PowerPoint Presentation

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Department of Economic Development

www.neded.org

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January 9, 2007

NEBRASKA
DEPARTMENT OF
ECONOMIC DEVELOPMENT

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Department of Economic Development

www.neded.org

The Nebraska Advantage Package is designed to:

• Create a business climate that makes Nebraska the preferredlocation for starting and growing business

• Promote growth of existing companies job retention and expansion

• Foster growth of existing companies through new investment

• Encourage new capital investment

• Increase the number of new successful startup business ventures

• Further refine Nebraska’s raw materials

• Foster the commercialization of new products and ideas in Nebraska

• Recognize unique differences in the State’s diverse economicengines

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Department of Economic Development

www.neded.org

1.Expanded Incentives for 5 “Tiers” ofinvestment and/or job creation

2.Rural Development Advantage

3.Research and Development Advantage

4.State and local sales tax exemptions ofmanufacturing machinery, equipment, andrelated services

5.Agriculture Innovation Advantage

6.Microenterprise Tax Credit Advantage

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Department of Economic Development

www.neded.org

MinimumMinimum NewTiers New JobsInvestment

Tier 1 10 $ 1 Million

Tier 2 30 $ 3 Million

Tier 3 30 $ 0 Million

Tier 4 100 $ 10 Million

Tier 5Maintain$ 30 Million

5 “Tiers” of Investment and/or Job Creation

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Department of Economic Development

www.neded.org

5 “Tiers” Key Features

Job tax credits may be applied against statewithholding of new employees

New small business tier

New jobs only tier

Refunds of 50% (Tier 1) to 100% (Tiers 2, 4 & 5) ofall sales tax paid for capital expenditures at theproject for tiers

Adds exportable services to all tiers

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Department of Economic Development

www.neded.org

Eligible Businesses

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Department of Economic Development

www.neded.org

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Rural Development AdvantageInvestment Credits: $2,750 (refundable) per $50,000Wage Credits: $3,000 (refundable) per FTE, includesteleworkers

Rural Level One

County Population:

Less than 15,000

New Investment:

$125,000

New Jobs Created: 2

Rural Level Two

County Population:

Less than 25,000

New Investment:

$250,000

New Jobs Created: 5

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Department of Economic Development

www.neded.org

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Department of Economic Development

www.neded.org

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Rural Development AdvantageLivestock Modernization/Expansion Now Eligible

A Livestock Production project may be applied for as of July 14, 2006.Livestock Production involves the operation of real and personal property forthe production of livestock useful to man, including breeding and grazinglivestock. The project must meet the Level 1 or Level 2 requirements forinvestment and employment growth at a location in one countymeeting the population requirement. Investment may include anyimprovements to real property and tangible personal property that aredepreciable under the Internal Revenue Code except for vehicles, planes, orrailroad rolling stock.

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Department of Economic Development

www.neded.org

Livestock Modernization

Project application may be filed on or after January 1, 2007.Livestock modernization is defined as the construction,improvement or acquisition of depreciable buildings, facilitiesor equipment for livestock housing, confinement, feeding,production and waste management. The project must have anet investment increase of at least $50,000. There is noemployment increase required. Equipment does not includebreeding stock, motor vehicles, planes, or railroad rollingstock.

A livestock modernization project maybe located in any county in Nebraska.

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Department of Economic Development

www.neded.org

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http://www.revenue.ne.gov

click: Tax Incentivesclick: Rural Development

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Department of Economic Development

www.neded.org

Research and Development Advantage

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No Application required

File a schedule with income tax returns

Any business firm subject to sales tax

Not a political subdivision or exempt organization

Credit may be claimed in tax years beginning onor after 1/1/06

Credit based on expenditures for research anddevelopment activities under section 174 of IRC

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Department of Economic Development

www.neded.org

State and local sales tax exemptionsof manufacturing machinery,equipment, and related services

Definition – Manufacturing

A series of actions performed upon tangiblepersonal property either by hand or machine,which results in that tangible personal propertybeing reduced or transformed into a differentstate, quality, form, property or thing.

(cont.)

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Department of Economic Development

www.neded.org

Definition – Manufacturing (cont.)

Manufacturing machinery and equipmentdoes not include: vehicles required to beregistered for operation on the roads, handtools, office equipment and computers,software and related peripheral equipmentnot used in the manufacturing process.

