The Hustle Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 651

Short Title: The Hustle Act. (Public)
Sponsors: Senators Garrett, Batch, and Salvador (Primary Sponsors).
Referred to: Rules and Operations of the Senate
March 26, 2025
*S651-v-1*
A BILL TO BE ENTITLED 1
AN ACT HELPING UNDER SERVED SMALL -BUSINESS TRIUMPH THROUGH 2
LENDING ENHANCEMENT. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. Article 10 of Chapter 143B of the General Statutes is amended by 5
adding a new Part to read: 6
"Part 20A. 7
"Small Business Capital Access. 8
"§ 143B-271.113. Small Business Capital Access Act. 9
(a) Title. – This Part shall be known and may be cited as the "North Carolina Small 10
Business Capital Access Act." 11
(b) Findings. – The General Assembly finds as follows: 12
(1) Small businesses and MWBEs are vital to North Carolina's economy, creating 13
jobs and driving innovation throughout the State. 14
(2) Despite their importance, these businesses face persistent barriers to accessing 15
capital necessary for startup, operation, and growth. 16
(3) Existing capital access programs have gaps that leave many qualified 17
businesses unable to secure necessary financing. 18
(4) Targeted interventions have proven successful in other states and countries in 19
addressing these capital access disparities. 20
(5) North Carolina has an opportunity to strengthen its economy by implementing 21
a coordinated strategy to expand capital access for small businesses and 22
MWBEs. 23
(c) Purpose. – The purpose of this Act is to establish a comprehensive framework to 24
expand access to capital for small businesses and Minority and Women -Owned Business 25
Enterprises throughout North Carolina through coordinated loan guarantees, direct investment, 26
support for community lenders, technical 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 651-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) MWBE. – A minority or women -owned business enterprise certified by the 4
North Carolina Office for Historically Underutilized Businesses. 5
(7) Office. – The Office of Small Business Capital Access. 6
(8) Program. – The North Carolina Small Business Capital Access Program. 7
(9) Small business. – A business that employs fewer than 500 full -time 8
employees. 9
(10) Technical assistance. – Professional guidance provided to business owners in 10
areas including but not limited to business planning, financial management, 11
marketing, operations, technology, and accessing capital. 12
(11) Underserved community. – A census tract that is designated as a low-income 13
community according to the most recent data from the U.S. Census Bureau or 14
is located in a rural area as defined by the North Carolina Rural Center. 15
(e) Office established, duties. – There is established within the Department of Commerce 16
the Office of Small Business Capital Access. The Office shall be headed by a Director appointed 17
by the Secretary of Commerce, who shall have substantial experience in small business financing, 18
economic development, or MWBE support. The Office shall fulfil the following 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 MWBEs. 24
(4) Conduct outreach to ensure par ticipation 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 Small 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
certified MWBE 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 Tempo re 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 651-First Edition Page 3
(6) Two members appointed by the General Assembly upon recommendation of 1
the Speaker of the House of Representatives, in cluding 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 Capital 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 ecos ystem. 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 MWBEs by reducing risk for private lenders. Required 17
guidelines for the Small Business Loan Guarantee Program include, but are 18
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 MWBEs; (ii) cover up to 90 percent of the loan 22
amount for MWBEs and up to 80 percent for other small businesses; 23
(iii) prioritize businesses that have been denied traditional financing 24
despite viable business models; (iv) establish maximum guarantee 25
amounts based on available funding; and (v) Require reasonable fees 26
to support program sustainability. 27
b. Eligible lenders are limited to (i) community banks; (ii) credit unions; 28
(iii) certified CDFIs; (iv) minority depository institutions; and (v) 29
other regulated financial institutions with small business lending 30
experience. 31
c. Eligible borrowers shall include small businesses and MWBEs that 32
meet all of the following requirements: 33
1. Are headquartered and operating in North Carolina. 34
2. Have been in operation for at least one year. 35
3. Demonstrate, to the satisfaction of the Office, sound business 36
practices and growth potential. 37
4. Have been unable to secure adequate financing through 38
conventional channels. 39
5. Will use loan proceeds for business purposes approved by the 40
Office, including working capital, equipment, inventory, or 41
expansion. 42
d. The Office shall develop a streamlined application process for lenders 43
and borrowers. 44
e. The Office shall establish a loan loss reserve to cover potential 45
defaults. 46
(2) The North Carolina MWBE Growth Fund shall function to provide equity and 47
near-equity capital to growth-stage MWBEs. Required guidelines for the Fund 48
include, but are not limited to, the following: 49
a. The Fund shall function to (i) make direct investments in quali fied 50
MWBEs; (ii) focus on assisting businesses with proven business 51
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 651-First Edition
models seeking growth capital; (iii) structure investments as equity, 1
convertible debt, revenue -based financing, or other flexible 2
instruments; (iv) make investments ranging from two hundr ed fifty 3
thousand dollars ($250,000) to two million dollars ($2,000,000); (v) 4
require co -investment from private investors on terms to be 5
determined by the Office; (vi) prioritize investments that will create 6
quality jobs in North Carolina; and ( vii) Reinv est returns from 7
successful investments to ensure Fund sustainability. 8
b. The Office shall contract with an experienced fund manager selected 9
through a competitive process to manage the Fund, with oversight 10
from the Board. 11
c. The fund manager shall meet all of the following requirements: 12
1. Have demonstrated experience in MWBE investment. 13
