Can a business with an existing Nebraska Advantage (or LB 775) project file a new application for a subsequent project covering the same activities, and how does timing affect its benefits?

Plain-English summary

Nebraska's economic-development incentive programs -- the older Employment and Investment Growth Act (LB 775) and the Nebraska Advantage Act -- let a business earn tax benefits for a "project" of qualifying investment and jobs. This ruling answers a recurring question: can a taxpayer file a new ("subsequent") application for a project that includes the same activities as an existing project? The answer is yes -- but the tax consequences depend entirely on the timing of the new application relative to the old project's entitlement period.

Subsequent application filed AFTER the previous project's entitlement period ends (specifically, after the period for direct sales tax refunds has ended): The subsequent project is treated as a continuation of the previous one, and the taxpayer keeps the benefits already earned.

• If the previous project received personal property tax exemptions, the applicant must elect, by checking a box on the Nebraska Advantage Act Application, one of two options for property placed in service after the subsequent application date:
  1. Keep that property in the previous project and continue its personal property tax exemption until the exemption period ends -- but that property does not count as new investment for the subsequent project; or
  2. Move that property into the subsequent project, count it as qualifying investment, and forego any previous-project property tax exemption on it.
• The applicant continues filing Form 312P (Claim for Nebraska Personal Property Exemption) consistent with the option chosen.
• Carryover tax credits from the previous project may be used until exhausted or until the previous project's carryover period expires; credits from the two projects are accounted for and used separately. If the subsequent project falls into recapture, benefits obtained through the previous project's carryover credits are not recaptured -- only benefits earned in the subsequent project are.

Subsequent application filed BEFORE the previous project's entitlement period ends: The previous project is deemed abandoned, and the subsequent project commences on the new application date.

• All employees at the project after the subsequent application date are counted only at the subsequent project, and building/equipment investment within the subsequent project's description is no longer treated as located at the previous project.
• Because the previous project's employment and investment levels were not maintained for its full entitlement period, the taxpayer becomes subject to recapture on the previous project.
• Previous-project credits cannot be used for sales/use tax refunds, withholding refunds/offsets, or real-estate-tax reimbursement after the subsequent application date -- remaining carryover credits are available only against income tax liability, and the property gets no previous-project property tax benefits.

The ruling also updates which guidance controls: applicants who filed subsequent-project applications before this ruling remain bound by Revenue Rulings 29-93-3, 29-96-2, and 29-05-11; applicants filing on or after the ruling's date are not bound by those prior rulings, except as stated here.

What this means for you

Businesses nearing the end of an incentive project

If you want a follow-on project covering the same activities and you want to keep everything you earned, wait until the previous project's sales-tax-refund entitlement period has ended before filing the subsequent application. That preserves earned benefits and carryover credits and lets you make a clean election about your post-application property.

Businesses tempted to file early

Filing a subsequent application before the previous project's entitlement period ends is costly: the previous project is treated as abandoned, you face recapture, and your old credits shrink to income-tax-only use. Model the recapture exposure before filing early.

Managing personal property tax elections

The checkbox election is consequential. Option 1 keeps the property tax exemption but the property won't count as new investment; Option 2 counts it as investment but drops the exemption. Choose based on which is worth more to your subsequent project, and keep filing Form 312P consistent with the choice.

Common questions

Q: Can I file a new Nebraska Advantage application for a project with the same activities as my current one?
A: Yes. A taxpayer may file for a subsequent project that includes the same activities; the effects depend on when it is filed.

Q: What happens if I file after my previous project's entitlement period ends?
A: The subsequent project is treated as a continuation. You keep earned benefits, use carryover credits separately, and elect how post-application property is treated for personal property tax.

Q: What happens if I file before the previous project's entitlement period ends?
A: The previous project is deemed abandoned and goes into recapture, and previous-project credits can then only offset income tax liability -- not generate sales/use tax, withholding, or real-estate-tax refunds after the subsequent application date.

Q: Does this ruling replace older guidance on subsequent applications?
A: For applications filed on or after its date, yes -- those applicants are not bound by Revenue Rulings 29-93-3, 29-96-2, and 29-05-11 (except as stated in the ruling). Applications filed before it remain bound by those prior rulings.

Citations and references

• Programs: Employment and Investment Growth Act (LB 775) and the Nebraska Advantage Act.
• Supersedes (for applications filed on or after Dec. 13, 2017): Revenue Rulings 29-93-3, 29-96-2, and 29-05-11, except as set forth in this ruling.
• Form: Nebraska Advantage Act Claim for Nebraska Personal Property Exemption, Form 312P.
• No statutes are cited in the text of this ruling.

