Fifty companies pledge to create 2,500 jobs, invest $1.5 billion under new Nebraska incentive act
Mutual of Omaha, building a $600 million headquarters, projects largest investment
The proposed Mutual of Omaha tower, on the left, is one of the more sizable development projects to be buoyed by tax-increment financing. (Courtesy of Lanoha Real Estate Co.)
LINCOLN — Nebraska’s newest program to spur economic growth, passed in 2020, has so far attracted agreements with 50 companies that pledge to create a total of 2,481 jobs and invest $1.55 billion.
The largest proposed investment was from Mutual of Omaha, which is building a new, skyscraper headquarters in downtown Omaha. The insurance company projects that it will create 100 new, full-time jobs and invest $473 million to attain state tax breaks.
The 44-story structure is estimated to cost $600 million, but a Mutual spokesman said the company agreed to investing $473 million because that was the amount “creditable” for the tax incentives.
Other big agreements were signed with Clean Harbors of Kimball ($180 million in investment and 80 new jobs), Perfect Day Inc. of Blair ($275 million investment, 70 jobs) and Novozymes of Blair ($267 million and 50 jobs).
The agreements under the ImagiNE Act — the state’s newest business incentive program — were contained in a report issued Oct. 31 by the state Departments of Revenue and Economic Development.
Those departments have projected that the state will provide $112 million in state tax refunds and credits to companies in the current fiscal year under all of Nebraska’s economic incentive programs (the ImagiNE and Advantage Acts and Legislative Bill 775). The estimated for 2024-25 is $118 million.
‘Are we investing in the right things?’
No tax credits or refunds have yet to be redeemed under the ImagiNE Act, largely because it can take several years to add the new jobs and invest the funds necessary to qualify for tax breaks.
But some refunds may begin in the current and subsequent fiscal years, a Revenue Department official said. The ImagiNE Act was initially projected to cost the state $50 million in foregone taxes by the current fiscal year.
State Sen. Lou Ann Linehan of Elkhorn, who heads the Legislature’s Revenue Committee, said it was “excellent” that so many businesses plan investments in the state, though she supports another look at the state’s incentive programs.
“Are we investing in the right things?” Linehan asked.
For instance, she said, should Nebraska be providing incentives to create more jobs when the state has a workforce shortage estimated at 100,000 jobs or more?
The state might be wiser to provide incentives for people to move to Nebraska, or for retired workers over 65 to re-enter the workforce, Linehan said.
She commented Thursday after state revenue officials provided an interim report to state lawmakers about so-called “tax expenditures” — or foregone tax revenue — that is granted in tax breaks and credits for companies that expand or locate in the state.
Such expenditures “narrow” the state’s tax base, thus shifting the load to the remaining taxpayers.
An interim report this year
This year’s tax expenditure report was just an “interim” report, and it estimated tax breaks in only three categories: consumer goods, energy and food. For instance, $269 million in sales taxes were exempted in 2022-23 because the state doesn’t tax groceries, and $260 million in tax revenue was foregone due to exceptions on medical equipment and prescription drugs.
A year ago, when a report on all tax breaks was required, it showed that the tax breaks provided by the state’s Advantage Act — the forerunner of the ImagiNE Act — was $93.4 million greater than the tax revenue generated. That prompted one senator to describe it as a tax “subsidy” for big corporations rather than a job creator.
The annual report on state tax incentives, also issued Oct. 31, indicated that from 2006 through 2020, the Advantage Act attracted 466 agreements with businesses that pledged to meet thresholds for new jobs created and new investments made to attain tax breaks.
It stated that 29,656 full-time equivalent jobs had been created and $22.58 billion in investments made so far via the Advantage Act, with $1.06 billion in tax credits used and another $1.14 billion yet to be claimed.
The Advantage Act, as well as the ImagiNE Act, provides tax breaks to a wide array of businesses, from data centers and corporate headquarters to meat processing, manufacturing, wind energy and financial services companies.
The recent reports presented to the Legislature do not indicate how much in tax breaks each individual business received, nor does it project how much each company stands to receive under the ImagiNE Act. That information is confidential and depends on whether a firm reaches the required job-creation and investments thresholds to get the tax breaks.
In 2019, the Legislature’s Performance Audit Committee reported that the Advantage Act was costing more in tax breaks than its originally estimated impact of $60 million per year.
That same report questioned the expense, in incentives, of creating new jobs, estimating that it cost between $5,159 and $208,559 in tax breaks for every job created.
Business groups have supported such tax incentive programs in the past, arguing that Nebraska needs them to compete with neighboring states. Opponents, meanwhile, question whether such tax breaks end up creating jobs that would have been created anyway.
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