2. Have a track record of successful investments in growth-stage 14
businesses. 15
3. Reflect the diversity of North Carolina in its leadership and 16
team. 17
4. Provide regular reports to the Office and Board on Fund 18
performance. 19
5. Provide post-investment support to portfolio companies. 20
(3) The CDFI Support Initiative to strengthen the capacity of Community 21
Development Financial Institutions serving North Carolina communities. 22
Required guidelines for the Initiative include, but are not limited to, the 23
following: 24
a. The Initiative shall function to (i) provide direct grants to certified 25
CDFIs operating in North Carolina; (ii) offer low-cost loan capital for 26
CDFI relending programs ; (iii) support capacity building for CDFI 27
operations; and (iv) facilitate partnerships between CDFIs and 28
traditional financial institutions. 29
b. Grant funds may be used for (i) loan loss reserves; (ii) operating 30
support; (iii) technology improvements; (iv) product development; 31
and (v) technical assistance capacity. 32
c. Priority shall be given to CDFIs that (i) primarily serve rural areas or 33
underserved urban communities; (ii) demonstrate strong performance 34
and financial management; (iii) show substantial len ding impact in 35
target communities; and (iv) leverage additional private capital. 36
d. Reporting on performance and grant funds shall be provided by 37
certified CDFIs as required by the Office. 38
(4) The Small Business Technical Assistance Network to ensure busin esses 39
receiving capital are prepared to use it effectively. Required guidelines for the 40
Network include, but are not limited to, the following: 41
a. The Initiative shall function to (i) provide business development 42
services to participants in all Program com ponents; (ii) coordinate 43
existing technical assistance providers throughout the State; (iii) fund 44
expanded capacity for high -performing providers; (iv) develop 45
specialized assistance for specific industries or business needs; and (v) 46
ensure services are accessible in all regions of the State. 47
b. Services provided shall include all of the following: 48
1. Business planning and financial management. 49
2. Market analysis and marketing strategy. 50
3. Operations and human resources support. 51
General Assembly Of North Carolina Session 2025
Senate Bill 651-First Edition Page 5
4. Technology adoption assistance. 1
5. Certification preparation for government contracting. 2
6. Capital readiness preparation. 3
c. The Office shall develop a simplified referral system to connect 4
businesses to appropriate services. 5
d. The Office shall track technical assistance outcomes and their 6
correlation with capital access program success. 7
(6) The State Procurement Financing Initiative to help small businesses and 8
MWBEs access the capital necessary to fulfill State contracts. Required 9
guidelines for the Initiative include, but are not limited to, the following: 10
a. The Initiative shall consist of the following: 11
1. A mobilization capital program providing short -term loans to 12
cover upfront costs of contract performance. 13
2. A factoring program allowing businesses to obtain immedi ate 14
payment on state contract invoices at favorable rates. 15
3. A bonding assistance program to help contractors secure 16
required performance and payment bonds. 17
4. A quickpay requirement mandating that all State agencies pay 18
approved invoices from small busin esses and MWBEs within 19
15 days. 20
b. Eligible businesses must (i) be certified as an MWBE or qualify as a 21
small business; (ii) have been awarded a contract with a State agency 22
or institution; and (iii) demonstrate the capacity to successfully 23
complete the contract with appropriate financial support. 24
c. The Office shall coordinate with the Division of Purchase and Contract 25
and other State contracting entities to implement the Initiative. 26
d. The guidelines created by the Office shall, for each program 27
component, including application procedures, maximum assistance 28
amounts, terms, and fees. 29
(7) The Small Business Innovation Fund to support innovative small businesses 30
with high growth potential. Required guidelines for the Fund include, but are 31
not limited to, the following: 32
a. The Fund shall function to (i) provide matching grants for recipients 33
of federal Small Business Innovation Research (SBIR) and Small 34
Business Technology Transfer (STTR) awards; (2) Support university 35
technology commercialization partnerships with small businesses; (3) 36
Fund regional innovation hubs in different parts of the state; and (4) 37
Provide proof -of-concept grants for promising innovations with 38
commercial potential. 39
b. The matching grant program shall: (1) Provide supplemental funding 40
of up to 50 percent of the federal award amount, not to exceed 41
$100,000; (2) Be available to North Carolina-based recipients of Phase 42
I SBIR or STTR awards; and (3) Include technical assistance to 43
support successful Phase II applications. 44
c. Regional innovation hubs shall: (1) Be established in partnership with 45
universities, community colleges, and private sector entities; (2) 46
Provide physical space, equipment, and resources for entrepreneurs; 47
(3) Offer specialized programming for innovative businesses; and ( 4) 48
Connect entrepreneurs with capital sources and business development 49
resources. 50
General Assembly Of North Carolina Session 2025
Page 6 Senate Bill 651-First Edition
d. The Office shall establish guidelines for each program component in 1
consultation with the North Carolina Board of Science, Technology & 2
Innovation. 3
(h) The North Carolina Small Business Capital Access Fund is established as a special 4
revenue fund in the Department of Commerce. The Fund shall consist of (i) appropriations by 5
the General Assembly; (ii) federal grant funds; (iii) private contributions and donations; (iv) loan 6
repayments and investment returns; (v) fees collected from program participants; and (vi) interest 7
earnings. The Fund shall be used exclusively for the purposes set forth in this section, including 8
reasonable administrative expenses. The Office shall establish separate accounts within the Fund 9
for different program components as necessary for proper financial management. 10
(i) The Office shall develop and implement a comprehensive evaluation framework to 11
measure the impact and effectiveness of the Program. Performance metrics shall include at least 12
(i) the number and demographics of businesses served by each program component; (ii) the 13
