At the end of a Nebraska incentive project, can a company sign a new agreement for the same activities and keep using its old credits?

Plain-English summary

Nebraska's Employment and Investment Growth Act (enacted as LB 775) gave companies sales/use, income, and property tax benefits in exchange for hitting employment and investment targets over an "entitlement period." This ruling answers what happens when that period ends and a company wants to keep going with a subsequent (second) agreement covering the same activities.

The core holding: at the end of a project's entitlement period, a taxpayer may enter a subsequent agreement for a project that includes the same activities as the previous one.

The key is timing, and the ruling describes two paths:

Path 1 — file after the first entitlement period expires (keeps all benefits). To retain and use all the benefits earned under the first project, the application for the subsequent agreement must be filed after the previous project's entitlement period has expired. Before the new project hits its own minimum employment and investment levels, the taxpayer can use remaining carryover credits from the first project to get refunds of sales or use tax on qualified and non-qualified property within the new project's scope. Those carryover credits keep working until they're fully used or the first project's carryover period expires, whichever comes first. Credits from the two projects are accounted for and used separately. Once the new project reaches its own minimum levels, the taxpayer can only get a direct refund on qualified property for which a refund hasn't already been claimed — if a refund was already obtained on that property using carryover credits, no direct refund is available, and the used credits are not reinstated.

Path 2 — file before the first period ends (two overlapping projects). Alternatively, a taxpayer may file a new application covering the same activities before the current entitlement period ends. This creates two separate overlapping projects, and the application must clearly distinguish between them. Because the projects overlap, the taxpayer may face recapture if the first project's employment and investment levels aren't maintained. Critically, under Neb. Rev. Stat. § 77-4104(6), no employment, investment, or credits may be included or used in more than one overlapping project. So carryover credits from the first project cannot be used for sales/use tax refunds on purchases in the subsequent project — they're available only against the taxpayer's income tax liability.

Current status. As posted today, the document carries the Department's standard guidance-document notice and states that applicants filing for subsequent Nebraska Advantage Act projects on or after December 13, 2017 must refer to Revenue Ruling 29-17-2 instead. Approved April 8, 1993. This ruling is the one cited by the later Revenue Ruling 29-96-2 on the same subsequent-agreement mechanics.

What this means for you

A company nearing the end of an LB 775 project

If you want to continue with the same activities and keep every benefit you earned, wait until your first project's entitlement period actually expires before filing the subsequent application. That lets you burn down leftover carryover credits as sales/use tax refunds on the new project until they're exhausted.

A company that files early and ends up with overlapping projects

Filing before the first period ends is allowed but changes the math: the two projects can't share any employment, investment, or credits (§ 77-4104(6)), you risk recapture if you don't maintain the first project's levels, and your old carryover credits can only offset income tax — not fund refunds on the new project.

A newer applicant under the Nebraska Advantage Act

If you're filing for a subsequent Nebraska Advantage Act project on or after December 13, 2017, this 1993 ruling isn't your guide — the document points you to Revenue Ruling 29-17-2.

Common questions

Q: Can I sign a new incentive agreement for the same activities after my project ends?
A: Yes. At the end of the entitlement period you may enter a subsequent agreement that includes the same activities as the previous project.

Q: How do I keep all my earned benefits?
A: File the subsequent application after the previous project's entitlement period has expired. You can then use remaining carryover credits from the first project for sales/use tax refunds on the new project until they run out or the carryover period ends.

Q: What if I file the new application before the first period ends?
A: You'll have two overlapping projects. Under § 77-4104(6), no employment, investment, or credits can count in more than one, so your old carryover credits can only offset income tax — not fund refunds on the new project — and you risk recapture if the first project's levels aren't maintained.

Q: Does this still apply to newer projects?
A: For subsequent Nebraska Advantage Act projects applied for on or after December 13, 2017, the document directs you to Revenue Ruling 29-17-2 instead.

Citations and references

• Employment and Investment Growth Act (LB 775) — the incentive program governing these project agreements.
• Neb. Rev. Stat. § 77-4104(6) — bars counting the same employment, investment, or credits in more than one overlapping project.
• Revenue Ruling 29-96-2 — a later ruling applying these subsequent-agreement rules to the property tax exemption.
• Revenue Ruling 29-17-2 — the ruling that subsequent Nebraska Advantage Act applicants (on or after December 13, 2017) must use instead.

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/rr299303_subsequent_agreements.pdf

Original ruling text

Revenue Ruling 29-93-3
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 file applications for subsequent Nebraska Advantage Act projects on or
after December 13, 2017 must refer to Revenue Ruling 29-17-2.
Economic Development Tax Incentives -- Subsequent Agreements. AT THE END OF A
PROJECT’S ENTITLEMENT PERIOD, A TAXPAYER MAY ENTER INTO A SUBSEQUENT
AGREEMENT UNDER THE EMPLOYMENT AND INVESTMENT GROWTH ACT, FOR A
PROJECT WHICH MAY INCLUDE THE SAME ACTIVITIES AS THE PREVIOUS PROJECT.
Advice has been requested regarding whether a taxpayer may enter into a subsequent project
agreement under the Employment and Investment Growth Act, which may include the same
activities as a previous project.
At the end of a current project’s entitlement period, a taxpayer may enter into a subsequent agreement
for another 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 agreement
must be filed after the previous project’s entitlement period has expired.
Prior to achieving the minimum required levels of employment and investment for the subsequent
project, a taxpayer may obtain refunds of sales or use tax paid on qualified and non-qualified
property falling within the scope of the subsequent project, by using any remaining credits which
were earned under the previous project agreement. These carryover credits may continue to be used
in this manner until they are fully used or until the carryover period of the previous project expires,
whichever occurs first. Credits from the previous and subsequent projects will be accounted for
and used separately. In the event that the subsequent project would fall into recapture, only the
benefits earned in the subsequent project would be subject to the applicable recapture provisions.
When the taxpayer achieves the minimum qualifying levels of employment and investment
required for the subsequent project, it can only receive a direct refund on qualified property for
which a refund has not been previously claimed. If a refund of sales or use tax is received on
qualified property falling within the scope of the subsequent project by using carryover credits
from the previous project, then no direct refund is available on the same property. Credits from the
previous project will not be reinstated.

Revenue Ruling 29-93-3

April 8, 1993

Page 2 of 2

Alternatively, a taxpayer may intentionally file, prior to the end of the current project’s entitlement
period, a new project application covering the same activities as the previous project. The
application must clearly distinguish between the two projects. In this event, the taxpayer will
have two separate overlapping projects. Due to the existence of the two separate projects, the
taxpayer may become subject to recapture provisions if the employment and investment levels of
the previous project are not maintained.
Pursuant to section 77-4104(6) of the Nebraska Revised Statutes, no employment, investment, or
credits may be included or used in more than one of these overlapping projects. Thus, credits from
the previous project may not be used to obtain sales or use tax refunds for any purchases falling
within the scope of the subsequent project. Carryover credits remaining from the previous project
would only be available for use against the taxpayer’s income tax liability.

April 8, 1993