40% of qualified rehabilitation expenditures in a tier one or two county, with no per-project cap — and contrary to most of what is published online, the program is open. Here is how it actually works.
Most published summaries of North Carolina’s mill credit are out of date. They describe a program that closed to new applications on January 1, 2015 — which was true for six years and has not been true since November 18, 2021. If you passed on a North Carolina mill because the mill credit “expired,” the economics deserve a second look. Jump to a section:
| Quick Facts — NC Mill Rehabilitation Credit (Article 3H) | |
|---|---|
| Income-producing rate | 40% of QREs in a development tier 1 or 2 area; 30% in a tier 3 area (G.S. 105-129.71(a)) |
| Non-income-producing rate | 40% of rehabilitation expenses, tier 1 or 2 only — no credit in tier 3 (G.S. 105-129.72) |
| Minimum spend | $3,000,000 of qualified rehabilitation expenditures ($10,000,000 for the railroad station credit) |
| Per-project cap | None. Unlike Article 3L, Article 3H has no dollar cap — the only limit is annual tax liability, with a nine-year carryforward (G.S. 105-129.73) |
| Tier locked | The county’s tier is fixed as of the date of the eligibility certification, so a tier change afterward does not reduce the credit |
| When claimed | In the year the site is placed in service; phased projects claim by phase. Non-income-producing: five equal installments |
| Tax credited | A binding election among franchise, income, or gross premiums tax — the election also governs carryforwards |
| Sunset | Project must be completed and placed in service before January 1, 2030 (G.S. 105-129.75(a)) |
The rate difference is the whole story. A $20 million mill rehabilitation in a tier one county generates $8 million of state credit under Article 3H. The same project under Article 3L — the general historic credit — generates a graduated credit capped at $4.5 million. On large mills the mill credit is worth roughly twice as much, and the gap widens as the budget grows.
We confirm the county tier and the eligibility tests before your budget locks, run the Article 3H against Article 3L comparison in dollars, structure the binding tax election around the investor’s actual liability, and place the federal-plus-state package. Moxie Investment Funds invests in qualifying North Carolina mill projects.
Model my mill under Article 3HOfficial references: N.C. Gen. Stat. Article 3H, §§105-129.70 through 105-129.75A; S.L. 2021-180 §42.7; NC Department of Revenue.
| Eligibility & Process | |
|---|---|
| Prior use | Manufacturing or ancillary to manufacturing, agricultural-products warehouse, or public/private utility |
| Historic status | Certified historic structure or State-certified historic structure |
| Vacancy test | At least 80% vacant for at least two years before the eligibility certification — stricter than Article 3L’s 65% targeted-investment test |
| Certifications | An eligibility certification and a cost certification, both from the State Historic Preservation Officer, filed with the Secretary of Revenue |
| Application fee | Statutorily capped at 1% of completed qualifying rehabilitation expenditures |
| Federal credit | Required for the income-producing credit; the non-income-producing credit is available only where the federal §47 credit is not allowed |
| Recapture | Five-year change-in-ownership forfeiture (two-thirds test) with federal §50(a)(1)(B) recapture percentages; death and certain mergers excepted |
Two practical notes. First, the 80%/two-year vacancy test is measured at the eligibility certification date, so partially re-tenanting a mill before you certify can disqualify it — sequence matters. Second, credit can be allocated among partners at the partnership’s discretion rather than strictly by ownership percentage, provided each owner’s year-end adjusted basis is at least 40% of the credit allocated to that owner. That flexibility is a structuring asset and it is easy to lose by drafting the operating agreement without it in mind.
We run the eligibility screen before anything is spent, sequence the certification against your leasing and construction schedule, and draft the credit-allocation mechanics into the structure rather than discovering them at closing.
Check whether my building qualifiesOfficial references: G.S. 105-129.70(3)–(5), 105-129.71(b)–(e), 105-129.74; NC State Historic Preservation Office (hpo.nc.gov).
| Article 3H — Mill Credit | Article 3L — Historic Credit |
|---|---|
| 40% (tier 1/2) or 30% (tier 3) of QREs | 15% of QREs to $10M, 10% from $10M–$20M, 0% above $20M |
| No per-project cap | $4,500,000 cap per income-producing project |
| No bonuses — the rate is the rate | +5% tier 1/2, +5% targeted investment, +5% education bonus |
| $3,000,000 minimum spend | No comparable minimum |
| 80% vacant for 2 years; manufacturing/utility prior use | 65% vacant for 2 years for the targeted-investment bonus; no prior-use test for the base credit |
| Placed in service before Jan 1, 2030 | QREs incurred before Jan 1, 2030; placed in service by Jan 1, 2032 |
The rule of thumb: a qualifying mill of any real size elects Article 3H. Article 3L is the better answer when the project fails the mill or vacancy tests, when qualified spend is under roughly $3 million, or on a non-income-producing property in a tier three county where 3H offers nothing. Between those poles the arithmetic depends on tier, spend, and the bonuses a 3L project can actually reach — which is a modelling exercise, not a rule of thumb, and it must happen before the eligibility certification is filed.
