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2022
NORTH DAKOTA
SCHEDULE RZ BOOKLET
RENAISSANCE ZONE ACT
EXEMPTIONS AND TAX CREDITS
Photo credit:
ND Tourism
Schedule RZ is a supplemental form that must
be completed and attached to the North
Dakota tax return by taxpayers claiming an
income exemption or tax credit under the
North Dakota Renaissance Zone Act.
WWW.TAX.ND.GOV
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Renaissance Zone Program Where to get help
Under the Renaissance Zone Program (N.D.C.C. Ch. 40-63), a city may If you have questions about the
establish a renaissance zone, a designated area within the city in which income tax incentives under the Act or the
tax and property tax incentives are available to taxpayers who purchase, lease, completion of Schedule RZ:
or improve real estate in the zone, or invest in a renaissance fund organization.
Call
Division of Community Services Individuals 701-328-1247
The North Dakota Commerce Department’s Division of Community Services Partnerships, 701-328-1258
administers the establishment and operation of a zone. For information on S corporations
the Program in general, a list of North Dakota cities with an approved zone, trusts, and estates
and contact information for each zone city, contact the Division of Community C corporations 701-328-1249
Services as follows: and financial institutions
Website: www.communityservices.nd.gov Speech or hearing impaired—call
Phone: 701-328-5300 Relay North Dakota at
Office address: 1600 E. Century Avenue, Bismarck, ND 58503 1-800-366-6888
Reminders Email
The following apply to taxpayers claiming a tax incentive under the Renaissance Individuals, estates, trusts,
Zone Program: partnerships, and S corporations—
individualtax@nd.gov
• Tax incentive disclosure—If requested by the chairman of North Dakota’s C corporations and financial
Legislative Management or a standing committee of the North Dakota institutions—corptax@nd.gov
Legislature, the Tax Commissioner must disclose the amount of any tax
deduction or tax credit earned or claimed by a taxpayer. The taxpayer’s Write
name, federal identification number, or any other confidential information ND Office of State Tax Commissioner
will not be disclosed. This applies to deductions and credits earned or 600 E. Boulevard Ave., Dept. 127
claimed after July 31, 2017. Bismarck, ND 58505-0599
• State and local tax clearance requirements—Starting August 1, 2017, Website
certain state and local tax incentives may not be granted to, or claimed, tax.nd.gov
by a taxpayer unless the taxpayer has satisfied all state and local tax
obligations and tax liens of record for taxes owed to North Dakota or a
political subdivision. In certain cases, a taxpayer may have to obtain a
state or local tax clearance record. For more information, see the State
and Local Tax Clearance Requirements Guideline on the Office of State Tax
Commissioner’s website.
Contents
Renaissance Zone Program ........................................................ This page
Where to get help ..................................................................... This page
General information ..............................................................................1
General and specific instructions for:
Part 1: Business or investment income exemption .................................3
Part 2: Business purchase or expansion tax credit ................................6
Part 3: Single-family residence tax credit ............................................8
Part 4: Historic property preservation or renovation tax credit ................9
Part 5: Renaissance fund organization investment tax credit ..................9
Part 6: Nonparticipating property owner credit ................................... 10
Instructions for calculating the zone apportionment factor .................... 11
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
Taxpayer—means an individual, For certain projects, the Division
estate, trust, corporation, of Community Services will issue
2022 passthrough entity, or other entity a preliminary approval letter. The
subject to North Dakota income tax purpose of the preliminary letter is
Schedule RZ
under N.D.C.C. Ch. 57-38. to allow the taxpayer to proceed with
instructions Zone—means a state-approved the eligible transaction or begin the
renaissance zone created under the rehabilitation work. The final zone
General information Act. project approval letter is issued after
the Division of Community Services
Zone project—means a qualifying
determines that the project has
Purpose of form transaction with respect to a parcel
satisfied the criteria for eligibility.
Schedule RZ is a supplemental of property that is approved by both
schedule that must be completed by a the local zone authority and the North Passthrough entity. In the case of
taxpayer claiming any of the income Dakota Commerce Department’s a passthrough entity, the copy of the
tax incentives available under the Division of Community Services. zone project approval letter must be
North Dakota Renaissance Zone Act. Zone project property—means the attached to the passthrough entity’s
All five pages of Schedule RZ must portion of a parcel of property that income tax return. The owners of
be attached to the taxpayer’s North has been approved as a zone project. the passthrough entity do not attach
Dakota income tax return. a copy of the zone project approval
letter to their North Dakota tax
Eligibility for tax incentives
returns.
For detailed information about Except for the tax credit for investing
the available income tax in a renaissance fund organization,
incentives under the Act, see the eligibility for the tax incentives is Passthrough entity
Renaissance Zone Tax Incentives dependent on having a zone project. If the taxpayer is a passthrough
Guideline on the Office of State entity, the amount of the exemption
Tax Commissioner’s website at Zone project or credit must be determined at the
www.tax.nd.gov. A taxpayer must apply to the local passthrough entity level and passed
zone authority for approval of a through to the owners according to
Definitions proposed transaction as a zone their respective interests in the entity.
Unless stated otherwise in these project. For more information on Schedule RZ must be completed by
instructions, the following definitions eligible transactions and how to apply the entity and attached to Form 58
apply: for a zone project, contact the local or Form 60. The total amount of the
zone authority for the zone in which exemption or credit must be reported
Act—means the Renaissance Zone the project will be located prior to on Schedule K of the applicable
Act under North Dakota Century Code entering the transaction. return. Each owner’s share of the
Ch. 40 -63. exemption or credit must be reported
Local zone authority—means the Zone project approval letter on North Dakota Schedule K-1.
governing body of the city in which Upon final approval of a zone See the instructions to Form 58 or
the zone is located, or the entity project, the North Dakota Commerce Form 60 for more information.
designated by the city governing body Department’s Division of Community Exception for certain
to promote, develop, and manage the Services will issue a final zone project S corporations. In the case of an
zone. approval letter to the local zone S corporation that is being taxed as
Parcel of property—means a authority, a copy of which is also a C corporation under an election
specific piece of real property provided to the taxpayer. Among pursuant to N.D.C.C. § 57-38-01.35,
consisting of land and the other things, the letter will include the the business or investment income
buildings, fixtures, structures, and following: exemption under the Act is claimed
improvements affixed to the land. • Project number assigned to the as a deduction on the corporation’s
Passthrough entity—means project by the local zone authority. North Dakota income tax return
(Form 40) and is passed through
an S corporation, limited • Description of the tax incentive(s)
to its shareholders according to
liability company not taxed as a allowed for the project. (This
their respective interests in the
corporation, general partnership, does not include any property tax
corporation. The credits under the
limited partnership, limited liability exemption that may be granted at
Act, however, may not be passed
partnership, limited liability limited the local government level.)
