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Tax Law

Recapture Not Required: COVID-19 May Excuse Businesses from Repayment of Nebraska Incentives

The Nebraska Department of Revenue (“Department”) issued guidance explaining that Nebraska Advantage Act (“Act”) project-holders may not have to repay incentives if they cannot meet their project obligations due to COVID-19. The Act provides incentives to businesses that commit to certain levels of employment and investment as part of an expansion project in Nebraska. The Act also contains a force majeure provision exempting project-holders from the obligation to repay incentives if they fail to meet employment or investment obligations due to an act of God or a national emergency. The Department considers the national emergency declared on March 13, 2020 to be a “triggering event” to invoke the force majeure provision. However, the Department notes that a project-holder must show the failure to meet its incentive obligations was caused by the COVID-19 national emergency. Specifically, the project-holder must provide evidence that its failure is “the direct result of forces beyond its control,” such as “a government order to cease or reduce operations, or a directed health measure that prevented the business from continuing its usual operations.” The Department stated that failure to meet obligations due to “financial hardship” or as “the result of a business decision within the control of the project-holder” is not sufficient to avoid recapture under the force majeure provision.

As the COVID-19 pandemic is likely to impair taxpayers’ abilities to comply with state incentive agreements, we encourage other states to consider the type of flexibility offered by Nebraska.