LB547 LB547
2021 2021
LEGISLATURE OF NEBRASKA
ONE HUNDRED SEVENTH LEGISLATURE
FIRST SESSION
LEGISLATIVE BILL 547
Introduced by Wayne, 13.
Read first time January 19, 2021
Committee: Revenue
1 A BILL FOR AN ACT relating to revenue and taxation; to amend sections
2 49-801.01, 50-1209, 77-2711, 77-27,119, 77-27,144, 77-5905, and
3 84-602.03, Revised Statutes Cumulative Supplement, 2020; to adopt
4 the Nebraska Small Business Act; to provide tax incentives as
5 prescribed; to change provisions relating to refunds of local option
6 sales and use taxes; to harmonize provisions; to provide an
7 operative date; and to repeal the original sections.
8 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Sections 1 to 28 of this act shall be known and may be
2 cited as the Nebraska Small Business Act.
3 Sec. 2. For purposes of the Nebraska Small Business Act, the
4 definitions found in sections 3 to 18 of this act shall be used.
5 Sec. 3. Any term has the same meaning as used in the Nebraska
6 Revenue Act of 1967.
7 Sec. 4. Base year means the year immediately preceding the year of
8 application, except that if the year of application is 2021, the base
9 year is either 2019 or 2020, whichever year the applicant had the larger
10 number of equivalent employees at the qualified location.
11 Sec. 5. Base-year employee means any individual who was employed in
12 Nebraska and subject to the Nebraska income tax on compensation received
13 from the taxpayer or its predecessors during the base year and who is
14 employed at the qualified location.
15 Sec. 6. Economic redevelopment area means an area in the State of
16 Nebraska in which:
17 (1) The average rate of unemployment in the area during the period
18 covered by the most recent federal decennial census or American Community
19 Survey 5-Year Estimate by the United States Bureau of the Census is at
20 least one hundred fifty percent of the average rate of unemployment in
21 the state during the same period; and
22 (2) The average poverty rate in the area is twenty percent or more
23 for the federal census tract in the area.
24 Sec. 7. Equivalent employees means the number of employees computed
25 by dividing the total hours paid in a year to employees by the product of
26 forty times the number of weeks in a year. Only the hours paid to
27 employees who are residents of this state shall be included in such
28 computation. A salaried employee who receives a predetermined amount of
29 compensation each pay period on a weekly or less frequent basis is deemed
30 to have been paid for forty hours per week during the pay period.
31 Sec. 8. Investment means the value of qualified property
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1 incorporated into or used at the qualified location. For qualified
2 property owned by the taxpayer, the value shall be the original cost of
3 the property. For qualified property rented by the taxpayer, the average
4 net annual rent shall be multiplied by the number of years of the lease
5 for which the taxpayer was originally bound, not to exceed ten years. The
6 rental of land included in and incidental to the leasing of a building
7 shall not be excluded from the computation. For purposes of this section,
8 original cost means the amount required to be capitalized for
9 depreciation, amortization, or other recovery under the Internal Revenue
10 Code of 1986, as amended. Any amount, including the labor of the
11 taxpayer, that is capitalized as a part of the cost of the qualified
12 property or that is written off under section 179 of the Internal Revenue
13 Code of 1986, as amended, shall be considered part of the original cost.
14 Sec. 9. Nebraska statewide average hourly wage for any year means
15 the most recent statewide average hourly wage paid by all employers in
16 all counties in Nebraska as calculated by the Office of Labor Market
17 Information of the Department of Labor using annual data from the
18 Quarterly Census of Employment and Wages by October 1 of the year prior
19 to application. Hourly wages shall be calculated by dividing the reported
20 average annual weekly wage by forty.
21 Sec. 10. Number of new employees means the number of equivalent
22 employees that are employed at the qualified location during a year that
23 are in excess of the number of base-year employees.
24 Sec. 11. Performance period means the year during which the
25 required increases in employment and investment were met or exceeded and
26 each year thereafter until the end of the third year after the year the
27 required increases were met or exceeded.
