3. Other Constitutional Defects. LB 644 may also be running afoul of the Foreign Commerce Clause and the Federal Preemption Doctrine, among other federal standards. The state risks intruding into areas reserved for federal authority over foreign relations and trade. A SHARP BREAK FROM NEBRASKA’S HISTORICAL PRACTICE In prior updates to its main incentive programs, Nebraska grandfathered existing projects—a practice that honored legal, business, and fairness obligations. LB 644 rejects that long-standing precedent. For the first time that we are aware of, Nebraska appears willing to disregard its own contracts and force companies into litigation to obtain what they have already earned. This abrupt reversal could discourage future investment at precisely the time when the state needs to continue to strongly compete for growth and stability. WHAT COMPANIES & ADVISORS SHOULD DO NOW The Nebraska Department of Revenue has stated it will soon add a “Yes/No” question to all incentive claims and incentive filings, asking whether the company constitutes a “foreign adversarial company.” To protect their rights, we are recommending that every company with an existing Nebraska incentive contract should do the following: 1. Attach a Legal Defense Positioning Statement. Regardless of how you presently answer the “Yes/No” question, we are working with companies and their CPAs on the specific written statement that should be attached to their incentive claims and filings, outlining the company’s specific facts and corporate structure, expressing the presence of a binding contract, and invoking the contractual legal and constitutional defenses discussed above. This will help avoid a waiver situation by preserving your legal and constitutional rights and help prevent the state from successfully contending that the company implicitly accepted this new condition (as well as other new conditions that may be enacted later). This is the time to make it clear you believe you have a binding contract and that no new or future unilateral, retroactive change will be accepted. 2. Monitor Ownership and Structure. Review corporate ownership and subsidiary relationships to minimize exposure to the “foreign adversarial” definition— while balancing business, legal, and global operational considerations. 3. Preserve What’s Needed for Your Legal Defense. We are guiding companies as to what project decision and performance records they should maintain and develop to be prepared to best defend if your incentives are denied. THE BIGGER PICTURE There are a variety of ways to express the bigger picture on this. At a minimum, LB 644 sends an unfortunate message to the national and local business communities and to the national site selection community that they cannot rely on the commitment Nebraska has made in its job and investment incentives. The ripple effect is yet to be seen. Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. See their websites at www.NebraskaStateTax.com and www.NebraskaIncentives.com for more information. For a copy of their full publications, The Anatomy of Resolving State Tax Matters or their Nebraska Business Expansion Decision Guide, please visit their websites or contact them at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com. CLASSIFIED AD Join Woods & Durham as a Senior Accountant We’re looking for an experienced accountant (5+ years in public accounting) who thrives on helping clients succeed. If you are a CPA, CPA candidate, or Enrolled Agent and have a passion for highlevel tax planning, small business consulting, and financial statement preparation, this senior accountant role is for you. At Woods & Durham, you’ll receive a competitive compensation package with excellent benefits, be part of a supportive team, and have the chance to grow your career in a respected, community-focused firm. Openings available in Holdrege, Neb.; Beloit, Kan.; Clay Center, Kan.; and Salina, Kan. For a detailed job description, visit nescpa.org/job-postings or contact Todd Shanks at (785) 825-5494 or tshanks@woodsanddurham.com. 18 Nebraska CPA
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