January 9, 2007
Department of Economic Development
www.neded.org
The Nebraska Advantage Package is designed to:
• Create a business climate that makes Nebraska the preferred
location for starting and growing business
• Promote growth of existing companies job retention and expansion
• Foster growth of existing companies through new investment
• Encourage new capital investment
• Increase the number of new successful startup business ventures
• Further refine Nebraska’s raw materials
• Foster the commercialization of new products and ideas in Nebraska
• Recognize unique differences in the State’s diverse economic
engines
Department of Economic Development
www.neded.org
1. Expanded Incentives for 5 “Tiers” of
2.
3.
4.
5.
6.
investment and/or job creation
Rural Development Advantage
Research and Development Advantage
State and local sales tax exemptions of
manufacturing machinery, equipment, and
related services
Agriculture Innovation Advantage
Microenterprise Tax Credit Advantage
Department of Economic Development
www.neded.org
5 “Tiers” of Investment and/or Job Creation
Tiers
Minimum
New Jobs
Minimum New
Investment
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
10
30
30
100
Maintain
$ 1 Million
$ 3 Million
$ 0 Million
$ 10 Million
$ 30 Million
Department of Economic Development
www.neded.org
5 “Tiers” Key Features
 Job tax credits may be applied against state
withholding of new employees
 New small business tier
 New jobs only tier
 Refunds of 50% (Tier 1) to 100% (Tiers 2, 4 & 5) of
all sales tax paid for capital expenditures at the
project for tiers
 Adds exportable services to all tiers
Department of Economic Development
www.neded.org
Eligible Businesses
R&D
Data Processing
Telecommunications
Insurance
Financial Services
Manufacturing
Distribution
Storage
Transportation
Admin. Headquarters
Export Services
Neb. Adv. Act
Rural Dev. Adv.
Tier 1
Tiers 2-5
Level 15
Level 25
All Levels
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Microenterprise
75% of sal es outsi de of Neb. or
to U.S. Govt - Software,
Computer Systems Desi gn,
Product Testi ng,
Gui dance/Survei l l ance,
Technol ogy Li censi ng
Retail
Service Businesses
All Other Businesses
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Department of Economic Development
www.neded.org
Rural Development Advantage
Investment Credits: $2,750 (refundable) per $50,000
Wage Credits: $3,000 (refundable) per FTE, includes
teleworkers
Rural Level One
Rural Level Two
County Population:
Less than 15,000
New Investment:
$125,000
New Jobs Created: 2
County Population:
Less than 25,000
New Investment:
$250,000
New Jobs Created: 5
Department of Economic Development
www.neded.org
Department of Economic Development
www.neded.org
Rural Development Advantage
Livestock Modernization/Expansion Now Eligible
A Livestock Production project may be applied for as of July 14, 2006.
Livestock Production involves the operation of real and personal property for
the production of livestock useful to man, including breeding and grazing
livestock. The project must meet the Level 1 or Level 2 requirements for
investment and employment growth at a location in one county
meeting the population requirement. Investment may include any
improvements to real property and tangible personal property that are
depreciable under the Internal Revenue Code except for vehicles, planes, or
railroad rolling stock.
Department of Economic Development
www.neded.org
Livestock Modernization
Project application may be filed on or after January 1, 2007.
Livestock modernization is defined as the construction,
improvement or acquisition of depreciable buildings, facilities
or equipment for livestock housing, confinement, feeding,
production and waste management. The project must have a
net investment increase of at least $50,000. There is no
employment increase required. Equipment does not include
breeding stock, motor vehicles, planes, or railroad rolling
stock.
 A livestock modernization project may
be located in any county in Nebraska.
Department of Economic Development
www.neded.org
http://www.revenue.ne.gov
click: Tax Incentives
click: Rural Development
Department of Economic Development
www.neded.org
Research and Development Advantage
 No Application required
 File a schedule with income tax returns
 Any business firm subject to sales tax
 Not a political subdivision or exempt organization
 Credit may be claimed in tax years beginning on
or after 1/1/06
 Credit based on expenditures for research and
development activities under section 174 of IRC
Department of Economic Development
www.neded.org
State and local sales tax exemptions
of manufacturing machinery,
equipment, and related services
Definition – Manufacturing
A series of actions performed upon tangible
personal property either by hand or machine,
which results in that tangible personal property
being reduced or transformed into a different
state, quality, form, property or thing.
(cont.)
