Nebraska Advantage Act
Description of Benefits


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General Information:

The Nebraska Advantage Act allows a taxpayer involved in a qualified business to earn and use benefits for investment and employment growth.  For a list of qualified business activities, click here.  There are six Tiers that have varying requirements and benefits for investment and employment.


Application Information:

An application must be filed for each project.  The application date for the project will impact the investment, employment, and the associated benefits allowed for the project.  A complete application must be filed to establish an application date. For applications filed on or after October 1, 2009, taxpayers must utilize E-verify to verify that all new employees are legally able to work in the United States, as required by Neb. Rev. Stat. § 77-5722.01. For more information on filing an application under the Nebraska Advantage Act, see the Application Guide and the Nebraska Advantage Application.


Requirements by Application Level:

Each of the Tiers requires a stated increase in the investment and employment levels by the end of the attainment period. Refer to the table below for the minimum required levels for each Tier.

The increase in investment is equal to the value of qualified property placed in service at the project after the date of application. Qualified property means any tangible property of a type subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986, or the components of such property, that will be located and used at the project or at the residence of a teleworker working in Nebraska. Qualified property does not include aircraft, barges, motor vehicles, railroad rolling stock, watercraft, or property rented to another person.

The increase in employment is equal to the number of new full-time equivalent (FTE) employees at the project. The number of new employees is calculated using the number of hours paid in the year. One FTE employee is equal to 40 hours per week for the entire year.

Year

Required Wage Level

Required Investment and Employment Threshold

Tiers 1-4

Tier 6*

Tier 1
10 FTE

Tier 2
30 FTE

Tier 4
100 FTE

Tier 5
n/a

Tier 6

75 FTE

50 FTE

2010

$21,742

$54,354

$1M

$3M

$10M

$32M

$10M

$100M

2009

$21,136

$52,841

$1M

$3M

$11M

$34M

$10M

$102M

2008

$20,281

$50,702

$1M

$3M

$10M

$31M

$10M

$100M

2007

$19,452

N/A

$1M

$3M

$10M

$30M

N/A

N/A

2006

$18,905

N/A

$1M

$3M

$10M

$30M

N/A

N/A

*The wage level varies by county.  It is equal to the greater of 200% of the county average or 150% of the state average. The wage level listed in the table is 150% of the state average.
Click here for Required Annual Wages by County for Tier 6.

Tier 3 has no minimum investment requirement.
Tier 5 does not require employment growth, but the average employment at the project for the entitlement period must be at least equal to the base year employment.


Description of Time Periods:

Year

Year means the federal taxable year of the taxpayer.

Base Year

The base year is the year immediately preceding the year during which the application was filed.

Attainment Period

The attainment period is the number of years, including the year of application, within which the taxpayer must meet the minimum levels of investment and employment required for benefits. 

  • Tiers 1, 3, and 6. The taxpayer must attain the minimum required levels within five years. 

  • Tiers 2, 4, and 5. The taxpayer must attain the minimum required levels within seven years.

Entitlement Period

Generally during the entitlement period, the taxpayer can both earn and use benefits. 

  • Tiers 1 and 3. The entitlement period begins with the year the taxpayer meets the minimum required levels of investment and employment growth, and continues until the end of the ninth year following the year of application, or the sixth year after the year the required increases were met or exceeded, whichever is sooner.

  • Tiers 2, 4 and 5. The entitlement period begins with the year the taxpayer meets the minimum required levels of investment and employment growth, and continues until the end of the sixth year after the year the required increases were met or exceeded.

The entitlement period for property tax benefits may be different from the entitlement period for other benefits for Tier 4. A taxpayer applying under Tier 4 has a two-part agreement. When the project attains the minimum required levels for a Tier 2 project, the project is eligible for all benefits of a Tier 2 project. When the project attains the minimum required levels for Tier 4, the project is eligible for certain property tax exemptions.

  • Tier 6. The entitlement period includes the year the taxpayer meets the minimum required levels of investment and employment, and the next nine years.

Carryover Period

During the carryover period, no additional credits are earned, but unused credits earned before the end of the entitlement period may be used.

  • Tiers 1 and 3. The carryover period begins the year after the end of the entitlement period, and ends at the end of the ninth year following the year of application.

  • Tiers 2 and 4. The carryover period begins the year after the end of the entitlement period, and ends at the end of the fourteenth year following the year of application.

  • Tier 6. The carryover period is one year after the end of the entitlement period.

