The Employment Expansion and Investment Incentive Act (LB 270) allowed a qualified taxpayer to receive refunds of sales and use taxes paid, and earn credits that may be used for Nebraska income tax and other sales and use taxes. In order to earn tax credits under the Employment Expansion and Investment Incentive Act, a company must be involved in a qualifying business activity, have an increase of $75,000 in qualifying investment, and two new full-time equivalent (FTE) employees within the taxable year. Click here for a list of qualified business activities.
The Employment Expansion and Investment Incentive Act provides tax credits to taxpayers who hired additional employees and invested in qualified property. A taxpayer can use the tax credits to reduce income tax liability by half, and receive refunds of Nebraska sales and use taxes paid. The taxpayer may distribute credits to the owners of the business entity in the same manner as income is distributed. The recipients can use the credits to reduce their income tax liability by half.
Initially, credits were established by increasing employment by at least two resident FTEs and making a minimum investment of $75,000 in the same year. Credits could also have been established by additional employee increases of at least two Nebraska resident FTEs without a corresponding investment increase during the next five years. A taxpayer earned $1,500 for each new employee and $1,000 for each increment of $75,000 in net, new investment.
The Nebraska Employment and Investment Credit Computation, Form 3800N, filed with a tax return is the method to report credits earned, investment made, and jobs created for employees.
If a taxpayer failed to maintain the required levels of investment and employment for at least two years after the year for which the credit was first allowed, part of the used and unused credits are subject to recapture. During the subsequent two years, the taxpayer must repay the state one-third of the amount of the credit subject to recapture for each year that the taxpayer did not maintain the required levels.
Any credit carryover remaining at the end of the fifth year expires.