Can a taxpayer with a signed Nebraska Advantage Act agreement under one tier amend it to a different tier?

Plain-English summary

The Nebraska Advantage Act signs businesses up under a specific tier -- each with its own investment, employment, wage, benefit, and audit rules. Sometimes a project doesn't grow the way it was planned, and the business wants to move to a different tier. This ruling answers: can you change the tier of a signed agreement, and if so, how?

The core rule (Neb. Rev. Stat. § 77-5723(8)): you can request a modification if it's consistent with the act's purposes and doesn't change the description of the project -- but you can never amend to a tier that grants a higher level of benefits, and never to a Tier 1 project. In practice, amendments move "down" to lower-benefit tiers.

The ruling lists exactly which changes are allowed, including:

• Tier 2 → Tier 3 or Tier 5.
• Tier 2WP/DC (Web Portal or Data Center) → Tier 2, 3, 5, or 5WP/DC.
• Tier 2 Large Data Center (2LDC) → Tier 2, 2WP/DC, 3, 5, or 5WP/DC.
• Tier 4 → Tier 2, 2WP/DC, 3, 5, or 5WP/DC.
• Tier 5WP/DC → Tier 5.
• Tier 5 Large Data Center (5LDC) → Tier 5 or 5WP/DC.
• Tier 6 → Tier 2, 2WP/DC, 3, 4, 5, or 5WP/DC, under special rules.

A few important mechanics:

• You can amend more than once (e.g., Tier 6 → Tier 4, then Tier 4 → Tier 5WP/DC).
• Everything is recomputed. When an agreement is amended, all benefits and time periods are recalculated as though the application had originally been filed for the amended tier. Any benefits already received that aren't allowable under the new tier must be repaid, with interest, before the Tax Commissioner signs the amended agreement.
• Some "amendments" aren't needed. For WP/DC, LDC, and Tier 4 agreements, if you never claim a property-tax exemption (never request those higher-tier property benefits), the agreement is simply treated as the underlying Tier 2 or Tier 5 agreement -- no amendment required.
• Alternative to amending: you can withdraw any application or agreement and file a new application at any time, but the withdrawal must include repaying any benefits received; the new application is treated as if there had been no prior one.

Special Tier 6 rules: whether a Tier 6 agreement can be amended depends on its activities. If all the project's activities qualify as business activities under Tier 2 and Tier 4, it can be amended. If only some qualify but the applicant defines an alternative plan limited to Tier 2/Tier 4 activities, it can be amended using that plan. If only some qualify and no alternative plan is defined, it cannot be amended.

What this means for you

Businesses with a signed Advantage Act agreement

If your project isn't hitting the levels for your current tier, you may be able to shift to a lower-benefit tier rather than lose everything -- but confirm your desired change is on the allowed list, and budget for repaying, with interest, any benefits you already took that the new tier wouldn't allow. Request an amendment by letter to the Nebraska Department of Revenue.

Tier 6 project holders specifically

Your ability to amend hinges on whether your activities fit within Tier 2 and Tier 4 qualified activities. If they don't fully fit, be ready to define an alternative plan limited to those activities; otherwise amendment is off the table.

If amendment won't work

Consider the withdrawal-and-refile route: withdraw (repaying benefits received) and file a fresh application, which is treated as brand new.

Common questions

Q: Can I amend my agreement to a tier with better benefits?
A: No. An agreement may not be modified to a tier that would grant a higher level of benefits, nor to a Tier 1 project (Neb. Rev. Stat. § 77-5723(8)).

Q: Do I have to pay anything back when I amend?
A: Yes, if you already received benefits that aren't allowable under the amended tier. Those must be repaid, with applicable interest, before the Tax Commissioner signs the amended agreement.

Q: Can I amend the same agreement more than once?
A: Yes. For example, a Tier 6 agreement may be amended to Tier 4, and that Tier 4 agreement may later be amended to a Tier 5WP/DC agreement.

Q: What if amending isn't allowed for my situation?
A: You may withdraw the application or agreement (repaying any benefits received) and file a new application at any time; it will be treated as though there had been no previous application.

Q: How do I request an amendment?
A: By sending a letter to the Nebraska Department of Revenue.

Citations and references

• Neb. Rev. Stat. § 77-5723(8) -- a taxpayer may request modification of an agreement if consistent with the act's purposes and not requiring a change in the project description; no modification to a higher-benefit tier or to a Tier 1 project; for a Tier 6 project the taxpayer must limit the project to qualified activities allowable under Tier 2 and Tier 4.
• Supersedes Revenue Ruling 29-05-10 (issued December 20, 2005).

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/rr291301_amending.pdf

Original ruling text

Revenue Ruling 29-13-1

Nebraska Advantage Tax Incentives

Supersedes Revenue Ruling 29-05-10, issued December 20, 2005

July 22, 2013

Amending a Nebraska Advantage Act Agreement
Issue
May a taxpayer who has a signed Nebraska Advantage Act agreement under one tier request a change
to another tier?

