Tax credit carry-over extension advanced

Businesses that make large capital investments in Nebraska could carry over unused tax credits for a much longer period under a bill advanced by the Legislature March 28.

LB161, introduced by Sen. Curt Friesen of Henderson, would extend the income tax credit carryover period for companies that file a Tier 6 application under the Nebraska Advantage Act from one year to 20 years after the end of the entitlement period. The change would apply to all Tier 6 project applications filed before, on or after the bill’s effective date.

The state Department of Revenue estimates that the bill would reduce state tax revenue by $1.8 million in fiscal year 2023-24 and another $1.89 million in FY2024-25.

The act, which provides tax incentives for businesses to relocate or expand in Nebraska, allows companies to carry over unused credits for a limited number of years depending on which of the act’s six tiers the project falls under.

Tier 6 is meant to encourage companies to make significant capital investments and bring high-paying jobs to the state. To qualify for Tier 6 benefits, companies must invest $10 million and create 75 new jobs or invest $109 million and create 50 new jobs.

Friesen said the current carry-over period of one year is too short for Tier 6 companies to use the credits they earn. In comparison, firms may carry forward credits for no more than nine years after application for a Tier 1 or Tier 3 project and for no more than 14 years after application for a Tier 2 or Tier 4 program.

Extending the carry-over period for Tier 6 companies would attract a wider range of businesses to the state, Friesen said, helping to diversify Nebraska’s economy at a time when the agricultural sector is struggling.

“This does not involve any new incentives, it simply allows a company that’s met the threshold to utilize the credits it’s earned,” he said.

Kiewit, a large construction firm with headquarters in Omaha, is the only company to have qualified for Tier 6 benefits so far, Friesen said.

A Revenue Committee amendment, adopted 37-0, reduced the proposed carryover period from 20 to 16 years.

Omaha Sen. Bob Krist supported the bill, saying it is needed to make sure the Nebraska Advantage Act is working as it should.

“These are not start-up companies. These are 100-year-old businesses that have been here, done the job and attracted good business [to the state],” he said.

Senators advanced the bill on a 37-0 vote.