Nebraska R&D Tax Credits

State and Federal Credits Available

15% Standard Rate

15% of federal credit for off-campus Nebraska R&D

35% University Rate

35% enhanced for on-campus Nebraska university research

20-Year Claim Period

Up to 20 years (4 for enhanced) if continuing to qualify

Fully Refundable (Entity Level)

No cap; elect income tax offset or sales/use refund

Claim Your Refundable Nebraska R&D Credit: Up to 35% of Federal Benefits for In-State Innovation

The Nebraska Advantage Research and Development Act, administered by the Nebraska Department of Revenue, rewards businesses for qualified research expenditures in the state by offering a refundable credit tied directly to federal IRC §41 guidelines. This credit supports innovation in agriculture, manufacturing, and technology sectors, allowing offsets against income taxes or refunds of sales and use taxes paid. Enacted in 2006 and available for tax years beginning on or before December 31, 2033, it applies to research performed in Nebraska, with enhanced rates for university collaborations at Nebraska colleges or universities.

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15% Standard Rate

15% of federal credit for off-campus Nebraska R&D

35% University Rate

35% enhanced for on-campus Nebraska university research

20-Year Claim Period

Up to 20 years (4 for enhanced) if continuing to qualify

Fully Refundable (Entity Level)

No cap; elect income tax offset or sales/use refund

Key Highlights

Ties directly to federal IRC §41 credit for seamless calculation
Apportioned for multi-state operations based on Nebraska activities
Available to all business entities, including pass-throughs
Requires E-Verify for new Nebraska hires to claim
No prior application needed: file with your tax return

Who Qualifies for the Nebraska R&D Tax Credit

Eligibility mirrors federal IRC §41: Businesses must perform qualified research in Nebraska, involving technological uncertainty and experimentation to develop or improve products, processes, or software. No industry restrictions, but strong uptake in agriculture, manufacturing, and biotech.

Eligible Entities

C Corporation May claim both the regular and basic research credit
S Corporation Limited entity-level use; can pass credits to shareholders
Partnerships / LLCs Credits pass through to owners via Schedule K-1

Qualified Research Expenses (QREs)

QREs must be Nebraska-sourced and meet federal definitions. Basic research payments to Nebraska universities qualify for the enhanced rate.

How to Calculate the Nebraska R&D Tax Credit

Nebraska's credit is calculated as a percentage of your federal R&D credit under IRC §41, making it straightforward for businesses already tracking qualified research expenses (QREs). Use only Nebraska-sourced activities for apportionment if operating multi-state. The state does not require a separate base calculation; it leverages federal results.

Regular Method (Prorated Federal Credit)

Compute your total federal R&D credit using IRS Form 6765, based on QREs like wages, supplies, and contract research.
Apportion the federal credit to Nebraska activities using a reasonable method (e.g., based on time spent, expenses incurred, or property/payroll factors).
Apply the state rate: 15% of the apportioned federal credit for standard off-campus research; 35% for on-campus at a Nebraska university.
Elect refund treatment: Use against income tax liability or as a refund of sales/use taxes paid. The election is made annually on Worksheet RD and is irrevocable for that tax year.

Example Calculation

Assume your business incurs $2 million in total QREs, all in Nebraska, yielding a $200,000 federal credit (10% effective rate).

Apportioned federal credit:$200,000 (100% Nebraska-sourced).

Standard off-campus:Nebraska credit = 15% × $200,000 = $30,000 (refundable).

If $500,000 of QREs are on-campus university research (federal portion: $50,000 credit):Enhanced credit = 35% × $50,000 = $17,500; remaining $150,000 federal = 15% × $150,000 = $22,500.

Total credit:$40,000, fully refundable with no cap.

Apportionment Calculation for Nebraska R&D Tax Credit

Identify Nebraska-sourced QREs for the tax year.
Compute apportionment ratio = Nebraska QREs / Total QREs (or another reasonable method, such as property/payroll factors).
Apply ratio to federal credit

Example Calculation

Total QREs =$2M

Nebraska QREs = $800K → Ratio = ($800K / $2M) =40%

Federal Credit = $200K → Nebraska Federal Portion = 40% × $200K =$80K

State Credit = 15% × $80K =$12K

If no Nebraska QREs prior → Ratio based on current year (full apportionment qualifies).

Apportionment Rules for Multi-State Businesses

Ratio must be reasonable, such as (Nebraska QREs / Total QREs) or property/payroll factors if more accurate.

For university enhanced rate, provide addresses of Nebraska campus/facility locations.

Startups follow federal base rules (no state-specific startup fixed-base).

Gross Receipts for Base Calculation

Use Nebraska-sourced gross receipts consistent with the corporate excise apportionment rules and IRC § 41 definitions.
Nebraska follows federal startup rules without state-specific fixed-base.
No prior gross receipts? Base defaults to 50% of current QREs (federal rule).

Estimate Your Credits

Nebraska-Specific Rules

Nebraska's R&D credit stands out for its refundability and federal alignment, minimizing compliance burden while maximizing cash returns, especially valuable for agribusiness and manufacturing firms with $100M+ in annual state claims.

