Taxes in Nebraska > Sources of Major State and Local Taxes > Major Policy Trends - The Growth of Economic Development Tax Incentives > Chronology of Changes in Tax Incentive Policy
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1985 - LB 273 - Enacted a sales tax refund for new manufacturing equipment purchased for a plant expansion or relocation. There was to be no refund for replacing old equipment. The bill also terminated a renewable energy tax credit effective January 1, 1986.
1986 - LB 1124 - Enacted the Employment Expansion and Investment Incentive Act. This act granted incentives to businesses that increased employment by two employees and invested at least $75,000. The incentives were $1,500 for each new employee and $1000 for each $75,000 in investment. In 2000, total credits claimed under the Act (as amended by LB 270 (1987)) were $4.5 million.
1987 - LB 775 - Enacted the Employment and Investment Growth Act. This grants income tax credits and sales tax refunds for companies that hire at least 30 new employees and invest at least $3 million. The income tax credits are equal to 5% of the increased payroll at the project for five years and 10% of the investment in the project. The benefits also include a refund of any sales taxes paid on equipment or other taxable property purchased in connection with the project. LB 775 also repealed the two-year-old sales tax refund for purchases of industrial machinery and equipment for plant expansions.
projects promising at least $10 million in new investment and 100 new
employees, qualifying companies may also receive a 15 year personal property
tax exemption for mainframe computers, certain aircraft, and agricultural
processing equipment used in connection with the project. For 2000, the
cost of the program is estimated to be between $30 to $150 million depending
on the percentage of the jobs claimed can be assumed to have been in the
state regardless of the credit.
1988 - LB 1234 – In addition to revising the individual income tax, the bill amended LB 775 (1987) by specifying that relocating a business within the state or transferring control of an existing business does not qualify for incentives under the act.
1989 – LB 335 – Amended the Employment Expansion and Investment Incentive Act to decrease the necessary investment to $75,000 and increase the credit amount to $1500 for each new employee or $75,000 of investment. The bill also changed the way employment and investment was calculated to a method more like LB 775, and reduced recapture to 1/3 of the amount of credits for each year the company failed to maintain the qualifying thresholds.
1992 - LB 1240 - Enacted the Enterprise Zone Act. This act granted larger investment tax credits under the Employment Expansion and Investment Incentive Act for projects located in five designated areas in the state. Jobs credits available under the act were also larger if the project employs residents of the enterprise zone. LB 608 (2003) eliminated enhanced credits for projects in an enterprise zone.
1995 – LB 377 – Imposed an excise tax, or checkoff on grain for purposes of financing a 20 cent-per gallon ethanol production incentive. The tax amount was ¾ cent for each bushel of corn or hundredweight of grain sorghum sold for feed, food, or industrial processing in Nebraska. The bill also provided $6 million to $8 million annually in General Funds for deposit in the Ethanol Production Incentive Cash Fund for six years.
LB 829 - Adopted the Quality Jobs Act. This act allowed companies that promise to increase employment and investment by either (1) $50 million in investment and 500 new jobs, or (2) $100 million in investment and 250 new jobs to retain the state withholding of employees up to 5% of the increased payroll, such withholding to instead be spent on employee benefit programs. The Act expired in 2000.
LB 830 - Adopted the Nebraska Redevelopment Act. This act allowed companies that met the same thresholds of investment and employment as in the Quality Jobs Act, to receive tax increment financing for a project on vacant land and areas up to ten miles outside city limits. The Act expired in 2000.
LB 1368 - Amended the Quality Jobs Act by providing for an alternate method for claiming the wage benefit credit allowed by the act. The alternative is a sliding scale corporate income tax credit depending on the average wage of the new jobs.
1997 - LB 264 – Extended LB 775 benefits to partnerships, LLCs and joint ventures in their own standing. It was enacted so Cargill could take advantage and not be required to pass the credits down to thousands of partners.
LB 875 - Amended community redevelopment law (tax increment financing) to (1) require a hearing and specific notice to other affected local governments of the redevelopment plan, (2) require any land within the redevelopment plan to be annexed into the city, (3) require a finding that the proposed project would not be feasible without TIF, and (4) require a cost benefit analysis before approving a TIF project beginning Jan. 1, 1999.
1999 - LB 87A – Reinstated report information that was struck by LB 431 in 1990, but had continued to be reported. The information reinserted in the report requirements was the name of the company, its location, and the expected employment and investment. This represented no change in policy.
