On August 17, 2020, the Nebraska Advantage Act was replaced by the ImagiNE Nebraska Act, which will take effect on January 1, 2021. Applications for the Nebraska Advantage Act filed on or before December 31, 2020, can be amended to choose the ImagiNE Nebraska Act if the new program better fits your needs. No new Nebraska Advantage Act applications will be accepted after December 31, 2020.
The ImagiNE Nebraska Act was put in place to offer tax incentives to businesses to encourage investment and employment growth in the state. Specific provisions target high-wage jobs and investment in distressed and rural areas.
There are several differences between the qualifications and applications required for the ImagiNE Nebraska Act and the Nebraska Advantage act, including the following:
- Applications for the ImagiNE Nebraska Act are now reviewed by the Department of Economic Development. The Department of Revenue will still be responsible for approving the refunds, credits, and exemptions a business receives.
- The application must:
- Request an agreement identifying the taxpayer’s levels of employment.
- Include specific information and acknowledgements.
- Include a $5,000 nonrefundable application fee.
- Incentives under the ImagiNE Nebraska Act may be claimed immediately after meeting the required thresholds. Under the Nebraska Advantage Act, a Qualification Audit was required before incentives could be claimed, a process that frequently lasted for months or years.
- The Nebraska Advantage Act required companies to segregate qualified and non-qualified activities for locations. Under the ImagiNE Nebraska Act, if a majority of the activities at a location qualify, then all the activities at that location are qualified.
- The definition of a qualified activity now encompasses a wider range of activities, including:
- Testing laboratories
- Rail or truck transportation
- Insurance carriers
- Wired or wireless telecommunications carriers (except satellite)
- Telemarketing providers
- Data processing or computer facilities management services
- Warehousing and storage
- Administrative management of the taxpayer's activities
- Logistics facilities
- Services provided on aircraft
- Research, development or testing for scientific, agricultural, animal husbandry, food product, industrial or technology purposes
- Production of electricity using renewable energy
- Computer systems design
- Financial services
- Any other business location where at least 75% of revenue is from sales made and delivered to unrelated customers outside Nebraska
- The levels of investment and employment that qualify for various incentives are:
- 20 new employees
- Investment of at least $250,000 but less than $1 million and five new employees within economic redevelopment areas
- Investment of at least $1 million and 10 new employees
- Investment of at least $5 million and 30 new employees
- Investment of at least $250 million and 250 new employees
- Investment of at least $50 million
- Approved agreements last for 15 years and all application levels can be changed up to one year after the year in which desired investment levels are met.
There are also several changes to the factors used to compute the credit, including:
- The requirements for qualified employees included in the count has changed significantly.
- Employees must now be Nebraska residents.
- Part-time employee hours are not included in the calculation of new FTEs hired after the base year.
- Benefits (such as health insurance) must be offered to new full-time employees.
- Part-time employee hours worked will no longer be included.
- Average wage requirements are higher than under the Nebraska Advantage Act.
- For applications filed in 2021, base year employment will be determined by the greater of employment in 2019 or 2020.
- For applications filed in 2022 and beyond, base year employment will be determined based on the prior calendar year.
Refunds available will be capped at $25 million for both 2021 and 2022, with the cap increasing to $100 million in 2023 and 2024, and $150 million for 2025. Beginning in 2026, incentives will be capped at three percent of state net tax receipts.
If you have questions about the ImagiNE Nebraska Act and its effects on your business, please contact our office. We would be happy to assist you.