incentives & Training

Nebraska Advantage Program (LB 312)

The Nebraska Advantage program can substantially reduce and may actually eliminate a company’s income, sales, payroll withholding and certain classes of personal property taxes for up to 15 years. The philosophy of the program is to reward companies on a project basis via a performance-based system in both the short and long term. Highlights include:

• Tax credits and sales tax refunds based on a flexible, six-tier investment and job creation schedule.

• Companies can utilize their investment credits to reduce or eliminate both sales and income tax liability. Compensation credits can reduce or eliminate employee withholding tax liability.

• Companies have 5 years to attain necessary job and investment creation levels and can utilize credits for up to 10 years.

• Qualifying business categories include manufacturing, call centers, software development, headquarter (administrative operations), data processing, insurance, financial services and distribution.

• Exemption from sales tax on manufacturing machinery, equipment and related services.

The Nebraska Advantage has 6 levels or tiers of benefits based on the amount of investment and number of jobs a company creates.

• Tier 1: $1 million investment, 10 new jobs

• Tier 2: $3 million investment, 30 new jobs

• Tier 3: no investment, 30 new jobs

• Tier 4: $10 million investment, 100 new jobs

• Tier 5: $30 million investment, no new jobs

• Tier 6: $10 million investment with 75 new jobs or $100 million investment and 50 new jobs

Compensation Credits can be used to reduce or eliminate a company’s payroll tax withholding liability, sales and use tax paid or corporate income tax liability. Under this provision, companies retain a portion of withholding tax attributable to new employees. The Compensation Credit is a sliding scale credit based on the average wage of new employees multiplied by the number of new employees. The percentage of credits is based on the Nebraska average weekly wage for the year of application. The wages are adjusted annually. Current credit levels are as follows:

• 3% if the average wage paid is at least 60% ($9.75 or $20,281 annual)

• 4% if the average wage paid is at least 75% ($12.19 or $25,351 annual)

• 5% if the average wage paid is at least 100% ($16.25 or $33,801 annual)

• 6% if the average wage paid is at least 125% ($20.31 or $42,251 annual) 

• 10% if at least 50 or 75 of the new jobs (depending on investment leve) pay an annual threshold wage greater than $80,004 in Douglas County; $68,700 in Sarpy County; and $80,104 in Washington County.

Investment tax credits reduce the company’s state corporate income tax, property or sales and use tax liability on company purchases to the extent that such liability. For projects qualifying for Tier 2 or Tier 4, the credit is 10%; and 15% for projects eligible for Tier 6. The credit is based on the company’s investment in qualified property, which includes building, equipment and components, during the entitlement period. For leased space, investment is equal to the annual lease rate times the term of the lease up to 10 years.

Refund of sales and use taxes are refunded on the projects capital purchases from the date of application through the meeting of the required levels of investment. The refund of sales and use taxes continues for qualified property after the taxpayer reaches the required levels through the entitlement period. For projects qualifying for Tier 2 or Tier 4, the credit is estimated by taking 50% of construction price of new building and improvements times the sales tax rate. For projects qualifying for Tier 6, 100% of sales tax on capital purchases would be refunded.

Sales and use tax paid on non-capital purchases (i.e. consumables and utilities) may be credited back to the company by using investment and compensation tax credits. The combined State and Local sales tax is 7.0% within most jurisdictions in Greater Omaha.

Personal Property Tax exemption allowed under Tier 4 is for turbine-powered aircraft, mainframe computers, agricultural processing machinery and personal property used in a distribution business for up to 10 years. For Tier 6 projects, the personal property tax exemption is granted for all tangible personal property at the project site for 10 years.

Real Property Tax refund is only available for projects that qualify for Tier 6. The refund is granted for real property at the project site for 10 years by utilizing investment and compensation tax credits against real estate tax liability. Leased property is also eligible for the refund.

The Attainment Period is the length of time after submitting an application that a company has to reach the threshold of investment and employment. For a project qualifying for Tier 2 or Tier 4, the attainment period is up to 7 years. For projects qualifying for Tier 6, the attainment period is the 5 years.

The Entitlement Period is the number of years a business may generate and use benefits and includes the year the investment and jobs are met. For a project qualifying for Tier 2 or Tier 4, the entitlement period is up to 7 years. For projects qualifying for Tier 6, the entitlement period is the 10 years.

Credits may be carried-over until fully utilized up to 14 years after the year of application for Tier 2 and Tier 4 projects, and one year for Tier 6 projects.

Other components of the Nebraska Advantage program include:

Research and Development Advantage - Provides a tax credit for research and development activities by any business entity. Allows a research tax credit to business firms that increase research expenditures in Nebraska. The credit is equal to 15% of any research and development expenditures that are greater than the average of the previous two years research and development spending. An important feature is that a business with little or no income may take advantage of the income tax credit by receiving a sales tax refund or a refundable income tax credit.

Microenterprise Tax Credit Advantage - Provides a 20 percent refundable investment tax credit to micro businesses on new investment in targeted communities. Applicants may qualify for a maximum $10,000 throughout the life of the program. The credit is geared to companies with five or fewer employees, including start-ups. The credits would apply to new expenditures for wages, buildings, and non-vehicle depreciable personal property.

Rural Development Advantage - Amends the Employment Expansion and Investment Incentive Act, formerly LB 608 passed in 2003, to provide qualified businesses with refundable tax incentives for projects that create 2 new jobs and invest $125,000 in counties with less than 15,000 residents. Tele-workers count as new employees. In addition, the $250,000-investment and 5-job thresholds remain in place for counties with populations 15,000-25,000.

Customized Job Training Program

The Customized Job Training Program, administered by the Nebraska Department of Economic Development (DED), offers a comprehensive on-the-job training program for new and expanding Nebraska businesses. Customized Job Training funds are used for on-the-job training for newly created production positions (managers, supervisors, accounting, clerical/office and janitorial positions are not eligible). Funds may reimburse the business up to 50 percent of the employee’s wages during the training time up to the allotted dollar amount (see table below). The business must retain all positions created for two years after the training has been completed. Nebraska’s training resources also include WIA funds, local community college training facilities, the local Workforce Development office and local city resources.

Capital Gains Exemption

Nebraska law provides for an exemption from state personal income tax on gains realized from selling or exchanging stock of one corporation acquired by an employee with that corporation. The corporation must do business in Nebraska for at least three years and must have a minimum of five shareholders. This provision is of major value to growth-oriented companies that use company stock options as part of employee compensation or retirement programs and, therefore can provide a company with a unique recruiting device.

Community Improvement Financing (CIF/TIF)

Community Improvement Financing (CIF) is Nebraska's version of Tax Increment Financing (TIF). This is a method of financing public improvements associated with a private development project in a designated redevelopment area by using the projected increase in the property tax revenue which will result from the private development.

This tax revenue increase is used to pay for the public improvements or is pledged to repay bonds issued by the local government or loans used to finance these improvements. Revenue bonds can be issued to finance all or part of a site's public pre-construction improvements. Public improvements include land purchase, clearance and sale, construction of streets, sidewalks, utilities, parks or other similar public spaces necessary in site preparation. CIF, in effect, can reduce developer capitalization to a leve