Foreign Adversarial Company Notice

This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of DOR and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.

This guidance document may change with updated information or added examples. DOR recommends you do not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get updates on your topics of interest.

On June 4, 2025, Governor Pillen signed LB 644, an act relating to foreign entities. Among the provisions enacted, Neb. Rev. Stat. § 77-3,114 puts in place new prohibitions regarding the entities which may receive benefits from Nebraska tax incentive programs. 

Effective October 1, 2025, § 77-3,114 prohibits foreign adversarial companies from receiving any benefit from Nebraska incentive programs. This includes entities applying for credits, investors who would claim the entity's credits on their tax returns, and all other taxpayers who would claim incentive credits from the foreign adversarial company. Any incentive credits held by foreign adversarial companies on or after October 1, 2025, will be permanently disallowed. This means that the credits owned by a foreign adversarial company on October 1, 2025, will be disallowed, even if it is later transferred to an eligible entity. Any incentive credits transferred to a foreign adversarial company will become disallowed once transferred. This includes credits from past years that have been carried forward. The foreign adversarial company will not earn any future credits. Effective October 1, 2025, foreign adversarial company-related credits will be disallowed on all tax returns.

It is the responsibility of the credit recipient to communicate these requirements to their investors. All incentive program recipients whose credits flow through to investors must inform their investors of this new requirement as it may impact their tax returns moving forward.

A “foreign adversary” means those countries listed in 15 C.F.R. 791.4, as such regulation existed on April 1, 2025. This list includes:

  • The People's Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region (China);
  • Republic of Cuba (Cuba);
  • Islamic Republic of Iran (Iran);
  • Democratic People's Republic of Korea (North Korea);
  • Russian Federation (Russia); and
  • Venezuelan politician Nicolás Maduro (Maduro Regime).

A “foreign adversarial company” is defined as any corporation, partnership, association, organization, or other combination of persons, which:

  • Is organized under the laws of a foreign adversary;
  • Has its principal place of business within a foreign adversary;
  • Is owned in whole or in part, operated, or controlled by the government of a foreign adversary; or
  • Is a subsidiary or parent of any company otherwise described.

A “government of a foreign adversary” means any person or group of persons exercising sovereign de facto or de jure political jurisdiction over any foreign adversary, or over any part of such country, and includes any subdivision of any such group and any group or agency to which such sovereign de facto or de jure authority or functions are directly or indirectly delegated. Such term shall include any faction or body of insurgents within a country assuming to exercise governmental authority whether such faction or body of insurgents has or has not been recognized by the United States.

If an ineligible entity or other taxpayer attempts to claim a foreign adversarial company-related benefit following October 1, 2025, the credit will be disallowed when the Nebraska Department of Revenue (DOR) processes their tax return. Section 77-3,114 will not impact the ability of all other entities to claim their incentive credits. Any investors, including foreign investors who are not a foreign adversarial company, will be able to continue to file and claim their eligible credits as normal.

Taxpayers will be asked on relevant tax returns to self-identify if they are a foreign adversarial company or if they are claiming any incentive credits that are related to a foreign adversarial company. Taxpayers should not claim any incentive credits from a foreign adversarial company. If DOR suspects a credit may be related to a foreign adversarial company, DOR may request the taxpayer provide additional information about the credit. Taxpayers who do not provide the required information to show the credit is permissible will have their business-related incentive credits disallowed. DOR may audit taxpayers to ensure compliance with this requirement.

If DOR later becomes aware that an ineligible benefit or credit was allowed, please be advised that DOR will take action to recover the benefit or credit to the extent allowed under Nebraska law through a deficiency notice, recapture notice, or any other permissible means.

Notes

  • A foreign adversarial company includes (but is not limited to), a taxpayer being owned by or owning a subsidiary or affiliate located in a country designated as a foreign adversary (see below) and a subsidiary or affiliate owned or controlled by the government of a foreign adversary. It also includes a subsidiary of a taxpayer that owns a subsidiary or affiliate located in a country designated as a foreign adversary and a subsidiary or affiliate owned or controlled by the government of a foreign adversary.
  • Review your income tax returns. Information listed on your federal business income tax return including Schedule K may indicate if the taxpayer is partially owned by a foreign adversarial company or is the parent company of one or more companies which are either organized under the laws of a foreign adversary and/or whose principal place of business is in a foreign adversary country.

This impacts benefits and credits under an incentive program of the State of Nebraska including the following:

  1. Beginning Farmer Tax Credit Act (NextGen),
  2. Biodiesel Tax Credit Act,
  3. Cast and Crew Nebraska Act,
  4. Community-Based Energy Development (C-BED),
  5. Community Development Assistance Act,
  6. Creating High Impact Economic Futures (CHIEF) Act,
  7. Defense Efforts Workforce Act (applications start 1/1/2027),
  8. Employer’s Tax Credit for Expenses Incurred for Temporary Assistance for Needy Families (TANF) Recipients,
  9. Employment and Investment Growth Act,
  10. Good Life Transformational Projects Act,
  11. ImagiNE Nebraska Act,
  12. Individuals with Intellectual and Developmental Disabilities Support Act - Employer Credits,
  13. Invest Nebraska Act,
  14. Key Employer and Job Retention Act,
  15. Nebraska Advantage Act,
  16. Nebraska Advantage Microenterprise Tax Credit Act,
  17. Nebraska Advantage Research and Development Act,
  18. Nebraska Advantage Rural Development Act,
  19. Nebraska Affordable Housing Tax Credit Act,
  20. Nebraska Employer Tax Credit for Employing Convicted Felons,
  21. Nebraska Higher Blend Tax Credit Act,
  22. Nebraska Job Creation and Mainstreet Revitalization Act,
  23. Nebraska Relocation Incentive Act,
  24. Nebraska Shortline Rail Modernization Act,
  25. New Markets Job Growth Investment Act,
  26. Renewable Chemical Production Tax Credit Act,
  27. Sustainable Aviation Fuel Tax Credit Act (applications start 7/1/2027), and
  28. Urban Redevelopment Act,
  29. Any other tax credits or benefits related to any other tax or other incentive programs created by legislative or executive action for the purposes of recruitment or retention of businesses in Nebraska.

 

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