amount of capital deployed, by program component, geographic region, industry, and business 14
demographics; (iii) the number of jobs created and retained as a result of Program assistance; (iv) 15
business revenue growth following program participation; (v) the amount of follow -on capital 16
secured by participants; (vi) default rates and program sustainability; (vii) return on investmen t 17
of public funds; and (viii) the economic impact in underserved communities. The Office contract 18
for and procure an independent evaluation by a qualified external entity every three years and 19
shall submit an annual report to the Governor and General Assem bly by October 1, which shall 20
include all of the following: 21
(1) Detailed information on program activities and outcomes. 22
(2) Financial statements for the Fund. 23
(3) Analysis of program effectiveness. 24
(4) Recommendations for program improvements. 25
(5) Other information requested by the Board. 26
(6) A copy of the report produced as a result of the independent evaluation 27
required by this subsection in years in which it is produced." 28
SECTION 2. Tax Credit. – Part 5 of Article 4 of Subchapter I of Chapter 105 of the 29
General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten: 30
"Part 5. Tax Credits for Qualified Certain Business Investments. 31
"§ 105-163.010. Definitions. 32
The following definitions apply in this Part: 33
(1) Affiliate. – An individual or business that controls, is controlled by, or is under 34
common control with another individual or business. 35
(2) Business. – A corporation, partnership, limited liability company, association, 36
or sole proprietorship operated for profit. 37
(3) Control. – A person controls an entity if the person owns, directly or 38
indirectly, more than ten percent (10%) of the voting securities of that entity. 39
As used in this subdivision, the term "voting security" means a security that 40
(i) confers upon the holder the right to vote for the election of members of the 41
board of directors or similar governing body of the business or (ii) is 42
convertible into, or entitles the holder to receive upon its exercise, a security 43
that confers such a right to vote. A general p artnership interest is a voting 44
security. 45
(3a) Eligible investor. – A person subject to one or more of the following: 46
a. The franchise tax levied in Article 3 of this Chapter. 47
b. The income taxes levied in Article 4 of this Chapter. 48
c. The gross premiums tax levied in Article 8B of this Chapter. 49
(3b) Eligible business. – A business that (i) is registered with the Secretary of State 50
under G.S. 105-163.013, (ii) has received during the current year or any of the 51
General Assembly Of North Carolina Session 2025
Senate Bill 651-First Edition Page 7
preceding three years assistance from the Office of Small Business Capital 1
Access pursuant to G.S. 143B-271.113, (iii) is headquartered and primarily 2
operating in this State, (iv) has been in operation at least one year, (v) during 3
its most recent fiscal year before filing an application for registration under 4
G.S. 105 163.013, it had gross revenues, as determined in accordance with 5
generally accepted accounting principles, of five million dollars ($5,000,000) 6
or less on a consolidated basis, and (vi) has 100 or fewer full-time employees. 7
(4) Equity security. – Common stock, preferred stock, or an interest in a 8
partnership, or subordinated debt that is convertible into, or entitles the holder 9
to receive upon its exercise, commo n stock, preferred stock, or an interest in 10
a partnership. 11
(5) Financial institution. – A business that is (i) a bank holding company, as 12
defined in the Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841, et 13
seq., or its wholly owned subsidiary, (ii) registered as a broker -dealer under 14
the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a, et seq., or its wholly 15
owned subsidiary, (iii) an investment company as defined in the Investment 16
Company Act of 1940, 15 U.S.C. §§ 80a-1, et seq., whether or not it is required 17
to register under that act, (iv) a small business investment company as defined 18
in the Small Business Investment Act of 1958, 15 U.S.C. §§ 661, et seq., (v) 19
a pension or profit -sharing fund or trust, or (vi) a bank, savings institution, 20
trust company, financial services company, or insurance company. The term 21
does not include, however, a business, other than a small business investment 22
company, whose net worth, when added to the net worth of all of its affiliates, 23
is less than ten million dollars ($10,000,000). The term also does not include 24
a business that does not generally market its services to the public and is 25
controlled by a business that is not a financial institution. 26
(5a) Granting entity. – Any of the following: 27
a. A domestic or foreig n corporation that (i) is tax -exempt pursuant to 28
section 501(c)(3) of the Code, (ii) has as its principal purpose the 29
stimulation of the development of the biotechnology industry, and (iii) 30
in furtherance of that purpose has received, or is a successor in interest 31
to an organization that has received, direct appropriations from the 32
State in at least three fiscal years. 33
b. A domestic or foreign corporation that meets the following three 34
conditions: 35
1. It is tax-exempt pursuant to section 501(c)(3) of the Code, is a 36
private foundation pursuant to section 509 of the Code, or is an 37
affiliate of either of the foregoing. 38
2. It has as its principal purpose one of the following: conducting 39
research and development in, or stimulating the development 40
of, electronic, p hotonic, information, or other technologies, 41
which may include investing in companies that provide 42
research, development, products, or services in these 43
technologies. 44
3. It meets one of the following conditions: 45
I. It received direct appropriations in furt herance of one 46
of these purposes from the State in at least three fiscal 47
years. 48
II. It was organized to perform one of these purposes for 49
an organization that meets condition I of this 50
sub-subdivision. 51
General Assembly Of North Carolina Session 2025
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III. It is an affiliate of an entity that meets condit ion II of 1
this sub-subdivision. 2
c. An institute that (i) is administratively located within a constituent 3
institution of The University of North Carolina, (ii) is financed in part 4
