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Department of Economic Developmentwww.neded.org
January 9, 2007
Department of Economic Developmentwww.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 Developmentwww.neded.org
1. Expanded Incentives for 5 “Tiers” of investment and/or job creation
2. Rural Development Advantage
3. Research and Development Advantage
4. State and local sales tax exemptions of manufacturing machinery, equipment, and related services
5. Agriculture Innovation Advantage
6. Microenterprise Tax Credit Advantage
Department of Economic Developmentwww.neded.org
Minimum Minimum New Tiers New Jobs Investment Tier 1 10 $ 1 MillionTier 2 30 $ 3 Million Tier 3 30 $ 0 MillionTier 4 100 $ 10 MillionTier 5 Maintain $ 30 Million
5 “Tiers” of Investment and/or Job Creation
Department of Economic Developmentwww.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 Developmentwww.neded.org
Eligible BusinessesMicroenterprise
Tier 1 Tiers 2-5 Level 15 Level 25 All Levels
R & D * * * * *Data Processing * * * *Telecommunications * * * *Insurance * * * *Financial Services * * * *Manufacturing * * * * *Distribution * * * *Storage * * * *Transportation * * * *Admin. Headquarters * * * *Export Services * * * * * 75% of sales outside of Neb. or to U.S. Govt - Software, Computer Systems Design, Product Testing, Guidance/Surveillance, Technology Licensing
Retail *Service Businesses *All Other Businesses *
Neb. Adv. Act Rural Dev. Adv.
Department of Economic Developmentwww.neded.org
Rural Development AdvantageInvestment Credits: $2,750 (refundable) per $50,000Wage Credits: $3,000 (refundable) per FTE, includes teleworkers
Rural Level OneCounty Population:
Less than 15,000
New Investment:
$125,000
New Jobs Created: 2
Rural Level TwoCounty Population:
Less than 25,000
New Investment:
$250,000
New Jobs Created: 5
Department of Economic Developmentwww.neded.org
Department of Economic Developmentwww.neded.org
Rural Development AdvantageLivestock 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 Developmentwww.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 Developmentwww.neded.org
http://www.revenue.ne.gov
click: Tax Incentives
click: Rural Development
Department of Economic Developmentwww.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 Developmentwww.neded.org
State and local sales tax exemptions of manufacturing machinery,
equipment, and related servicesDefinition – 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 Developmentwww.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 Developmentwww.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 Developmentwww.neded.org
Microenterprise
Tax Credit
Department of Economic Developmentwww.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 Developmentwww.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 Developmentwww.neded.org
Distressed Areas
Department of Economic Developmentwww.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 Developmentwww.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 Developmentwww.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 Developmentwww.neded.org
Part 1•1A-Describe your business
–Activities, products, markets
•1B-Narrative explaining expansion plans-timelines
•1C-Addressing market needs
Department of Economic Developmentwww.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 Developmentwww.neded.org
Part 3•1. Enter the amount authorized
•2. Enter your prior credits
•3. Enter your remaining credits
Department of Economic Developmentwww.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 Developmentwww.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 Developmentwww.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 Developmentwww.neded.org
Department of Economic Developmentwww.neded.org
Department of Economic Developmentwww.neded.org
Department of Economic Developmentwww.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 Developmentwww.neded.org
Lincoln Office 1-800-426-6505