Can an employee who works at the Advantage Act project and also at other locations count toward new employees, the compensation credit, and retained withholding?

Plain-English summary

The Nebraska Advantage Act rewards businesses for adding jobs at a qualifying project. But what about an employee who works partly at the project and partly at the company's other locations? This ruling explains how to count that employee toward the number of new employees, the compensation credit, and the income tax withholding the business gets to keep.

Everything is measured in hours worked at the project. Under Neb. Rev. Stat. § 77-5714, the "number of new employees" means the number of equivalent employees at the project. Hours worked at the project are converted to employee equivalents based on a 40-hour week, and part-time employees are counted for the hours they actually work at the project.

A multi-location employee is, in effect, a part-timer at the project. If someone works both at the project and at other company locations, only the hours at the project count toward the number of new employees.

The 80% full-time rule. An employee who regularly works at the project but also does some work elsewhere is treated as full-time at the project if more than 80 percent of their compensated time is spent there.

Compensation credit and withholding follow the same proportion. For an employee who works at more than one location and earns at least 60% of the Nebraska average wage for the application year, the compensation on which the credit (Neb. Rev. Stat. § 77-5725(3)) is computed is based on the portion of time worked at the project. The same project-attributable portion determines how much withholding the taxpayer may retain using compensation credits.

What this means for you

Businesses with employees split across sites

Track project hours carefully. An employee who spends more than 80% of paid time at the project counts as a full-time project employee; otherwise, count only their project hours as a fraction of a 40-hour equivalent. Your compensation credit and retained withholding for that person are limited to the project-attributable share of their pay.

Payroll and HR staff administering an Advantage Act project

Build your headcount and credit calculations off hours-at-the-project, not total employment. For split employees who clear the 60%-of-Nebraska-average-wage bar, apportion both the credit base and the withholding retention by the project time fraction.

Common questions

Q: How are part-time or split-location employees counted?
A: By the hours they work at the project, converted to 40-hour-week equivalents. Only project hours count.

Q: When is a multi-location employee treated as full-time at the project?
A: When more than 80 percent of their compensated time is spent at the project.

Q: How much of a split employee's pay supports the compensation credit and withholding retention?
A: The portion attributable to time worked at the project (for employees earning at least 60% of the Nebraska average wage).

Citations and references

• Neb. Rev. Stat. § 77-5714 -- "number of new employees" means the number of equivalent employees employed at the project.
• Neb. Rev. Stat. § 77-5725(3) -- compensation credit equal to a percentage times the average wage of new employees times the number of new employees.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr290503_more_locations.pdf

Original ruling text

Revenue Ruling 29-05-3
Economic Development Tax Incentives
December 20, 2005
Economic Development Tax Incentives -- New Employees at More Than One Location. TO DETERMINE
THE NUMBER OF NEW EMPLOYEES, THE CREDIT ON WAGES PAID, OR WITHHOLDING
ATTRIBUTABLE TO NEW EMPLOYEES AT THE PROJECT, NEW EMPLOYEES WHO ARE
EMPLOYED AT MORE THAN ONE LOCATION CAN BE INCLUDED TO THE EXTENT THEY
ARE PAID FOR WORK PERFORMED AT THE PROJECT.
Advice has been requested as to whether or not an employee who works at the project and also at
other locations of the taxpayer could be included in determining the number of new employees, in the
computation of the credit based on compensation, or in the retention of income tax withholding for the
purposes of the Nebraska Advantage Act.
Section 77-5714, R.S.Supp. 2005, provides in part that:
Number of new employees means the number of equivalent employees that are employed at the
project . . .
Section 77-5725(3), R.S.Supp. 2005, provides in part that:
. . . a credit equal to . . . percent times the average wage of new employees times the number of
new employees . . .
The number of new employees is based on the number of hours worked at the project. The number
of hours worked are converted to employee equivalents based on a forty hour week. Any part-time
employees would have the number of hours they worked included in determining the equivalent
number of employees working at the project.
If employees work both at the project and at other locations of the taxpayer, they are in effect part-time
employees at the project. The number of hours they work at the project will be included in determining
the number of new employees.
Employees who regularly work at the project, but who also perform some services for the taxpayer at
other locations, will be considered employed full-time at the project if more than 80 percent of the time
for which they are compensated is spent at the project.
For employees who work at more than one taxpayer location and who earn at least 60% of the
Nebraska average wage for the year of application, the amount of the compensation on which the
credit is computed will be based on the portion of the time that they work at the project. The number
of hours included in computing the number of new employees can be used to determine the portion of
the compensation paid on which the credit can be computed. The portion of the compensation that is
attributable to the project will be used in determining the amount of withholding that may be retained
using compensation credits.
APPROVED:

Mary Jane Egr
State Tax Commissioner
December 20, 2005

Nebraska Department of Revenue, PO Box 94818, Lincoln, Nebraska 68509-4818