Great Plains Government Finance
Officers Association – 15 May 2014
Roadmap
Greater Omaha Economic Development Partnership
Nebraska Advantage Tax Incentive Program
Incentive Calculation – Tier 1 Project, Metal Fab
Sales Tax Refund
Economic and Fiscal Impact – Tier 1 Project, Metal Fab
Greater Omaha Economic
Development Partnership
Who Are the Partners?
Advance Southwest Iowa
Mike Dellinger
Randy Thelen
Executive Director
Senior Vice President
Economic Development
Lisa Scheve
Executive Director
Sean Johnson
Toby Churchill
Executive Director
Executive Director
Cecilia Harry
Economic Development Manager
Greater Omaha Combined Statistical Area
Nine-county combined
statistical area – 925,709
Projected population in 2018 –
984,634
Nearly 1.3 million people within
a 60-minute drive
Partnership History
Funding
•
Sarpy County Co-Located – 1991
(pop. 165,853)
•
Target Omaha (Phase I & II)
1994 – 2003
•
Washington County/Gateway
Co-Located – 2002
(pop. 20,252)
•
GO! Phase I & II
2004 – 2013
•
Cass County EDC Co-Located – 2008
(pop. 25,133)
•
Prosper Omaha Phase I
2014 - 2018
•
Greater Fremont Development Council – 2013
(pop. 36,427)
•
Advance Southwest Omaha
--Council Bluffs/Pottawattamie County
(pop. 92,913)
--Other Iowa Counties Expressing Interest
How Does the Partnership Operate?
Each partner:
– Retains its own board of directors
– Maintains their own annual program of work priorities (in
addition to Partnership POW)
– Raise their own funds for staff and operations
Each partner board chairman holds a position on the
Partnership’s Economic Development Council and an exofficio position on the Greater Omaha Chamber’s board of
directors.
Partnership Funding and Successes
• Greater Omaha Economic Development Partnership
operations funded by the fundraising arm - GO!
• Since 2004, contributions from more than 300
businesses, foundations and City of Omaha
• Landed 391 projects
• Created or retained 22,235 jobs
• More than $4.1 billion in capital investment
Nebraska Advantage Program
Nebraska Advantage Program
Rewards companies through performance based short and long-term
benefits
Flexible, six-tier investment and job creation schedule
Compensation credits reduce or eliminate employee withholding tax
liability
Investment credits reduce or eliminate both sales and income tax
liability
Level of benefits increases with increasing employment and investment
Nebraska Advantage Program
Companies have 5 to 7 years to attain necessary job and investment
creation levels
Credits can be used through entitlement (earn and use) and carryover periods for up to a total of 10 - 15 years
Program can reduce or eliminate a company’s income, sales, payroll,
withholding and certain classes of personal property taxes for up to
10 - 15 years
Nebraska Advantage Program
Six Tier Performance Thresholds
Tier 1:
$1 million of new investment and 10 new jobs
Tier 2:
$3 million of new investment and 30 new jobs
Large Data Center = $201 million of new investment and 30 new jobs
Tier 3:
New job creation only - 30 new jobs
Tier 4:
$12 million of new investment and 100 new jobs
Tier 5:
New investment only - $37 million
Tier5:
Renewable Energy - $20 million
Tier 6:
$11 million investment with 75 new high paying jobs or $110 million
investment and 50 new high paying jobs
Nebraska Advantage Program
Qualified types of businesses:
R & D (1)
Internet Access
Data processing
Cloud Computing
Telecommunications
Customer Service Centers
Insurance
Data Centers
Financial services
Satellite Group Centers
Manufacturing (1)
Financial services
Distribution
Telemarketing
Headquarters (2)
Web Portals
Exportable services (1)(3)
Retail Sales of Tangible Personal Property
(4)
(1) Tier one
(2) Administrative operations
(3) Software development, computer systems design, product testing guidance or surveillance systems design and technology
licensing).
(4) If 20 percent is at wholesale, manufactured or to another qualified business.
