WE HAVE BEEN SEEING RENEWED INTEREST IN TAX incentives this year, both in Nebraska with legislative action on a new incentive program and in other states. Nebraska’s main economic development incentive program began with the 1987 Employment and Investment Growth Act (known as LB775), which was continued and enhanced through its successor in 2005, the Nebraska Advantage Act (known as LB312). The 2020 Imagine Nebraska Act is the third generation of Nebraska’s leading business growth incentive platform. These programs have incented the creation of more than 1,000 expansion projects, with over $45 billion of capital investment and 100,000-plus new jobs in Nebraska. Nebraska also has numerous other business incentives that are available to companies in many industries. With more companies exploring expansion and investment opportunities, incentives are becoming an increasingly important part of the decision-making process. We are writing this article to share practical insights on how to approach these opportunities and avoid common pitfalls that can impact the value and receipt of available incentives. In working on incentive projects with CPAs, company tax teams, and company leadership, we often encounter issues that might not be obvious at the outset but can significantly affect results. Many of these challenges come up early and can be difficult—or even impossible—to fix later. Based on that experience, we’ve outlined some of the most important legal and structural considerations to keep in mind, as projects tend to be most successful when these items are addressed upfront. APPLICATION ISSUES & PROJECT DESIGN Which Program: Several Nebraska business expansion incentives are available—both tax and non-tax. Before moving forward with a project, it’s important to evaluate which programs are the best fit. In some cases, a single project may qualify for more than one program. Project Entities: Depending on the incentive, the structure of your company and its related entities may need to meet specific eligibility requirements. It’s important to confirm this early in the process. Qualified Business: The project must usually fall within one or more “qualified business” activities. This may sound straightforward, but the Nebraska Department of Revenue can sometimes challenge whether a business qualifies. A clear and accurate description of your operations can make a big difference. Project Activities Description: How you describe your project matters. Being too broad or too narrow can impact eligibility and the amount of incentives available. Careful drafting upfront can help avoid issues later. Commitment: You’ll usually need to determine your expected levels of new investment and employment. These decisions directly affect the level of benefits available and your flexibility going forward. Employees: Understanding your base year employee count and required wage levels is critical. These factors often drive qualification and benefit levels. Coordination With State & Local Approvals: Timing is important. Your project should align with state and local approvals, zoning or site entitlements, and any additional incentives you’re pursuing. STATE TAX BRIEFING CRITICAL LEGAL CRITERIA TO ADDRESS FOR INCENTIVE PROJECTS BY NICK NIEMANN AND MATT OTTEMANN, McGRATH NORTH LAW FIRM 18 Nebraska CPA
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