Did the COVID-19 national emergency automatically prevent Nebraska Advantage Act incentive recapture?

Plain-English summary

The COVID-19 national emergency was a qualifying force-majeure trigger, but it did not automatically excuse Nebraska Advantage Act recapture. A project holder had to prove that the emergency directly caused its failure to maintain required employment or investment levels.

Two requirements for relief

The project holder had to show both that a triggering event occurred and that the triggering event caused the failure. The Department accepted President Trump's March 13, 2020 national-emergency declaration as the first requirement.

For causation, the project holder needed evidence of forces beyond its control, such as a government order to cease or reduce operations or a directed health measure preventing normal operations.

What did not establish force majeure

Financial hardship alone was not enough. Nor was a business decision within the project holder's control.

The GIL specifically said choosing a reduction in force instead of a paid ready-to-work program was an economic decision and did not qualify. Making required performance less profitable also did not establish relief when performance remained possible.

The period protected from recapture depended on how long the project holder could demonstrate that the triggering event continued to cause its failure.

Common questions

Q: Did the declaration of a national emergency by itself stop recapture?

A: No. It supplied the triggering event, but the project holder still had to prove direct causation.

Q: Could a government shutdown or directed health measure support relief?

A: Yes, if it directly prevented the project holder from maintaining the required levels.

Q: Was reduced profitability enough?

A: No. The GIL distinguished inability caused by the emergency from financial hardship or unprofitability.

Q: How long did relief last?

A: Only as long as the project holder could show that the triggering event continued to cause the failure.

Citations and references

• Neb. Rev. Stat. § 77-5727(1) — recapture for failing to meet or maintain employment or investment
• Neb. Rev. Stat. § 77-5727(9) — force majeure for an act of God or national emergency
• Blue Creek Farm, Inc. v. Aurora Co-op. Elevator Co., 259 Neb. 1032 (2000)
• First Data Resources v. International Gateway Exchange, 2004 WL 2187566 (D. Neb. Sept. 28, 2004)
• Nebraska GIL 29-20-1 — COVID-19 national-emergency recapture requests

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/general-information-letters-gils
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/gil/GIL-29-20-1_Force_Majeure.pdf

Original ruling text

GIL 29-20-1 Tax Incentives: Effect of the COVID-19 National Emergency on
Recapture Under the Nebraska Advantage Act
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR)
until amended. A guidance document does not include internal procedural documents that only affect the
internal operations of DOR and does not impose additional requirements or penalties on regulated parties
or include confidential information or rules and regulations made in accordance with the Administrative
Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on
regulated parties, you may request a review of the document.
This guidance document may change with updated information or added examples. DOR recommends you do
not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get updates
on your topics of interest.
April 22, 2020
Dear XXXX,
You have asked whether the COVID-19 pandemic and the subsequent declaration of a national emergency is
sufficient to invoke Neb. Rev. Stat. § 77-5727(9) to relieve Nebraska Advantage Act project-holders who fail
to maintain the required employment or investment levels of their obligation to repay all or a portion of the
tax incentive benefits they have previously received. Because of the nature of the question asked, this General
Information Letter (GIL) is being provided in response.
GILs address general questions; provide analysis of issues; and direct taxpayers to the Nebraska statutes,
Nebraska Department of Revenue (DOR) regulations, revenue rulings, or other sources of information to help
answer a question. A GIL is a statement of current DOR policy, and taxpayers may rely on DOR to follow
the principles or procedures described in a GIL until it is rescinded or superseded. You may also find current
regulations, revenue rulings, information guides, taxpayer rulings, and other GILs that may be helpful to you
at revenue.nebraska.gov.
The Nebraska Advantage Act (Act) provides that all or a portion of tax incentives previously earned shall be
recaptured if the project-holder fails to meet1 the required levels of employment or investment by the end of
the attainment period or fails to maintain those levels for the entire entitlement period. See Neb. Rev. Stat.
§ 77‑5727(1). The Act also contains a force majeure provision that excuses the project-holder’s failure to
maintain the required employment and investment levels under specific circumstances. The Act specifically
provides that “[t]he recapture required by [Neb. Rev. Stat. § 77-5727] shall not occur if the failure to maintain
the required levels of employment or investment was caused by an act of God or national emergency.”
Neb. Rev. Stat. § 77‑5727(9). An act of God or national emergency as provided for in the statute is the
“triggering event.”
To avoid recapture under the force majeure provision, the project-holder must show both that (1) a triggering
event occurred, and (2) the project-holder’s failure to maintain required employment or investment levels
was caused by the triggering event. On March 13, 2020, President Trump declared a national emergency
as a result of the COVID-19 pandemic. DOR considers this to be a triggering event pursuant to Neb. Rev.
Stat. § 77‑5727(9). To avoid recapture under the Act, the project-holder must demonstrate that the national
emergency was the cause of its failure to maintain employment or investment.