Time Periods Per Tier:

Time Period

Tier 1

Tier 2

Tier 3

Tier 4

Tier 5

Tier 6

Attainment

5

7

5

7

7

5

Entitlement

6 or 7*

7

6 or 7*

7

7

10

Carryover

0 to 3*

2 to 8*

0 to 3*

2 to 8*

N/A

1

Maximum Life

10

15

10

15

13

15

*Time periods are limited by the maximum life of the project.


Description of Available Benefits:

Direct Refund

A direct refund is the refund of Nebraska and local sales and use taxes paid on the purchase of qualified property for use at the project, or on the purchase or lease of aircraft for use in connection with the project, which is placed in service during the attainment and entitlement periods. The aircraft may not be used to transport an elected official, or for fundraising for an elected official.

Qualified property is any tangible property of a type subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986, or the components of this property, that will be located and used at the project or at the residence of a teleworker working in Nebraska. Qualified property does not include aircraft, barges, motor vehicles, railroad rolling stock, watercraft, or property that is rented to another person.

Investment Credit

The investment credit is a credit equal to three percent (Tier 1), ten percent (Tiers 2 and 4), or 15 percent (Tier 6) of the investment made in qualified property at the project during the attainment or entitlement periods. The credit on qualified property placed in service, from date of application through the end of the tax year in which the minimum required levels are met, is earned in the qualification year. Credits are also earned on qualified property placed in service in other years during the entitlement period.

Investment credits may be used for a sales and use tax refund, income tax refund, or for Tier 6, a real property tax credit reimbursement.

Compensation Credit

  • Tiers 1, 2, 3, and 4. In each year of the entitlement period, the compensation credit is computed as follows:

(number of new FTEs) x (average annual wage of new employees) x (credit percentage)

The number of new equivalent employees at the project is the lesser of: (1) the equivalent employees at the project during a year in excess of the number of equivalent base year employees; or (2) the number of equivalent new employees.

A new employee is an employee hired after the base year or transferred into Nebraska after the base year who earns the required wage.

The number of equivalent employees is calculated using the number of hours paid in the year. One FTE employee is equal to 40 hours per week for the entire year.

Average annual wage means the taxable wages paid to new employees at the project divided by the number of equivalent employees that make up these wages.

The credit percentage ranges from three percent to six percent depending on the average annual wage paid to new employees.

  • Tier 6. In each year of the entitlement period, the compensation credit is equal to ten percent times the taxable compensation of all non-base year employees.
The compensation credit may be used for a sales and use tax refund, an income tax refund, a withholding tax credit refund, or for Tier 6, a real property tax credit reimbursement.

Personal Property Tax Exemption

  • Tier 4. A taxpayer may claim a personal property tax exemption on four types of property acquired after the date of application:
  1. Turbine powered aircraft;
     
  2. Computer systems and specific peripherals that require environmental controls;
     
  3. Business equipment involved directly in the processing of agricultural products; and
     
  4. Distribution facility equipment used to store and move product.

Turbine powered aircraft may be exempted from the first January 1 following the date of acquisition of the property through the ninth calendar year after the project attains the minimum required investment level of $10 million in new investment and 100 new, FTE employees. The aircraft may not be used to transport an elected official, or for fundraising for an elected official.

The computer systems and specific peripherals, agricultural processing equipment, and distribution facility equipment may be exempted from the first January 1 following the end of the year during which the required levels were exceeded and the next nine calendar years.

  • Tiers 2 and 5. The property tax exemption on computer systems and specific peripherals is only available to a taxpayer who has a project for an Internet web portal or a data center.

Computer systems and specific peripherals that require environmental controls of temperature and power may be exempted from the first January 1 following the end of the year during which the required levels were exceeded and the next nine calendar years.  

  • Tier 6. A taxpayer may claim a personal property tax exemption on any personal property at the project and on turbine powered aircraft acquired after the date of application.

Turbine powered aircraft, acquired after the date of application, may be exempted from the first January 1 following the date of acquisition of the property through the ninth year after the project attains the minimum required investment and new FTE employee levels. The aircraft may not be used to transport an elected official, or for fundraising.

All personal property at the project may be exempted from the first January 1 following the end of the year during which the required levels were exceeded and the next nine calendar years.

Sales and Use Tax Refund

This is a refund of Nebraska and local sales and use taxes paid on otherwise non-refundable purchases.  For Tiers 1, 2, 3, and 4, the purchases must be used at the project.  For Tier 6, the purchases may be used anywhere in Nebraska. The credits used for a sales and use tax refund must be earned in a prior tax year. 