partnership, or similar entity that through to the shareholders. On or
passes its income, deductions, and • The starting date of the 5-year before the due date or extended due
credits to its owners. However, it does exemption or credit period, if date of Form 40, the corporation must
not include a cooperative or a real applicable. provide each of its shareholders with
estate investment trust. The information in the final zone a notice containing the following:
Renaissance fund organization— project approval letter will be needed • The heading: Renaissance Zone
means an entity established by a city to complete Schedule RZ. A copy Shareholder Notice.
for the sole purpose of raising funds of the final zone project approval
to invest in and provide financing letter must be attached to the North
to zone projects and other projects Dakota income tax return along with
located in a renaissance zone. Schedule RZ.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
• The statement: This notice Priority of exemptions 1. Tax credits that may not be
contains information that is and credits carried back or carried forward to
important to the preparation of A taxpayer may qualify for more than another tax year.
your North Dakota income tax one tax incentive under the Act. If a 2. Tax credits that may be carried
return. For instructions on how taxpayer qualifies for both an income back.
to report this information on your exemption and a tax credit under 3. Tax credits that may be carried
North Dakota income return, the Act, the income exemption must forward.
obtain Schedule RZ from the be applied first to determine North
North Dakota Office of State Tax Dakota taxable income. Then the Note: In the case of an individual,
Commissioner. Attach a copy of tax credit must be subtracted from the credit for income tax paid to
this notice to your North Dakota the tax calculated on North Dakota another state must be applied first in
income tax return. taxable income. all cases.
• Name, address, and federal
employer identification number Multiple income exemptions Property tax clearance
(FEIN) of the corporation. If a business qualifies for both the requirement
business income exemption under North Dakota Century Code
• Tax year of the corporation to the Act and the new or expanding § 57-01-15.1 provides that, before
which the income exemption business income exemption under certain state tax incentives may be
relates. N.D.C.C. Ch. 40-57.1, the following claimed, a taxpayer must obtain a
• Name and social security number steps apply: property tax clearance record from
(or FEIN) of the shareholder.
1. Choose which of the two each North Dakota county in which
• Shareholder’s share of the exemptions to apply first. the taxpayer holds a 50 percent
business or investment income or more ownership interest in real
exemption. 2. Calculate the amount of the
exemption to be applied first by property. The property tax clearance
Passthrough entity owner. If you multiplying the total North Dakota record(s) must be attached to the
own an interest in a passthrough net income of the business by the North Dakota income tax return
entity, the entity must provide you first exemption’s apportionment on which the incentive is claimed.
with a North Dakota Schedule K-1 factor (see “Apportionment The income exemptions and tax
showing your share of the entity’s factor” below). credits claimed on Schedule RZ are
subject to this requirement. For more
income exemption or tax credit. 3. Subtract the amount of the first information and the procedure for
However, if you are a shareholder exemption (determined in step 2) meeting this requirement, see the
of an S corporation that elected from the total North Dakota instructions to the applicable North
to be taxed as a C corporation net income of the business to Dakota income tax form as follows:
under N.D.C.C. § 57-38-01.35, you determine the amount of the
will receive a Renaissance Zone North Dakota net income that In the case See instructions to:
Shareholder Notice instead of a North remains. of:
Dakota Schedule K-1, which will Form ND-1 Sch. ND-1SA (exemption)
show your share of the corporation’s 4. Calculate the amount of the or Sch. ND-1TC (credit)
income exemption only. exemption to be applied
second by multiplying the Form 38 Form 38, Tax Computation
Schedule (exemption) or
If you receive a North Dakota remaining North Dakota net Sch. 38-TC (credit)
Schedule K-1 or Renaissance Zone income (determined in step 3)
Shareholder Notice, claim your share by the second exemption’s Form 40 Form 40, pg. 1 (exemption)
or Sch. TC (credit)
of the income exemption or tax credit apportionment factor (see
on your North Dakota income tax “Apportionment factor” below). Form 58 Schedule K
return as follows: Form 60 Schedule K
Apportionment factor. For purposes
1. Enter your share of the exemption of steps 2 and 4, the exemption’s Disclosure notification
or credit on the applicable line of apportionment factor means the Upon written request from the
Schedule RZ. A separate line is chairman of a North Dakota legislative
provided in Parts 1, 4, 5, and 6 of • Zone apportionment factor in
Schedule RZ on which to report the case of the business income standing committee or Legislative
an exemption or tax credit passed exemption under the Renaissance Management, the law requires the
through to you by a passthrough Zone Act. See page 11 for details. Office of State Tax Commissioner to
disclose the amount of any deduction
entity. Also complete Part 7 of • Apportionment factor prescribed
or credit claimed on a tax return.
Schedule RZ. under N.D. Admin. Code
Any other confidential information,
2. Attach Schedule RZ and a copy § 81-03-01.1-06 in the case of the
such as a taxpayer’s name, social
of the North Dakota Schedule K-1 new or expanding business income
security number, or federal employer
or Renaissance Zone Shareholder exemption under N.D.C.C.
identification number, may not be
Notice to your North Dakota Ch. 40-57.1.
disclosed.
income tax return. Multiple tax credits
If you qualify for more than one
tax credit under North Dakota law
(including the Act), the credits must
be applied in the following order:
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
Change in qualifying use. If the Investment use property. If the
zone project property ceases to be zone project property is used for
used for its qualifying business or investment purposes, the amount
Instructions for investment purpose, the taxpayer is of the exemption equals the actual
Part 1 ineligible for the exemption starting net income derived from the zone
with the first day of the month in project property during the portion of
which the property’s use changes. the tax year the taxpayer is eligible
Business or for the exemption. For this purpose,
Transfer of zone project property. investment income means:
investment income The business or investment income
exemption exemption and its 60-month • Net rental income from the lease
exemption period attach to the of the property.
General instructions zone project property. If the zone • Taxable portion of a gain from the
project property is transferred sale or exchange of the property
Who should complete to another taxpayer before the during the exemption period.