Department of Economic Development
www.neded.org
Definition – Manufacturing (cont.)
Manufacturing machinery and equipment
does not include: vehicles required to be
registered for operation on the roads, hand
tools, office equipment and computers,
software and related peripheral equipment
not used in the manufacturing process.
Department of Economic Development
www.neded.org
Definition – Manufacturing (cont.)
Manufacturing does not include retail,
generation or transmission of electricity, the
production or transmission of information,
programming, or the preparation of food for
immediate consumption or purification or
transportation of water.
Department of Economic Development
www.neded.org
Microenterprise
Tax Credit
Department of Economic Development
www.neded.org
What is a Microenterprise?
•In a designated distressed area.
•Any Business with 5 or fewer FTEs.
–FTE-Full time equivelent=2080 hours per year
–5 FTEs = 10,400 hours paid per year to employees.
•Applicant is:
Actively, Personally, Continually
engaged in operations of the business.
–Explain management and decision making.
–Explain daily time spent in the business.
Department of Economic Development
www.neded.org
Two Qualifying Examples:
5 employees work 40 hours/week
5 X 40 = 200 hours X 52 weeks = 10,400
3 employees work 30 hours/week
3 X 30 = 90 X 52 weeks= 4680
PLUS
3 employees work 20 hours/week
3 X 20 = 60 hours X 52 weeks = 3120
PLUS
1 employee works 40 hours/week
1 X 40 = 40 X 52 = 2080
TOTAL: 4680 + 3120 + 2080 = 9,880
Department of Economic Development
www.neded.org
Distressed Areas
Department of Economic Development
www.neded.org
Application Rules
•Application is required
•No Fee to apply
•Dates beginning 1/1/2006
ending 12/31/2010
•May not participate in other Nebraska Advantage
Programs
•Lifetime limit of $10,000 for application and related
parties.
Department of Economic Development
www.neded.org
How credits are calculated
Refundable Tax Credits
•20% of new investment
–New investment: increase in buildings and depreciable
personal property other than vehicles. Increase in leased
property valued at annual rent increase multiplied by years of
lease not to exceed 10 years.
•20% of employee compensation increase
–New employment: increase in compensation over
compensation in tax year prior to application based on W-4
reporting
Department of Economic Development
www.neded.org
Application Process
Three Sections
–Part 1
•Information about the business
•Estimates for expenditures/credits
–Part 2
•Dept. of Revenue Authorization
–Part 3
•Actual Expenditures
•Documentation
Department of Economic Development
www.neded.org
Part 1
•1A-Describe your business
–Activities, products, markets
•1B-Narrative explaining expansion plans-timelines
•1C-Addressing market needs
Department of Economic Development
www.neded.org
Part 2
•Completed by Department of
Revenue.
–This will confirm your authorized amount
approved by Revenue.
–A copy will be sent to you.
Department of Economic Development
www.neded.org
Part 3
•1. Enter the amount authorized
•2. Enter your prior credits
•3. Enter your remaining credits
Department of Economic Development
www.neded.org
Part 3-continued
• 4.Calculating your actual credits
Chart 3A
You will need:
–Depreciation schedule
–Invoices for purchases
–Lease agreements
–Total income for your business
–Total payroll for your business
–Tax forms
Department of Economic Development
www.neded.org
Part 3-continued
•5. Calculate the lesser of lines 3 and 4
– (This is the credit you will receive)
•6. Attach documentation
Be Sure that ALL tax records and the
Microenterprise Application are signed by
the Authorized Person(s)
Department of Economic Development
www.neded.org
Tax Forms Needed
•Federal income tax return (at least first four pages) for applicant
and microbusiness.
–Profit and Loss/Schedule C for Sole Proprietors
•Nebraska Reconciliation of Income Tax Withheld
•Form W-3N (including wage and tax stmt.)
•Form W-2
If Applicable:
•Affiliations Schedule (Form 851)
•Copy of each Shareholder’s Share of Income, Credits,
Deductions, etc (Schedule K-1)
Department of Economic Development
www.neded.org
Department of Economic Development
www.neded.org
Department of Economic Development
www.neded.org
Department of Economic Development
www.neded.org
Mail Completed Application
to:
Mary Hugo
Nebraska Dept. of Revenue
301 Centennial Mall South
P.O. Box 94818
Lincoln, NE 68509-4818
Department of Economic Development
www.neded.org
Lincoln Office
1-800-426-6505
Department of Economic Development
www.neded.org