Conclusion
A Tier 2 agreement may be amended to a Tier 3 or Tier 5 agreement.
A Tier 2 Web Portal or Data Center (Tier 2WP/DC) agreement may be amended to a
Tier 2, Tier 3, Tier 5, or Tier 5 Web Portal or Data Center (Tier 5WP/DC) agreement. Under a
Tier 2WP/DC agreement, the taxpayer will receive the Tier 2 benefits as soon as the taxpayer has met
or exceeded the Tier 2 required levels by meeting the required levels at the entire project, prior to
meeting the required levels for the data center or Internet web portal. If the taxpayer never requests
any property tax benefits by claiming an exemption, the Tier 2WP/DC agreement will be treated as a
Tier 2 agreement and an amendment is not necessary.
A Tier 2 Large Data Center (Tier 2LDC) agreement may be amended to a Tier 2, Tier 2WP/DC,
Tier 3, Tier 5, or Tier 5WP/DC agreement.
A Tier 4 agreement may be amended to a Tier 2, Tier 2WP/DC, Tier 3, Tier 5, or Tier 5WP/DC
agreement. Under a Tier 4 agreement, the taxpayer will receive the Tier 2 benefits as soon as the
taxpayer has met or exceeded the Tier 2 required levels. If the taxpayer never qualifies at the higher
levels required for Tier 4 property tax benefits, or if the taxpayer never requests any property tax
benefits by claiming an exemption, the Tier 4 agreement will be treated as a Tier 2 agreement and an
amendment is not necessary.
A Tier 5WP/DC agreement may be amended to a Tier 5 agreement. Under a Tier 5 WP/DC agreement,
the taxpayer will receive the Tier 5 benefits as soon as the taxpayer has met or exceeded the Tier 5
required levels by meeting the required levels at the entire project, prior to meeting the required
levels for the data center or Internet web portal. If the taxpayer never requests any property tax
benefits by claiming an exemption, the Tier 5WP/DC agreement will be treated as a Tier 5 agreement
and an amendment is not necessary.
A Tier 5 Large Data Center (Tier 5LDC) agreement may be amended to a Tier 5 or
Tier 5WP/DC agreement. Under a Tier 5LDC agreement, the taxpayer will receive the Tier 5 benefits
as soon as the taxpayer has met or exceeded the Tier 5 required levels by meeting the required
levels at the entire project, prior to meeting the required levels for the data center. If the taxpayer
never requests any property tax benefits by claiming an exemption, the Tier 5LDC agreement will be
treated as a Tier 5 agreement and an amendment is not necessary.
A Tier 6 agreement may be amended to a Tier 2, Tier 2WP/DC, Tier 3, Tier 4, Tier 5, or
Tier 5WP/DC agreement under special rules detailed below.

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

Revenue Ruling 29-13-1

July 22, 2013

Page 2 of 2

Analysis
Neb. Rev. Stat. § 77-5723(8), provides:
The taxpayer may request that an agreement be modified if the modification is consistent
with the purposes of the act and does not require a change in the description of the
project. An agreement may not be modified to a tier that would grant a higher level of
benefits to the taxpayer or to a tier 1 project. Once satisfied that the modification to
the agreement is consistent with the purposes stated in the act, the Tax Commissioner
and taxpayer may amend the agreement. For a tier 6 project, the taxpayer must agree
to limit the project to qualified activities allowable under tier 2 and tier 4.
Taxpayers request an amendment by sending a letter to the Nebraska Department of Revenue.
Under the Nebraska Advantage Act, there are a significant number of differences in benefits,
qualification requirements, qualified business activities, applicable time periods, and audit standards
between the different tiers. Consequently, a project under one tier may not be an eligible project under
a different tier. Therefore, an agreement can only be amended as listed above. An agreement may be
amended more than once. For example, a Tier 6 agreement may be amended to a Tier 4 agreement.
The Tier 4 agreement may subsequently be amended to a Tier 5WP/DC agreement.
When an agreement is amended, all benefits and time periods will be recomputed for the agreement
as though the application was originally filed for the amended tier. Any benefits previously received
that are not allowable under the amended agreement must be repaid, with applicable interest, before
the amended agreement will be signed by the Tax Commissioner.
As an alternative to amending, any application or agreement may be withdrawn and a new application
filed at any time. The request to withdraw must include repayment of any benefits received for the
project which is being withdrawn. The new application will be considered as though there had not
been a previous application.
Special Rules Applicable to Tier 6 Agreements
When a taxpayer files an application for a Tier 6 project, the ability to amend the agreement depends
on whether all activities in the plan are qualified business activities under Tier 2 and Tier 4.

1. If all of the activities in the Tier 6 project are qualified business activities under Tier 2 and
   Tier 4, the agreement may be amended.
2. If only a portion of the activities in the Tier 6 project are qualified business activities under
   Tier 2 and Tier 4, but the applicant defines an alternative plan that only includes activities that
   qualify under Tier 2 and Tier 4, the agreement may be amended using the alternative plan.
3. If only a portion of the activities in the Tier 6 project are qualified business activities under
   Tier 2 and Tier 4, and the applicant does not define an alternative plan that only includes
   activities that qualify under Tier 2 and Tier 4, the agreement may not be amended.
   APPROVED:

Douglas A. Ewald
Tax Commissioner
July 22, 2013