Complete Part 1 if the incentive property’s 60-month exemption In the case of an installment
allowed for the zone project, as period expires, the exemption and sale contract, the taxpayer may
specified in the zone project approval the unused portion of the 60-month exempt the taxable portion of the
letter, is the business or investment exemption period transfer with the gain recognized in each tax year
income exemption. property. The taxpayer who transfers over the life of the contract, even
If there is more than one project the property is ineligible for the though the 60-month exemption
for which this exemption is allowed, exemption starting on the first day period or the renaissance
complete a separate Schedule RZ, of the month of disposition. If the zone itself expires before all
Part 1, for each project. property is transferred to a taxpayer installments are received.
who also qualifies for the business or However, interest income derived
The business or investment income investment income exemption with from the installment sale contract
exemption may be claimed on the respect to the property, the taxpayer is not eligible for the exemption.
following forms— acquiring the property is eligible for
In the case of a(n): Form the exemption for the unexpired The exemption is allowed only to
Individual ND-1 portion of the 60-month exemption the extent that the investment
Estate or trust 38 period starting on the first day of the income is included in North Dakota
C corporation 40 month of acquisition. taxable income. In addition, if the
zone project primarily consists of an
expansion of an existing building,
If the taxpayer is a passthrough Amount of income
the exemption amount is limited
entity, see “Passthrough entity” on exemption to an amount attributable to the
page 1. The amount of income that may be expanded portion of the building. See
Optional credit election. If certain exempted is dependent on whether the instructions to Part 1, line 16, of
conditions are met, an individual the zone project property is used for Schedule RZ for the calculation of the
(Form ND-1) filer who qualifies for business or investment purposes. exemption amount.
the business income exemption may The property is considered used for
elect to claim a tax credit in lieu of business purposes if it is used in an Maximum exemption amount per
the business income exemption. See occupation, trade, profession, or year. In any tax year, a taxpayer
the instructions to Part 2 (Business commercial or mercantile enterprise. may exempt no more than $500,000
purchase or expansion tax credit) Property is used for investment of eligible income derived from
on page 6 for details. If the election purposes if the property is not part zone projects approved on or after
is made, do not complete Part 1; of or used in the regular course August 1, 2013. The eligible income
instead, complete Part 2. of any trade or business of the amounts attributable to zone projects
taxpayer. Unless a taxpayer can approved on or after August 1, 2013,
Five-year exemption period show otherwise, any property that is that are derived from all business
The exemption is allowed in each purchased, leased, or rehabilitated by and investment interests held by the
year of a five-year exemption period a passthrough entity will be presumed taxpayer during the tax year must
that begins on the date specified in to be used for business purposes. be combined for purposes of this
limitation.
the zone project approval letter. The Business use property. If the
five-year exemption period is a period zone project property is used for
of sixty consecutive months. Once the business purposes, the amount of the Specific line
60-month exemption period begins to exemption depends on the location of instructions
run, it runs uninterrupted through the the real property (owned or leased)
end of the 60-month period. by the business, the portion of the • If the taxpayer directly owns or
The exemption is allowed over tax year the taxpayer is eligible for leases the zone project property,
the entire 60-month exemption the exemption, and whether or not complete lines 1 through 17 of
period even though the life of the the zone project primarily consists of Part 1.
renaissance zone itself expires before the expansion of an existing building.
the end of the 60-month period. See the instructions to Part 1, lines 8
through 15, of Schedule RZ for the
calculation of the exemption amount. 3
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
• If the taxpayer owns an interest project. This date does not change of Schedule FACT, Form 60),
in a passthrough entity, and even if the property is transferred and all of the shareholders are
Part 1 of Schedule RZ is being to another taxpayer. See “Five-year full-year nonresidents of North
completed only to claim the exemption period” on page 3 for more Dakota, multiply the amount from
taxpayer’s share of a business information. Form 60, Schedule KS, line 1, by
or investment income exemption the apportionment factor from
amount shown on a North Dakota Line 8 Form 60, Schedule FACT, line 14,
Schedule K-1 received from the North Dakota business income and enter the result.
passthrough entity, skip lines 1 If the corporation’s shareholders
through 17, and enter the If the taxpayer qualified for the
exemption amount on lines 18 and investment income exemption, do include both residents and
19 of Part 1. Include a copy of the not enter any of the investment nonresidents of North Dakota,
North Dakota Schedule K-1 with income on this line—see line 16. calculate the amount to enter on
this line by combining the amounts
Schedule RZ. See “Passthrough If the taxpayer is claiming both calculated for the shareholders as
entity owner” on page 2 of the business income exemption follows:
these instructions for more under the Act and the new or
information. expanding business income Full-year resident individual,
exemption under N.D.C.C. estate, or trust—Include the
Line 1 Ch. 40-57.1, see “Multiple income shareholder’s amount from
Enter the project number assigned exemptions” on page 2 before Form 60, Schedule KS, Column 5.
to the zone project by the local zone completing this line. Full-year nonresident
authority, as shown on the final zone individual, estate, or trust—
project approval letter. If the taxpayer If the business incurred a net loss, Include the shareholder’s amount
does not have a copy of the final zone enter zero. Otherwise, enter a net from Form 60, Schedule KS,
project approval letter, contact the income as follows: Column 6.
local zone authority to obtain one. • Resident individual—For a Part-year resident individual—
Attach a copy of the final zone resident individual filing North Include the sum of the
project approval letter to the Dakota Form ND-1, enter the shareholder’s amounts attributable
North Dakota return. amount from Federal Form 1040, to the resident and nonresident
Schedule C or Schedule C-EZ. portions of the tax year. To
Line 3 calculate the amount for the
• Nonresident or part-year
Enter the street address of the resident portion of the tax year,
resident individual—For a
zone project property. Include the multiply the shareholder’s amount
nonresident or part-year resident
apartment, suite, or other unit from Form 60, Schedule KS,
individual filing North Dakota
number, if applicable. Do not enter a Column 5, by a ratio equal to the
Form ND-1, enter the amount
post office box number. number of months the shareholder
from Schedule ND-1NR, line 3,
Column B. was a resident of North Dakota
Line 4 divided by 12 months. To calculate
If the taxpayer qualified for more • C corporation—For a
than one zone project at the same C corporation filing North Dakota the amount for the nonresident
street address, check the “Yes” box Form 40, enter the amount portion of the tax year, first
and enter the project numbers for all from Form 40, page 1, line 6. multiply the shareholder’s amount
of them on the line provided on the However, if Schedule CR was from Form 60, Schedule KS,
schedule. completed, enter the amount from Column 5, by a ratio equal to the
Schedule CR, Part 1, line 6 of the number of months the shareholder
Note: If the taxpayer has more applicable column. was a nonresident of North
than one zone project for which the Dakota divided by 12 months,
• S corporation—For an
taxpayer qualifies for the business and then multiply this result by
S corporation filing North
or investment income exemption, the apportionment factor from
Dakota Form 60 that carries on
complete a separate Schedule RZ, Form 60, Schedule FACT, line 14.
