Pub. 2 2020 Issue 5

17 nebraska society of cpas W W W . N E S C P A . O R G Nick Niemann andMatt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help companies evaluate and deploytheoptimalincentiveprograms for their clients and to address incentive issues with the appropriate state or local agency. Learn more at www.NebraskaStateTax.com. For a copy of their publication, N e b r a s k a Ta x I n c e n t i v e Briefing, please call Nick or Matt at (402) 341-3070 or email them at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com , respectively. a big choice. For a limited period of time (through December 31, 2020), you can act ually choose which tax incentive platform is best for you. The reason this choice exists is because u n d e r t h e Ne b r a s k a Ad v a n t a g e Grandfather provision, you have four to six years to actually meet the new job and investment thresholds—if you file the Nebraska Advantage Application by December 31, 2020. So, even if you are presently uncertain about your future growth, you can file your application by December 31, 2020, and then have until 2024-2026 to actually implement your expansion (and then continue to earn the potentially higher Nebraska Advantage Act tax incentive benefits for six to 10 years after that). In essence, this becomes a grandfathered “protective filing.” If you decide later to change your site or your plans, you can do so. Or, if you decide later you won’t reach the new job and investment threshold, you can simply withdraw the application (and if you so choose, switch and then file under the ImagiNE Nebraska Act). There are 15 specific business, legal, and financial criteria that determine which platform will be better for your specific project. The newanti-discrimination provision in the 2020 ImagiNENebraskaAct weighs heavily in favor of filing a Grandfather “protective filing” Nebraska Advantage Application by December 31, 2020, even if by the numbers ImagiNE Nebraska looks better for you. The anti-discrimination provision was offered as a well-intentioned senatorial amendment and was adopted. The 2020 ImagiNE Nebraska Act says the incentive agreement between the company and the state “shall” include a “requirement that the taxpayer not violate any state or federal law against discrimination.” So, on its face, this broadandvague condition can mean that any such violation (whether or not adjudicated) by any employee of the taxpayer anywhere in the country becomes a breach of the contract, which could have the unintended consequence of the loss of all project incentives. This becomes a significant risk to any company that is depending on the incentive in making its expansion decision. This could also lead to a burdensome audit by the Nebraska Department of Revenue, which by law needs to assure compliance with the Act. Perhaps the Department of Revenue will find a defensible way tomake this workable. Hopefully, the 2021 Legislature will refine the provision. However, if a company waits until then to find out, it will be too late to file a 2020 Grandfather Application under the Nebraska Advantage Act. We welcome the opportunity to discuss this with you, as business leaders continue to quickly adjust and refocus their business models towards the future. t Tier 1 Tier 2 Tier 2 Data Center Tier 3 Tier 4 Tier 5 Tier 6 REQUIREMENTS New # of Jobs 10 FTE 30 FTE 30 FTE 30 FTE 100 FTE Maintain 75/50 FTE New Investment $1,000,000 $3,000,000 $200,000,000 $0 $12,000,000 $37M or $20M (Renew Energy) $10M/$109M Wage Threshold 60% State Average 60% State Average 60% State Average 60% State Average 60% State Average N/A 200% County/ 150% St. Ave. TAX INCENTIVE BENEFITS Wage Credit 3-6% 3-6% 3-6% 3-6% 3-6% None 10% ITC 3% 10% 10% None 10% None 15% Sales Tax Refund ½ Yes Yes None Yes Yes Yes Personal Property Tax Exemption N/A Data Center Computers or Internet All Personal Property N/A Aircraft, Computers, Ag Proc. & Dist., Equip. Data Center Computers or Internet All Personal Property At Project Real Property Tax Credit Refund N/A N/A N/A N/A N/A N/A Yes OTHER FEATURES Project Length Other Requirements Extremely Blighted Tax Credit Use • Attainment Period – Up to 4 or 6 Years Left No additional employee benefits required to be offered No special provisions. To offset withholding liability, sales tax, and corporate income tax. • Entitlement Period – 6, 7 or 10 Years • Carry Over Period – 2 to 16 Years Qualified Business Categories Vary Depending On Tier. Process: Through NDR. 2005 Nebraska Advantage Act Incentive Summary (Apply by 12-31-20) Economic Redevelop- ment Area Small Manufacturers Growth and Expansion Quality Jobs Quality Jobs Investment Mega-Project Modernization REQUIREMENTS Rural Urban New # of Jobs 5 FTE 5 FTE 10 FTE 10 FTE 20 FTE 30 FTE 250 FTE None New Investment $250,000 $1,000,000 $1,000,000 $1,000,000 None $5,000,000 $250,000,000 $50,000,000 Wage Threshold 70% State Average 70% State Average 75% State Average 90% State Average 100% State Average 150% of State Average TAX INCENTIVE BENEFITS Wage Credit 6% 6% 4% 4% 100% = 5% 150% = 7% 200% = 9% 150% = 7% 200% = 9% None Invest Tax Credit 4% 4% 4% 4% None 7% 7% None Sales Tax Refund/ Exemption None None None None None Yes Yes Yes Personal Property Tax Exemption Ag Processing Machinery & Data Center Equipment All Tangible Personal Property Ag Processing Machinery & Data Center Equipment OTHER FEATURES Project Length Other Requirements Extremely Blighted Tax Credit Use • Ramp Up Period–Up to 5 Years Must offer health insurance and show benefits for job to count. Broad/Vague Anti-DiscriminationProvision = Project Legal Risk of losing all incentives Wage Credit and ITC are 1% point higher for Extremely Blighted Areas. To offset withholding liability, sales tax, and corporate income tax. Also for job training and recruitment of new, high wage employees. Also to repay loans from the Imagine Nebraska Revolving Loan Fund for workforce training and infrastructure development. • Performance Period– 7 Years • Carry Over Period– 3 Years Program Cap: $25M/year for 2021-22; 100M/year for 2023-24; 150M/year for 2025. 3% of State tax receipts thereafter. Then no new Apps. Whileonly full-timeemployees count, FTE calculation is stillapplicable. Process Change: File with Nebraska Department of EconomicDevelopment. Audit & ClaimsstillNDR. Footnote: (1) 7% if $10 M investment for manufacturers. 2020 Imagine Nebraska Act Incentive Summary (Apply starting 1-1-21) Anti-Discrimination (1) (1)