LB605 LB605
2019 2019
LEGISLATURE OF NEBRASKA
ONE HUNDRED SIXTH LEGISLATURE
FIRST SESSION
LEGISLATIVE BILL 605
Introduced by Lindstrom, 18.
Read first time January 23, 2019
Committee: Revenue
1 A BILL FOR AN ACT relating to revenue and taxation; to amend sections
2 77-2715.07, 77-2717, and 77-2734.03, Reissue Revised Statutes of
3 Nebraska; to adopt the Renewable Chemical Production Tax Credit Act;
4 to harmonize provisions; and to repeal the original sections.
5 Be it enacted by the people of the State of Nebraska,
-1-
LB605 LB605
2019 2019
1 Section 1. Sections 1 to 11 of this act shall be known and may be
2 cited as the Renewable Chemical Production Tax Credit Act.
3 Sec. 2. The Legislature finds and declares that Nebraska is home to
4 an emerging biotechnology and bioproducts sector that yields important
5 innovations and collaborative opportunities with the existing
6 agricultural sector. The Legislature further finds that advances in
7 biotechnology and bioproducts will play a critical role in addressing
8 global challenges, reducing our environmental footprint, and creating
9 sustainable materials including renewable chemicals made from Nebraska-
10 based agricultural products.
11 Sec. 3. For purposes of the Renewable Chemical Production Tax
12 Credit Act, unless the context otherwise requires:
13 (1) Biomass feedstock means sugar, starch, polysaccharide, glycerin,
14 lignin, fat, grease, or oil derived from plants, animals, or algae or a
15 protein capable of being converted to a building block chemical by means
16 of a biological or chemical conversion process;
17 (2) Building block chemical means a molecule that is converted from
18 biomass feedstock as a first product or a secondarily derived product
19 that can be further refined into a higher-value chemical, material, or
20 consumer product;
21 (3) Director means the Director of Economic Development;
22 (4) Eligible business means a business that has been certified by
23 the director under section 4 of this act;
24 (5) Food additive means a building block chemical that is not
25 primarily consumed as food but which, when combined with other
26 components, improves the taste, appearance, odor, texture, shelf life, or
27 nutritional content of food. The director, in his or her discretion,
28 shall determine whether or not a biobased chemical is primarily consumed
29 as food;
30 (6) Pre-eligibility production threshold means, with respect to each
31 eligible business, the number of pounds of renewable chemicals produced,
-2-
LB605 LB605
2019 2019
1 if any, by an eligible business during the calendar year prior to the
2 calendar year in which the business first qualified as an eligible
3 business pursuant to section 4 of this act; and
4 (7)(a) Renewable chemical means a building block chemical with a
5 significant biobased content that can be used for products including
6 polymers, plastics, food additives, solvents, intermediate chemicals, or
7 other formulated products with a significant nonfossil carbon content.
8 (b) Renewable chemical includes:
9 (i) Biobased chemicals that can be a food, feed, or fuel additive;
10 and
11 (ii) Supplements, vitamins, nutraceuticals, and pharmaceuticals.
12 (c) The director may include additional chemicals or materials in
13 the definition of renewable chemical by rule and regulation after
14 consulting with appropriate experts from the University of Nebraska,
15 including, but not limited to, the Industrial Agricultural Products
16 Center.
17 (d) Renewable chemical does not include a chemical sold or used as
18 fuel.
19 Sec. 4. (1) A business may apply to the director for certification
20 as an eligible business. The program certification application shall be
21 in the form and be made under the procedures specified by the director.
22 (2) Within thirty days after receiving a program certification
23 application for certification under this section, the director shall
24 certify the business as satisfying the conditions required of an eligible
25 business, request additional information, or deny the program
26 certification application. If the director requests additional
27 information, the director shall certify the business or deny the program
28 certification application within thirty days after receiving the
29 additional information. If the director neither certifies the business
30 nor denies the program certification application within thirty days after
31 receiving the original program certification application or within thirty
-3-
LB605 LB605
2019 2019
1 days after receiving the additional information requested, whichever is
2 later, then the program certification application is deemed approved if
3 the business meets the requirements in subsection (3) of this section. A
4 business that applies for program certification and is denied may
5 reapply.