100 percent of its business in
Part 1, for each project. Add the • Partnership—For a partnership
North Dakota, enter the amount
separately calculated amounts and filing North Dakota Form 58
from Form 60, Schedule KS,
enter the total in Part 7, line 1, of one that carries on 100 percent of
line 1.
of the schedules. its business in North Dakota,
Regardless of where the enter the amount from Form 58,
Line 7 corporation carries on its business, Schedule KP, line 1.
Enter the exemption period start date if all of its shareholders are full-
for the zone project, as shown on year residents of North Dakota, Regardless of where the
the final zone project approval letter. enter the amount from Form 60, partnership carries on its business,
This date establishes the beginning of Schedule KS, line 1. if all of its partners are individuals,
estates, and trusts that are full-
the five-year (60-month) exemption If the corporation carries on its year residents of North Dakota,
period that applies to the zone business both within and without enter the amount from Form 58,
North Dakota (and is required Schedule KP, line 1.
to complete lines 1 through 14
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
If the partnership carries on its sole proprietorship, enter the a qualified rehabilitation (see line 5,
business both within and without net income from Schedule C item d). If the primary purpose of the
North Dakota (and is required to or Schedule C-EZ (Form 1040) zone project is to make improvements
complete lines 1 through 14 of attached to Federal Form 1041. to, or rehabilitate, the existing
Schedule FACT, Form 58), and all Note: For a nonresident estate or building, and any expansion of the
of the partners are individuals, trust, enter only that portion of existing building is only incidental to
estates, and trusts that are the net income from Schedule C or the larger project, the zone project
full-year nonresidents of North Schedule C-EZ (Form 1040) that is will not be considered an expansion
Dakota, multiply the amount from attributable to North Dakota. for purposes of this limitation. In this
Form 58, Schedule KP, line 1, by case, skip lines 11a and 11b, and
the apportionment factor from Lines 9a through 9h enter “1.000000” on line 11c. Then
Form 58, Schedule FACT, line 14, Zone apportionment factor go to line 12.
and enter the result. (business income only)
If the partnership’s partners If all of the taxpayer’s business Lines 14a through 14c
include different types of real property in North Dakota is Exemption period limitation
partners—resident individual, located at the zone project location, (business income only)
nonresident individual, skip lines 9a through 9g and enter Full-year eligibility. If the taxpayer
corporation, etc.—calculate the “1.000000” on line 9h. Then go to is eligible for the exemption for
amount to enter on this line by line 10. the entire tax year, skip lines 14a
combining the amounts calculated and 14b, and enter “1.000000” on
for the partners as follows: If only a portion of the taxpayer’s
business real property in North line 14c. Then go to line 15. This
Full-year resident individual, Dakota is located at the zone project applies if all of the following apply:
estate, or trust—Include the location, complete lines 9a through 9g • The taxpayer is eligible for the
partner’s amount from Form 58, to calculate the zone apportionment business income exemption as of
Schedule KP, Column 5. factor to enter on line 9h. The the beginning of the tax year. See
Full-year nonresident instructions for lines 9a through 9g “Five-year exemption period” on
individual, estate, trust— are on page 11 of these instructions. page 3.
Include the partner’s amount from
Form 58, Schedule KP, Column 6. Real property includes leaseholds, • The taxpayer used the zone
i.e., real property that the taxpayer is project property in the business
Part-year resident individual— leasing and using in the business. for the entire tax year.
Include the sum of the partner’s
amounts attributable to the If the zone project consists of the • The 60-month exemption period
resident and nonresident portions lease of space in a building for did not expire during the tax year.
of the tax year. To calculate the business purposes, and the taxpayer This condition is satisfied if the
amount for the resident portion had previously qualified for a zone 60th month of the exemption
of the tax year, multiply the project for leasing space in the period falls in the last month of
partner’s amount from Form 58, same building for use in the same the tax year or later.
Schedule KP, Column 5, by a ratio business, complete lines 9a through Partial year eligibility. The
equal to the number of months the 9h. For purposes of completing taxpayer is eligible for the business
partner was a resident of North lines 9a through 9h, do not include income exemption for only part of the
Dakota divided by 12 months. the previously leased space or its tax year if any of the following apply:
To calculate the amount for contents in Column B (Zone project
the nonresident portion of property location). • The taxpayer became eligible for
the tax year, first multiply the the business income exemption
partner’s amount from Form 58, Lines 11a through 11c during the tax year in a month
Schedule KP, Column 5, by a ratio Expansion limitation factor other than the first month of the
equal to the number of months the (business income only) tax year. See “Five-year exemption
partner was a nonresident of North If the primary purpose of the zone period” on page 3.
Dakota divided by 12 months, project is the expansion of an existing • The taxpayer sold the zone project
and then multiply this result by building that the taxpayer owned property, terminated the lease
the apportionment factor from and used for business purposes prior on the zone project property, or
Form 58, Schedule FACT, line 14. to applying for the zone project, permanently withdrew the zone
Corporation partner—If complete lines 11a through 11c. For project property from use in the
a partner is a corporation, this purpose, an “expansion” means business during the tax year.
contact the Office of State Tax adding physical square footage to • The maximum 60-month
Commissioner, Corporation Income an existing building to increase the exemption period allowed for the
Tax Section, for information on amount of usable space within the zone project property expired
how to determine the amount to building. during the tax year, and the 60th
include. Generally, the type of qualifying month is a month other than the
• Fiduciary—For a fiduciary transaction which may involve an last month of the tax year.
filing North Dakota Form 38 expansion is a purchase with major
that operates a business as a improvements (see line 5, item b) or
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
If any of the above conditions apply, Expansion project limitation. If
complete lines 14a through 14c the primary purpose of the zone
to calculate an exemption period project is the expansion of an existing
eligibility factor. Enter on line 14a the building that the taxpayer owned and Instructions for
smaller of the following: used for investment purposes prior Part 2
to applying for the zone project, the
• Number of months the taxpayer
amount of the exemption is limited.
was eligible for the exemption Business purchase
For this purpose, an “expansion”
during the tax year.
means adding physical square footage or expansion tax
• Number of months the taxpayer to an existing building to increase the
owned or leased the zone project amount of usable space within the credit
property during the tax year. If the building.
taxpayer acquired the zone project General instructions
property during the tax year, Generally, the type of qualifying
include the month of acquisition. transaction which may involve an Who should complete
If the taxpayer disposed of the expansion is a purchase with major Complete Part 2 only if all of the
zone project property during the improvements (see line 5, item b) or following conditions are met:
tax year, exclude the month of a qualified rehabilitation (see line 5, • The taxpayer is an individual
disposition. item d). (Form ND-1) filer with a zone
• Number of months the zone If the primary purpose of the zone project that qualified for the
project property was used in the project is to make improvements to, business income exemption.
