Tax exemption for Enchanted Castle tabled
BISMARCK -- The state Board of Equalization is debating whether a request made Tuesday by Gary Greff, owner of the Enchanted Castle Hotel in Regent, meets guidelines for a five-year, 100-percent tax exemption for new businesses.
The board did not make a decision at its meeting in Bismarck, asking for more time to consider the request.
"So we gave it our best shot," Greff said. "I thought that, at the present time, we're not turning a profit yet but hope to down the road, and you can only apply for this in the first year of operation. I thought it would be worth applying, in case we make a profit, and it could give us a break in income tax for the first five years."
North Dakota's income tax exemption for new or expanding businesses allows a primary sector or tourism-related business, like the Enchanted Castle Hotel, to qualify for a tax exemption for up to five years.
The Enchanted Highway Foundation, which Greff heads, purchased the former Regent school in 2010 for $66,000.
The Enchanted Castle Hotel opened in May 2012 and is one of several attractions for people traveling along the Enchanted Highway, which has a collection of seven metal sculptures beginning off Interstate 94's Exit 72 north of Gladstone and continuing 32 miles south to Regent.
Greff felt the meeting with the board went well and said he told them the tax break would help once the hotel "gets its name out there and begins making a profit."
"(The board) said they'd never had a business apply from the tourism end of it, so they were leery on giving it out right away until they'd done some research on it, so they tabled it and said the board will meet with the tourism and commerce departments and get the guidelines," he said.
Cory Fong, state tax commissioner, said Greff applied for the exemption for 2012 through 2016 and estimated it could save him about several thousand dollars over five years.
Fong said the state incentive program is for new or expanding businesses to receive up to a five-year, 100 percent tax exemption.
Business eligibility is determined by the state board of equalization, which includes Fong, Gov. Jack Dalrymple, Agriculture Commissioner Doug Geohring, State Treasurer Kelly Schmidt and State Auditor Bob Peterson.
Fong said the board can grant a partial exemption, but it is more likely the board would grant 100 percent income tax exemptions for five years, in the hopes that the business gets off to sound footing and creates jobs.
"But (Tuesday) was new ground because the Enchanted Castle is a different category of business than the board usually deals with," he said. "Usually, we deal with manufacturing businesses that create new wealth by producing something here that will go elsewhere."
Fong said the board's primary concern is how to handle similar requests from tourism-like businesses. For example, Fong said there is a business in Riverdale, the Riverdale High Lodge, which is similar to the Enchanted Castle.
Both hotels were formerly high schools and both were remodeled.
While the Riverdale High Lodge is already established and could not apply for the exemption, Fong said the board wants to consider how it will handle such an exemption request from other businesses down road.
"We want to consider the policy and make sure it is narrow enough," he said. "We have the ability, as a board, to deny the request if we feel it does not meet the requirements or is not necessary.
"(Tuesday) we decided to hold up on a decision because it is new ground for us. We want to look at our policy and make sure that we are distinguishing from any kind of a hotel and are only capturing unique businesses that are vacation spots. We'll have to do more work with the tourism department on that."
Fong added that the holdup is not a reflection on Greff.
"Gary Greff is passionate and a visionary," Fong said. "He deserves credit for creating something unique in that part of the state. This is not a reflection of any kind on the work he's done, but we need to think of the big picture and what the consequences of the board's decision might be."