6 (3) To be certified as an eligible business under the Renewable
7 Chemical Production Tax Credit Act, a business shall meet all of the
8 following requirements:
9 (a) The business produced at least one million pounds of renewable
10 chemicals in this state during the calendar year for which tax credits
11 are sought;
12 (b) The business is physically located in this state;
13 (c) The business organized, expanded, or located in this state on or
14 after the effective date of this act; and
15 (d) The business is in compliance with all agreements entered into
16 under the act and pursuant to any other tax credits or programs
17 administered by the Department of Economic Development or the Department
18 of Revenue.
19 (4)(a) An eligible business shall enter into an agreement with the
20 director for the successful completion of all requirements of the act.
21 The agreement may certify the business to receive tax credits under the
22 act for up to four years.
23 (b) As part of the agreement, the eligible business shall agree to
24 collect and provide any information reasonably required by the director
25 or the Department of Revenue in order to allow the director and
26 department to fulfill their reporting obligations under section 10 of
27 this act.
28 Sec. 5. The director shall consider program certification
29 applications under section 4 of this act in the order in which they are
30 received. The director may accept program certification applications on a
31 continuous basis or may establish, by rule and regulation, an annual
-4-
LB605 LB605
2019 2019
1 program certification application deadline. The director may approve
2 program certification applications for eligible businesses for a total of
3 up to three million dollars in tax credits for calendar years 2021 and
4 2022 and up to six million dollars per calendar year for calendar years
5 2023 and beyond. Program certification applications approved after such
6 annual limit has been reached shall be placed on a wait list in the order
7 in which they are received.
8 Sec. 6. (1) An eligible business may apply to the Department of
9 Revenue for tax credits under the Renewable Chemical Production Tax
10 Credit Act.
11 (2) To receive tax credits, the eligible business shall submit a tax
12 credit application to the Department of Revenue on a form prescribed by
13 the department. The tax credit application shall be made during the
14 calendar year following the calendar year in which the eligible business
15 produced the renewable chemicals for which it seeks tax credits. The tax
16 credit application shall include the following information:
17 (a) The number of pounds of renewable chemicals produced in the
18 state by the eligible business during the calendar year for which tax
19 credits are sought; and
20 (b) Any other information reasonably required by the department in
21 order to establish and verify the amount of credits earned under the act.
22 (3) An eligible business shall fulfill all the requirements of the
23 act and its agreement with the director under section 4 of this act
24 before receiving tax credits under the act or entering into a subsequent
25 agreement. If an agreement is not successfully fulfilled, the director
26 may decline to enter into a subsequent agreement and the Department of
27 Revenue may decline to issue a tax credit.
28 (4) If the department determines that a tax credit application is
29 complete, that an eligible business qualifies for tax credits, and that
30 the eligible business has fulfilled all requirements of its agreement
31 with the director, the department shall approve the tax credit
-5-
LB605 LB605
2019 2019
1 application within the limits set forth in sections 5 and 7 of this act
2 and shall certify the amount of tax credits approved to the eligible
3 business.
4 Sec. 7. (1) The tax credit under the Renewable Chemical Production
5 Tax Credit Act shall be in an amount equal to the product of seven and
6 one-half cents multiplied by the number of pounds of renewable chemicals
7 produced in this state by the eligible business during each calendar year
8 in excess of the eligible business’s pre-eligibility production
9 threshold. The maximum amount of tax credits that may be issued to an
10 eligible business under a single tax credit application shall not exceed
11 one million five hundred thousand dollars per year.
12 (2) The tax credit shall be a refundable credit that may be used
13 against any income tax imposed by the Nebraska Revenue Act of 1967. Any
14 credit in excess of the eligible business' tax liability shall be
15 refunded to the taxpayer.
16 (3) An eligible business shall not receive a tax credit for
17 renewable chemicals produced before the date the business first qualified
18 as an eligible business.
19 (4) The tax credit shall not be available for any renewable
20 chemicals produced before the 2021 calendar year.
