LB544 LB544
2021 2021
LEGISLATIVE BILL 544
Approved by the Governor May 25, 2021
Introduced by Wayne, 13.
A BILL FOR AN ACT relating to revenue and taxation; to amend sections
49-801.01, 50-1209, 77-2711, 77-27,119, 77-27,144, 77-5905, and 84-602.03,
Revised Statutes Cumulative Supplement, 2020; to adopt the Urban Redevelopment Act; to provide tax incentives as prescribed; to change provisions relating to refunds of local option sales and use taxes; to harmonize provisions; to provide an operative date; and to repeal the original sections.
Be it enacted by the people of the State of Nebraska,
Section 1. Sections 1 to 28 of this act shall be known and may be cited as the Urban Redevelopment Act.
Sec. 2. For purposes of the Urban Redevelopment Act, the definitions found in sections 3 to 18 of this act shall be used.
Sec. 3. Any term has the same meaning as used in the Nebraska Revenue Act of 1967.
Sec. 4. Base year means the year immediately preceding the year of
application, except that if the year of application is 2021, the base year is
either 2019 or 2020, whichever year the applicant had the larger number of
equivalent employees at the qualified location.
Sec. 5. Base-year employee means any individual who was employed in
Nebraska and subject to the Nebraska income tax on compensation received from the taxpayer or its predecessors during the base year and who is employed at
the qualified location.
Sec. 6. Economic redevelopment area means an area in the State of
Nebraska in which:
(1) The average rate of unemployment in the area during the period covered by the most recent federal decennial census or American Community Survey 5-Year Estimate by the United States Bureau of the Census is at least one hundred fifty percent of the average rate of unemployment in the state during the same period; and
(2) The average poverty rate in the area is twenty percent or more for the federal census tract in the area.
Sec. 7. Equivalent employees means the number of employees computed by
dividing the total hours paid in a year to employees by the product of forty times the number of weeks in a year. Only the hours paid to employees who are residents of this state shall be included in such computation. A salaried employee who receives a predetermined amount of compensation each pay period on
a weekly or less frequent basis is deemed to have been paid for forty hours per week during the pay period.
Sec. 8. Investment means the value of qualified property incorporated into or used at the qualified location. For qualified property owned by the taxpayer, the value shall be the original cost of the property. For qualified property rented by the taxpayer, the average net annual rent shall be
multiplied by the number of years of the lease for which the taxpayer was originally bound, not to exceed ten years. The rental of land included in and incidental to the leasing of a building shall not be excluded from the computation. For purposes of this section, original cost means the amount required to be capitalized for depreciation, amortization, or other recovery under the Internal Revenue Code of 1986, as amended. Any amount, including the labor of the taxpayer, that is capitalized as a part of the cost of the qualified property or that is written off under section 179 of the Internal Revenue Code of 1986, as amended, shall be considered part of the original cost.
Sec. 9. Nebraska statewide average hourly wage for any year means the most recent statewide average hourly wage paid by all employers in all counties in Nebraska as calculated by the Office of Labor Market Information of the Department of Labor using annual data from the Quarterly Census of Employment and Wages by October 1 of the year prior to application. Hourly wages shall be
calculated by dividing the reported average annual weekly wage by forty.
Sec. 10. Number of new employees means the number of equivalent employees that are employed at the qualified location during a year that are in excess of
the number of base-year employees.
Sec. 11. Performance period means the year during which the required increases in employment and investment were met or exceeded and each year thereafter until the end of the third year after the year the required increases were met or exceeded.
Sec. 12. Qualified location means any location in a city of the metropolitan class or a city of the primary class that is used or will be used by the taxpayer to conduct business activities and that is located within an
economic redevelopment area. More than one qualified location may be part of
the same project.
Sec. 13. Qualified property means any tangible property of a type subject to depreciation, amortization, or other recovery under the Internal Revenue
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Code of 1986, as amended, or the components of such property, that will be
located and used at the qualified location. Qualified property does not include
(1) aircraft, barges, motor vehicles, railroad rolling stock, or watercraft or
(2) property that is rented by the taxpayer qualifying under the Urban Redevelopment Act to another person.
Sec. 14. Ramp-up period means two years from the date the complete application was filed with the Director of Economic Development.
Sec. 15. Related taxpayers shall include any corporations that are part of a unitary business under the Nebraska Revenue Act of 1967 but are not part of the same corporate taxpayer, any business entities that are not corporations but which would be a part of the unitary business if they were corporations,
and any business entities if at least fifty percent of such entities are owned by the same persons or related taxpayers and family members as defined in the ownership attribution rules of the Internal Revenue Code of 1986, as amended.
