Ezel / Tax Rulings / NE
NE 29-91-3 Tax Incentives 1991-05-30

In a sale-leaseback, does property a company sells and leases back count as 'investment' for Nebraska's LB 775 incentive?

Short answer: Only if it was first put into service after the application. Under Revenue Ruling 29-91-3, when a taxpayer leases property in a sale-leaseback that it previously owned, that property qualifies as 'investment' under the Nebraska Employment and Investment Growth Act only if the property was first placed in service by the taxpayer after the date of its Act application. When it does qualify, the property is valued at its original purchase price or cost — not at the amount of the lease payments. The ruling supersedes Revenue Ruling 29-90-3 and is effective for all agreements entered into under the Act.

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This page answers the general question as of 1991. Ezel answers yours, under current Nebraska tax law, with citations.

Currency note: this ruling is from 1991
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

Nebraska's Employment and Investment Growth Act (LB 775) rewards companies for investing in qualifying Nebraska property. This ruling addresses a financing structure companies sometimes use — the sale-leaseback, where a company sells property it owns and then immediately leases it back so it keeps using the property but frees up cash.

The question: does property a taxpayer leases back (property it previously owned) count as "investment" for the Act's incentives?

The holding: the lease of previously-owned property qualifies as investment only if the property was first placed in service by the taxpayer after the date of its Act application. In other words, you can't take property you already had in service, sell-and-lease-it-back, and claim it as new qualifying investment — the property has to have first gone into service after you applied for the incentive.

Valuation: when leased property does qualify, it is valued at its original purchase price or cost, not at the amount of the lease payments. That prevents inflating (or deflating) the investment figure through the lease terms.

The ruling supersedes Revenue Ruling 29-90-3 and states that it is effective for all agreements entered into under the Nebraska Employment and Investment Growth Act. Approved by State Tax Commissioner M. Berri Balka in 1991.

What this means for you

A company using a sale-leaseback under an LB 775 agreement

Leased-back property counts toward your investment target only if it first went into service after your application date. Property already in service before you applied doesn't become qualifying investment just because you route it through a sale-leaseback. And when it does count, use its original purchase price or cost for the investment figure — not the lease payments.

Tax and finance advisors structuring incentive deals

Check the in-service date against the application date before treating leased property as qualified investment, and value qualifying leased property at original cost. Applies to all agreements entered under the Act.

Common questions

Q: Does sale-leaseback property count as investment for the Nebraska Employment and Investment Growth Act?
A: Only if the property was first placed in service by the taxpayer after the date of the Act application.

Q: How is qualifying leased property valued?
A: At its original purchase price or cost — not the amount of the lease payments.

Q: What if I already had the property in service before applying?
A: Then leasing it back does not make it qualifying investment; the first-in-service date must come after the application date.

Citations and references

  • Nebraska Employment and Investment Growth Act (LB 775) — the incentive program whose "investment" definition this ruling applies to sale-leaseback property.
  • Revenue Ruling 29-90-3 — the earlier ruling this one supersedes.

Source

Original ruling text

ebraska
partment
[sP revenue

Revenue Ru1ing 29-9t-/
Supersedes 29-90-3

Economic Development Tax fncentives--Sale-lease back. THE LEASE
By A TÀXpÀyER oF PROPERTY WHrCH IT PREVTOUSLY OÌ{NED QUALTFTES ÀS

IIIVESTI,IENT ONLY IF THE PROPERTY WAS FIRST PT,ÀCED IN SERVICE BY
THE TÀXPAYER ÀTTER THE DÀTE OF THE APPLICÀTION. THE PROPERTY
I{ILIJ BE VÀLUED AT ITS ORIGINAL PURCHÀSE PRICE OR COST.

Àdvice has been requested regarding whether property leased in a
sale-lease back situation qualifies as investment for purposes
of the Nebraska Employment and fnvestment Growth Act.
The lease by a taxpayer of any property which it previously
owned will qualify as investrnent onÌy if the property was first
placed in ser¡¡ice by' the taxpayer after the date of its
Employment and Investment Growth Act applicatj-on. The property
will be valued at its original purchase price or cost rather
than the amount of the lease payments.
This revenue rul-ing is effective for all agreements entered Ínto
under the provisions of the Nebraska Employment and Investment
Growth Act.
ÀPPROVED:

l,t. Berri
State Tax Commissioner

,u" -3oL, 19e1

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