1

Project-holders in specific tiers are permitted to receive a property tax benefit prior to meeting investment and
employment levels. The discussion of a project-holder’s failure to meet levels in this GIL refers only to these situations.
See Neb. Rev. Stat. § 77-5727(1)(b), which provides that “[i]n the case of a taxpayer who has failed to meet the required
levels of investment or employment within the required time period, all reduction in the personal property tax because of
the act shall be recaptured.

GIL 29-20-1

Page 2 of 2

In contract law, a force majeure provision “allocates the risk if performance becomes impossible or
impracticable as a result of an event or effect that the parties could not have anticipated or controlled.” Blue
Creek Farm, Inc. v. Aurora Co-op. Elevator Co., 259 Neb. 1032, 1034 (Neb. 2000). The test to invoke such
provision is, generally, “whether under the particular circumstances there was such an insuperable interference
occurring without the parties’ intervention as could not have been prevented by prudence, diligence and care.”
First Data Resources v. International Gateway Exchange, 2004 WL 2187566 at 7 (D. Neb. Sept. 28, 2004);
see also, Great Lakes Gas Transmission Ltd. Partnership v. Essar Steel Minnesota, LLC, (871 F.Supp.2d
843, 852 (D. Minn. 2012). The Act makes it clear that the burden is on the project-holder to show that its
failure to maintain the required levels was not within its control but was caused by the triggering event.
Neb. Rev. Stat. § 77‑5727(9).
To demonstrate that failure to maintain levels was caused by the triggering event, a project-holder must
provide evidence that its failure was the direct result of forces beyond its control including, but not limited to, a
government order to cease or reduce operations, or a directed health measure that prevented the business from
continuing its usual operations. The force majeure clause does not excuse performance on the basis of financial
hardship or where the failure to maintain levels was the result of a business decision within the control of the
project-holder. Elavon, Inc. v. Wachovia Bank, Nat. Ass’n, 841 F.Supp.2d 1298, 1307-08 (2011) (finding that
defendant could not avail itself of the force majeure clause despite the economic perils that faced the banking
industry because the decision to violate the contract was well within its control); Route 6 Outparcels, LLC
v. Ruby Tuesday, Inc., 88 A.D.3d 1224, 1226, 931 N.Y.S.2d 436, 438 (2011) (finding that defendant could
not avail itself of the force majeure clause even though it had no control over the economic downturn where
defendant had options, though limited, and made the calculated choice to allocate funds to the payment of its
debts rather than to perform under the contract). Therefore, the decision to do a reduction-in-force rather than
a paid ready-to-work program is economic in nature, and as a result, will not be eligible for relief under force
majeure. Similarly, it is not sufficient to show that the triggering event simply made maintaining employment
or investment levels less profitable. United Sugars Corp. v. U.S. Sugar Co., 2015 WL 1529861 at 3-4 (D.
Minn. April 2, 2015) (finding that the force majeure clause did not apply where governmental action made
performance unprofitable but did not prevent or prohibit performance).
The length of time for which Neb. Rev. Stat. § 77-5727(9) prevents recapture will depend on the project‑holder’s
ability to demonstrate that the triggering event continued to cause its failure to maintain levels.
This position applies to all requests to invoke Neb. Rev. Stat. § 77-5727(9) as a result of the national emergency
declared on March 13, 2020.
For the Tax Commissioner
Sincerely,

Elizabeth Gau
Attorney, Policy Section
Nebraska Department of Revenue