Invest Nebraska Act Description
In general, terms have the same meaning as in the Revenue Act of 1967.
How to Apply
An application must be filed with the State Tax Commissioner. All applications and supporting information will remain confidential except the name of the company, location of the project, and the amounts of increased employment and investment. The decision to approve or deny an application will be made in open meeting by the Invest Nebraska Board, which is comprised of the Governor, Treasurer, and the chairperson of the Nebraska Investment Council.Contents of the application: (See Outline of Requirements for Application for details.) A written statement describing the plan including the start date, employment, wages, and investment for a business in Nebraska engaged in one or more qualified business activities in the state;Shows that the project will result in meeting the required levels of investment, employment, and wages.
- Plans for achieving the required levels of employment, wages, and investment for the project prior to the end of the sixth year after the year in which the application is submitted and for maintaining the required levels of employment, wages, and investment for the next 108 months.
- The written policy of the company against any requirement of genetic testing for employment or promotion;
- Sufficient documents, plans, and specifications as required by the Tax Commissioner to support the plan and define a project;
- If more than one location within the state is involved, sufficient documentation to show that the employment, and investment at different locations are interdependent parts of the plan; and
- A nonrefundable application fee of five thousand dollars to be deposited into the Invest Nebraska Fund.
Failure to meet required levels of employment and investment by the end of the sixth year after the year the application was submitted, or to continue the project at or above the employment and investment levels required in the agreement for the entire entitlement period, will result in recapture of benefits.MINIMUM REQUIRED LEVELS: The required level of wages is based on the calendar year the application was filed. Once established for a project, the required level of wages will not change during the life of the project. The taxpayer must meet the minimum required levels of employment, investment, and wages by the end of the sixth year after the year the application was filed.The Nebraska Department of Revenue will determine the required levels of wages for each year. After the required levels are determined, the Department will publish the required levels. The levels may change each year. The required levels are based on Nebraska Department of Labor statistics reported as of July 1 prior to the calendar year the application is filed.
Required Level of Wages
Employees are at or above the required level of wages if the wages they receive during the year exceed the required amount. Overtime, bonuses, or other irregular payments are not considered. The wages of an employee who only worked part of the year for the company will be annualized.
Required Level of Employment
The required increase in employment has been attained if the number of full-time equivalent employees calculated for the current year exceeds the number of full-time equivalent employees in the base year by the required number of employees. In calculating full-time equivalents in the current year, only hours for base-year employees and employees receiving above the minimum required wage are used. Employees who worked for the company in Nebraska are counted as base-year employees when they are transferred into the project.New Nebraska jobs will be calculated from the base year which is the federal taxable year immediately preceding the start date, rather than the year before the application is filed as in LB 775. The start date is the first year after the application in which a building or a part of a building is placed in service.
Required Level of Investment
The required increase in investment has been attained if at the end of the year the increase in investment placed in service, reduced by the new investment no longer in service, exceeds the required amount of investment.
Levels of Applications
There are three levels of required investment, employment, and wages for which the applicant may apply. Other than the alternative benefit applications, all applications must be filed before June 1, 2005.
$10 Million and 25 Employees
These levels are available for any projects that are located entirely outside of counties with a population of one hundred thousand or more. As of the 2000 census, there are three counties that cannot be included in a project at these levels, Douglas, Lancaster, and Sarpy.The required levels are wages of at least 100% of the Nebraska annual average wage, ten million dollars of new investment, and twenty-five new employees.
For projects located in Douglas, Lancaster, or Sarpy counties, or having a portion of the project in any of these counties, there are two sets of required levels. The company may use either set of levels to qualify the project.The required levels are wages of at least 110% of the Nebraska annual average wage, and either fifty million dollars of new investment and five hundred new employees, or one hundred million dollars of new investment and two hundred fifty new employees.
The required levels are wages of at least 120% of the Nebraska annual average wage, two hundred million dollars of new investment, and five hundred new employees. Applications must be filed before October 1, 2002.