Fully Refundable Options (Entity Level)

Elect to offset income taxes or receive a direct refund of sales and use taxes paid, providing immediate liquidity even with low tax liability. Ideal for startups or loss-making entities.

High Prorated Rate

15% (or 35% enhanced) of federal credit delivers strong value for in-state innovation, particularly in agriculture and tech, with no entity-level caps.

Extended Claim Period

Ongoing credit generation tied to continued federal eligibility, with credits claimable over 20 years (4 years for enhanced), ensuring long-term benefits without statewide limits.

Other Unique Rules

E-Verify Mandate: Document electronic verification of work eligibility for all new employees hired in Nebraska during the tax year for which the credit is claimed (required since October 1, 2009); non-compliance disqualifies the credit.
Pass-Through Treatment:Credits flow pro-rata to owners via Schedule K-1 for partnerships, S-corps, and LLCs; unitary groups apportion at entity level. When distributed to owners, the credits are nonrefundable at the owner level and can only offset the owner's Nebraska income tax liability.
University Collaboration Bonus:35% rate applies only to on-campus or university-owned facilities at a Nebraska college or university; claimable for the first year and up to 4 following years if continuing to qualify.
Audit Guidelines: Retain records for 4 years, including federal Form 6765 and E-Verify logs; aligns with federal §41 documentation standards.

Fully Refundable Options (Entity Level)

Elect to offset income taxes or receive a direct refund of sales and use taxes paid, providing immediate liquidity even with low tax liability. Ideal for startups or loss-making entities.

High Prorated Rate

15% (or 35% enhanced) of federal credit delivers strong value for in-state innovation, particularly in agriculture and tech, with no entity-level caps.

Extended Claim Period

Ongoing credit generation tied to continued federal eligibility, with credits claimable over 20 years (4 years for enhanced), ensuring long-term benefits without statewide limits.

Other Unique Rules

E-Verify Mandate: Document electronic verification of work eligibility for all new employees hired in Nebraska during the tax year for which the credit is claimed (required since October 1, 2009); non-compliance disqualifies the credit.
Pass-Through Treatment:Credits flow pro-rata to owners via Schedule K-1 for partnerships, S-corps, and LLCs; unitary groups apportion at entity level. When distributed to owners, the credits are nonrefundable at the owner level and can only offset the owner's Nebraska income tax liability.
University Collaboration Bonus:35% rate applies only to on-campus or university-owned facilities at a Nebraska college or university; claimable for the first year and up to 4 following years if continuing to qualify.
Audit Guidelines: Retain records for 4 years, including federal Form 6765 and E-Verify logs; aligns with federal §41 documentation standards.

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Nebraska R&D Tax Credits Case Study

A Nebraska-based ag-tech firm recovered significant refunds to fuel expansion.

$150,000

total state R&D tax credits earned

60%

of wages qualified for credits

$450,000

total R&D tax credits earned (federal + state combined)

Frequent Asked Questions

The Nebraska Advantage Research and Development Act provides a refundable credit equal to 15% of your federal IRC §41 R&D credit for Nebraska activities, or 35% for university on-campus research. It offsets income taxes or refunds sales/use taxes, administered by the Nebraska Department of Revenue.

Activities must align with federal IRC §41: technological experimentation to eliminate uncertainty in developing or improving business components, conducted in Nebraska. Examples include prototyping farm equipment or software for crop optimization. Strike Tax verifies qualifying projects.

For a $200,000 federal credit from Nebraska QREs, you could claim $30,000 (15%) refundable, or up to $70,000 (35%) with university ties. Stack with federal for total savings; use Strike Tax’s calculator for personalized estimates.

Yes, fully refundable as an income tax credit or sales/use tax refund at the entity level, even with no liability, perfect for startups. No cap applies, and E-Verify compliance is key. Strike Tax maximizes refund elections.

No pre-approval needed; file Worksheet RD and Form 3800N with your Nebraska tax return (corporate, partnership, or fiduciary). Include federal Form 6765 data and E-Verify documentation. Strike Tax handles filing and compliance.

Absolutely: Nebraska's credit is computed from your federal §41 amount, allowing full stacking without double-dipping. This amplifies savings for the same QREs. Strike Tax optimizes dual claims.

No major state alterations; the credit remains tied to federal rules. Federally, Section G of Form 6765 is optional for tax year 2025 (becoming mandatory for tax year 2026), and Section 174 allows full expensing. Strike Tax navigates these updates.

Yes, all new employees hired in Nebraska during the tax year must be verified via E-Verify; provide documentation or the credit is denied. This applies regardless of entity type. Strike Tax assists with compliance checks.

Apportion using a reasonable method, such as Nebraska QRE ratio (or property/payroll factors if elected), applied to your federal credit. For example, 40% Nebraska activities on a $100,000 federal credit yields $6,000 state credit (15%). Strike Tax models apportionment accurately.

High QREs in crop innovation and equipment R&D qualify easily, with refundability providing cash for operations. The 20-year claim period ensures sustained benefits. Strike Tax tailors claims for Nebraska's ag sector.

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