Maximizing Your Nebraska R&D Credit

Innovation drives growth, and Nebraska continues to reward businesses investing in research and development through its R&D tax credit program. Whether you’re improving products, streamlining processes, or developing new technology, this credit can provide meaningful savings while supporting continued investment in the state’s economy. 

Here’s what you need to know about qualifying, calculating, and maximizing your Nebraska R&D credit. 

Understanding the Nebraska R&D Tax Credit 

Nebraska’s Research and Development (R&D) tax credit complements the federal R&D credit, offering a state-level incentive to businesses that perform qualified research activities. The credit is designed to encourage innovation, job creation, and technological advancement across industries such as manufacturing, software development, and agricultural technology. 

Eligible businesses can claim 15% of the federal R&D credit allowed or 35% when the research is conducted in partnership with a Nebraska college or university. 

What activities and expenses qualify? 

To qualify, research activities must meet the same general criteria used for the federal R&D credit: 

• The work must aim to develop or improve a product, process, formula, or software. 
• The activity must involve a process of experimentation that relies on hard sciences, such as engineering, biology, or computer science. 
• The outcome must be uncertain at the outset, requiring systematic testing and evaluation. 

Eligible expenses typically include: 

• Wages for employees directly involved in research or supporting qualified projects.
• Supplies used in the research process. 
• Contract research costs, such as payments to third-party vendors performing R&D work on behalf of your company.
  
  

How do I calculate and claim the credit? 

The Nebraska R&D tax credit is calculated based on the federal credit amount, with enhanced benefits for in-state collaboration. Businesses claim the credit using Form 3800N, and those evaluating whether they qualify for additional benefits under the Nebraska Advantage R&D Act can review the program’s requirements on the Nebraska Department of Revenue’s resource page. 

Credits can be used to offset income tax liability or, for certain businesses, employee withholding tax. Proper coordination with your federal return is essential to ensure all documentation and calculations align. 

How can I maximize my credit value? 

Because the R&D credit depends on detailed support, recordkeeping is key. To make the most of the incentive: 

• Maintain documentation of projects, including objectives, testing phases, and technical uncertainties. 
• Track qualified wages and supply costs in your accounting system using clear project identifiers. 
• Evaluate ongoing or new partnerships with Nebraska universities to increase the credit percentage to 35%.
• Conduct an annual review of potential qualifying activities, especially in production, software, or process improvement settings. 
  
  

Update: LB644 and “Foreign Adversary Company” Restrictions 

A key legislative update for 2025 is the passage of LB644, which restricts certain Nebraska tax credits, including the R&D credit, from being claimed by “Foreign Adversary Companies” beginning October 1, 2025.  These are entities with specific ownership or operational ties to countries identified as foreign adversaries, including China, Cuba, Iran, North Korea, Russia, and Venezuela. 

Businesses should review the Nebraska Department of Revenue’s Foreign Adversary Company Notice for detailed criteria to confirm eligibility before filing. 

Get the Most Out of Your R&D Credits with Lutz 

The Nebraska R&D tax credit remains a valuable incentive for businesses driving innovation across the state. By understanding the rules, documenting effectively, and staying up to date on legislative changes, you can maximize the benefit and strengthen your organization’s financial position. If you’re ready to make sure your R&D activities are working as hard as you are, our tax services assist you every step of the way. Contact us to learn more.