On Aug. 17, 2020, Nebraska Gov. Pete Ricketts signed Legislative Bill 1107, enacting a number of credits and incentives programs as well as providing significant property tax credit reform. A high-level summary of the new programs and amendments follows.
New credit programs
ImagiNE Nebraska Act
The ImagiNE Nebraska Act (INA) provides tax incentives for taxpayers with certain levels of investment and employment at qualifying locations. Taxpayers may be eligible for various incentives including wage credits, investment tax credits, sales tax credits, personal property tax exemptions and real property tax refunds.
Different incentives are available for investment and hiring at the following levels:
- Investment of $1 million and 10 new employees
- Twenty new employees
- Investment of $5 million and 30 new employees
- Investment of $250 million and 250 new employees
- Investment of $250,000 to $1 million and five new employees
- Investment of $50 million
Not all incentives are available at each level of investment, but more than one incentive may be available. The ultimate amount of incentive also depends on the population of the county, the amount of average wage paid and whether the location is in an economic redevelopment area.
There are numerous qualifying locations, including manufacturing, including pre-production services; testing laboratories; rail transportation; truck transportation; insurance carriers; wired or wireless telecommunications carriers (except satellite); telemarketing bureaus and other contact centers; data processing; computer facilities management services; warehousing and storage; administrative management of the taxpayer’s activities; logistics facilities; certain aircraft services; certain research, development, or testing; production of electricity using renewable energy; computer systems design; financial services; or any other business location where at least 75% of revenue is from sales to customers who are not related that are delivered outside Nebraska.
Applications must be submitted to the Nebraska Department of Economic Development (DED) and generally provide the taxpayer and qualifying locations, the projected amount of new investment and new employees, the levels of investment and employment for the various incentives, as well as other necessary information.
The DED will also establish a revolving loan program for applicants of the INA incurring expenses for workforce training and infrastructure development.
Key Employer and Jobs Retention Act
The Key Employer and Jobs Retention Act is intended to incentivize ‘key’ employers to remain in the state and retain high-earning employees when the employer experiences a change in ownership or control and the new owners are considering relocating out of state. A ‘key’ employer is one with at least 1,000 employees in the state, offers certain benefits to full-time employees, enforces policies against discrimination, electronically verifies the work eligibility status of new employees, has experienced a change in ownership within the prior 24 months, is at risk of moving more than 1,000 existing employees out of state, retains at least 90% base-year employment and is considered a qualified business.
Qualifying key employers may receive wage retention credits totaling 5% of the total compensation paid by the employer in the year to all retained employers of the employer in Nebraska who are paid wages at a rate equal to at least 100% of the statewide average hourly wage. The total amount of credits available for an employer is capped at $4 million in any one year. If multiple key employers qualify for benefits in a single year, the first applicant will be fully funded first. The wage retention credit can be used to reduce the employer’s income tax liability or the employer’s income tax withholding employer or payor tax liability.
Renewable Chemicals Production Tax Credit Act
The Renewable Chemicals Production Tax Credit Act creates a refundable tax credit of 7.5 cents-per-pound of chemical produced for qualifying eligible chemical businesses. The maximum credit allowed per year is $1.5 million. The credit may be used against any income tax imposed in the state and any excess is refunded to the taxpayer. Eligible businesses must produce at least one million pounds of renewable chemicals during the year for which the tax credits are sought and meet certain location requirements. The credit becomes available for businesses producing renewable chemicals in 2022 or later.
Customized Job Training Act
The Customized Job Training Act will be administered by the DED and will offer grants to employers for reimbursement of job training expenses. The grants will be available for job training programs for jobs that are net new jobs or that result in a net increase in wages per employee. The amount of the grants and number of grants awarded will be determined by the DED based upon available funding.
Property tax credit and reform
The Nebraska Property Tax Incentive Act provides that, for taxable years beginning on or after Jan. 1, 2020, taxpayers that pay school district taxes during a taxable year are allowed a refundable credit against the state income or franchise tax. The credit is a percentage set by the Nebraska Department of Revenue. For calendar year 2020, the credit percentage will be set so that the total amount of credits for the taxable year is $125 million. Subsequent calendar years provide increased credit as provided by statute. Eligible taxpayers include individuals, corporations, partnerships, LLCs, trusts, estates or any entity paying school district taxes. The department will develop procedures for taxpayers who pay school district taxes, but are otherwise not subject to state income or franchise taxes to be able to receive refundable credits.
The Personal Property Tax Relief Act, which provided an exemption of $10,000 of certain personal property, is repealed beginning in the 2020 tax year.
Many of the new Nebraska credits and incentives programs are highly nuanced and require applications and agreements with the DED. The INA program, which could provide taxpayers with significant incentives, must be carefully and thoroughly reviewed for qualification eligibility and program application timelines and requirements. The incentive programs are intended to encourage new businesses to relocate to Nebraska, support existing businesses to remain and grow in Nebraska, and attract new investment and jobs in the state.
Businesses in the COVID-19 economy should consider credits and incentives as many states continue to offer a myriad of opportunities for investment, training and hiring. North Carolina recently offered a new Job Retention Grant program while many other opportunities are available to middle-market businesses. Taxpayers with questions about eligibility for Nebraska credits and incentives, or statutory incentives available throughout the country, should speak to their state and local credits and incentives adviser.