even where the company already had an incentive contract with the state signed prior to Oct. 1, 2025. Those contracts, of course, do not contain the new LB644 restrictions. This was significant because it marked the first time that we are aware of where Nebraska had attempted to impose a substantive, adverse, retroactive change to an existing project incentive contract. As previously referenced, the Department has now paused enforcement of LB644 to existing projects with agreements signed prior to Oct. 1, 2025. It is unclear how long this “pause” will last. On Jan. 16, 2026, the Nebraska Department of Revenue posted a document on its website titled “Foreign Adversarial Company FAQs.” This article reviews and analyzes several of the principal issues addressed in that publication. DEPARTMENT CONTENDS A PARENT COMPANY MAY DIRECTLY OR INDIRECTLY HOLD MORE THAN 50% CONTROL OF A SUBSIDIARY LB644 specifies that it applies to entities that are “a subsidiary or parent of any company” that otherwise constitutes a “foreign adversarial company.” The Department recently provided its position that “a parent company is a company that directly or indirectly holds more than 50% control of the subsidiary.” Direct control, per the Department, is “holding more than 50% control of the subsidiary by direct ownership.” Indirect control, per the Department, is “when an ultimate parent holds more than 50% control of other subsidiaries that in turn hold more than 50% control of an underlying subsidiary. An ultimate parent is the topmost company within the hierarchy of the entire organization.” The Department’s assertion that “indirect control” creates a parent-subsidiary relationship significantly expands the scope of entities that could fall within the definition of a “foreign adversarial company.” Impacted companies should carefully evaluate the multiple legal arguments and defenses available to them. REFUND CLAIMS THAT DO NOT ADDRESS LB644 STATUS MAY BE LEGALLY INCOMPLETE If LB644 is legally valid, demonstration that a taxpayer is not a “foreign adversarial company” is mandatory to receive incentives. Thus, any refund claim on file that does not address the taxpayer’s status under LB644 may be legally incomplete. That claim may remain unpaid until the company’s LB644 status is addressed. Alternatively, that claim could be formally denied by the Department because the claim does not include the new requisite condition (or the proof relating to this new condition) that all requirements for receipt of the refund have been met. The same is true for income tax returns that utilize credits to pay an income tax liability. The Department may decide that such return is incomplete and take steps to deny the use of those credits if the LB644 status is not addressed. Some companies have adopted a wait-and-see approach with respect to LB644, choosing to address the issue only if and when it is raised by the Department. However, that approach may be a risky strategy, as the Department can formally deny any claim that does not demonstrate compliance with all requirements. Companies should proactively evaluate and support both newly filed and existing refund claims, as well as income tax returns utilizing credits, by addressing LB644 considerations before questions arise. THE IMPORTANCE OF A PROTECTIVE HEARING REQUEST FOR REFUND CLAIMS For most Nebraska refund claims, the Department must act to allow or deny that claim within 180 days of its filing. Given this firm deadline, the Department has been asking multiple companies to address their status under LB644 in a condensed timeframe—sometimes within a few weeks. Failure to provide this status in the timeframe stated by the Department may cause the Department to deny the refund claim. If the Department denies your claim, a company’s only recourse is to appeal that decision to the District Court. At District Court, the company normally is not allowed to introduce any additional information in support of the claim. Rather, the Court normally reviews the case on the factual record previously submitted by the company to the Department. This generally puts the taxpayer at a potentially fatal disadvantage as to the outcome. This procedural trap can be avoided if a company simply makes a protective formal hearing request concerning their refund claim. For claims requesting a refund of sales or use tax, this request can be made when the claim is filed or any time before the Department formally acts on the claim. This hearing request has multiple effects. First, it will stop the 180-day period to act CONTINUED FROM PAGE 15 16 Nebraska CPA
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