28 Sec. 12. Qualified location means any location in this state that
29 is used or will be used by the taxpayer to conduct business activities
30 and that is located within (1) an economic redevelopment area or (2) a
31 city or village with less than one hundred thousand inhabitants.
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1 Sec. 13. Qualified property means any tangible property of a type
2 subject to depreciation, amortization, or other recovery under the
3 Internal Revenue Code of 1986, as amended, or the components of such
4 property, that will be located and used at the qualified location.
5 Qualified property does not include (1) aircraft, barges, motor vehicles,
6 railroad rolling stock, or watercraft or (2) property that is rented by
7 the taxpayer qualifying under the Nebraska Small Business Act to another
8 person.
9 Sec. 14. Ramp-up period means two years from the date the complete
10 application was filed with the Director of Economic Development.
11 Sec. 15. Related taxpayers shall include any corporations that are
12 part of a unitary business under the Nebraska Revenue Act of 1967 but are
13 not part of the same corporate taxpayer, any business entities that are
14 not corporations but which would be a part of the unitary business if
15 they were corporations, and any business entities if at least fifty
16 percent of such entities are owned by the same persons or related
17 taxpayers and family members as defined in the ownership attribution
18 rules of the Internal Revenue Code of 1986, as amended.
19 Sec. 16. Taxpayer means a corporate taxpayer or other person
20 subject to either an income tax imposed by the Nebraska Revenue Act of
21 1967 or a franchise tax under Chapter 77, article 38, or a partnership,
22 limited liability company, subchapter S corporation, cooperative,
23 including a cooperative exempt under section 521 of the Internal Revenue
24 Code of 1986, as amended, limited cooperative association, or joint
25 venture that is or would otherwise be a member of the same unitary group
26 if incorporated, which is, or whose partners, members, or owners
27 representing an ownership interest of at least ninety percent of the
28 control of such entity are, subject to or exempt from such taxes, and any
29 other partnership, limited liability company, subchapter S corporation,
30 cooperative, including a cooperative exempt under section 521 of the
31 Internal Revenue Code of 1986, as amended, limited cooperative
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1 association, or joint venture when the partners, members, or owners
2 representing an ownership interest of at least ninety percent of the
3 control of such entity are subject to or exempt from such taxes.
4 Sec. 17. Wages means the wages and other payments subject to the
5 federal medicare tax.
6 Sec. 18. Year means the taxable year of the taxpayer.
7 Sec. 19. (1) To earn the incentives set forth in the Nebraska Small
8 Business Act, the taxpayer shall file an application for an agreement
9 with the Director of Economic Development.
10 (2) The application shall:
11 (a) Identify the taxpayer applying for incentives;
12 (b) Identify the location where the new investment and employment
13 will occur, including documentation to show that such location is a
14 qualified location;
15 (c) State the estimated, projected amount of new investment and the
16 estimated, projected number of new equivalent employees; and
17 (d) An application fee of five hundred dollars. The fee shall be
18 remitted to the State Treasurer for credit to the Nebraska Incentives
19 Fund.
20 (3) Subject to the limit in subsection (4) of this section, the
21 director shall approve the application and authorize the total amount of
22 incentives expected to be earned as a result of the project if he or she
23 is satisfied that the plan in the application defines a project that
24 meets the requirements established in section 20 of this act and such
25 requirements will be reached within the required time period.
26 (4) The director shall not approve further applications once the
27 expected incentives from the approved projects total fifteen million
28 dollars. All but one hundred dollars of the application fee shall be
29 refunded to the applicant if the application is not approved for any
30 reason.
31 (5) Applications for incentives shall be considered in the order in
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1 which they are received.
2 (6) The director has ninety days to approve a complete application.
3 (7) After approval, the taxpayer and the director shall enter into a
4 written agreement. As part of such agreement, the taxpayer shall agree to
5 complete the project and the director, on behalf of the State of
6 Nebraska, shall designate the approved plans of the taxpayer as a project
7 and, in consideration of the taxpayer's agreement, agree to allow the
8 taxpayer to use the incentives contained in the Nebraska Small Business
9 Act up to the total amount that were authorized by the director at the
10 time of approval. The application and all supporting documentation, to
11 the extent approved, shall be considered a part of the agreement. The
12 agreement shall state:
13 (a) The levels of employment and investment required by the act for
14 the project;
15 (b) The time period under the act in which the required levels must
16 be met;
17 (c) The documentation the taxpayer will need to supply when claiming
18 an incentive under the act;
19 (d) The date the application was filed; and
20 (e) The maximum amount of incentives authorized.
