Incentives Update 05-03-2022

Nebraska Legislative Update………..

The Nebraska’s Unicameral meets every year, and every year we (CFO Services) are involved directly or indirectly, on various legislation that impacts Economic Development.  Our role is technical and narrow, but we have gone ahead and drafted a short summary and provided various links for more detail.  In addition to the typical activities/bills that occur every year, this year’s session was particularly interesting because State Senators were also responsible for allocating over $1B of ARPA funds.

Again, the intent is not to summarize everything that occurred, but to highlight certain areas of interest. If you have any questions, please don’t hesitate to reach out to Chad Denton (@ 

Nebraska’s second session of the 107th Legislature adjourned on April 20th, 2022, which was a 60-day session and resulted in 146 bills passed.  CFO Services, as an Economic Developer/Compliance Partner, views a lot of the session with a more narrow lens, so this correspondence is cursory, and attempts to create awareness of the ARPA activity, in Nebraska, and hone in on specific bills that may impact business incentives. 

Provided below is a link to the Nebraska Unicameral site, as well as two other sites that we identified that provide a broader perspective/summary:


In addition to funding households, small businesses and schools, the American Rescue Plan Act (ARPA) was provided as a relief fund to state and local governments that were negatively impacted by the coronavirus pandemic. In Nebraska, over $1B (Pandemic funding bill approved – Unicameral Update ( in ARPA funds has been allocated to the State of Nebraska and its counties, cities, and local communities. As a result, a significant amount of time, during the 60-day legislative session, was spent sifting through over $4 billion of requests made for ARPA appropriations.  The aforementioned link provides a good summary directly from the State’s Unicameral Update.  High points include:

  • Rural and urban workforce housing grants to help attract new talent; and
  • Support for community college capital projects, as well as workforce development and dual-credit programs for high school students; and
  • Recovery grants in qualified census tracts, primarily targeted to North and South Omaha; and
  • Internships, apprenticeships and customized workforce training programs; and
  • Expanding childcare capacity; and
  • Rural Health Complex to be located at the University of Nebraska at Kearney; and
  • Assistance for direct care staff at licensed Medicaid-certified nursing facilities; and
  • Support for new, industrial rail park infrastructure; and
  • Site and building development support for a North Omaha Industrial Park project; and
  • Agricultural Research Service National Center; and
  • Assistance to alleviate pandemic-related setbacks for shovel-ready capital projects building arts, culture, humanities and sports amenities across the state; and
  • Enhanced outdoor recreation sites across the state; and
  • Adjustments to the Nebraska’s Business Innovation Act (to spur additional investment, and assist the H3 career scholarship program

Other Legislation: 

LB873 reduces individual and corporate income tax top rates  over five years to 5.84%, offers income tax credits for property taxes paid to community colleges, boosts total income tax credits available for property taxes paid to local schools to $548 million, and $567 million for 2023, and completely phases out income taxes on social security income.

LB1261 extends the Nebraska Advantage Rural Development Act (NRDA) through 2027 and increases the tax credits available from $1 million to $10 million. The bill also allows a refundable income tax credit equal to ten percent of the investment, not to exceed a credit of $500,000 per application, specific to livestock modernization. A separate technical change also occurred specific to ImagiNE Nebraska, allowing/ensuring that rural and urban manufacturing tiers may include more than one location within their stated project parameters.

LB1150 was passed and includes a combination of other bills/provisions, mostly related to business incentives:

  • LB817, an incentive clean-up bill from the Nebraska Department of Revenue, 
  • LB502, which provides for the same sales tax treatment for Data Center projects under the Nebraska Advantage Act, as compared to those under ImagiNE Nebraska, 
  • LB985 corrects an unintended base-year calculation, under ImagiNE Nebraska, for companies that hired more employees as a result of the COVID-19 pandemic, and 
  • LB1094 clarifies the treatment/inclusion of Nebraska resident teleworkers under ImagiNE Nebraska.

NOT PASSED was LB701, which would have extended the Nebraska Job Creation and Mainstreet Job Development Act by 5 years (from 2022 – 2027) and Nebraska Advantage Research and Development Act by 1 year (from 2022 – 2023).   

174 Deduction, Foreign Research Expenses, April 2022 


Companies with foreign research expenses must account for section 174 changes soon. Beginning in tax years that begin after December 31, 2021, companies with foreign research will have to capitalize and amortize all foreign research over 15 years. This will increase taxable income, so companies need to plan for this change, especially the software industry. But companies can reduce the impact of these 174 changes, by asking foreign research vendors to break out development and maintenance expenses.   

Be Aware – Taxable income will rise and soon. 

It is amazing that the Tax Cuts and Jobs Act (TCJA) passed in 2017, will have a major impact upon companies with foreign research. Starting in tax year 2022, the TCJA requires all companies with research expenses to now capitalize and amortize all 174 deductions. For domestic research expenses, the amortization period is five years. But for foreign research expenses the amortization period is 15 years, triple the domestic timeframe. 

Congress has introduced a bill to modify and delay the implementation of these changes to Sec. 174, with the most recent being included in the “Build Back Better” bill.  Yet this bill has stalled in Congress and there is no certainty in a change being passed. Companies must be ready to not only incorporate these changes into tax policy but find ways to ensure maximum benefit.  

Be Ready – Mitigate the rise in income by breaking out Foreign Expenses  

There is a way companies can help mitigate the increase in taxable income from foreign research expenses. Companies should only amortize foreign expenses that are related to actual development. If a foreign vendor performs both development and maintenance work, a company can remove the maintenance expenses from the 174 deductions and amortize. This distinction provides an opportunity to make sure only the correct amount is amortized.  

To ensure only development work is deducted and amortized under 174, companies should work with foreign research vendors to itemize their expenses, especially those related to development and maintenance work. This might take some planning with foreign vendors, but it could considerably help lower taxable income.   

Companies with foreign research need to take a proactive approach and prepare for an increase in taxable income related to the TCJA 174 changes.  One such way to prepare is for companies to work with foreign research vendors to itemize expense between development and maintenance work, thereby to helping to mitigate the amount of increase in a company’s taxable income by carving out the maintenance work for immediate expensing and reducing the amount of foreign design work to be amortized under 174. 

CFO Services Can Help With Your Research Credit & Tax Incentive Needs 

  • Through knowledge and perspectives gained working with virtually every industry and type of client (Fortune 500, medium-size and small companies), CFO Services has committed to a strategy of providing a depth of knowledge in a narrow field of focus: business incentives and credits. Overall:  CFO Services provides companies with services to identify and secure federal, state and local incentives across the United States 
  • Specialities:
  • Federal/State R&D Credits:  Helping clients with the R&D credit calculation, documentation, and exam for creating or improving the product/process. 
  • Multi-State Credits & Incentives:  Collaborate with our clients to capture statutory and discretionary state incentives. 
  • Technology:  Both areas of service utilize proprietary technology to streamline the capture, compliance, and management of a client’s business incentives.

IRS CircIRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.