Are R&D Tax Credits Available in Nebraska?

Are R&D Tax Credits Available in Nebraska?

Yes. The state of Nebraska offers the Research and Development (R&D) Tax Credit to taxpayers for tax years beginning on or after January 1, 2006.  Below is a brief overview of the credit.

• The credit is available for businesses that incur R&D expenditures in Nebraska.
• The Nebraska statute leverages off of the federal Section 174 definition of R&D activities.
• The Nebraska R&D credit equals:
  • 15% of the federal credit amount as calculated under Section 41 of the Internal Revenue Code, and
  • 35% of the federal credit for R&D activities conducted on the campus of a Nebraska college or university, or at a Nebraska facility owned by a college or university.
• For companies doing business both within Nebraska and outside, the amount of the credit can be determined by either taking the ratio of qualifying expenditures within the state to total expenditures and multiplying it by the federal credit amount OR by apportioning the amount of the credit on the federal income tax return to the state based on the average of the property factor and the payroll factor.
• Credits can be used to obtain a refund of state sales and use taxes paid, against the income tax liability of the taxpayer, or they can be used as a refundable credit.
• For pass through entities, credit amounts can be used to offset an individual shareholder's tax liability.
• Companies claiming the credit must use the federal E-verify system for employees as a condition for including their compensation in the taxpayer’s R&D expenses.
• The credit will sunset or expire for tax years beginning after December 31, 2033.