Rural Development Act Calculation Tips

Terms

Base Year

• Base year means the tax year preceding the year of application
   

Eligible Employee

• Eligible employee means a Nebraska employee subject to Nebraska income tax withholding on compensation received from the applicant or an employee of a qualified employee leasing company which employs ALL of the applicant's employees.

  An applicant under the Nebraska Advantage Rural Development Tax Credit Act is required to use E-Verify, a federal electronic verification program, to timely verify that Nebraska employees hired after the date of application are legally able to work in Nebraska. An applicant must provide proof that it has registered for E-Verify at the time of application.

  Teleworkers performing activities interdependent with the project may be included as an eligible employee if the teleworker resides in any county which meets the population requirements for the selected level.

  Note: The hours worked by any person considered an independent contractor or the employee of another taxpayer cannot be used in the computation under this section.
   

Full-time Equivalent (FTE) Employees

• FTE means the number of employees calculated by dividing the total hours paid in a year by the product of forty times the number of weeks in a year.

  Note: The number of FTE employees does not equal the number of people employed in many cases. A part-time employee or an individual employed for only part of the year will equal less than one FTE. An employee who worked overtime may equal more than one FTE.
   

Nebraska Employee

• Nebraska employee means an individual who works in Nebraska at the project.
   

Year

• Year means the taxable year of the taxpayer.
   

Employment Calculation Tips

FTE growth is equal to the lesser of the following:

1. Current-year FTE employees at the project minus base year FTE employees at the project. For this portion of the calculation, include all employees that work at the project regardless of wage rate.
     
2. Hours paid to employees working at the project who were hired since the beginning of the year of application, timely verified through E-Verify to be authorized to work in Nebraska, and who earn the required wage. Only include the hours for which an individual earns the required wage.

   Include the hours paid in the year in the calculation. If hours are adjusted to pay the overtime differential, only include actual hours worked.

   Note: The result of the calculation will always be rounded down to the lower whole number for purposes of determining whether or not the business has met the required level of employment and for calculating the amount of credit that was earned. A taxpayer will only be deemed to have met the FTE levels if the growth in hours is equal to or greater than the minimum required FTE employees for the selected level times 40 hours times the number of weeks in the year. A taxpayer does not qualify when the FTE growth calculated would only meet the minimum required FTE level if it were rounded up to a whole number.
   ​

Example:
 

 *Hours paid for 7 weeks below the required hourly rate are not allowable hours.
**The required wage for the year of application for this example is $16.82.

Required Wage
 

Exclude bonuses, overtime, and other irregular payments.

Project Base Year Employees

• Project base year employees mean any person is employed by the taxpayer in the base year and working at the project or as a teleworker performing interdependent activities and residing in a county meeting population requirements for the selected level.
   

Hourly Person

• Hourly person include all hours paid such as regular, overtime (actual hours), holiday, vacation leave, sick leave, jury duty, and funeral leave.
• Exclude payments converted to hours such as vacation paid upon termination, severance, bonuses, vacation paid in cash.
   

Salaried Person

• A salaried person is considered to have worked the standard number of hours of the full-time hourly employees (generally 2080 hours – 40 hours a week, multiplied by 52 weeks paid, if the person was employed for the entire year).
   

Limitation

• Acquiring an existing Nebraska business will not generate employment growth unless the acquired business expands beyond its original size. The base year must be adjusted for the FTEs of the acquired business.

Level 1 and Level 2 applicants, complete and attach  Worksheet I to your application

Investment Calculation Tips

Investment Growth

• Investment growth means qualified property available for use at the end of the current year less qualified property available for use on the last day of the base year.
   

Qualified Property

• For Level 1 and Level 2 applications, qualified property includes tangible depreciable property other than vehicles, planes, and railroad rolling stock.
• For Livestock Modernization projects, qualified property includes tangible depreciable buildings, facilities, or equipment for livestock housing, confinement, feeding, production, and waste management. Equipment does not include breeding stock, vehicles, planes, or railroad rolling stock.
• Livestock modernization or expansion does not include any improvements made to correct a violation of the Environmental Protective Act, the Integrated Solid Waste Management Act, the Livestock Waste Management Act, a rule or regulation adopted and promulgated pursuant to such acts, or any order of the Nebraska Department of Environment and Energy (NDEE) undertaken within five years after a complaint issued from the NDEE Director.
• Purchased and leased property are included for Level 1, Level 2, and livestock modernization projects, but are valued differently.
  • Purchased property is valued at its tax basis before depreciation.
  • Note: The increase in investment is equal to the original tax basis of the qualified assets acquired less the original tax basis of any assets of a qualified type retired in the same year.
  • Example: A 2023 applicant places in service a new piece of equipment with an original tax basis of $22,000. The new equipment replaces property purchased in 2017 with an original tax basis of $15,000. The investment growth is $7,000.
     
• Leased property is valued at the average net annual rent times the number of years of the lease for which the applicant was originally bound, not to exceed ten tax years.

  Note: Leased property should be valued and included in the computation of investment at the end-of-the-year measuring point for each year the lease is still in place and the equipment is used at the project. Leases also need to be included in the base year investment calculation.

  Example: A 2023 applicant with a December 31 tax-year end enters into a three-year lease for computer hardware which begins on November 1, 2023, and ends on October 31, 2026. The lessee is required to pay $10,000 per year.

  The value of the lease for investment purposes is $30,000 for the tax years ending December 31, 2023, 2024, and 2025. The value of the lease at December 31, 2026, is zero.
   

Limitation

• Acquiring an existing Nebraska business will not generate investment growth, unless the business acquired expands beyond its original size. The property acquired through the acquisition of a business must be added to the base year investment.
• Level 1 and Level 2 applicants, complete and attach  Worksheet II, for Applications 2006 or Later to your application.
• Livestock Modernization applicants, complete and attach Worksheet LM to your application