by a domestic or foreign corporation that is tax -exempt pursuant to 5
section 501(c)(3) of the Code, (iii) has as a principal purpose the 6
stimulation of economic development based on the advancement of 7
science, engineering, and technology, and (iv) funds, either directly or 8
in collaboration with other entities, small businesses enga ging in 9
developing technology. 10
(6) North Carolina Enterprise Corporation. – A corporation established in 11
accordance with Article 3 of Chapter 53A of the General Statutes or a limited 12
partnership in which a North Carolina Enterprise Corporation is the only 13
general partner. 14
(7) Pass-through entity. – Defined in G.S. 105-228.90. 15
(7b) Qualified business. – A qualified business venture, a qualified grantee 16
business, or a qualified licensee business. 17
(8) Qualified business venture. – A business that (i) engages p rimarily in 18
manufacturing, processing, warehousing, wholesaling, research and 19
development, or a service -related industry, and (ii) is registered with the 20
Secretary of State under G.S. 105-163.013. 21
(9) Qualified grantee business. – A business that (i) is registered with the 22
Secretary of State under G.S. 105 -163.013, and (ii) has received during the 23
current year or any of the preceding three years a grant, an investment, or other 24
funding from a federal agency under the Small Business Innovation Research 25
Program administered by the United States Small Business Administration or 26
from a granting entity as defined in this section. 27
(9a) Qualified licensee business. – A business that meets all of the following 28
conditions: 29
a. It is registered with the Secretary of State under G.S. 105-163.013. 30
b. During its most recent fiscal year before filing an application for 31
registration under G.S. 105 -163.013, it had gross revenues, as 32
determined in accordance with generally accepted accounting 33
principles, of one million dolla rs ($1,000,000) or less on a 34
consolidated basis. 35
c. It has been certified by a constituent institution of The University of 36
North Carolina or a research university as currently performing under 37
a licensing agreement with the institution or university for the purpose 38
of commercializing technology developed at the institution or 39
university. For the purpose of this section, a research university is an 40
institution of higher education classified as a Doctoral/Research 41
University, Extensive or Intensive, in the m ost recent edition of "A 42
Classification of Institutions of Higher Education", the official report 43
of The Carnegie Foundation for the Advancement of Teaching. 44
(10) Real estate-related business. – A business that is involved in or related to the 45
brokerage, s elling, purchasing, leasing, operating, or managing of hotels, 46
motels, nursing homes or other lodging facilities, golf courses, sports or social 47
clubs, restaurants, storage facilities, or commercial or residential lots or 48
buildings is a real estate -related business, except that a real estate -related 49
business does not include (i) a business that purchases or leases real estate 50
from others for the purpose of providing itself with facilities from which to 51
General Assembly Of North Carolina Session 2025
Senate Bill 651-First Edition Page 9
conduct a business that is not itself a real estate -related business or (ii) a 1
business that is not otherwise a real estate -related business but that leases, 2
subleases, or otherwise provides to one or more other persons a number of 3
square feet of space which in the aggregate does not exceed fifty percent 4
(50%) of the number of square feet of space occupied by the business for its 5
other activities. 6
(10a) Related person. – A person described in one of the relationships set forth in 7
section 267(b) or 707(b) of the Code. 8
(11) Security. – A security as defined in Section 2(1) of the Securities Act of 1933, 9
15 U.S.C. § 77b(1). 10
(12) Selling or leasing at retail. – A business is selling or leasing at retail if the 11
business either (i) sells or leases any product or service of any nature from a 12
store or other location ope n to the public generally or (ii) sells or leases 13
products or services of any nature by means other than to or through one or 14
more other businesses. 15
(13) Service-related industry. – A business is engaged in a service-related industry, 16
whether or not it als o sells a product, if it provides services to customers or 17
clients and does not as a substantial part of its business engage in a business 18
described in G.S. 105 -163.013(b)(4). A business is engaged as a substantial 19
part of its business in an activity described in G.S. 105-163.013(b)(4) if (i) its 20
gross revenues derived from all activities described in that subdivision exceed 21
twenty-five percent (25%) of its gross revenues in any fiscal year or (ii) it is 22
established as one of its primary purposes to engage in any activities described 23
in that subdivision, whether or not its purposes were stated in its articles of 24
incorporation or similar organization documents. 25
(14) Subordinated debt. – Indebtedness that is not secured and is subordinated to 26
all other indebte dness of the issuer issued or to be issued to a financial 27
institution other than a financial institution described in subdivisions (5)(ii) 28
through (5)(v) of this section. Except as provided in G.S. 105-163.014(d1), 29
any portion of indebtedness that matures earlier than five three years after its 30
issuance is not subordinated debt. 31
"§ 105-163.011. Tax credits allowed. 32
(a) No Credit for Brokered Investments. – No credit is allowed under this section for a 33
purchase of equity securities or subordinated debt if a broker's fee or commission or other similar 34
remuneration is paid or given directly or indirectly for soliciting the purchase. 35
(b) Individuals. –Eligible Investors. – Subject to the limitations contained in 36
G.S. 105-163.012, an individual eligible investo r who purchases the equity securities or 37
subordinated debt of a qualified business an eligible business directly from that business is 38
allowed as a credit against the tax imposed by Part 2 of this Article for the taxable year an amount 39
equal to twenty -five percent (25%) of the amount invested. The aggregate amount of credit 40
allowed an individual eligible investor for one or more investments made in a single taxable year 41
under this Part, whether directly or indirectly as owner of a pass-through entity, may not be less 42