Sec. 16. Taxpayer means any person subject to sales and use taxes under the Nebraska Revenue Act of 1967 and subject to withholding under section
77-2753 and any entity that is or would otherwise be a member of the same unitary group, if incorporated, that is subject to such sales and use taxes and such withholding. Taxpayer does not include a political subdivision or an organization that is exempt from income taxes under section 501(a) of the Internal Revenue Code of 1986, as amended. For purposes of this section,
political subdivision includes any public corporation created for the benefit of a political subdivision and any group of political subdivisions forming a joint public agency, organized by interlocal agreement, or utilizing any other method of joint action.
Sec. 17. Wages means the wages and other payments subject to the federal medicare tax.
Sec. 18. Year means the taxable year of the taxpayer.
Sec. 19. (1) To earn the incentives set forth in the Urban Redevelopment Act, the taxpayer shall file an application for an agreement with the Director of Economic Development.
(2) The application shall:
(a) Identify the taxpayer applying for incentives;
(b) Identify the location where the new investment and employment will occur, including documentation to show that such location is a qualified location;
(c) State the estimated, projected amount of new investment and the estimated, projected number of new equivalent employees; and
(d) Include an application fee of five hundred dollars. The fee shall be
remitted to the State Treasurer for credit to the Nebraska Incentives Fund.
(3) Subject to the limit in subsection (4) of this section, the director shall approve the application and authorize the total amount of incentives expected to be earned as a result of the project if he or she is satisfied that the plan in the application defines a project that meets the requirements established in section 20 of this act and such requirements will be reached within the required time period.
(4) The director shall not approve further applications once the expected incentives from the approved projects total eight million dollars. All but one hundred dollars of the application fee shall be refunded to the applicant if
the application is not approved for any reason.
(5) Applications for incentives shall be considered in the order in which they are received.
(6) The director has ninety days to approve a complete application.
(7) After approval, the taxpayer and the director shall enter into a written agreement. As part of such agreement, the taxpayer shall agree to
complete the project and the director, on behalf of the State of Nebraska,
shall designate the approved plans of the taxpayer as a project and, in consideration of the taxpayer's agreement, agree to allow the taxpayer to use the incentives contained in the Urban Redevelopment Act up to the total amount that were authorized by the director at the time of approval. The application and all supporting documentation, to the extent approved, shall be considered a part of the agreement. The agreement shall state:
(a) The levels of employment and investment required by the act for the project;
(b) The time period under the act in which the required levels must be
met;
(c) The documentation the taxpayer will need to supply when claiming an
incentive under the act;
(d) The date the application was filed; and
(e) The maximum amount of incentives authorized.
(8) The application, the agreement, all supporting information, and all other information reported to the Director of Economic Development shall be
kept confidential by the director, except for the name of the taxpayer, the location of the project, the estimated amounts of increased employment and investment stated in the application, the date of the complete application, the date the agreement was signed, and the information required to be reported by
section 28 of this act. The application, the agreement, and all supporting information shall be provided by the director to the Department of Revenue. The director shall disclose, to any municipalities in which project locations exist, the approval of an application and the execution of an agreement under this section. The Tax Commissioner shall also notify each municipality of the amount and taxpayer identity for each refund of local option sales and use taxes of the municipality within thirty days after the refund is allowed or
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approved. Disclosures shall be kept confidential by the municipality unless publicly disclosed previously by the taxpayer or by the State of Nebraska.
(9) There shall be no new applications for incentives filed under this section after December 31, 2031.
Sec. 20. (1) A tax credit shall be allowed to any taxpayer who has an
approved application pursuant to the Urban Redevelopment Act if the taxpayer:
(a) Attains a cumulative investment in qualified property of at least one hundred fifty thousand dollars and hires at least five new employees at the qualified location before the end of the ramp-up period; and
(b) Pays a minimum qualifying wage of seventy percent of the Nebraska statewide average hourly wage to the new equivalent employees for whom tax incentives are sought under the Urban Redevelopment Act.
(2) A tax credit shall be allowed to any taxpayer who has an approved application pursuant to the Urban Redevelopment Act if the taxpayer attains a cumulative investment in qualified property of at least fifty thousand dollars at the qualified location before the end of the ramp-up period.
(3) Subject to subsection (5) of this section, the amount of the credit allowed under subsection (1) of this section shall be:
(a) Three thousand dollars for each new equivalent employee, except that such amount shall be increased by one thousand dollars for each equivalent employee who lives in an economic redevelopment area; and
(b) Two thousand seven hundred fifty dollars for each fifty thousand dollars of increased investment.
(4) Subject to subsection (5) of this section, the amount of the credit allowed under subsection (2) of this section shall be five percent of the investment.