Nebraska Advantage Program
Tier 1 Project Potential Benefits
Tier 1: $1 million of new investment and 10 new Jobs
• Sliding scale compensation tax credit each year for 7 years
• 3% investment tax credit for 7 years
• 50% sales & use tax refunds on depreciable property
Nebraska Advantage Program
Tier 2 Project Potential Benefits
Tier 2: $3 million of new investment and 30 new jobs
•
•
•
•
Sliding scale compensation tax credit each year for 7 years
10% investment tax credit for 7 years
100% sales & use tax refunds on capital purchases
Personal property tax exemption up to 10 years for the following:
– Computer systems and certain peripherals – data center
Tier 2 Large Data Center: $201 million and 30 new jobs
• 10 year exemption on all personal property on site
• Use credits for real property tax rebates from state
• Sign sequential Tier 5 application at same time
Nebraska Advantage Program
Tier 3 Project Potential Benefits
Tier 3: 30 new jobs and no new investment
• Sliding scale compensation tax credit each year for 7 years
Nebraska Advantage Program
Tier 4 Project Potential Benefits
Tier 4: $12 million of new investment and 100 new Jobs
•
•
•
•
Sliding scale compensation tax credit each year for 7 years
10% investment tax credit for 7 years
100% sales & use tax refunds on depreciable property
Personal property tax exemption up to 10 years for the following:
– Turbine powered aircraft
– Computer systems and certain peripherals
– Agricultural processing machinery
– Personal property used in distribution facilities
Nebraska Advantage Program
Tier 5 Project Potential Benefits
Tier 5: $37 million of new investment and maintain jobs
• 100% sales & use tax refunds on project’s capital purchases
• Personal property tax exemption up to 10 years for the following:
– Computer systems and peripherals
Nebraska Advantage Program
Tier 6 Project Potential Benefits
Tier 6: $11 million of new investment and 75 new jobs or
$110 million of new investment and 50 new jobs
•
•
•
•
•
10% compensation tax credit each year for 10 years*
15% investment tax credit for 10 years
100% sales & use tax refunds on depreciable property
Personal property tax exemption up to 10 years for all taxable personal
property
Ability to use credits for Real Property Tax
* If wage is either 200% of the average county wage or 150% of the average state wage (whichever is higher).
Nebraska Advantage Program
Compensation Credit Scale
Job Tax
Credit
Percentage of
Nebraska
Average Wage*
Threshold
(per hour)
Threshold
(annual salary)
3%
60%
$11.33
$23,561
4%
75%
$14.16
$29,451
5%
100%
$18.88
$39,268
6%
125%
$23.60
$49,085
10%
200%
$28.32**
$58,902**
* Nebraska average wage fixed by date of application.
** State-wide average hourly and annual wage thresholds for Tier 6.
Nebraska Advantage Program
Use of Compensation Credits
Use of Credits
Credit
Use
Compensation Credit
Employee Withholding
Income Tax
Sales Tax
Real Property Tax (Tier 6 only)
Investment Credits
Income Tax
Sales Tax
Real Property Tax (Tier 6 only)
Nebraska Advantage Program
Incentive Calculation
Nebraska Advantage Program
Useful Sites for Incentive Calculation
Nebraska Department of Revenue:
http://www.revenue.nebraska.gov/incentiv/neb_adv/312_info.html
List of Nebraska Advantage Act Applications
Wage Requirements; Statutes and Rulings; Application Guide
Effective Income Tax Rates
Nebraska Department of Economic Development: http://neded.org/business/tax-incentives
Incentive Calculator
U.S. Bureau of Labor Statistics: http://www.bls.gov/bls/blswage.htm
Wage estimates
Nebraska Department of Labor: http://neworks.nebraska.gov/analyzer/default.asp
Wage estimates
Or Call Me at 402.978.7903
Nebraska Advantage Program
Tier 1 Example
Location: Omaha CSA
Inside City Limits: Yes, combined state and local sales tax - 7%
Model Geography: Omaha CSA
Industry: Manufacturing – Metal Fabrication
Investment: $1.5 million
Employment: 10
U.S. BLS median wage production occupations: $14.38/hour (initial 4%
compensation credit)
Nebraska Advantage Program
Tier 1 Example
Compensation
Credit
I.
Compensation Credit - 4% of annual compensation.
Potential
Credits
A.
Assumptions are as follows Number of New Employees in Year 1:
10
Average Annual Salary (year 1):
$29,910
Assumes initial payroll of :
Also assumes 3% COLA increases each year thereafter.
