ImagiNE Nebraska Act + Benefits, Application Process & Examples

The ImagiNE Nebraska Act (“ImagiNE Nebraska”) replaced the Nebraska Advantage Act (“LB312”) on January 1, 2021. ImagiNE Nebraska is Nebraska’s primary incentives program, designed to encourage the expansion and relocation of businesses in Nebraska.

Eligibility

Only certain types of businesses are eligible for ImagiNE Nebraska, and eligibility is determined on a location-by-location basis. To be a qualified location, a majority of the business activities at a location (based on a headcount analysis) must be within one or more of the eligible NAICS codes or specified activities.

See the list of “Qualified Location” NAICS codes and specified activities HERE.

Project employees must receive a certain minimum average wage (varies by application tier and by application year) and must also be offered a sufficient package of benefits.

Application Levels

Each application level has different requirements and benefits, and some have different location or industry requirements.

Investment means the value of qualified property incorporated into or used at a qualified location. For qualified property leased from an unrelated person, the average net annual rent is multiplied by the number of years of the lease, not to exceed ten (the total value of the lease is recognized in the first year). Qualified property is any tangible property subject to depreciation, amortization, or other recovery under the IRC or the components of such property located at a qualified location. Qualified property does not include aircraft, barges, motor vehicles, railroad rolling stock, watercraft, or property that is rented by the taxpayer to another person.

All application tiers allow up to five calendar years to reach the required levels, seven years to earn credits, and a three-year credit carryover period.

Benefits & Usage

The benefits of ImagiNE Nebraska vary by application tier but can include the following:

• Investment tax credits;
• Wage credits;
• Exemptions/refunds of sales/use tax paid on purchases at the project;
• Personal property tax exemptions.

Tax credits can be applied against these taxes:

• Income tax;
• New employee Nebraska income tax withholding tax (Wage Credits only);
• Sales/use tax paid on purchases at the project;

Credits can also be used for repayment or reimbursement of the following:

• Infrastructure or Job Training Loans through the ImagiNE Revolving Loan Program;
• Employee recruitment and retention costs (including marketing, relocation, search firm fees, student loans, tuition, and down payment on primary residence in Nebraska);
• New employee training costs;
• Employer-sponsored childcare expenses.

Application Process

An application is required for ImagiNE Nebraska. The application date establishes the beginning date for recognizing new investment. The application date also establishes the base year for employment purposes. Base year employment is the number of full-time equivalent employees in the calendar year prior to the application date. Employment growth in future years is measured against base-year employment.

Applications are filed with the Nebraska Department of Economic Development, with an application fee of $5,000.

Annual Reporting

Each year, a form summarizing the new jobs and investment is required to be filed with the income tax return. In the year the required levels of new jobs and investment are reached, credits earned can immediately be used without waiting for an audit. Benefits can continue to be earned for the next six years, provided the required levels of jobs and investment are maintained. The Department of Revenue may conduct an audit at a later date to verify the accuracy of the information reported and benefits claimed.

Examples

“Economic Redevelopment Area”

Small office located in an Economic Redevelopment Area

Investment: $250,000 within 5 years (office equipment and remodel)

Employment = 5 new full-time employees in 5 years, average Medicare hourly wage $17.31

Estimated Benefits:

• Investment Credit = $10,000
• Wage Credit = $75,610
• Total Benefits = $85,610

“Manufacturing Growth & Expansion – Rural”

Small manufacturer located outside the Omaha or Lincoln area

Investment: $1 million within 5 years (equipment and a new building lease)

Employment = 5 new full-time employees in 5 years, average Medicare hourly wage $17.31

Estimated Benefits:

• Investment Credit = $40,000
• Wage Credit = $75,610
• Total Benefits = $115,610

“Manufacturing Growth & Expansion – Urban

Small manufacturer located in the Omaha or Lincoln area

Investment: $1 million within 5 years (equipment and a new building lease)

Employment = 10 new full-time employees in 5 years, average Medicare hourly wage $18.54

Estimated Benefits:

• Investment Credit = $40,000
• Wage Credit = $107,977
• Total Benefits = $147,977

“Growth & Expansion” – Small Size Headquarters

Small headquarters office anywhere in Nebraska

Investment: $1 million within 5 years (new office lease, office equipment)

Employment = 10 new full-time office employees in 5 years, average Medicare hourly wage $22.25

Estimated Benefits:

• Investment Credit = $40,000
• Wage Credit = $129,584
• Total Benefits = $169,584

“Quality Jobs” – Medium Size Headquarters

Medium size headquarters office located anywhere in Nebraska

Investment: No new investment

Employment = 20 new full-time office employees in 5 years, average Medicare hourly wage $24.73

Estimated Benefits:

• Investment Credit = $0
• Wage Credit = $360,069
• Total Benefits = $360,069

“Quality Jobs Investment” – Large Manufacturer/Processor

Manufacturing/processing facility located anywhere in Nebraska

Investment:  $3 million building expansion, $2 million equipment within 5 years

Employment = 30 new full-time office employees in 5 years, average Medicare hourly wage $24.73

Estimated Benefits:

• Investment Credit = $350,000
• Wage Credit = $540,103
• Sale/Use Refunds = $99,523
• Total Benefits = $989,629  (plus potential Property Tax exemptions)

“Quality Jobs Investment” – Large Headquarters

Headquarters located anywhere in Nebraska

Investment:  $10 million building purchase, $2 million remodel, $2 million furnishings & equipment

Employment = 100 new full-time office employees in 5 years, average Medicare hourly wage $37.09

Estimated Benefits:

• Investment Credit = $980,000
• Wage Credit = $3,780,213
• Sale/Use Refunds = $206,531
• Total Benefits = $4,966,564

If you have any questions about the ImagiNE Nebraska Act, please contact us. You can also learn more by visiting https://www.lutz.us/imagine-nebraska/.