business during the tax year. If or rehabilitate, the existing building, • The zone project consists of a
the taxpayer put the zone project and any expansion of the existing purchase, lease, or improvement
property into use in the business building is only incidental to the larger of real property used in a business
during the tax year, include the project, the zone project will not be owned and operated as a sole
month in which the zone project considered an expansion for purposes proprietorship by the individual.
property was first put into use of this limitation. • The underlying purpose of the
in the business. If the taxpayer zone project is to purchase,
If the expansion project limitation
removed the zone project property expand, or make leasehold
applies, complete the following
from use in the business during improvements to the business.
worksheet to calculate the amount to
the tax year, exclude the month
enter on this line:
in which the zone project property • The zone project is located in
a renaissance zone city with a
was permanently removed from 1. Total eligible
population of no more than 2,500.
use in the business. investment income 1__________
• The zone project’s cost is over
2. Square footage
$75,000.
Line 16 added by project ....2__________
North Dakota investment income • The individual elects to claim the
If the taxpayer qualified for the 3. Total square footage
business purchase or expansion
investment income exemption, enter of building after
credit in lieu of the business
the following on this line: expansion .............3__________
income exemption (in Part 1 of
4. Divide line 2 by Schedule RZ).
• Rents, less related expenses, from line 3 ...................4__________
the zone project property received Making the election. To make
during the months the taxpayer 5. Investment income
the election, complete Part 2 of
was eligible for the exemption exemption. Multiply
Schedule RZ and attach Schedule RZ
during the tax year. line 1 by line 4.
to Form ND-1. Do not complete
Enter this amount
Part 1. For the election to be valid,
• Taxable portion of a gain from on line 16 of
Form ND-1 must be filed on or before
the sale or exchange of the Part 1 ...................5__________
zone project property during the its due date or extended due date.
exemption period. In the case The election is irrevocable and binding
of an installment sale contract, over the zone project’s five-year
the taxpayer may exempt the exemption period.
taxable portion of the gain
recognized in each tax year over Amount of tax credit
the life of the contract, even The tax credit is equal to $2,000 per
though the exemption period or year over a five-year credit period—
renaissance zone expires before see “Five-year credit period” below. If
all installments are received. the credit exceeds the individual’s tax,
However, interest income derived the unused portion is not refundable
from the installment sale contract and may not be carried over and used
is not eligible for the exemption. on a subsequent tax year’s return.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
Five-year credit period Line 2 Partial-year eligibility. The
The credit is allowed in each year of a Enter the project number assigned taxpayer is eligible for the credit for
five-year credit period that begins on to the zone project by the local zone only part of the tax year if any of the
the same date the business income authority, as shown on the final zone following apply:
exemption begins, as specified in the project approval letter. If the taxpayer
• The taxpayer became eligible for
zone project approval letter. The five- does not have a copy of the final zone
the credit during the tax year in a
year credit period is a period of sixty project approval letter, contact the
month other than the first month
consecutive months, consisting of five local zone authority to obtain one.
of the tax year. See “Five-year
12-month periods. A $2,000 credit Attach a copy of the final zone credit period” on page 6 for more
is allowed in each 12-month period. project approval letter to the information.
With respect to the individual’s tax North Dakota return. • The taxpayer ceases to use the
year, if the individual is not eligible
zone project property for business
for the credit for the entire tax year, Line 4 purposes during the tax year.
a credit of $166.67 ($2,000 divided Enter the street address of the zone
• The 60-month credit period
by 12) is allowed for each month of project property. Include the suite
expired during the tax year, and
eligibility during the tax year. or unit number, if applicable. Do not
the 60th month is not the last
Once the 60-month credit period enter a post office box number.
month of the tax year.
begins to run with respect to the
zone project property, it runs Line 5 If any of the above conditions apply,
uninterrupted through the end of the If the taxpayer qualified for more enter on line 9 the smaller of the
60-month credit period. The credit than one zone project at the same following:
is allowed over the entire 60-month street address, check the “Yes” box
credit period even if the renaissance and enter the project numbers for all • Number of months the taxpayer
zone itself expires. If the property is of them on the line provided on the was eligible for the credit during
permanently withdrawn from business schedule. the tax year.
use, the individual is ineligible for • Number of months the taxpayer
the credit starting on the first day of Line 8 owned or leased the zone project
the month in which the withdrawal Enter the five-year exemption period property during the tax year. If the
occurs. start date for the zone project, as taxpayer acquired the zone project
shown on the final zone project property during the tax year,
Transfer of zone project property. approval letter. This date establishes include the month of acquisition.
The tax credit and its 60-month credit the beginning of the five-year credit If the taxpayer disposed of the
period attach to the zone project period that applies to the zone project zone project property during the
property. If the property is transferred property. This date does not change tax year, exclude the month of
to another individual before the end even if the property is transferred disposition.
of the 60-month credit period, the to another taxpayer. See “Five-year • Number of months the zone
individual transferring the property credit period” on page 6 for more project property was used in the
is ineligible for the credit starting information. business during the tax year. If
with the month of disposition. If the
the taxpayer put the zone project
property is transferred to another Line 9 property into use in the business
qualifying individual before the end Credit period limitation during the tax year, include the
of the 60-month credit period, the
individual acquiring the property Full-year eligibility. If the taxpayer month in which the zone project
is eligible for the credit for the is eligible for the credit for the entire property was first put into use
unexpired portion of the 60-month tax year, enter “12” on line 9 and go in the business. If the taxpayer
credit period. to line 10. The taxpayer is eligible for removed the zone project property
the credit for the entire tax year if all from use in the business during
of the following apply: the tax year, exclude the month
Specific line in which the zone project property
• The taxpayer was eligible for was permanently removed from
instructions the credit as of the beginning use in the business.
of the tax year. See “Five-year
Line 1
credit period” on page 6 for more
Fill in the circle on this line to indicate
information.
eligibility for the credit in Part 2,
Schedule RZ, and to irrevocably • The taxpayer used the zone
elect to take the credit in lieu of the project property in the business
business income exemption in Part 1, for the entire tax year.
Schedule RZ. • The 60-month credit period did
not expire during the tax year.
This applies if the 60th month of
the credit period falls in the last
month of the tax year or later.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
Change in primary place of • The taxpayer was eligible for the
residence. If an individual who credit as of the beginning of the
Instructions for qualifies for the tax credit with tax year. See “Five-year credit
respect to a single-family residence period” on page 7.
