POLICY:
The Local Government Agency (LGA) must pay 100% of the project costs and then request reimbursement. Generally, the reimbursement rate is 80%, which means the LGA must pay 20% of project costs, although the reimbursement rate may vary depending on the program area. Final reimbursement will not be made until the project has been inspected and accepted by NCDOT.
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Reimbursement is the standard method of payment for Federal-aid projects. The LGA pays for services (pre-construction and construction), NCDOT reimburses the LGA, and then the Federal Highway Administration (FHWA) reimburses NCDOT. Reimbursement requests may be submitted throughout the progression of the project, as phases are completed.
For federally funded projects, NCDOT will typically reimburse 80% of eligible project costs up to the Federal Award amount, in accordance with the Agreement. Reimbursement means the LGA must pay 100% of the costs up front, document payment, and then request Reimbursement of 80% of eligible project costs from NCDOT. This guarantees that the LGA pays at least 20% of project costs; however, LGAs may pay more than 20% if project costs are higher than originally estimated. For certain program areas, the LGA may not be required to contribute with a match. Specific reimbursement rates will be specified in the
Agreement and will detail any requirements for a local match.
Sales
Tax
Municipalities and other units of local government are eligible for sales tax refunds under
North Carolina General Statute (NCGS) 105-164.14 (b) or (c); therefore, when an LGA enters into a contract with a Contractor, they usually require the Contractor to submit a Sales Tax Certification Form with every pay application. That form identifies how much local or state tax has been paid by the Contractor. The LGA pays the entire amount due the Contractor as part of the contract payment. Then, the LGA requests Reimbursement from NCDOT for contract payments, less the sales tax amount. The LGA may also request Reimbursement of the sales tax from the North Carolina Department of Revenue (NCDOR) on an annual or quarterly basis in accordance with
NCGS 105-164.14 (b) or (c).
IMPORTANT: Under no circumstances does NCDOT reimburse sales tax paid directly or indirectly by the LGA.
Example:
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| Contractor submits Pay Application | $ 500,000 |
| Contract submits Sales Tax Paid (part of total pay app) | $ 20,000 |
| LGA pays Contractor | $ 500,000 |
| Eligible Expenses for Reimbursement | $ 480,000 |
| LGA requests 80% reimbursement from NCDOT | $ 384,000 |
| LGA pays 20% non-federal match | $ 96,000 |
| LGA requests sales tax from NCDOR | $ 20,000
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It is the LGA's responsibility to deduct the sales tax as part of their request for Reimbursement from NCDOT. NCDOT should review the LGA's Reimbursement request and determine that all sales tax has been deducted from the amount requested for Reimbursement prior to authorizing payment.
Work Performed by NCDOT
NCDOT will have direct costs associated with the project for pre-construction, regardless if Preliminary Engineering (PE) is eligible for Reimbursement. At the end of the project, NCDOT will calculate the Department's charges and bill the LGA for the non-federal share of the NCDOT charges. If there is insufficient federal funding to pay for the share of the NCDOT charges, then those amounts will also be billed to the LGA.