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Department of Economic Development

www.neded.org

Definition – Manufacturing (cont.)

Manufacturing does not include retail,generation or transmission of electricity, theproduction or transmission of information,programming, or the preparation of food forimmediate consumption or purification ortransportation of water.

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Department of Economic Development

www.neded.org

Microenterprise

Tax Credit

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Department of Economic Development

www.neded.org

What is a Microenterprise?

•In a designated distressed area.

•Any Business with 5 or fewer FTEs.

–FTE-Full time equivelent=2080 hours per year

–5 FTEs = 10,400 hours paid per year to employees.

•Applicant is:

Actively, Personally, Continually

engaged in operations of the business.

–Explain management and decision making.

–Explain daily time spent in the business.

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Department of Economic Development

www.neded.org

Two Qualifying Examples:

5 employees work 40 hours/week

5 X 40 = 200 hours X 52 weeks = 10,400

3 employees work 30 hours/week

3 X 30 = 90 X 52 weeks= 4680

PLUS

3 employees work 20 hours/week

3 X 20 = 60 hours X 52 weeks = 3120

PLUS

1 employee works 40 hours/week

1 X 40 = 40 X 52 = 2080

TOTAL: 4680 + 3120 + 2080 = 9,880

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Department of Economic Development

www.neded.org

Distressed Areas

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Department of Economic Development

www.neded.org

Application Rules

•Application is required

•No Fee to apply

•Dates beginning 1/1/2006

ending 12/31/2010

•May not participate in other Nebraska AdvantagePrograms

•Lifetime limit of $10,000 for application and relatedparties.

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Department of Economic Development

www.neded.org

How credits are calculated

Refundable Tax Credits

•20% of new investment

–New investment: increase in buildings and depreciablepersonal property other than vehicles. Increase in leasedproperty valued at annual rent increase multiplied by years oflease not to exceed 10 years.

•20% of employee compensation increase

–New employment: increase in compensation overcompensation in tax year prior to application based on W-4reporting

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Department of Economic Development

www.neded.org

Application Process

Three Sections

–Part 1

•Information about the business

•Estimates for expenditures/credits

–Part 2

•Dept. of Revenue Authorization

–Part 3

•Actual Expenditures

•Documentation

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Department of Economic Development

www.neded.org

Part 1

•1A-Describe your business

–Activities, products, markets

•1B-Narrative explaining expansion plans-timelines

•1C-Addressing market needs

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Department of Economic Development

www.neded.org

Part 2

•Completed by Department ofRevenue.

–This will confirm your authorized amountapproved by Revenue.

–A copy will be sent to you.

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Department of Economic Development

www.neded.org

Part 3

•1. Enter the amount authorized

•2. Enter your prior credits

•3. Enter your remaining credits

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Department of Economic Development

www.neded.org

Part 3-continued

• 4.Calculating your actual credits

Chart 3A

You will need:

–Depreciation schedule

–Invoices for purchases

–Lease agreements

–Total income for your business

–Total payroll for your business

–Tax forms

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Department of Economic Development

www.neded.org

Part 3-continued

•5. Calculate the lesser of lines 3 and 4

– (This is the credit you will receive)

•6. Attach documentation

Be Sure that ALL tax records and theMicroenterprise Application are signed bythe Authorized Person(s)

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Department of Economic Development

www.neded.org

Tax Forms Needed

•Federal income tax return (at least first four pages) for applicantand microbusiness.

–Profit and Loss/Schedule C for Sole Proprietors

•Nebraska Reconciliation of Income Tax Withheld

•Form W-3N (including wage and tax stmt.)

•Form W-2

If Applicable:

•Affiliations Schedule (Form 851)

•Copy of each Shareholder’s Share of Income, Credits,Deductions, etc (Schedule K-1)

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Department of Economic Development

www.neded.org

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Department of Economic Development

www.neded.org

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Department of Economic Development

www.neded.org

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Department of Economic Development

www.neded.org

Mail Completed Applicationto:

Mary Hugo

Nebraska Dept. of Revenue

301 Centennial Mall South

P.O. Box 94818

Lincoln, NE 68509-4818

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Department of Economic Development

www.neded.org

Lincoln Office 1-800-426-6505