Part 3 ceases to use it as the primary • The taxpayer used the zone
place of residence, i.e., as the legal project property as his or her
Single-family residence, during the five-year credit primary place of residence for the
period, the individual is ineligible for entire tax year.
residence tax the tax credit starting with the first
credit day of the month in which the change • The 60-month credit period did
occurs. not expire during the tax year.
This applies if the 60th month of
General instructions the credit period falls in the last
Who should complete Specific line month of the tax year or later.
Complete Part 3 if the incentive instructions Partial-year eligibility. The
allowed for the zone project, as taxpayer is eligible for the credit for
specified in the zone project approval Line 1 only part of the tax year if any of the
letter, is the single-family residence Enter the project number assigned following apply:
tax credit. This credit is only allowed to the zone project by the local zone
to an individual on Form ND-1. authority, as shown on the final zone • The taxpayer became eligible for
project approval letter. If the taxpayer the credit during the tax year in a
Five-year credit period does not have a copy of the final zone month other than the first month
The credit is allowed in each year of project approval letter, contact the of the tax year. See “Five-year
a five-year credit period. The five- local zone authority to obtain one. credit period” on page 7.
year credit period is a period of sixty Attach a copy of the final zone • The taxpayer sold or otherwise
consecutive months, consisting of project approval letter to the disposed of the residence during
five 12-month periods. The $10,000 North Dakota return. the tax year.
credit is allowed in each of the five • The taxpayer established another
12-month periods. If the individual Line 3 residence as his or her primary
is not eligible for the tax credit for Enter the street address of the zone place of residence during the tax
the entire tax year, a credit equal to project property. Do not enter a year.
$833.33 ($10,000 divided by 12) is post office box number.
• The 60-month credit period
allowed for each month of eligibility expired during the tax year, and
during the tax year. Line 4
If the taxpayer qualified for more the 60th month is not the last
Once the 60-month credit period than one zone project at the same month of the tax year.
begins to run, it runs uninterrupted street address, check the “Yes” box
through the end of the 60-month and write the project numbers for all If any of the above conditions apply,
credit period. The credit is allowed of them on the line provided on the enter on line 10 the smaller of the
over the entire 60-month credit schedule. following:
period even if the renaissance zone • Number of months the taxpayer
itself expires before the end of the Line 9 is eligible for the credit during the
60-month credit period. Enter the five-year credit period tax year.
Transfer of zone project property. start date for the zone project, as • Number of months the taxpayer
The tax credit and its five-year shown on the final zone project owned and occupied the residence
credit period attach to the single- approval letter. This date establishes during the tax year. If the
family residence. If the residence the beginning of the five-year credit taxpayer acquired the residence
is transferred to another taxpayer period that applies to the zone project during the tax year, include the
before the five-year credit period property. This date does not change month in which the taxpayer
expires, the tax credit and the unused even if the property is transferred took title to the residence or first
portion of the five-year credit period to another taxpayer. See “Five-year occupied it, whichever occurs
transfer with the property. The credit period” on page 7. last. If the taxpayer disposed of
individual who transfers the residence the residence during the tax year,
is ineligible for the tax credit starting Line 10 exclude the month of disposition.
with the month of disposition. If the Credit period limitation
• Number of months the residence
residence is transferred to another Full-year eligibility. If the taxpayer was used as the primary place of
individual who also qualifies for is eligible for the tax credit for the residence.
the tax credit with respect to the entire tax year, enter “12” on line 10
residence, the individual acquiring the and go to line 11. The taxpayer is
property is eligible for the tax credit eligible for the credit for the entire tax
for the unexpired portion of the five- year if all of the following apply:
year credit period starting with the
month of acquisition.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
entity owner” on page 2 of Line 11
these instructions for more Carryforward to 2023
Instructions for information. If the total available tax credit on
line 9 exceeds the amount on line 10,
Part 4 Line 1 enter on this line the portion of the
Enter the project number assigned excess that is eligible for carryover to
Historic property to the zone project by the local zone the 2023 tax year.
authority, as shown on the final zone
Except for passthrough entities,
preservation or project approval letter. If the taxpayer
attach a statement showing how
renovation tax does not have a copy of the final zone
the amount entered on this line
project approval letter, contact the
was determined.
credit local zone authority to obtain one.
Attach a copy of the final zone
General instructions project approval letter to the
North Dakota return.
Who should complete Instructions for
Complete Part 4 if the incentive Line 3
allowed for the zone project, as Enter the street address of the project Part 5
specified in the zone project approval property. Include the apartment,
letter, is the historic property suite, or other unit number, if Renaissance
preservation or renovation tax credit. applicable. Do not enter a post
fund organization
This credit may be claimed on the office box number.
following forms: investment tax
Line 4
In the case of a(n): Form If the taxpayer qualified for more credit
Individual ND-1 than one zone project at the same
Estate or trust 38 street address, check the “Yes” box General instructions
C corporation 40 and write the project numbers for all Who should complete
If the taxpayer is a passthrough of them on the line provided on the Complete Part 5 if the taxpayer
entity, see “Passthrough entity” on schedule. made a qualifying investment in
page 1. Note: If the taxpayer has more a renaissance fund organization
than one zone project for which the (RFO), as evidenced by receipt of
When to claim credit taxpayer qualifies for the historic a North Dakota Renaissance Fund
The first year the tax credit must be property preservation or renovation Organization Investment Reporting
claimed is the tax year in which the tax credit, complete a separate Form from the RFO.
preservation or renovation work is Schedule RZ for each project. Add This credit may be claimed on the
completed, as specified in the final the separately calculated amounts following forms—
zone project approval letter. If the and enter the total in Part 7, line 4,
entire credit cannot be used in the tax of one of the schedules. In the case of a(n): Form
year in which it is first claimed, the Individual ND-1
unused credit may be carried over for Line 7 Estate or trust 38
up to five tax years. Enter a historic property preservation C corporation 40
or renovation tax credit from a If the taxpayer is a passthrough
Specific line North Dakota Schedule K-1. See entity, see “Passthrough entity” on
“Passthrough entity” on page 1 for page 1.
instructions more information. Attach a copy of
• If the taxpayer directly owns the the North Dakota Schedule K-1.