than t en thousand dollars ($10,000) and may not exceed fifty five hundred thousand dollars 43
($50,000).($500,000). The credit may not be taken for the year in which the investment is made 44
but may be taken for the taxable year beginning during the calendar year in which the application 45
for the credit becomes effective as provided in subsection (c) of this section. 46
(b1) Pass-Through Entities. – This subsection does not apply to a pass-through entity that 47
has committed capital under management in excess of five million dollars ($5,000,000) or to a 48
pass-through entity that is a qualified business or a North Carolina Enterprise Corporation. 49
Subject to the limitations provided in G.S. 105-163.012, a pass-through entity that purchases the 50
equity securities or subordinated debt of a qualified business directly from the business is eligible 51
General Assembly Of North Carolina Session 2025
Page 10 Senate Bill 651-First Edition
for a tax credit equal to twenty-five percent (25%) of the amount invested. The aggregate amount 1
of credit allowed a pass-through entity for one or more investments made in a single taxable year 2
under this Part, whether directly or indirectly as owner of another pass -through entity, may not 3
exceed seven hundred fifty thousand dollars ($750,000). The pass -through entity is not eligible 4
for the credit for the year in whic h the investment by the pass -through entity is made but is 5
eligible for the credit for the taxable year beginning during the calendar year in which the 6
application for the credit becomes effective as provided in subsection (c) of this section. 7
Each individual who is an owner of a pass -through entity is allowed as a credit against the 8
tax imposed by Part 2 of this Article for the taxable year an amount equal to the owner's allocated 9
share of the credits for which the pass -through entity is eligible under thi s subsection. The 10
aggregate amount of credit allowed an individual for one or more investments made in a single 11
taxable year under this Part, whether directly or indirectly as owner of a pass-through entity, may 12
not exceed fifty thousand dollars ($50,000). 13
If an owner's share of the pass-through entity's credit is limited due to the maximum allowable 14
credit under this section for a taxable year, the pass -through entity and its owners may not 15
reallocate the unused credit among the other owners. 16
(b2) Credit Bonus. – The credit allowed under this Part shall be increased by ten percent 17
(10%) of the credit amount if the amount generating the credit is invested in an eligible business 18
that is (i) located in a development tier one area or development tier two area , as defined in 19
G.S. 143B-437.08, (ii) an MWBE, as defined in G.S. X, or (iii) both. 20
(c) Application. – To be eligible for the tax credit provided in this section, the taxpayer 21
eligible investor must file an application for the credit with the Secretary. The application should 22
be filed on or before April 15 of the year following the calendar year in which the investment 23
was made. The Secretary may not accept an application filed after October 15 of the year 24
following the calendar year in which the investmen t was made. An application is effective for 25
the year in which it is timely filed. The application must be on a form prescribed by the Secretary 26
and must include any supporting documentation that the Secretary may require. If an investment 27
for which a credit is applied for was paid for other than in money, the taxpayer must include with 28
the application a certified appraisal of the value of the property used to pay for the investment. 29
The application for a credit for an investment made by a pass-through entity must be filed by the 30
pass-through entity. 31
(d) Penalties. – The penalties provided in G.S. 105-236 apply in this Part. 32
"§ 105-163.012. Limit; carry-over; ceiling; reduction in basis. 33
(a) The credit allowed a taxpayer under G.S. 105-163.011 may not exceed the amount of 34
income tax imposed by Part 2 of this Article for the taxable year reduced by the sum of all other 35
credits allowable except tax payments made by or on behalf of the taxpayer. The amount of 36
unused credit allowed under G.S. 105-163.011 may be c arried forward for the next five 37
succeeding years. 38
(b) The total amount of all tax credits allowed to taxpayers under G.S. 105-163.011 for 39
investments made in a calendar year may not exceed seven million five hundred thousand ten 40
million dollars ($7,500,000).($10,000,000). The Secretary of Revenue shall calculate the total 41
amount of tax credits claimed from the applications filed pursuant to G.S. 105-163.011(c). If the 42
total amount of tax credits claimed for investments made in a calendar year exc eeds this 43
maximum amount, the Secretary shall allow a portion of the credits claimed by allocating the 44
maximum amount in tax credits in proportion to the size of the credit claimed by each taxpayer. 45
(c) If a credit claimed under G.S. 105-163.011 is reduced as provided in this section, the 46
Secretary shall notify the taxpayer of the amount of the reduction of the credit on or before 47
December 31 of the year following the calendar year in which the investment was made. The 48
Secretary's allocations based on applications filed pursuant to G.S. 105-163.011(c) are final and 49
shall not be adjusted to account for credits applied for but not claimed. 50
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(d) The taxpayer's basis in the equity securities or subordinated debt acquired as a result 1
of an investment in a qualifiedan eligible business shall be reduced for the purposes of this Article 2
by the amount of allowable credit. "Allowable credit" means the amount of credit allowed under 3
G.S. 105-163.011 reduced as provided in subsection (c) of this section. 4
"§ 105-163.013. Registration. 5
(a) Repealed by Session Laws 1993, c. 443, s. 4. 6
(b) Qualified Business Ventures. – In order to qualify as a qualified business venture 7
under this Part, a business must be registered with the Securities Division of the Department of 8
the Secretary of State. To register, the business must file with the Secretary of State an application 9
and any supporting documents the Secretary of State may require from time to time to determine 10
that the business meets the requirements for registration as a qualified business venture. A 11
business meets the requirements for registration as a qualified business venture if all of the 12