21 (5) Any tax credit allowable to a partnership, a limited liability
22 company, a subchapter S corporation, or an estate or trust may be
23 distributed to the partners, limited liability company members,
24 shareholders, or beneficiaries in the same manner as income is
25 distributed.
26 (6) An eligible business shall claim the tax credit by attaching the
27 tax credit certification received from the department under section 6 of
28 this act to the business' tax return for the tax year in which the credit
29 was approved.
30 Sec. 8. The failure by an eligible business in fulfilling any
31 requirement of the Renewable Chemical Production Tax Credit Act or any of
-6-
LB605 LB605
2019 2019
1 the terms and obligations of an agreement entered into pursuant to
2 section 4 of this act may result in the reduction, termination, or
3 rescission of the tax credits under the act and may subject the eligible
4 business to the repayment or recapture of tax credits claimed.
5 Sec. 9. Except for the identity of a recipient of tax credits under
6 the Renewable Chemical Production Tax Credit Act and the amount of such
7 credits, any information or record in the possession of the Department of
8 Economic Development or Department of Revenue with respect to the act
9 shall be presumed by such departments to be a trade secret and shall be
10 kept confidential by such departments unless otherwise ordered by a
11 court.
12 Sec. 10. (1) On or before January 31, 2022, and on or before each
13 January 31 thereafter, the director and the Department of Revenue shall
14 electronically submit a report on the Renewable Chemical Production Tax
15 Credit Act to the Revenue Committee of the Legislature. At a minimum, the
16 report shall include the following information regarding tax credits and
17 the recipients of such credits:
18 (a) The aggregate number of pounds, and a list of each type, of
19 renewable chemicals produced in Nebraska by all recipients (i) during the
20 calendar year prior to the calendar year for which each recipient first
21 received tax credits and (ii) for each calendar year thereafter;
22 (b) The aggregate sales of all renewable chemicals produced by all
23 recipients in each calendar year for which there are at least five
24 recipients;
25 (c) The aggregate number of pounds, and a list of each type, of
26 biomass feedstock used in the production of renewable chemicals in
27 Nebraska by all recipients (i) during the calendar year prior to the
28 calendar year for which each recipient first received tax credits and
29 (ii) for each calendar year thereafter;
30 (d) The number of employees located in Nebraska of all recipients
31 (i) during the calendar year prior to the calendar year for which each
-7-
LB605 LB605
2019 2019
1 recipient first received tax credits and (ii) for each calendar year
2 thereafter;
3 (e) The number and aggregate amount of tax credits issued for each
4 calendar year;
5 (f) The number of eligible businesses placed on the wait list for
6 each calendar year and the total number of eligible businesses remaining
7 on the wait list at the end of that calendar year;
8 (g) The dollar amount of tax credit claims placed on the wait list
9 for each calendar year and the total dollar amount of tax credit claims
10 remaining on the wait list at the end of that calendar year;
11 (h) For each eligible business which received tax credits during
12 each calendar year: (i) The identity of the eligible business; (ii) the
13 amount of the tax credits; and (iii) the manner in which the eligible
14 business first qualified as an eligible business, whether by organizing,
15 expanding, or locating in the state; and
16 (i) The total amount of all tax credits claimed during each calendar
17 year, and the portion issued as refunds.
18 (2) In order to protect the presumption of confidentiality provided
19 for in section 9 of this act, the director and Department of Revenue
20 shall report all information in an aggregate form to prevent, to the
21 extent reasonably possible, information being attributable to any
22 particular eligible business, except as provided in subdivision (1)(h) of
23 this section.
24 Sec. 11. The Department of Economic Development and Department of
25 Revenue may adopt and promulgate rules and regulations necessary to carry
26 out the Renewable Chemical Production Tax Credit Act.
27 Sec. 12. Section 77-2715.07, Reissue Revised Statutes of Nebraska,
28 is amended to read:
29 77-2715.07 (1) There shall be allowed to qualified resident
30 individuals as a nonrefundable credit against the income tax imposed by
31 the Nebraska Revenue Act of 1967:
-8-
LB605 LB605
2019 2019
1 (a) A credit equal to the federal credit allowed under section 22 of
2 the Int