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January 9, 2007

NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT. January 9, 2007. 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

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January 9, 2007

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  1. NEBRASKA DEPARTMENT OF ECONOMIC DEVELOPMENT January 9, 2007

  2. 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

  3. Expanded Incentives for 5 “Tiers” of 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

  4. 5 “Tiers” of Investment and/or Job Creation Minimum Minimum New TiersNew JobsInvestment Tier 1 10 $ 1 Million Tier 2 30 $ 3 Million Tier 3 30 $ 0 Million Tier 4 100 $ 10 Million Tier 5 Maintain $ 30 Million

  5. 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

  6. Eligible Businesses

  7. Rural Level One County Population: Less than 15,000 New Investment: $125,000 New Jobs Created: 2 Rural Development AdvantageInvestment Credits:$2,750 (refundable) per $50,000Wage Credits: $3,000 (refundable) per FTE, includes teleworkers Rural Level Two County Population: Less than 25,000 New Investment: $250,000 New Jobs Created: 5

  8. 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.

  9. 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.

  10. http://www.revenue.ne.gov click:Tax Incentivesclick: Rural Development

  11. 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

  12. 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.)

  13. 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.

  14. 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.

  15. Microenterprise Tax Credit

  16. 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.

  17. 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

  18. Distressed Areas

  19. 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.

  20. 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

  21. 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

  22. Part 1 • 1A-Describe your business • Activities, products, markets • 1B-Narrative explaining expansion plans-timelines • 1C-Addressing market needs

  23. Part 2 • Completed by Department of Revenue. • This will confirm your authorized amount approved by Revenue. • A copy will be sent to you.

  24. Part 3 • 1. Enter the amount authorized • 2. Enter your prior credits • 3. Enter your remaining credits

  25. 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

  26. 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)

  27. 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)

  28. Mail Completed Application to: Mary Hugo Nebraska Dept. of Revenue 301 Centennial Mall South P.O. Box 94818 Lincoln, NE 68509-4818

  29. Lincoln Office 1-800-426-6505

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