LB 539 – Allowed companies to qualify for LB 775 benefits using leased employees.
LB 605 – Provided a new ethanol production credit of 7.5 cents per gallon for up to three years for production coming on line after June 1, 1999.
2000 - LB 936 - Enacted the Rural Economic Opportunities Act. The act provides credits against income tax for businesses that (1) increase employment by 0.5% of the labor force in the county and pay at least 125% of the average wage in the county or 100% of the average wage in the region and (2) invest an amount at of least $50,000 times the required number of new employees if the county has a population of 300 or less or $100,000 times the required number of new employees in larger counties. The credits are 5% of the increased payroll at the project and 10% of the investment.
LB 968 – This bill was an omnibus property tax bill that, among other things, required LB 775 beneficiaries to file a claim with the county to receive the personal property tax exemption.
2001 – LB 536 - Enacted a new 18-cents per gallon ethanol production incentive for production coming on line in 1999 which had not previously received benefits, or production that will come online between 2002 and June 1, 2004. The bill funded the incentives using a half-cent per bushel checkoff per bushel of corn or hundredweight of sorghum for eight years (through October 1, 2009) and $1.5 million annually in general funds for six years (through 2007-08). The bill also required companies receiving incentives to sign a contract with the state that governs the incentives and production and inspection responsibilities.
LB 620 - Adopted the Invest Nebraska Act to replace the expired Quality Jobs Act. Essentially, the benefits are like the Quality Jobs Act provisions that grant a sliding scale credit of 3% of the increased payroll at the project to 5% based on the average wage at the project. This credit may be taken against the withholding obligation of the employer. There is also a smaller qualification threshold of $10 million in investment and 25 new employees for projects in counties with a population of 100,000 or less. In this level of qualification, the jobs must pay at least the average annual wage in the state. For those companies qualifying with the old Quality Jobs Act thresholds, the jobs must pay at least 110% of the state's average wage. Finally, a "super tier" level of qualification is provided for companies promising to invest at least $200 million and employ at least 500 new employees at a wage of at least 120% of the state's average wage. Such qualifiers receive either the wage benefit credit allowed the other qualifiers or a 15% investment credit.
2003 - LB 608 – LB 608 replaced the Employment Expansion and Investment Incentive Act with an application-based, limited program that is available for projects in those counties with a population of less than 25,000 or located in an enterprise zone. Companies are to apply for benefits while stating the expected number of new employees and investment. To qualify, the project must promise at least five new employees and $250,000 of new investment. The amount of the credits that can be earned are $3,000 for each new employee and $3,750 for each $50,000 of investment. Credits are not larger for projects located in an enterprise zone.
If the project qualifies, the taxpayer and the Tax Commissioner are to enter into a contract. However, the total amount of possible credits that the Tax Commissioner may approve may not exceed $2.5 million for 2004-05 and 2005-06 and $3 million in the years following. Projects are approved on a first come first serve basis.
2004 – LB 479 – Placed some restrictions on companies seeking to qualify for ethanol production incentives. The primary ones were (1) provisions defining "new facility" to exclude expansions of existing facilities and any facility at which construction takes place after the June 30, 2004 deadline, and (2) defining and enforcing quality standards for ethanol.
The bill also provided procedures for collecting excess production credits paid to ethanol producers, and imposed new record-keeping requirements. Production incentives cannot be transferred to a related party.
LB 1065 - provided additional funding for ethanol production incentives by (1) reducing the income tax credit for use of gasoline for off-road purposes by 1.25 cents and committing the proceeds to the EPIC Fund, (2) increasing the ethanol checkoff from one-half cent to three-fourths cent per bushel of corn or hundredweight of sorghum, and (3) transferring $1.5 million annually from the Petroleum Release Remedial Action Fund to the EPIC Fund.
2005 - LB 90 - Increased the excise tax, or checkoff, levied on sales of corn and grain sorghum to finance ethanol incentives from three-fourths cent to seven-eights cent per bushel of corn or hundredweight of sorghum beginning Oct. 1, 2005, through Oct. 1, 2010. The bill also amended intent language to increase general fund appropriations to the Ethanol Production Incentive Cash Fund. The general fund appropriations are to be $4 million for FY2005-06 and FY2006-07 (up from $1.5 million previously), $5.5 million for FY2007-08, and $2.5 million for FY2008-09 through FY2011-12. The total increase in general fund support for the EPIC fund is intended to be $20.5 million under LB 90.