21 (8) The application, the agreement, all supporting information, and
22 all other information reported to the Director of Economic Development
23 shall be kept confidential by the director, except for the name of the
24 taxpayer, the location of the project, the estimated amounts of increased
25 employment and investment stated in the application, the date of the
26 complete application, the date the agreement was signed, and the
27 information required to be reported by section 28 of this act. The
28 application, the agreement, and all supporting information shall be
29 provided by the director to the Department of Revenue. The director shall
30 disclose, to any municipalities in which project locations exist, the
31 approval of an application and the execution of an agreement under this
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1 section. The Tax Commissioner shall also notify each municipality of the
2 amount and taxpayer identity for each refund of local option sales and
3 use taxes of the municipality within thirty days after the refund is
4 allowed or approved. Disclosures shall be kept confidential by the
5 municipality unless publicly disclosed previously by the taxpayer or by
6 the State of Nebraska.
7 (9) There shall be no new applications for incentives filed under
8 this section after December 31, 2031.
9 Sec. 20. (1) A tax credit shall be allowed to any taxpayer who has
10 an approved application pursuant to the Nebraska Small Business Act if
11 the taxpayer:
12 (a) Attains a cumulative investment in qualified property of at
13 least one hundred fifty thousand dollars and hires at least five new
14 employees at the qualified location before the end of the ramp-up period;
15 and
16 (b) Pays a minimum qualifying wage of seventy percent of the
17 Nebraska statewide average hourly wage to the new equivalent employees
18 for whom tax incentives are sought under the Nebraska Small Business Act.
19 (2) Subject to subsection (3) of this section, the amount of the
20 credit shall be:
21 (a) Three thousand dollars for each new equivalent employee, except
22 that such amount shall be increased by one thousand dollars for each
23 equivalent employee who lives in an economic redevelopment area; and
24 (b) Five percent of the increased investment, except that such
25 percentage shall be six percent if the taxpayer's increased investment is
26 greater than five hundred thousand dollars.
27 (3) The credit calculated under subsection (2) of this section shall
28 not exceed fifty thousand dollars. The taxpayer shall receive such credit
29 for each year of the performance period that the taxpayer is at or above
30 the required levels of employment and cumulative investment.
31 (4) A taxpayer shall not qualify for any credits under the Nebraska
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1 Small Business Act if the taxpayer is receiving any benefits under any
2 other tax incentive program offered by the State of Nebraska.
3 (5) A teleworker working from his or her residence shall not be
4 considered an equivalent employee of the taxpayer for purposes of the
5 Nebraska Small Business Act unless the teleworker's residence is located
6 in the economic redevelopment area, city, or village in which the
7 taxpayer's qualified location is located.
8 Sec. 21. (1)(a) If the taxpayer acquires an existing business, the
9 increases in investment and employment shall be computed as though the
10 taxpayer had owned the business for the entire taxable year preceding the
11 date of application.
12 (b) If the taxpayer disposes of an existing business and the new
13 owner maintains the minimum increases in investment and employment
14 required to create incentives, the taxpayer shall not be required to make
15 any repayment under section 23 of this act solely because of the
16 disposition of the business.
17 (2) If the structure of a business is reorganized, the taxpayer
18 shall compute the increases on a consistent basis for all periods.
19 (3) If the taxpayer moves a business from one qualified location to
20 another qualified location and the business was operated in a qualified
21 location during the taxable year preceding the date of application, the
22 increases in investment and employment shall be computed as though the
23 taxpayer had operated the business at the new location for the entire
24 taxable year preceding the date of application.
25 (4) If the taxpayer enters into any of the following transactions,
26 the transaction shall be presumed to be a transaction entered into for
27 the pu