If the local refund for a single locality is more than $25,000, the locality will be notified in advance and the payment of the local tax will be delayed.

Income Tax Refund

Credits may be used to reduce the income tax liability of the taxpayer's entire unitary group. The credits used for an income tax refund may be earned in a prior year or the current year.

Credits earned by a partnership, S corporation, limited liability company, cooperative, limited cooperative association, or an estate or trust may be distributed in the same ratio as income. The recipient of the distributed credit may use the credit to reduce their income tax liability from the year of distribution through the end of the entitlement period or carryover period, whichever is later.

Withholding Tax Refund

  • Tiers 1, 2, 3, and 4. Compensation credits may be used to receive a refund of, or to reduce the taxpayer’s payroll withholding tax liability, attributable to the number of new employees at the project, excluding compensation in excess of $1 million paid to any one employee.

  • Tier 6. Compensation credits may be used to receive a refund of, or to reduce the taxpayer’s payroll withholding tax liability, attributable to all employees at the project other than base-year employees, excluding compensation in excess of $1 million paid to any one employee.

The credits used for a withholding tax refund must be earned in a prior tax year. 

Real Property Tax Reimbursement

  • Tier 6. The credits may be used for a reimbursement from the State equal to real property taxes due after the year the project met the minimum required levels of investment and employment through the end of the carryover period on investment made after the date of application.

The credits used for a real property tax reimbursement must be earned in a prior tax year. 


Benefits by Application Level:

 
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
Tier 6
Benefit
          Direct Refund
50%
100%
 
100%
100%
100%
          Investment Credit
3%
10%
 
10%
 
15%
          Compensation Credit
3%-6%
3%-6%
3%-6%
3%-6%
 
10%
          Personal Property Tax Exemption
 
Computer
Systems1
 
Computer
Systems1
All TPP2
Use of Credits
          Sales and Use Tax Refund
Yes
Yes
Yes
Yes
 
Yes
          Income Tax Refund
Yes
Yes
Yes
Yes
 
Yes
          Distribution of Credit
Yes
Yes
Yes
Yes
 
Yes
          Withholding Refund3
Yes
Yes
Yes
Yes
 
Yes
          Real Property Tax Reimbursement
 
 
 
 
  
Yes

1The exemption is only available for an Internet web portal or a data center project.
2TPP = Tangible Personal Property
3The withholding refund is limited to prior year compensation credit.


Audit and Review Procedures:

Application

A taxpayer submits an application with supporting documents, including an application fee, to the Nebraska Department of Revenue (Department).  Each application is reviewed to ensure that the applicant is an eligible taxpayer, and that the plan relates to a qualifying business activity at interdependent locations.

Audit

When the taxpayer notifies the Department that it has reached the qualification levels, an audit is conducted to confirm the attainment of the minimum required levels of investment and employment, verification of the credits earned in the attainment period, and the accuracy of the initial direct sales and use tax refund. The Department reviews annual filings for claimed tax benefits for reasonableness. The Department conducts periodic maintenance audits of selected taxpayers and projects to ensure that projects have continued to comply with the minimum levels of investment and employment necessary for the selected Tier, and to verify the propriety of the credits reported and benefits received. The confirmation of attainment of the minimum required levels of new investment and employment required for the property tax exemption may be done as part of the original qualification audit for Tier 4, or as part of a maintenance audit of a subsequent year.

Claims for Benefits

The taxpayer files claims for sales and use tax paid during the entitlement and carryover periods. All claims are reviewed to confirm the proper payment of tax on items eligible for benefits. The review of the claim may involve testing of certain transactions based on dollar scopes or issues. 

The taxpayer must file a claim for the personal property tax exemption on or before May 1 with the Tax Commissioner, on a Form 5725X, with a copy of the form filed with the county assessor in which the property is located. The Department determines whether the taxpayer is eligible for the exemption based on whether or not the required levels of investment and employment have been met, and whether or not the property falls within the classes of exempt personal property. A Tier 6 taxpayer may elect to use credits for a reimbursement of property taxes paid on real property purchased or leased after the date of application and used at the project. Prior to approving the reimbursement, the Department will confirm the required payment was made to the county.

The taxpayer files Nebraska income tax and withholding returns claiming the use of credits as an offset of all, or a portion, of the taxes due. The Department will review and approve the credit usage. The Department also reviews or audits the information to ensure that credits were only used as an offset against the withholding attributable to the appropriate employees.


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