Can a Nebraska company cancel its Employment and Investment Growth Act (LB 775) agreement and instead claim credits under the Employment Expansion and Investment Incentive Act?

Plain-English summary

In the late 1980s Nebraska ran two overlapping tax-incentive programs. The Employment and Investment Growth Act (LB 775) rewarded larger projects that hit high investment and employment thresholds; the Employment Expansion and Investment Incentive Act was a separate, smaller-scale credit program. This ruling addresses a company that signed up under the big Growth Act, then realized it "will probably not reach, or maintain the required investment and employment levels," and wants to switch to the Expansion Act instead.

The core holding: a taxpayer may cancel an agreement executed under the Employment and Investment Growth Act and then claim credits under the Employment Expansion and Investment Incentive Act. The Growth Act does not specifically address cancellation, but cancellation "is not expressly prohibited," so the taxpayer and the State Tax Commissioner can agree to cancel. The ruling is effective for applications filed both before and after January 1, 1988.

Three conditions to cancel. The taxpayer must:

1. Submit a written request to cancel the agreement.
2. Repay any incentives already received, together with interest at the current rate set in section 45-104.01 of the Nebraska Revenue Act of 1967, running from the date the incentives were received through the date of repayment.
3. Make the request within three calendar years of the due date (including extensions) of the income tax return or report of income for the year the application was filed.

After cancellation. Once these conditions are met, the Commissioner acknowledges the cancellation in writing, and a copy of that acknowledgment must accompany the amended income tax returns that then have to be filed. A cancelled agreement cannot be reinstated, but the taxpayer is not barred from filing a brand-new Growth Act application for future investment and employment.

Timing of the Expansion Act credits. A taxpayer cannot claim Employment Expansion Act credits for the same employment or investment while a Growth Act agreement covering them remains in effect. Only once the Growth Act agreement is cancelled may the taxpayer file amended returns -- within the available statute of limitations -- to claim the Expansion Act credits.

What this means for you

A company that signed an LB 775 agreement it can no longer meet

You are not stuck. You can negotiate a cancellation with the State Tax Commissioner, but be ready to pay back any incentives already taken with interest, to act within the three-year window tied to your application-year return, and to attach the Commissioner's written acknowledgment to your amended returns.

A company weighing which incentive program to use

Switching programs is possible but not free or automatic. You cannot double-dip: no Expansion Act credit for employment or investment already committed to an in-force Growth Act agreement. Plan the cancellation first, then claim the Expansion Act credits on amended returns.

Common questions

Q: Can I get out of an Employment and Investment Growth Act agreement?
A: Yes. Although the Act does not address cancellation, it does not prohibit it, so you and the State Tax Commissioner can agree to cancel if you meet the three conditions.

Q: Do I have to pay anything back?
A: Yes, if you already received incentives under the agreement. You must repay them with interest at the section 45-104.01 rate from the date of receipt through repayment.

Q: Is there a deadline to request cancellation?
A: Yes -- within three calendar years of the due date (including extensions) of the income tax return or income report for the year the application was filed.

Q: Can I claim Expansion Act credits before cancelling?
A: No. You cannot claim Employment Expansion Act credits for employment or investment while a Growth Act agreement covering them is in effect. After cancellation, you may claim them on amended returns filed within the statute of limitations.

Q: Can I re-enter the Growth Act later?
A: A cancelled agreement cannot be reinstated, but you are not precluded from filing a new Growth Act application for future investment and employment.

Citations and references

• Nebraska Revenue Ruling 29-88-2, "Economic Development Tax Incentives -- Withdrawal to the Employment Expansion and Investment Incentive Act" (Nebraska Department of Revenue, issued May 9, 1988; approved by State Tax Commissioner John M. Boehm).
• Neb. Rev. Stat. § 45-104.01 (interest rate on repaid incentives), Nebraska Revenue Act of 1967, as amended.
• Programs referenced: the Employment and Investment Growth Act (LB 775) and the Employment Expansion and Investment Incentive Act.

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/rr298802_withdrawal.pdf

Original ruling text

Revenue Ruling 29-88-2

Economic Develo
s

an

n

nt Tax lncentives--Withdrawal to the Em
ve

ment

PLOYMENT AND INVESTMENT
GROWTH ACT AND, SUBSEQUENTLY, CLAIM CRED]TS UNDER THE
EMPLOYMENT EXPANSION AND INVESTMENT INCENTIVE ACT. THIS
RULING IS EFFECTTVE FOR APPLICATIONS FILED BOTH BEFORE AND
AFTER JANUARY 1, 1988.

Advice has been requested as to whether a taxpayer may cancel an
agreement executed under the Employment and lnvestment Growth Act
and claim credits under the Employment Expansion and lnvestment
lncentive Act.
The taxpayer and the State Tax Commissioner have signed an agreement
under lh" Employment and lnvestment Growth Act. The taxpãyer has
later determined that it will probably not reach , or ma¡htáin the
required investment and employment levels.
The Employment and lnvestment Growth Act does not specifically address
the cancellation of an agreement executed thereunder; however, it is not
expressly prohibited. The taxpayer and the State Tax Commissioner
can, therefore, agree to cancel an agreement. The taxpayer must fulfill
the following conditions in order for the State Tax Commissioner to
agree to cancel an agreement:
1

.

The taxpayer submits a written request to cancet the

agreement.
2

3

lf the taxpayer has received incentives under the agreement,
the incentives must be repaid, together with interest, at the
current rate established in section 45-104.01, of the Nebraska
Revenue Act of 1967, as amended, from the date of receipt of
the incentives through the date of repayment.
The request to cancel must be made within three calendar
years of the due date, including extensions, of the income tax
return or report of income for the year the application was

filed.

Upon satísfying these conditions, the State Tax Commissioner wilt
acknowledge, in wríting, the cancellation of the agreement. A copy of
this acknowledgment must accompany the amended income tax returns
which are required to be filed. A cancelted agreement cannot be
reinstated. A taxpayer who previously cancelled an agreement is not
preclu_ded from filing a new application under the Employment and lnvestment Growth Act for future investment and employment.

Revenue Ruling No. 29-88-2

Page 2

The Employment and lnvestment Growth Act does not allow a taxpayer to
claim tax credits for employment or investment under the Employment
Expansion and lnvestment lncentive Act during the period an Employment and lnvestment Growth Act agreement which includes such
employment and investment remains in effect. Once the agreement is
cancelled, the taxpayer may file amended tax returns within the
available statute of limitations period for the purpose of claiming
credits under the Employment Expansion and lnvestment lncentive Act.
APPROVED:

4¿t 4/,,C/;i"
/'/

John M. Boehm
State Tax Commissioner

M.y /,'4, 1988