The first three sections of LB 90 created the Building Entrepreneurial Communities Act to provide grants, distributed by the Department of Economic Development, to collaborating communities, at least one of which is in economic distress. The grants are to be matched dollar for dollar by local funds and are for projects to develop entrepreneurial and technical assistance, build business capacity or leadership or generate opportunities for young families. Grants cannot exceed $75,000 and may last for two years. The program is to terminate Jan. 1, 2011.
LB 90 also created the Agricultural Opportunities and Value-Added Partnerships Act to support value-added opportunities through innovative partnerships among agricultural and community interests, increase the agricultural share of the entire food system profit, and enhance opportunities to participate in electronic commerce. The Department of Economic Development and the Department of Agriculture are to establish a competitive grant process to fund promising projects in research, education and training, market development, and business planning and technical assistance. Grants cannot exceed $75,000 for any one project and are to be matched by at least 25% of the applicant's funds. Annual reports of the activities under the act are to be made and the act is to terminate on Jan. 1, 2011.
Finally, the bill increased the maximum net worth for agricultural loan recipients from $300,000 to $500,000 and increased the maximum loan amount from $250,000 to $500,000 for purposes of NIFA financing.
LB 312 - Adopted the Nebraska Advantage Act, a multi-faceted tax incentive to replace the Employment and Investment Growth Act. The bill also adopted the Nebraska Advantage Research and Development Act which created a tax credit for increases in research and development spending and the Nebraska Microenterprise Tax Credit Act to grant refundable tax credits for investing in microenterprises. The bill also renamed the Employment Expansion and Investment Incentive Act as the Nebraska Advantage Rural Development Act and created an additional tier of benefits under that act for counties with population less than 15,000 if the company increases employment by only two jobs and invests only $125,000. Finally, the bill granted a sales tax exemption for manufacturing machinery and equipment, defined broadly, and any repairs or other services thereto.
There will be no new applications under the Employment and Investment Growth Act (LB 775, 1987) after Jan. 1, 2006, the operative date of the Nebraska Advantage Act.
There will be five tiers of benefits allowed under LB 312:
Tier 1 and Tier 3, will sunset after five years.
Qualifiers in all tiers except Tier 5 will receive a wage credit equal to 3% of the increased compensation at the project if the jobs pay between 60% and 75% of the state average wage, 4% if they pay between 75% and 100%; 5% if they pay between 100% and 125%; and 6% if they pay more than 125% of the state average wage. Employees must be paid at least 60% of the state average wage to count as new employees under the act and to be considered in determining the percentage amount of credit received. Credits are earned for employment and investment made any time during the entitlement period.
LB 312 requires an annual report from the Tax Commissioner every July 15. The report will list agreements under the act, the identities of the taxpayers, and the locations of the projects. The report will also show investment, employment and benefits earned by industry group.
LB 312 adds a new requirement for project-specific information. The new information to be reported is (1) the identity of the taxpayer, (2) the location of the project, and (3) the total amount of investment and jobs credits used and refunds granted over the prior two years as a single aggregated number. This information will be reported every other year. The report will also have to describe the methodology used in calculating the net impact of the program and any investment or industry multipliers used, and any limitations in the methodology.
LB 312 also enacted the Nebraska Advantage Microenterprise Act. This act grants refundable income tax credits equal to 20% of any new investment or employment by a microenterprise in a distressed area of the state. Microenterprises are businesses with five or fewer employees. Distressed areas are defined with regard to high unemployment, population loss or below average income. The amount of credits for which an applicant or a close relative can qualify is limited to $10,000 for the life of the program. The maximum amount of credits that can be approved by the Department of Revenue in any one year is $3 million. There are to be no new applications for benefits under the act after Dec. 31, 2010.
2006 - LB 990 - Added a new way of qualifying for benefits under the Nebraska Advantage Rural Development Act. The act now allows a tax credit equal to 10 percent of any investment in livestock modernization equipment provided the investment is at least $50,000. These investments may occur anywhere in the state and receive the refundable tax credit. LB 990 also increased the tax credits available under the Beginning Farmer Tax Credit Act to 10% of the cash rental amount or 15% of the cash equivalent amount of the share rental amount. The bill also created a refundable credit for the beginning farmer equal to the entire cost of a financial management program, up to $500.