Revenue Ruling 29-10-3
Nebraska Advantage Tax Incentives
Supersedes Revenue Ruling 29-09-2

WAGE AND INVESTMENT LEVELS FOR 2011
NEBRASKA ADVANTAGE TAX INCENTIVE APPLICATIONS

Issue:

What are the required wage and investment levels for Nebraska Advantage tax incentive applications filed on or after January 1, 2011?

Conclusion:

On or after January 1, 2011, an applicant must meet the following wage and investment requirements to qualify for benefits under the Nebraska Advantage Act:

• Tier 1 applicants must meet an investment requirement of $1 million, and a wage requirement of $21,986 for at least 10 new employees;
   
• Tier 2 applicants must meet an investment requirement of $3 million, and a wage requirement of $21,986 for at least 30 new employees;
   
• Tier 3 applicants must meet a wage requirement of $21,986 for at least 30 new employees;
   
• Tier 4 applicants must meet an investment requirement of $11 million, and a wage requirement of $21,986 for at least 100 new employees;
   
• Tier 5 applicants must meet an investment requirement of $33 million; and
    
  
• Tier 6 applicants must meet an investment requirement of $10 million and an employment requirement of at least 75 new employees, or an investment requirement of $100 million and an employment requirement of at least 50 new employees. Tier 6 applicants must also meet a wage requirement of at least $54,966.
  
  Note: Wage requirements may vary based upon the county where the project is located.
  

Analysis:

The Nebraska Advantage Act requires investment thresholds to be indexed on October 1 of each year and apply to all applications filed on or after January 1 of the following year. See Neb. Rev. Stat. § 77-5725(9). The index is calculated as the result of the 12 most recent Producer Price Indexes (PPI) (published monthly by the United States Department of Labor, Bureau of Labor Statistics), divided by the PPI for the first quarter of 2006 for Tier 1, Tier 2, Tier 4, and Tier 5 applicants, or the first quarter of 2008 for Tier 6 applicants, multiplied by the applicable investment threshold for each respective tier. See Neb. Rev. Stat. § 77-5725(1). The result is rounded to the next lowest $1 million. Adjustments do not apply to projects after the year of application.

Under the Nebraska Advantage Act, Tier 1, Tier 2, Tier 3, and Tier 4 applicants may be entitled to a credit of 3% to 6% of the average wage paid to new employees, if the wage equals at least 60% of the Nebraska average annual wage for the year of application. Tier 6 applicants may be entitled to a credit of 10% of the average wage paid to all employees employed at the project (excluding base-year employees) if the wage exceeds the greater of 200% of the county average weekly wage, or 150% of the state average weekly wage for the year of application. For applications filed before July 15, 2010, wages are defined as compensation subject to withholding for federal income tax; for applications filed on or after July 15, 2010, wages are defined as compensation subject to the federal Medicare tax. Also, the wage credit is not available for compensation in excess of $1 million paid to any employee for a project in any tier. See Neb. Rev. Stat. § 77-5725(3) and (4).

Wage levels for the Nebraska Advantage Rural Development Act are set by Neb. Rev. Stat. § 77-27,188(1)(b) based on the growth in the rural Nebraska average wage. The wage limit for the Nebraska Advantage Microenterprise Tax Credit Act is established in Neb. Rev. Stat. § 77-5903 at 150% of the Nebraska average weekly wage.

*Tier 6 only, state-wide average. Wage levels for each county available here.

APPROVED:
Douglas A. Ewald
Tax Commissioner

November 12, 2010