When to claim credit
zone project property, complete The first year the tax credit must
lines 1 through 11 of Part 4. Line 10
Current year credit be claimed is the tax year in which
• If the taxpayer owns an interest Enter on this line the portion of the the investment was made. The date
in a passthrough entity, and total available tax credit on line 9 of the investment is shown on the
Part 4 of Schedule RZ is being that is being used to reduce the 2022 investment reporting form. If the
completed only to claim the tax liability. If there is a tax credit entire credit cannot be used in the tax
taxpayer’s share of the historic carryforward from a prior tax year year in which it is first claimed, the
property preservation or on line 8, use the credits in the order unused credit may be carried over for
renovation tax credit shown on that is most beneficial. up to five tax years.
a North Dakota Schedule K-1
received from the passthrough If the taxpayer is a passthrough
entity, skip lines 1 through 6c entity, enter the total amount from
and complete lines 7 through 11 line 9, and skip line 11. Except
of Part 4. Include a copy of the for passthrough entities, attach
North Dakota Schedule K-1 with a statement showing how the
Schedule RZ. See “Passthrough amount entered on this line was
determined.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
Disqualifying redemption through 3, and complete lines 4
The tax credit is disallowed and through 8 of Part 5. Include
must be repaid to the state by a a copy of the North Dakota Instructions for
taxpayer if the taxpayer originally Schedule K-1 with Schedule RZ.
made the investment and redeems See Passthrough entity owner” Part 6
the investment within ten years of on page 2 of these instructions
making it. For this purpose, “redeem” for more information. Nonparticipating
means that the taxpayer initiates a
transaction with the RFO in which the Line 1 property owner
taxpayer receives cash or property Enter the name of the renaissance credit
in return for the stock or other zone city having the renaissance fund
investment interest. A disqualifying organization in which the taxpayer General instructions
redemption does not occur if a made the investment. This city will
taxpayer transfers part or all of an be identified on the North Dakota Who should complete
investment interest to a third party, Renaissance Fund Organization Complete Part 6 if the incentive
nor does it occur if the RFO initiates Investment Reporting Form allowed for the zone project, as
the transaction. received from the renaissance fund specified in the zone project approval
organization. letter, is the nonparticipating property
If there is a disqualifying redemption, owner credit.
the RFO must complete another Line 4
This credit may be claimed on the
North Dakota Renaissance Fund Enter an RFO investment tax credit
following forms:
Organization Investment Reporting from a North Dakota Schedule K-1.
Form and submit it to the Office of See “Passthrough entity” on page 1 In the case
State Tax Commissioner. A copy of for more information. Attach a copy of a(n): Form
the completed form must be given to of the North Dakota Schedule K-1. Individual Form ND-1
the taxpayer. Estate or trust 38
Repayment of disallowed credit. Line 7 C corporation 40
A credit disallowed as the result of Current year credit
a disqualifying redemption must be Enter on this line the portion of the If the taxpayer is a passthrough
repaid to the state. The repayment total available tax credit on line 6 entity, see “Passthrough entity” on
must be made with the North Dakota that is being used to reduce the 2022 page 1.
income tax return filed for the tax liability. If there is a tax credit
tax year in which the redemption carryforward from a prior tax year When to claim credit
occurred. No penalty or interest on line 5, use the credits in the order The first year the tax credit must be
applies to a timely repayment of that is most beneficial. claimed is the tax year in which the
related zone project is completed,
the disallowed credit. Do not file an If the taxpayer is a passthrough as specified in the final zone
amended return or use Schedule RZ entity, enter the total amount from project approval letter issued to the
to report the redemption. line 6, and skip line 8. Except for nonparticipating property owner. If
If a taxpayer makes a passthrough entities, attach the entire credit cannot be used in the
disqualifying redemption, the a statement showing how the tax year in which it is first claimed,
taxpayer must contact the Office amount entered on this line was the unused credit may be carried over
of State Tax Commissioner for determined. for up to five tax years.
instructions on how to report the
redemption on the North Dakota Line 8
tax return. Carryforward to 2023 Specific line
If the total available tax credit on instructions
line 6 exceeds the amount on line 7,
Specific line enter on this line the portion of the • If the taxpayer directly owns the
instructions excess that is eligible for carryover to zone project property, complete
the 2023 tax year. lines 1 through 10 of Part 6.
• If the taxpayer made the • If the taxpayer owns an interest in
investment, complete lines 1 Except for passthrough entites,
a passthrough entity, and Part 6
through 8 of Part 5. attach a statement showing how
of Schedule RZ is being completed
• If the taxpayer owns an interest in the amount entered on this line
only to claim the taxpayer’s
a passthrough entity, and Part 5 was determined.
share of the nonparticipating
of Schedule RZ is being completed property owner tax credit shown
only to claim the taxpayer’s on a North Dakota Schedule K-1
share of the renaissance fund received from the passthrough
organization investment tax entity, skip lines 1 through 5
credit shown on a North Dakota and complete lines 6 through 10
Schedule K-1 received from the of Part 6. Include a copy of the
passthrough entity, skip lines 1
10
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
North Dakota Schedule K-1 with Property used in the business.
Schedule RZ. See “Passthrough Property is used in the business if it
entity owner” on page 2 of Instructions is actually used, available for use, or
these instructions for more capable of being used in the regular
information. for calculating course of the business during the tax
period. This includes the following:
the zone
Line 1
• Inventoriable goods in process.
Enter the project number assigned apportionment
to the zone project by the local zone • Property held as reserves or
authority, as shown on the final zone factor standby facilities, or property held
project approval letter. If the taxpayer (for Part 1, lines 9a-9h) as a reserve source of materials.
does not have a copy of the final zone • Property under construction
project approval letter, contact the General instructions if actually used in the regular
local zone authority to obtain one. course of the business, but
Attach a copy of the final zone These instructions explain how to
only to the extent of the value
project approval letter to the calculate the zone apportionment
attributable to its use. In the case
North Dakota return. factor for Part 1, lines 9a through 9h.
of an improvement to an existing
business that is approved as a
Line 3 Factor in general
zone project, personal property
Enter the street address of the The zone apportionment factor is a
that is purchased for purposes of
nonparticipating property owner’s fraction composed of the following:
the improvement and becomes
project property. Include the • Numerator (Column B) an integral part of the business
apartment, suite, or other unit The numerator includes the real property is excluded from the
number, if applicable. Do not enter a average value of the owned and zone factor until completion of the
post office box number. rented properties that are used improvement project.
at the business’s zone project
Property required to be included in
Line 4 location.
the zone apportionment factor must
If the taxpayer qualified for more Exception for certain rented remain in the zone apportionment
than one zone project at the same property. If the zone project factor until its permanent withdrawal
street address, check the “Yes” box consists of the rental of space in is established by an identifiable event,
and write the project numbers for all a building for business purposes, such as its sale or the lapse of an
of them on the line provided on the and the taxpayer had previously extended period of time (normally
schedule. qualified for a zone project for five years) during which the property
renting space in the same building is held for sale.
