The R&D Tax Aspects of Nebraska Innovation
Nebraska-Innovation
Nebraska is committed to job growth and
industry growth, especially for businesses in the state
investing in research and development (R&D). Growth
is accomplished through Nebraska’s economic and tax policies
which promote innovation incentives that provide opportunity
for cash savings. A refundable R&D tax credit is one
of the main driving forces of innovation in Nebraska.
Nebraska Research
& Development Tax Credit
The Nebraska Advantage Research and
Development Credit is based on the Federal R&D Tax Credit
as described in IRS Section 41. The refundable tax
credit for qualified research and development activities
undertaken by a business is calculated in 2 ways: the
apportionment using actual expenditures and the alternative
methods to apportion credit.
Each method for calculating the Nebraska R&D Tax Credit
includes industry and university research and development
expenses within the calculation. Although industry and
university R&D expenses are both eligible under the
guidelines of the Nebraska R&D Tax Credit, R&D
conducted at universities qualifies at a higher rate for both
calculations of the credit. Both calculations require an
existing Federal R&D Tax Credit for the given tax year.
Method 1 for calculating the Nebraskan R&D Tax Credit, the
apportionment using property and payroll factors, uses
property factors, payroll factors, and their averages to
compute a tax credit. The percentages vary for
off-campus and on-campus payroll/property factors.
Method 2 for calculating the Nebraskan R&D Tax Credit, the
apportionment using actual expenditures, uses the 15% of the
federal tax credit multiplied by the ratio of off-campus
qualified research expenses (QREs) to the federal QREs summed
with 35% of the federal credit multiplied by the ratio of
on-campus QREs to federal QREs.
Qualified research must meet the
following four criteria:
• New or improved products,
processes, or software
• Technological in nature
• Elimination of uncertainty
• Process of experimentation
The Nebraska Advantage
Act (NAA)
The Nebraska Advantage Act was adopted in
2005 and provides incentives for R&D activities. The act
created the Nebraska R&D credit and established programs
that, with qualifications, created refunds on sales taxes paid
for qualified capital purchases, personal property, or certain
other items defined in the law.
From 2001 to 2007, Nebraska's R&D tax policy and
competitive advantage program have yielded a 34.2% employment
increase in R&D Engineering Services and a 20.6%
employment increase in biosciences, engineering, and research
and technology businesses. These results have created
substantial incentives for a company to operate and locate in
Nebraska.
Nebraska R&D Focus
The State of Nebraska's largest industries
include Agriculture , BioSolutions, Transportation Logistics ,
Software and Technology, Finance and Insurance, Health
Services, and Advanced Manufacturing. Nebraska has a
total GSP of $109.6 billion in 2013. The chief selling points
are regional culture, central location with vital continental
transport infrastructure, a public power system, and
industrial real estate capacity.
Nebraska is rated 3rd in best Pro-Business legal climate, 5th
in top 10 states for young people, 2nd in Biofuels leaders-
Ethanol, 9th in top 10 states for Growth & innovation, and
tied for 3rd for biotechnology Strength specialization.
In 2011, the non-farm industries with the highest number of
employees in Nebraska were Trade, Transport, Warehouse and
Utilities (195,781); Education and Health Services (137,082);
Professional and Business Services (103,495); and
Manufacturing (93,096).
Nebraska also has a business incubator called NMotion that has
had success in providing support to new businesses. NMotion is
based in Lincoln, Nebraska and is a mentor-driven,
education-focused startup accelerator. Nmotion targets
the Agriculture, Healthcare, Education, Finance/Insurance, and
Sports Technologies industries.
The summer 2014 nMotion class
consists of:
• Adolade
- Lincoln, NE - Assists companies in creating mobile
applications that are rewarding and engaging
for users through their own platform.
• Mowdo - Lincoln, NE - Provides a
application platform for users to find quick and easy local
lawn care by
connecting them with local lawn care
professionals.
• Commissioner - Lincoln, NE -
Provides a sports application to track and provide match
analysis for next
generation player development.
• oneCanvas - Lincoln, NE - easy to
use graphics editor that allows you to create print quality
digital
scrapbook pages on your desktop or on a
tablet.
• Fanstreamm - Lincoln, NE -
Fanstreamm provides group tickets to customers easily for
the sports and
entertainment industry.
• Quantified Ag - Lincoln, NE -
Quantified Ag is an agricultural Internet of Things company
that has created a
platform that combine sensors and data
to deliver total quality control over cattle.
• MusicSpoke - Lincoln, NE -
MusicSpoke is an easy-to-use, high quality sheet music
marketplace facilitated
by finding gifted composers and letting
them sell on the market.
University of Nebraska
– Lincoln (UNL)
The University of Nebraska is a key driver
in academic R&D in the state. The most recent large
project includes a Innovation Campus in Lincoln to connect the
university and private sector. University of Nebraska Lincoln
is among the largest employers in the state, with a workforce
of more than 13,000.
NUTech Ventures is a nonprofit affiliate of UNL and was
established to commercialize technologies by forming R&D
partnerships between the university and the private
sector.
The Nebraska Innovation Campus - located in Lincoln adjacent
to the UNL campus - is a 249-acre public/private research and
technology center. The Innovation campus was recently opened
and is entering the next phase of its development - creating
attached innovation centers and additional sections to attract
talent and open opportunities for students and faculty.
The Innovation Campus cooperated with global food company
ConAgra Foods, Inc to cultivate innovations in food
productioniii and processes in the campus' greenhouses.
Conclusion
Nebraska's economic and tax policies,
friendliness to industry, and academic institutions make it an
appealing state in which to locate R&D activities. The
Nebraska Advantage presents an opportunity to take advantage
of savings captured through the R&D tax credit.