A company engaged in the following activities and which is subject to Nebraska sales and use taxes and the Nebraska income tax; any partnerships, S corporations, limited liability companies, or joint ventures when the partners, shareholders, or members are subject to such taxes; and exempt cooperatives.The storage, warehousing, distribution, or transportation of tangible personal property;The sale of tangible personal property if more than 20 percent of the total sales are in any combination of the following: (a) sales for resale (wholesale sales), or (b) sales of tangible personal property assembled, fabricated, manufactured, or processed by the seller, or (c) sales of tangible personal property used by the purchaser in any qualifying activities;The conduct of research, development, or testing for scientific, agricultural, animal husbandry, food product, or industrial purposes;The performance of data processing, telecommunications, or insurance services;The performance of financial services, provided the applicant is subject to the franchise tax on financial institutions, or is licensed by the Nebraska Department of Banking or the Securities and Exchange Commission;The assembly, fabrication, manufacture, or processing of tangible personal property;The administrative management of any activities including headquarters facilities of such activities;Any combination of the activities listed above.
Who Does Not Qualify?
Restaurants;Farming, ranching, or livestock operations;Most retailers, except those qualifying above;Contractors and repair persons.
What Qualifies as Investment?
Tangible property of a type subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986. Capitalized amount less Nebraska sales or use tax is used in calculating investment. (Property excluded: aircraft, barges, motor vehicles, railroad rolling stock, watercraft, or property rented to another person.)Improvements to real estate (e.g., buildings).Property transferred into Nebraska (valued at original cost).Rental property. Net annual lease payments up to a maximum of ten years or three years beyond the entitlement period, whichever is earlier.
The Following Do Not Create Credits or Allow Benefits
Any acquisition of a business operating in this state during the last 366 days.Movement of an ongoing business within Nebraska.Purchase or lease of any property previously owned by the taxpayer or related person.Purchase or lease of any property from a related person.Qualified property placed in service before the date of application.Renegotiation of leases in effect on date of application, where no material changes are made, other than expiration date.
Tax Incentives Provided
A credit is allowed each year of the entitlement period the taxpayer is at or above the required levels of investment, wages, and employment. The entitlement period is the tax year the required levels are reached and the next 108 months.
Wage Benefit Credit
The wage benefit credit is a percentage of the total compensation paid to employees, who earn above the required wage and who are not base-year employees.The percentage of the credit is on a sliding scale from 0% up to 5% based on the average wages paid at the project for the year. The average wage is the total wages paid at the project to all employees regardless of their level of compensation, divided by the equivalent number of all employees at the project.
Alternative Investment Credit
For any application filed as an alternative benefit application, in lieu of any wage benefit credit, a credit equal to 15 percent of the investment in qualified property placed in service at the project on or after the date of application through the end of the entitlement period.
How Credits are Used
The wage benefit credit may be used in a year after it is earned, to reduce the amount of withholding that must be remitted to the state from the wages paid at the project other than to base-year employees. The amount retained by the company may not exceed 5% of the wages paid to employees at the project, other than base-year employees.Either the wage benefit credit or the investment credit may be used to reduce or eliminate the income tax liability during any year of the entitlement period. The credit may be carried over for up to eight years after the end of the entitlement period. Unused credits are nonrefundable.
Transferability of Credits
Any credits allowed a partnership, S corporation, an estate or trust, limited liability company, or a cooperative may be distributed to the partners, shareholders, beneficiaries or members for use against their income tax liabilities.Credits may be transferred with the project in certain situations, and may be taken by the new owner, if the project is transferred in its entirety or by a tax-free transaction under IRC § 381.
Coordination With Other Benefits
Any investment or employment eligible for benefits under the Quality Jobs Act ( LB 829) is not eligible under LB 620. However, any investment or employment eligible for benefits under LB 620 may be included in the determination of any benefits under the Employment and Investment Growth Act (LB 775), the Employment Expansion and Investment Incentive Act (LB270), or the Rural Economic Opportunities Act (LB936).
The company must maintain records on pay rate, regular hours worked, overtime hours worked, and bonuses for each employee from the base year through the end of the entitlement period. These records are necessary to determine which employees were paid above the required level of wages. Information from Wage and Tax Statements, Forms W-2, is not sufficient.
The State Tax Commissioner will annually make a report by industry group similar to the LB 775 report, showing investment, jobs, and wages paid.