Line 6 for use in the same business, do
Enter a nonparticipating property not include in the numerator the Property used at zone project
owner credit from a North Dakota space leased for the previous zone location. Property is included in the
Schedule K-1. See “Passthrough project and any owned or rented numerator of the zone apportionment
entity” on page 1 for more property located in that space. factor if it is physically located and
information. Attach a copy of the used at the zone project location.
North Dakota Schedule K-1. • Denominator (Column A)
Property in transit on the last day of
The denominator includes the
the tax year and mobile or movable
Line 9 average value of all owned and
property is considered to be located
Current year credit rented properties used in the
and used at the zone project location
Enter on this line the portion of the business in North Dakota.
in the following situations:
total available tax credit on line 8 Determining average value of
• The property is in transit between
that is being used to reduce the property. See the specific line
separate physical locations of the
2022 tax liability. If the taxpayer is instructions for lines 9a through
same business and the property’s
a passthrough entity, enter the total 9g later in this section for how to
destination is the zone project
amount from line 8, and skip line 10. determine the average value of the
location.
Except for passthrough entities, property.
attach a statement showing how • The property is in transit between
the amount entered on this line Property includable in zone a buyer and seller and, based on
was determined. apportionment factor. The zone the taxpayer’s regular accounting
apportionment factor must include practices, is included in the
Line 10 all North Dakota real and tangible denominator of the zone factor,
Carryforward to 2023 personal property owned and rented and the property’s final destination
If the total available tax credit on that is used in the regular course of is the zone project location.
line 8 exceeds the amount on line 9, the taxpayer’s business during the tax
enter on this line the portion of the period.
excess that is eligible for carryover Real and tangible personal property
to the 2023 tax year. Except for includes land, buildings, machinery,
passthrough entities, attach stocks of goods, equipment, and
a statement showing how the other tangible property. It does not
amount entered on this line was include coin and currency.
determined. 11
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
• The mobile or movable property, Monthly averaging exception. Net annual rental rate. The net
such as construction equipment, If the averaging method described annual rental rate for an item of
trucks, or leased electronic above does not properly reflect the rented property equals the annual
equipment, is assigned to the zone average value of the property, the tax rental rate paid less any subrents
project location. This includes an commissioner may require or allow received from subtenants. If the
automobile assigned to a traveling averaging on a monthly basis. This taxpayer received subrents, the
employee who is assigned to the method will generally be applied in following apply:
zone project location. the following situations:
• Do not deduct the subrents from
• There are substantial fluctuations the annual rental rate if they
Specific line in the values of the property constitute income earned in the
during the tax year. regular course of the business.
instructions
• The property is acquired after the • If the subrents produce a negative
Lines 9a through 9e beginning of the tax year. or clearly inaccurate value for
In Column A (Total North Dakota any item of rented property,
• The property is disposed of before
property), enter on the applicable line another method that properly
the end of the tax year.
the average value of the business’s reflects the value of the rented
tangible assets that are owned property may be required by the
Example of monthly averaging
and located in North Dakota. In tax commissioner or requested by
Assume the following property values
Column B (Zone project property the taxpayer. For this purpose, the
determined as of the end of each
only), enter the portion of the amount resulting value must not be less
month:
in Column A that is physically located than an amount which bears the
and used at the zone project location. January $ 2,000 same ratio to the annual rental
See “Exception for certain rented February 2,000 rate paid for the rented property
property” under “Factor in general” March 3,000 as the fair market value of that
for treatment of tangible assets April 3,500 portion of the rented property
owned and located in certain rented May 4,500 used by the taxpayer bears to
property. the total fair market value of the
June 10,000
Determining the average value July 15,000 rented property.
of owned property. The average August 17,000 Annual rental rate. Generally, the
value of owned property must be September 23,000 annual rental rate means the amount
determined by adding the original October 25,000 paid as rent for the rented property
cost (or other basis used for federal November 13,000 for a twelve month period. If the
income tax purposes) of the property property is rented for a term of less
December 2,000
as properly reported on the books of than twelve months, the annual
the business on the first and last days Total $ 120,000
rental rate equals the rent paid for
of the tax year and dividing the sum The average value of the property for the actual rental term during the
by two. the tax year is $10,000 ($120,000 tax year. If property is rented for a
Depreciation, amortization, and divided by 12). term of twelve or more months and
depletion must be disregarded. the current tax year covers a period
Include capital additions or Line 9f of less than twelve months because
improvements made during the tax Rented property of a reorganization or change of
year in this calculation. Also note the For rented property, enter in accounting period, etc., the rent
following: Column A (Total North Dakota paid for the short tax year must be
property) the amount determined by annualized.
• Inventory of stock of goods must multiplying the net annual rental rate
Rent. Rent means the actual sum
be valued using the valuation by eight. In Column B (Zone project
of money or other consideration
method used for federal income property only), enter the portion
payable, directly or indirectly, by the
tax purposes. of the amount in Column A that is
taxpayer or for the taxpayer’s benefit
• Property acquired by gift or attributable to the rented property
for the use of the rented property,
inheritance must be valued at its physically located and used at the
including the following:
basis for depreciation purposes zone project location. See “Exception
under federal income tax law. for certain rented property” under • Any amount payable for the
• Leasehold improvements are “Factor in general.” use of real or tangible personal
considered property owned Note: Leasehold improvements property, or any part thereof,
by the lessee regardless of are considered property owned by whether designated as a fixed sum
whether the lessee is entitled the lessee regardless of whether of money or as a percentage of
to remove the improvements or the lessee is entitled to remove the sales, profits, or otherwise.
the improvements revert to the improvements or the improvements • Any amount payable as additional
lessor when the lease expires. revert to the lessor when the lease rent or in lieu of rent, such as
Value at the original cost of the expires. See the instructions to interest, taxes, insurance, repairs
improvements. lines 9a through 9e. or any other items which are
required to be paid by the terms
of the lease or other arrangement.
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North Dakota Office of State Tax Commissioner 2022 Schedule RZ instructions
This does not include an amount Rent does not include incidental Exception to net annual rental
paid as a service charge, such as day-to-day expenses, such as hotel rate method. If the use of the net
for utilities or janitorial services. accommodations or daily automobile annual rental rate method produces
If a payment includes both rent rentals. a negative or clearly inaccurate
and other unsegregated charges, value, or where rented property is
the amount of rent must be used by the taxpayer at no charge
determined by considering the or rented at a nominal rate, the net
relative values of the rent and the annual rental rate for the property
other items. must be determined on the basis of a
reasonable market rental rate for the
property.
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