset. 21
This Part is repealed effective for investments made on or after January 1, 2014." 22
SECTION 3. Appropriations. – There is appropriated from the General Fund to the 23
Department of Commerce the sum of fifty million dollars ($50,000,000) in recurring funds 24
beginning with the 2026 -2027 fiscal year to establish and implement the North Carolina Small 25
Business Capital Access Program. Funds appropriated by this act shall not revert but shall remain 26
available until expended. The Department shall allocate the funds as follows: 27
(1) $20,000,000 to the Small Business Loan Guarantee Program. 28
(2) $10,000,000 to the North Carolina Qualifying Business Growth Fund. 29
(3) $5,000,000 to the CDFI Support Initiative. 30
(4) $5,000,000 to the Small Business Technical Assistance Network. 31
(5) $5,000,000 to the State Procurement Financing Initiative. 32
(6) $4,000,000 to the Small Business Innovation Fund. 33
(7) $1,000,000 for administrative costs. 34
SECTION 4. Rulemaking. – The Department of Commerce shall adopt rules 35
necessary to implement the provisions of this Act. 36
SECTION 5. Severability. – If any provision of this act or its application is held 37
invalid, the invalidity does not affect other provisions or applications of this act that can be given 38
effect without the invalid provisions or application, and to this end the provi sions of this act are 39
severable. 40
SECTION 6. Effective Date. – This act becomes effective July 1, 2026. Within 60 41
days of the effective date of this act, the Secretary of Commerce shall appoint the Director of the 42
Office of Small Business Capital Access. W ithin 90 days of the effective date of this act, all 43
appointments to the Board shall be completed, and the Board shall hold its first meeting. Within 44
180 days of the effective date of this act, the Office shall develop and publish program guidelines 45
for all program components. Within one year of the effective date of this act, the Office shall 46
implement the Small Business Loan Guarantee Program, the CDFI Support Initiative, the Small 47
Business Technical Assistance Network; and a unified application system fo r all components. 48
Within two years of the effective date of this act, the Office shall implement the North Carolina 49
MWBE Growth Fund, the State Procurement Financing Initiative, and the initial regional 50
innovation hubs. 51