LUTZ BUSINESS INSIGHTS
nebraska microenterprise tax credit
russ smith, tax & consulting director
The Microenterprise Tax Credit is available to individuals who are actively engaged in the daily management and operation of a microenterprise. A microenterprise can be any industry or entity type located in Nebraska that has five or fewer full-time equivalents at the time a Microenterprise Tax Credit application is filed.
2021 Legislation resulted in changes to the Microenterprise Tax Credit. The discussion below reflects the 2021 changes that are effective for applications filed on or after September 1, 2021.
APPLICANTS & RELATED PERSONS
Approved applicants are eligible for a refundable Nebraska income tax credit of up to 20% of the increase in investment and/or employment at the business compared to base year levels. The maximum credit allowed is $20,000 (applications filed prior to September 1, 2021, were subject to a $10,000 limit).
The $20,000 cap is a lifetime cap for the applicant and related persons. Related persons include those defined under the Internal Revenue Code as a co-owner of the business, individuals, and businesses with more than 50% common ownership, and a parent and their minor son or daughter.
Individuals engaged in farm or livestock operations with a net worth of more than $500,000 or ineligible for the Microenterprise Tax Credit.
The base year for determining growth is the year before the application is filed. Investment growth is based on an increase in purchases over a two-year period compared with base year purchases. Eligible investments include purchases of depreciable assets, repairs and maintenance, advertising, legal and professional fees, and leases.
Employment growth is based on the increase in compensation (including employer health insurance contributions) over a two-year period compared with base year compensation. Compensation paid in excess of 150% of the Nebraska average weekly wage ($1,380 per week for 2021 applications) is excluded from the employment growth calculation.
If you think the Microenterprise Tax Credit may apply to you, and you have experienced or expect to experience employment and/or investment increases over the next two years, you may want to consider filing a Microenterprise Tax Credit application. Under current law, 2032 is the last year that Microenterprise Tax Credit applications can be filed.
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
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.