following are true as of the date the business files the required application: 13
(1) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 14
(1a) Reserved for future codification purposes. 15
(1b) Either (i) it was organized after January 1 of the calendar year in which its 16
application is filed or (ii) during its most recent fiscal year before filing the 17
application, it had gross revenues, as determined in accordance with generally 18
accepted accounting principles, of five million dollars ($5,000,000) or less on 19
a consolidated basis. 20
(2) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 21
(3) It is organized to en gage primarily in manufacturing, processing, 22
warehousing, wholesaling, research and development, or a service -related 23
industry. 24
(4) It does not engage as a substantial part of its business in any of the following: 25
a. Providing a professional service as def ined in Chapter 55B of the 26
General Statutes. 27
b. Construction or contracting. 28
c. Selling or leasing at retail. 29
d. The purchase, sale, or development, or purchasing, selling, or holding 30
for investment of commercial paper, notes, other indebtedness, 31
financial instruments, securities, or real property, or otherwise make 32
investments. 33
e. Providing personal grooming or cosmetics services. 34
f. Offering any form of entertainment, amusement, recreation, or athletic 35
or fitness activity for which an admission or a membership is charged. 36
(5) It was not formed for the primary purpose of acquiring all or part of the stock 37
or assets of one or more existing businesses. 38
(6) It is not a real estate-related business. 39
The effective date of registration for a qualified business ve nture whose application is 40
accepted for registration is 60 days before the date its application is filed. No credit is allowed 41
under this Part for an investment made before the effective date of the registration or after the 42
registration is revoked. For th e purpose of this Article, if a taxpayer's investment is placed 43
initially in escrow conditioned upon other investors' commitment of additional funds, the date of 44
the investment is the date escrowed funds are transferred to the qualified business venture fr ee 45
of the condition. 46
To remain qualified as a qualified business venture, the business must renew its registration 47
annually as prescribed by rule by filing a financial statement for the most recent fiscal year 48
showing gross revenues, as determined in accor dance with generally accepted accounting 49
principles, of five million dollars ($5,000,000) or less on a consolidated basis and an application 50
for renewal in which the business certifies the facts required in the original application. 51
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Failure of a qualified business venture to renew its registration by the applicable deadline 1
shall result in revocation of its registration effective as of the next day after the renewal deadline, 2
but shall not result in forfeiture of tax credits previously allowed to taxpayers who invested in 3
the business except as provided in G.S. 105-163.014. The Secretary of State shall send the 4
qualified business venture notice of revocation within 60 days after the renewal deadline. A 5
qualified business venture may apply to have its registration reinstated by the Secretary of State 6
by filing an application for reinstatement, accompanied by the reinstatement application fee and 7
a late filing penalty of one thousand dollars ($1,000), within 30 days after receipt of the 8
revocation notice from the Secretary of State. A business that seeks approval of a new application 9
for registration after its registration has been revoked must also pay a penalty of one thousand 10
dollars ($1,000). A registration that has been reinstated is treated as if it had not been revoked. 11
If the gross revenues of a qualified business venture exceed five million dollars ($5,000,000) 12
in a fiscal year, the business must notify the Secretary of State in writing of this fact by filing a 13
financial statement showing the revenues of the business for that year. 14
(b1) Qualified Licensee Businesses. – In order to qualify as a qualified licensee business 15
under this Part, a business must be registered with the Securities Division of the Department of 16
the Secretary of State. To register, the business must file with the Secretary of State an application 17
and any supporting documents the Secretary of State may require from time to time to determine 18
that the business meets the requirements for registration as a qualified licensee business. The 19
requirements for registration as a qualified licensee business are set out in G.S. 105-163.010. 20
The effective date of registration for a qualified licensee business whose application is 21
accepted for registration is the filing date of its application. No cre dit is allowed under this Part 22
for an investment made before the effective date of the registration or after the registration is 23
revoked. 24
To remain qualified as a qualified licensee business, the business must renew its registration 25
annually as prescribed by rule by filing a financial statement for the most recent fiscal year 26
showing gross revenues, as determined in accordance with generally accepted accounting 27
principles, of one million dollars ($1,000,000) or less on a consolidated basis and an application 28
for renewal in which the business certifies the facts required in the original application. 29
Failure of a qualified licensee venture to renew its registration by the applicable deadline 30
results in revocation of its registration effective as of the next day after the renewal deadline, but 31
does not result in forfeiture of tax credits previously allowed to taxpayers who invested in the 32
business except as provided in G.S. 105-163.014. The Secretary of State shall send the qualified 33
licensee business notice of revocation within 60 days after the renewal deadline. A qualified 34
licensee business may apply to have its registration reinstated by the Secretary of State by filing 35
an application for reinstatement, accompanied by the reinstatement application fee and a l ate 36
filing penalty of one thousand dollars ($1,000), within 30 days after receipt of the revocation 37
notice from the Secretary of State. A business that seeks approval of a new application for 38
registration after its registration has been revoked must also pay a penalty of one thousand dollars 39
($1,000). A registration that has been reinstated is treated as if it had not been revoked. 40
