Will the Nebraska Tax Commissioner agree to change the required employment and investment levels in a signed LB 775 agreement?

Plain-English summary

Under Nebraska's Employment and Investment Growth Act (LB 775), a company signed an agreement committing to specific required levels of employment and investment in exchange for tax incentives. This ruling addresses when the Tax Commissioner will let a company change those required levels in an already-signed agreement.

The core holding: an agreement "will only be amended as contained in this ruling." The Act does not specifically prohibit amending agreements, and the Tax Commissioner determined that, in the absence of such a prohibition, an amendment of the required levels will be allowed only in two very limited situations:

1. Where the possibility of an amendment will encourage taxpayers to make an initial commitment to increase employment; and
2. Where amending the agreement will accelerate the repayment of incentives already received that will be recaptured under the existing agreement.

For the second situation, the taxpayer must request the change and repay the incentives received (or taxes not paid) through the use of any credits earned, and that repayment must include interest running from the date the refund was paid or the tax's due date.

Everything else is off the table. "All other changes in the required levels of employment and investment will not be agreed to by the Tax Commissioner." So a company generally cannot simply renegotiate its targets down (or up) at will.

The alternative for a growing project. A taxpayer "whose expectations regarding the project have significantly increased" can instead apply for additional agreements. The newly planned investment and employment can be defined as a new project, which may overlap other projects as to location, time, or both -- rather than being folded into the existing agreement by amendment.

(This ruling was distributed as a scanned image; portions describing the Act's specific required-level thresholds did not convert cleanly to text and are not restated here. The two amendment situations, the interest-on-repayment requirement, and the additional-agreement option above are legible in the source.)

What this means for you

A company that wants to change its LB 775 commitments

Don't expect to freely renegotiate your required levels. The Commissioner will amend them only to encourage an initial commitment to more employment, or to speed up repayment of incentives headed for recapture (with interest). Any other change is refused.

A company whose project has grown beyond the original plan

The path forward is a new agreement for the additional investment and employment, defined as a separate project that may overlap your existing one in location or time -- not an amendment of the old agreement.

Common questions

Q: Can I lower my required employment and investment levels by amendment?
A: Only in the two situations the ruling allows -- encouraging an initial commitment to increase employment, or accelerating repayment of incentives that will be recaptured. All other changes to the required levels are refused.

Q: Is there a cost to the recapture-acceleration amendment?
A: Yes. You must repay the incentives received (or taxes not paid) through credits earned, plus interest from the date the refund was paid or the tax's due date.

Q: What if my project simply got bigger?
A: Apply for an additional agreement. The new investment and employment can be defined as a new project that may overlap your existing project in location, time, or both.

Q: Can I rely on this ruling today?
A: It is the Department's general policy and is "binding on the Nebraska Department of Revenue until amended," but the LB 775 program has evolved since 1987. Confirm current law and consult a Nebraska tax professional.

Citations and references

• Nebraska Revenue Ruling 29-87-3, "Economic Development Tax Incentives -- Amendment of Agreements" (Nebraska Department of Revenue, issued September 4, 1987; approved by the State Tax Commissioner). The legible ruling text cites no statute sections by number; it interprets the Tax Commissioner's authority to amend the required levels in an Employment and Investment Growth Act agreement.

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/rr298703_amend_agreement.pdf

Original ruling text

Revenue Ruling 29-87-3

Economic

nt Tax lncentive

EV

H

menciment of

A reements.

AG R EEMENT WI LL ONLY BE AMENDED AS CONTAINED IN .THIS RULING.

N

Advice has been requested as to whether the Tax Commissioner will
egree to a change in the required levels 'of employment and investment
in a signed agreement for the purposes of il-r" Employment and
lnvestment Growth Act (Act).

The Act does no.t speciíically prohibit the amendment. of agreements.
The Tax Commissioner has determined that in 'the absence õf such a
prohibition, an amendment will be altowed only in two very limited
situations. First, where the possibility of an amendment of an
agreement will encourage taxpayers to make an initíal commitment to
increase employment, and second, where amending the agreement will
accelerate the repavment of incentives received th-at w¡ll b-e recaptured
under the exísiing agreement.

The Tax

the

reguired
incentive
employees
addition,
and admi

an

":i

recaptu re provisions .

tion
the

Any taxpayer whoie expectations.regarding the project have significantly
increased can apply for additional agreemeñts. The'newly plannËd investl
mgnt and employment can be ijeíined as a new project nrh¡cn may overlap
other projects as to location, time or both.

The Tax Commissioner wíll allow the amenciment of the requireC levels of
employment ald investment in agreements only for the situations contained in this . ruling. All other changes in the requirec levels of
employment and investment will not be agreed to by the Tax
Commissioner.

employment of at least thirty new
t least three million dollars may be
n
g an investment of at least twenty
st request the change, and make
..
eceiveC or taxes not paid through
use
of
any
credits
that
have
been.
earned. The påyment must
lh"^
include interest from the--date the refund was paid, or thä iue date of
paid,
the tax

not

through the date of the payment.

An agreement that requiies the employment of at least one hundred new
employees anc the investment of at least . ten million dollars may be
changed to an agreement requiring the employment of at leasi thirty new

Revenue Ruling 29-87-3

Page 2

employees and the investment of at least three million dollars. The
taxpayer must request the change, and make payment
to.the appropriate
counties of all amounts of property tax, with - interest, that i,,ave not
been previously paid under the terms of the agreement.

After the benefitó received have been repaid, àn amended egreement will
be signed and will be considered as the agreement" The reluired levels
of employment and investment, es amendedl will be used to tompute, or
recompute, the incentives and eny recapture for the entire tife of the
agreement.

An agreement that has been amended may be amended again only ¡f
specifically allowed by this.ruling. ónce amended, ih. orijinal
required levels of employment and inveitment cannot be reestablished. -

AP

Donald S. Leuenberger
State Tax Commissioner
Septembe ,

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