Employees
Average Wage
Year 1
10
$299,104
$29,910
Entitlement
Year 2
10
$308,077
$30,808
Entitlement
Year 3
10
$317,319
$31,732
Entitlement
Year 4
10
$326,839
$32,684
Entitlement
Year 5
10
$336,644
$33,664
Entitlement
Year 6
10
$346,744
$34,674
Entitlement
Year 7
10
$357,146
$35,715
Entitlement
Total
B.
Payroll
$2,291,873
Calculation of Compensation Credit*:
Total
Compensation
Credit =
$2,291,873 x 0.04 =
$91,675
Nebraska Advantage Program
Tier 1 Example
Sales Tax Refund
B.
Sales Tax Refund - Based on purchases of materials
Potential
going into project. (50% of purchase price of new
Credits
building and building improvements X sales tax rate.
Combined state and local sales tax equals 7.0%)
1.
Building
$500,000 x 0.07 x 0.5 x 0.5 =
2.
Non-Manufacturing Furniture, Fixtures and Equipment
$100,000 x 0.07 x 0.5 =
3.
$8,750
$3,500
Additional Investment (estimate)
TBD
x 0.07 x 0.5 =
Total Sales Tax Refund:
TBD
$12,250
$12,250
Nebraska Advantage Program
Tier 1 Example
Investment Tax
Credit
C.
Investment Credit: 3% of investment in qualified
property during 6-7 year entitlement period.
Includes all investment in building, equipment and
components. For leased space, investment is equal
to annual lease rate times term of lease for up to
10 years. This credit may be applied to state
corporate income tax liability or sales and use tax
liabilities.
$1,500,000 x 0.03 =
$45,000
$45,000
Nebraska Advantage Program
Tier 1 Example
Total Tax Refunds
and Credits
Compensation Credit:
$91,675
Sales Tax Refund:
$12,250
Investment Tax Credit:
$45,000
TOTAL:
$148,925
(about $21,275 per entitlement year)
Nebraska Advantage Program
Key Features
• Apply by the project and not by the company
• Under contract with the state
• Used equipment brought into Nebraska at original
purchase price
• 1/2 contract price of building considered components
• Ability to use F.T.E. for new employment counts*
• Credits earned may be used for refunds of sales tax paid
on consumables
* F.T.E. is based on 2,080 hours (40 hours per week x 52
weeks)
Nebraska Advantage Program
Sales Tax Refund
Nebraska Advantage Program
Sales Tax Refunds
Issues and Ideas
• Compensation Credit and Investment Tax Credit
– Effective rate versus earned compensation credit
– ITC leftover
• Identify when irregular expenditure occurs
– X12 Seasonal Adjustment Techniques
• Nebraska Advantage List and Company Relationships
Nebraska Advantage Program
Blair Sales and Use Tax, 2006 to 2014
Sales Tax Refunds
Issues and Ideas
220000
Irregular Component
Original Data
200000
180000
160000
1.6
140000
120000
1.4
100000
1.2
1.0
0.8
06
07
08
09
10
11
Source: Nebraska Department of Revenue
12
13
14
Nebraska Advantage Program
Economic and Fiscal Impact
Metal Fab Project (tier 1)
Nebraska Advantage Program 10 Metal Fab Jobs
Tier 1 Example
Regional Economic
Support the activities of an additional 13 workers
Impact –
Annual Estimate
Provides a $2.3 million incremental boost to the
Using IMPLAN
regional economy
Top Sectors with an Increase in Output:
Wholesale Trade
Real Estate (owner-occupied dwellings)
Management of Companies and Enterprises
Food and Drinking Places
Hospitals and Physicians
Insurance Carriers
Financial Activities (credit intermediation)
Annual Economic/Fiscal Impact Summary
Nebraska Advantage Program Metal Fab Project
Tier 1 Example
Based on Jobs/Payroll Only
State and Local
(Excludes property, income and sales taxes paid by company
Fiscal Impact –
itself, and taxes paid by trailing suppliers, etc.)
Annual Estimate
Total*
Using IMPLAN
(Direct + Indirect +
Induced)
Total Annual Payroll
$746,088
Total Annual Taxable Retail Sales
$221,961
Total Annual State and Local Tax
Revenue:
Sales Tax:
@5.5% state sales tax
@1.5% local option sales tax
Property Tax:
Individual Income Tax
$72,935
$11,063
$8,692
$2,371
$35,759
$26,113
Q&A
Scott Strain, Senior Director – Research; Economist in Residence
Greater Omaha Chamber
402.978.7903
[email protected]