Nebraska Research and Development Tax Credit Summary

Nebraska offers a research and development 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 credit amount is equal to 15% of the federal credit amount as calculated under Section 41 of the Internal Revenue Code.
  • 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.
  • Beginning after October 1, 2009, Companies claiming the credit must electronically verify the work eligibility status of all newly-hired employees in Nebraska during the tax year in which the credit is claimed.

Nebraska R&D Tax Credit Case Study

A Lincoln agricultural firm engaged KBKG to assist in the calculation of its R&D credit for federal and Nebraska purposes. The Company limited the scope of the study to include only the current year.  The Company qualified for the federal R&D Tax Credit of $96,250 and an additional $14,438 of state R&D Tax Credit in Nebraska . Summary of credits:

Year  Total QREs Credit Total QREs Credit
2014 $1,100,000 $96,250 $1,100,000 $14,438
2013 850,000 N/A 850,000 N/A
2012 800,000 N/A 800,000 N/A
2011 825,000 N/A 825,000 N/A
Total  $3,575,000 $96,250 $3,575,000 $14,438

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