We build both cases side by side in dollars, with the investor pricing attached to each, so the election is made on numbers rather than on which statute someone happened to read first.
Run the 3H vs. 3L comparison on my projectOfficial references: G.S. 105-129.74; G.S. 105-129.108(i); N.C. Gen. Stat. Articles 3H and 3L.
The state election is only one layer. A tier one North Carolina mill electing Article 3H combines a 40% state credit with the 20% federal historic credit — the statute requires the federal §47 credit for the income-producing version, so the two are designed to work together. Where the building converts to affordable housing, federal and state LIHTC can layer on top of that; where the tract qualifies, new markets credits can as well.
| Illustrative — $20M QREs, tier 1 county, income-producing | |
|---|---|
| Federal historic credit (20%) | $4,000,000, claimed ratably over five years |
| NC mill credit, Article 3H (40%) | $8,000,000, no cap, nine-year carryforward |
| Combined credits | $12,000,000 — 60% of qualified rehabilitation expenditures |
| For contrast, under Article 3L | $2,500,000 state (capped structure) + $4,000,000 federal = $6,500,000 |
Credits are not cash — syndication converts them, and pricing, timing, and the investor’s tax position all move the net proceeds. But the order of magnitude is the point: on a large North Carolina mill, electing Article 3H rather than Article 3L can be worth several million dollars of equity, and the door closes when the project must be placed in service before January 1, 2030.
We price the full stack, structure the federal and state pieces to the investors who can actually use them, coordinate bridge financing against the equity timing, and drive the deal to closing. That is the whole business.
Price my project’s full credit stackIllustration only, not a projection or tax advice. Actual credits depend on certified expenditures, tier designation, and investor pricing.
Yes. Article 3H was reenacted by S.L. 2021-180 Section 42.7, signed November 18, 2021, and the reenactment reached back to rehabilitation projects whose eligibility application was submitted on or after January 1, 2015. The old January 1, 2015 application deadline no longer exists. The current limit is a sunset: the project must be completed and placed in service before January 1, 2030.
It did, and for six years that was correct. The 2021 Appropriations Act reenacted Article 3H in full — not just the railroad station provision — and the NC Department of Revenue's own law-change summaries and its 2025 Biennial Tax Expenditure Report both confirm the reenactment. A great deal of published commentary still describes the repealed version.
For an income-producing rehabilitation, 40% of qualified rehabilitation expenditures in a development tier one or two county and 30% in a tier three county. For a non-income-producing rehabilitation it is 40%, available in tier one and tier two counties only, taken in five equal installments. Minimum qualified spend is $3 million. There is no per-project dollar cap.
No. G.S. 105-129.74 bars claiming a credit under Article 3L with respect to the same activity for which the Article 3H mill credit is claimed. You elect one. On a qualifying mill of meaningful size the 40% uncapped mill credit is usually the larger number, but the comparison should be modelled before the eligibility certification is filed.
Yes, and for the income-producing version the federal credit is actually required — G.S. 105-129.71(a) conditions the state credit on the taxpayer being allowed the federal Section 47 credit. The non-income-producing credit under G.S. 105-129.72 is the opposite: it is available only to a taxpayer who is not allowed the federal credit.
A separate 40% credit for a former manufacturing facility that was a railroad station or is adjacent to one, requiring at least $10 million of qualified expenditures, at least two years of 80% vacancy, designation as a local landmark certified on or before June 30, 2027, a tier one or two location, a qualified opportunity zone, and a certificate of occupancy on or before December 31, 2029.
The project must be completed and placed in service before January 1, 2030. On a mill rehabilitation, that is a live construction-schedule constraint rather than a distant date — certification, financing, and construction all have to fit inside it.
If you have a North Carolina mill, the arithmetic changed in 2021 and the clock runs to placed-in-service before 2030. Let's model it.