(5) A taxpayer may qualify for a credit under either subsection (1) or (2)
of this section, but cannot qualify for a credit under both such subsections.
The credit shall not exceed fifty thousand dollars. The taxpayer shall receive such credit for each year of the performance period that the taxpayer is at or
above the required levels of employment and cumulative investment.
(6) A taxpayer shall not qualify for any credits under the Urban Redevelopment Act if the taxpayer is receiving any benefits under any other tax incentive program offered by the State of Nebraska.
(7) A teleworker working from his or her residence shall not be considered an equivalent employee of the taxpayer for purposes of the Urban Redevelopment Act unless the teleworker's residence is located in the economic redevelopment area in which the taxpayer's qualified location is located.
Sec. 21. (1)(a) If the taxpayer acquires an existing business, the increases in investment and employment shall be computed as though the taxpayer had owned the business for the entire taxable year preceding the date of
application.
(b) If the taxpayer disposes of an existing business and the new owner maintains the minimum increases in investment and employment required to create incentives, the taxpayer shall not be required to make any repayment under section 23 of this act solely because of the disposition of the business.
(2) If the structure of a business is reorganized, the taxpayer shall compute the increases on a consistent basis for all periods.
(3) If the taxpayer moves a business from one qualified location to
another qualified location and the business was operated in a qualified location during the taxable year preceding the date of application, the increases in investment and employment shall be computed as though the taxpayer had operated the business at the new location for the entire taxable year preceding the date of application.
(4) If the taxpayer enters into any of the following transactions, the transaction shall be presumed to be a transaction entered into for the purpose of generating benefits under the Urban Redevelopment Act and shall not be
allowed in the computation of any benefit or the meeting of any required levels under the agreement except as specifically provided in this subsection:
(a) The purchase or lease of any property that was previously owned by the taxpayer who filed the application or a related taxpayer unless the first purchase by either the taxpayer who filed the application or a related taxpayer was first placed in service at a qualified location after the beginning of the taxable year the application was filed;
(b) The renegotiation of any lease in existence during the taxable year the application was filed which does not materially change any of the terms of
the lease other than the expiration date;
(c) The purchase or lease of any property from a related taxpayer, except that the taxpayer who filed the application will be allowed any benefits under the act to which the related taxpayer would have been entitled on the purchase or lease of the property if the related taxpayer was considered the taxpayer;
and
(d) Any transaction entered into primarily for the purpose of receiving benefits under the act which is without a business purpose and does not result in increased economic activity in the state.
Sec. 22. (1) The credits allowed under section 20 of this act may be
used:
(a) To obtain a refund of sales and use taxes paid under the Local Option Revenue Act, the Nebraska Revenue Act of 1967, the Qualified Judgment Payment Act, and sections 13-319, 13-324, and 13-2813;
(b) As a refundable income tax credit claimed on an income tax return of
the taxpayer. The return need not reflect any income tax liability owed by the taxpayer;
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(c) To reduce the taxpayer's income tax withholding employer or payor tax liability under section 77-2756 or 77-2757. To the extent of the credit used,
such withholding shall not constitute public funds or state tax revenue and shall not constitute a trust fund or be owned by the state. The use by the taxpayer of the credit shall not change the amount that otherwise would be
reported by the taxpayer to the employee under section 77-2754 as income tax withheld and shall not reduce the amount that otherwise would be allowed by the state as a refundable credit on an employee's income tax return as income tax withheld under section 77-2755. The amount of credits used against income tax withholding shall not exceed the withholding attributable to the number of new equivalent employees employed by the taxpayer. If the amount of credit used by
the taxpayer against income tax withholding exceeds such amount, the excess withholding shall be returned to the Department of Revenue in the manner provided in section 77-2756, such excess amount returned shall be considered unused, and the amount of unused credits may be used as otherwise permitted in
this section; and
(d) To obtain a payment from the state equal to the real property taxes due after the year the required levels of employment and investment were met,
for real property at a qualified location that is acquired by the taxpayer after the date the application was filed. The payment from the state shall be
made only after payment of the real property taxes have been made to the county as required by law. Payments shall not be allowed for any taxes paid on real property for which the taxes are divided under section 18-2147 or 58-507.
(2) A claim for the credit may be filed quarterly for refund of the sales and use taxes paid, either directly or indirectly, after the filing of the income tax return for the taxable year in which the credit was first allowed.
(3) Once the taxpayer attains the required levels of employment and investment, the taxpayer shall be entitled to a refund of all sales and use taxes paid, either directly or indirectly, under the Local Option Revenue Act,
the Nebraska Revenue Act of 1967, the Qualified Judgment Payment Act, and sections 13-319, 13-324, and 13-2813 on the qualifying investment.
(4) For purposes of subsections (