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/rr291702_subsequent_applications.pdf

Original ruling text

Revenue Ruling 29-17-2

Nebraska Advantage Tax Incentives
December 13, 2017

Subsequent Nebraska Advantage Act Applications
This guidance document is advisory in nature but is binding on the Nebraska
Department of Revenue (Department) until amended. A guidance document does
not include internal procedural documents that only affect the internal operations
of the Department 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.
The Department 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.
Applicants who filed applications for subsequent Employment and Investment Growth Act
and/or Nebraska Advantage Act projects prior to the date of this revenue ruling are bound
by the provisions of Revenue Rulings 29-93-3, 29-96-2, and 29-05-11. Applicants who file
applications for subsequent Nebraska Advantage Act projects on or after the date of this
revenue ruling are not bound by the prior revenue rulings, except as set forth below.

Issue
Can a taxpayer with an agreement for a project under the Employment and Investment
Growth Act (LB 775) or the Nebraska Advantage Act file a Nebraska Advantage application
for a subsequent project that includes the same activities as the previous project?

Conclusion
A taxpayer may file an application for a subsequent Nebraska Advantage Act project
that includes the same activities as the previous project. The effects and impact of the
subsequent application depend on when it is filed.

Analysis
Subsequent Application Filed AFTER End of Previous Project’s Entitlement Period

As a previous LB 775 or Nebraska Advantage Act project nears its end, a taxpayer may
wish to file an application for a subsequent Nebraska Advantage Act project including the
same activities as the previous project. In order to retain and use all of the benefits earned
under the previous project, the application for the subsequent Nebraska Advantage Act

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

Revenue Ruling 29-17-2

December 13, 2017

Page 2 of 3

agreement must be filed after the previous project’s entitlement period relating to direct
sales tax refunds has ended.
When a previous project has received personal property tax exemptions, and an application
for a subsequent project is filed, the applicant must either:

1. Elect that the property placed in service after the date the subsequent application
   is filed remains in the previous project, and continue to take the property tax
   exemption on this property until the exemption period for personal property tax
   for the previous project expires. The property claimed as exempt for property tax
   purposes will not count as new investment for the subsequent project; or
2. Elect that the property placed in service after the date the subsequent application
   is filed is included in the subsequent project, count the property as investment
   toward qualification for the subsequent project, and forego any property tax
   exemptions otherwise available for this property in the previous project.
   The applicant must make this choice by marking the applicable checkbox on the Nebraska
   Advantage Act Application when filing a subsequent application.
   If the applicant chooses the first option, it may continue to annually file the Nebraska
   Advantage Act Claim for Nebraska Personal Property Exemption, Form 312P, for the
   previous project through the end of the exemption period for personal property tax, and
   may include property placed in service after the date of the subsequent application.
   If the applicant chooses the second option, it may continue to file the Form 312P for
   property placed in service prior to the date of the subsequent application, but it cannot
   claim as exempt any property placed in service after the application date for the subsequent
   project that it will claim as new investment for the subsequent project.
   The subsequent project is considered to be a continuation of the previous project. Any
   tax credits remaining from the previous project may be claimed by the taxpayer until
   they are fully used or until the carryover period of the previous project expires, whichever
   occurs first.
   A taxpayer may use remaining tax credits to obtain refunds of sales or use taxes paid on
   purchases of qualified and nonqualified property for the subsequent project, to obtain
   a refund or offset of income tax withholding on employee wages paid after the date of
   application of the subsequent project, or to get a reimbursement of real estate taxes after
   the date of the subsequent application. If carryover credits are used to request a refund
   of sales or use taxes paid on qualified investment in the subsequent project before the
   required levels are reached, there will be no direct refund for sales tax paid on the same
   property, and tax credits from the previous project will not be reinstated. Tax credits from
   the previous and subsequent projects will be accounted for and used separately. In the
   event that the subsequent project falls into recapture, the benefits received through the
   use of carryover credits from the previous project are not recaptured. Only the benefits
   earned in the subsequent project would be recaptured.

Revenue Ruling 29-17-2

December 13, 2017

Page 3 of 3

Subsequent Application Filed BEFORE End of Previous Project’s Entitlement Period

The treatment is not the same if a taxpayer files an application for a subsequent project
prior to the end of the previous project’s entitlement period, which includes the same
activities as the previous project. The previous project is considered abandoned and the
subsequent project will commence on the date of the subsequent application.
All employees working at the project after the date of the subsequent application,
regardless of their date of hire, will be considered employees only at the subsequent
project. Any investment in the building and equipment that is within the description of
the subsequent project will not be considered as located and used at the previous project
as of the date of the subsequent application, regardless of whether the investment was
made before or after the date of the subsequent application.
As a result, the taxpayer will become subject to recapture since the employment and
investment levels of the previous project were not maintained for all remaining years of
the entitlement period for the previous project. Credits from the previous project may
not be used to obtain sales or use tax refunds for any purchases after the date of the
subsequent project, to obtain a refund or offset of income tax withholding on employee
wages paid after the date of the subsequent project, or to get a reimbursement of real
estate taxes after the date of the subsequent project. Carryover credits remaining from
the previous project would only be available for use against the taxpayer’s income tax
liability. Any property at the subsequent project will not be eligible for any property tax
benefits related to the previous project.
APPROVED:
Tony Fulton
Tax Commissioner
December 13, 2017