If the gross revenues of a qualified business venture exceed one million dollars ($1,000,000) 41
in a fiscal year, the business mu st notify the Secretary of State in writing of this fact by filing a 42
financial statement showing the revenues of the business for that year. 43
(c) Qualified Grantee Businesses. – In order to qualify as a qualified grantee business 44
under this Part, a business must be registered with the Securities Division of the Department of 45
the Secretary of State. To register, the business must file with the Secretary of State an application 46
and any supporting documents the Secretary of State may require from time to time to determine 47
that the business meets the requirements for registration as a qualified grantee business. The 48
requirements for registration as a qualified grantee business are set out in G.S. 105-163.010. 49
The effective date of registration for a qualified gra ntee business whose application is 50
accepted for registration is the filing date of its application. No credit is allowed under this Part 51
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for an investment made before the effective date of the registration or after the registration is 1
revoked. 2
To remain qualified as a qualified grantee business, the business must renew its registration 3
annually as prescribed by rule by filing an application for renewal in which the business certifies 4
the facts demonstrating that it continues to meet the applicable requirements for qualification. 5
(d) Application Forms; Rules; Fees. – Applications for registration, renewal of 6
registration, and reinstatement of registration under this section shall be in the form required by 7
the Secretary of State. The Secretary of State may, b y rule, require applicants to furnish 8
supporting information in addition to the information required by subsections (b), (b1), and (c) 9
of this section. The Secretary of State may adopt rules in accordance with Chapter 150B of the 10
General Statutes that are needed to carry out the Secretary's responsibilities under this Part. The 11
Secretary of State shall prepare blank forms for the applications and shall distribute them 12
throughout the State and furnish them on request. Each application shall be signed by the owners 13
of the business or, in the case of a corporation, by its president, vice -president, treasurer, or 14
secretary. There shall be annexed to the application the affirmation of the person making the 15
application in the following form: "Under penalties presc ribed by law, I certify and affirm that 16
to the best of my knowledge and belief this application is true and complete." A person who 17
submits a false application is guilty of a Class 1 misdemeanor. 18
The fee for filing an application for registration under this section is one hundred dollars 19
($100.00). The fee for filing an application for renewal of registration under this section is fifty 20
dollars ($50.00). The fee for filing an application for reinstatement of registration under this 21
section is fifty dollars ($50.00). 22
An application for renewal of registration under this section must indicate whether the 23
applicant is a minority business, as defined in G.S. 143-128, and include a report of the number 24
of jobs the business created during the preceding year tha t are attributable to investments that 25
qualify under this section for a tax credit and the average wages paid by each job. An application 26
that does not contain this information is incomplete and the applicant's registration may not be 27
renewed until the information is provided. 28
(e) Revocation of Registration. – If the Securities Division of the Department of the 29
Secretary of State finds that any of the information contained in an application of a business 30
registered under this section is false, it shall revoke the registration of the business. The Secretary 31
of State shall not revoke the registration of a business solely because it ceases business operations 32
for an indefinite period of time, as long as the business renews its registration each year as 33
required under this section. 34
(f) Transfer of Registration. – A registration as a qualified business may not be sold or 35
otherwise transferred, except that if a qualified business enters into a merger, conversion, 36
consolidation, or other similar transaction with ano ther business and the surviving company 37
would otherwise meet the criteria for being a qualified business, the surviving company retains 38
the registration without further application to the Secretary of State. In such a case, the qualified 39
business must prov ide the Secretary of State with written notice of the merger, conversion, 40
consolidation, or similar transaction and the name, address, and jurisdiction of incorporation or 41
organization of the surviving company. 42
(g) Report by Secretary of State. – The Secretary of State shall report to the Revenue 43
Laws Study Committee by October 1 of each year all of the businesses that have registered with 44
the Secretary of State as qualified business ventures, qualified licensee businesses, and qualified 45
grantee businesses. The report shall include the name and address of each business, the location 46
of its headquarters and principal place of business, a detailed description of the types of business 47
in which it engages, whether the business is a minority business as defined i n G.S. 143-128, the 48
number of jobs created by the business during the period covered by the report, and the average 49
wages paid by these jobs. 50
"§ 105-163.014. Forfeiture of credit. 51
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(a) Participation in Business. – A taxpayer who has received a credit under this Part for 1
an investment in a qualifiedan eligible business forfeits the credit if, within three years after the 2
investment was made, the taxpayer participates in the operation of the qualified eligible business. 3
For the purpose of this section, a taxp ayer participates in the operation of a qualifiedan eligible 4
business if the taxpayer, the taxpayer's spouse, parent, sibling, or child, or an employee of any of 5
these individuals or of a business controlled by any of these individuals, provides services of any 6
nature to the qualified eligible business for compensation, whether as an employee, a contractor, 7
or otherwise. However, a person who provides services to a qualifiedan eligible business, whether 8
