LUTZ BUSINESS INSIGHTS
IMAGINE NEBRASKA ACT (LB1107)
russ smith, TAX & CONSULTING DIRECTOR
On August 17, 2020, Governor Pete Ricketts, signed into law Legislative Bill 1107, which includes a new business tax incentive program called the ImagiNE Nebraska Act. The ImagiNE Nebraska Act replaces the Nebraska Advantage Act (“LB312”) effective January 1, 2021. All existing Nebraska Advantage Act project applications filed through the end of 2020 will continue per the terms of the Nebraska Advantage Act. However, no new Nebraska Advantage Act application will be accepted after December 31, 2020.
The ImagiNE Nebraska Act is similar to the Nebraska Advantage Act but updated to encourage high-wage jobs, promote investment in distressed and rural areas, simplify administrative requirements, and allow for more transparency and accountability.
Highlights of the ImagiNE Nebraska Act:
- Applications will be reviewed and approved by the Nebraska Department of Economic Development. The Nebraska Department of Revenue will continue to be responsible for auditing investment and employment and approving credits, refunds, and exemptions.
- Qualified activities and qualified locations are much easier to determine. There is no longer a requirement to segregate qualified and non-qualified activities. Either all activities at a project location will be qualified, or none will be qualified.
- All qualified business types are eligible for all application levels. This includes administrative management (headquarters).
- All application levels applied for can be changed up to one year after the year the desired investment/employment levels were met.
- Refunds and use of credits will be capped each year, with only $25 million available in each of 2021 and 2022, increasing to $100 million in 2023 and 2024. In addition, Applications may not be approved if future refunds and credit utilization is expected to exceed the calendar year limits.
- Credits, refunds, and exemptions can be claimed as soon as a business attains the required levels. A Qualification Audit is no longer needed before benefits can be realized. The Department of Revenue has the authority to conduct audits at a later date.
- For 2021 applications, base year employment will be the greater of 2019 or 2020 employment. For all subsequent years, the calendar year prior to the application year will be used for determining base year employment levels.
- Average wage requirements are higher than under the Nebraska Advantage Act.
- Lower average wage requirements apply to certain manufacturers and aircraft servicers. Higher compensation credits are allowed for certain manufacturers and aircraft servicers located outside of Douglas, Lancaster, and Sarpy counties.
- Health insurance and benefits must be offered to new full-time employees.
- Non-Nebraska residents are no longer included in the new employment calculations. UPDATE: Non-Nebraska residents can be included for applications filed 5/25/21 or later.
- Part-time employee hours are no longer included in the calculation of actual new full-time equivalents hired after the base year.
- Extra incentives are allowed for projects in Extremely Blighted Areas.
- A new application level is available for projects with as little as $250,000 investment and 5 new employees located in an Economic Redevelopment Area.
See our ImagiNE Nebraska application matrix for a summary of the requirements and benefits for each application level. For questions or assistance, please contact us.
ABOUT THE AUTHOR
RUSS SMITH + TAX & CONSULTING DIRECTOR
Russ Smith is a Tax & Consulting Director at Lutz with over 20 years of state tax experience. He specializes in state income tax planning and compliance and helps clients minimize state and local taxes through the use of incentives.
AREAS OF FOCUS
- Tax Planning & Compliance
- State and Local Tax (SALT)
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- BSBA, University of Nebraska, Kearney, NE
- Graduate Studies, University of Nebraska, Lincoln, NE
- Douglas County Historical Society, Board Member
- Douglas County Historical Society Foundation, Board Member
- Nebraska Income Tax Update + LB873
- Iowa Income Tax Update + HF2317
- ImagiNE Nebraska Act + Benefits, Application Process & Examples
- Nebraska Taxation of Military Retirement Pay
- Nebraska Microenterprise Tax Credit
- ImagiNE Nebraska Act (LB1107)
- Will a Nebraska 529 College Savings Plan Reduce Your Tax Obligations?
- Income Tax Nexus May Affect Your Business; Here's How
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