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On January 1, 2021, the ImagiNE Nebraska Act became effective. The Nebraska Advantage Act, one of the State's existing incentives programs, expired at the end of 2020, and the ImagiNE Nebraska Act (Act) takes its place. The Act provides various tax incentives under various application levels, each with its own job growth, investment, location, business activity, wage requirements and incentive earning potential, as summarized in the following table:¹

Only wages paid to employees who are Nebraska residents are included in the computation to determine the number of equivalent employees.

To qualify for benefits under the Act, the qualified locations and business activities referenced in the table must be within one or more of the following codes under the North American Industry Classification Code System (NAICS):

• Manufacturing 31, 32, or 33
• Testing laboratories - 541380
• Rail or truck transportation - 482, 484
• Insurance carriers - 5241
• Wired or wireless telecommunications carriers (except satellite) — 517311, 517312
• Telemarketing providers - 561422
• Data processing or computer facilities management services - 518210
• Warehousing and storage — 4931
• Administrative management of the taxpayer's activities, including headquarter facilities
• Logistics facilities
• Services provided on aircraft
• Research, development, or testing for scientific, agricultural, animal husbandry, food product, industrial, or technology purposes
• Production of electricity using renewable energy
• Computer systems design - 5415
• Financial services

An alternative location qualification allows for another business location when at least 75% of its revenue is derived from sales that are made to customers who are not related and are delivered to a location outside of Nebraska. Relying upon this alternative qualification method, the majority of the taxpayer's business activities (based on the number of its employees engaged in the business) cannot be from agriculture, forestry, fishing, and hunting; transportation and warehousing; information; utilities; mining, quarrying, and oil and gas extraction; public administration; or construction industries.

To receive incentives under the Act, a taxpayer must apply to the Nebraska Department of Economic Development (DED) and pay the $5,000 application fee. If the application is approved, the DED and the taxpayer will enter into an agreement regarding the qualified location(s) for the incentives.

An agreement is valid for up to 15 years. Employment and investment levels must be reached by the end of the ramp-up period, which is the four years after the year of application. Credits can be used in the order they were first allowed. If credits are the same age, credits from an older tax incentive program, such as the Nebraska Advantage Act, must be applied first. Credits can be used beginning with the tax year the minimum levels were reached. The performance period consists of the year the employment and investment levels were met and the following six years. The carry-over period for any incentives is the three years after the end of the performance period.

Implications

Taxpayers should consider the potential application of the new incentives' programs adopted in the ImagiNE Nebraska Act to their businesses in Nebraska, taking into consideration the requirements to qualify for the programs and the application processes.

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¹ From "imagineNE Nebraska Economic Development Incentives" brochure dated January 2021. A copy of the brochure is available at https://imagine.nebraska.gov.