as an officer, a member of the board of directors, or otherwise does not participate in its operation 9
if the person receives as compensation only reasonable reimbursement of expenses incurred in 10
providing the services, participation in a stock option or stock bonus plan, or both. 11
(b) False Application. – A ta xpayer who has received a credit under this Part for an 12
investment in a qualified an eligible business forfeits the credit if the registration of the qualified 13
business is revoked because information in the registration application was false at the time the 14
application was filed with the Secretary of State.eligible business received assistance pursuant to 15
G.S. X as a result of providing false information to the Office and assistance was withdrawn as 16
a result. 17
(c) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7. 18
(d) Transfer or Redemption of Investment. – A taxpayer who has received a credit under 19
this Part for an investment in a qualifiedan eligible business forfeits the credit in the following 20
cases: 21
(1) Within one year three years after t he investment was made, the taxpayer 22
transfers any of the securities received in the investment that qualified for the 23
tax credit to another person or entity, other than in a transfer resulting from 24
one of the following: 25
a. The death of the taxpayer. 26
b. A final distribution in liquidation to the owners of a taxpayer that is a 27
corporation or other entity. 28
c. A merger, conversion, consolidation, or similar transaction requiring 29
approval by the owners of the qualified eligible business under 30
applicable State law, to the extent the taxpayer does not receive cash 31
or tangible property in the merger, conversion, consolidation, or other 32
similar transaction. 33
(2) Except as provided in subsection (d1) of this section, within five three years 34
after the investment was ma de, the qualified eligible business in which the 35
investment was made makes a redemption with respect to the securities 36
received in the investment. 37
In the event the taxpayer transfers fewer than all the securities in a manner that would result 38
in a forfeiture, the amount of the credit that is forfeited is the product obtained by multiplying 39
the aggregate credit attributable to the investment by a fraction whose numerator equals the 40
number of securities transferred and whose denominator equals the number of securities received 41
on account of the investment to which the credit was attributable. In addition, if the redemption 42
amount is less than the amount invested by the taxpayer in the securities to which the redemption 43
is attributable, the amount of the credit that is forfeited is further reduced by multiplying it by a 44
fraction whose numerator equals the redemption amount and whose denominator equals the 45
aggregate amount invested by the taxpayer in the securities involved in the redemption. The term 46
"redemption amount" means all amounts paid that are treated as a distribution in part or full 47
payment in exchange for securities under section 302(a) of the Code. 48
(d1) Certain Redemptions Allowed. – Forfeiture of a credit does not occur under this 49
section if a qualified business venture that engages primarily in motion picture film production 50
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makes a redemption with respect to securities received in an investment and the following 1
conditions are met: 2
(1) The redemption occurred because the qualified business venture completed 3
production of a film, sold the film, and was liquidated. 4
(2) Neither the qualified business venture nor a related person continues to engage 5
in business with respect to the film produced by the qualified business venture. 6
(e) Effect of Forfeiture. – A taxpayer who forfeits a credit under this section is liable for 7
all past taxes avoided as a result of the credit plus interest at the rate established u nder 8
G.S. 105-241.21, computed from the date the taxes would have been due if the credit had not 9
been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a 10
taxpayer who fails to pay the past taxes and interest by th e due date is subject to the penalties 11
provided in G.S. 105-236. 12
"§ 105-163.015. Sunset. 13
This Part is repealed effective for investments made on or after January 1, 2014." 14
SECTION 3. Appropriations. – There is appropriated from the General Fund to the 15
Department of Commerce the recurring sum of $50,000,000 for the 2025 -2026 fiscal year to 16
establish and implement the North Carolina Small Business Capital Access Program. Funds 17
appropriated by this act shall not revert but shall remain available until expen ded. The 18
Department shall allocate the funds as follows: 19
(1) $20,000,000 to the Small Business Loan Guarantee Program. 20
(2) $10,000,000 to the North Carolina MWBE Growth Fund. 21
(3) $5,000,000 to the CDFI Support Initiative. 22
(4) $5,000,000 to the Small Business Technical Assistance Network. 23
(5) $5,000,000 to the State Procurement Financing Initiative. 24
(6) $4,000,000 to the Small Business Innovation Fund. 25
(7) $1,000,000 for administrative costs. 26
SECTION 4. Rulemaking. – The Department of Commerce shall a dopt rules 27
necessary to implement the provisions of this Act. 28
SECTION 5. Severability. – If any provision of this act or its application is held 29
invalid, the invalidity does not affect other provisions or applications of this act that can be given 30
effect without the invalid provisions or application, and to this end the provisions of this act are 31
severable. 32
SECTION 6. Effective Date. – This act becomes effective July 1, 2026. Within 60 33
days of the effective date of this act, the Secretary of Commerce shall appoint the Director of the 34
Office of Small Business Capital Access. Within 90 days of the effective date of this act, all 35
appointments to the Board shall be completed, and the Board shall hold its first meeting. Within 36
180 days of the effective date of this act, the Office shall develop and publish program guidelines 37
for all program components. Within one year of the effective date of this act, the Office shall 38
implement the Small Business Loan Guarantee Program, the CDFI Support Initiative, the Small 39
Business Technical Assistance Network; and a unified application system for all components. 40
Within two years of the effective date of this act, the Office shall implement the North Carolina 41
MWBE Growth Fund, the State Procurement Financing Initiative, and th e initial regional 42
innovation hubs. 43