Published in the Lincoln Journal Star on March 2, 2021
Over the past 12 months, we have lost many of the small businesses that make our communities whole. Thousands more have been forced to delay planned investment and pause plans for future growth.
With nearly all Nebraska communities experiencing consequences, it is important that every tool, including the Microenterprise Tax Credit, remains available to the entrepreneurs and community leaders working so hard to recover.
From hair salons and restaurants to grocery and hardware stores, more than 80% of the state’s entrepreneurs fall into the microbusiness category. The heart of our communities, they provide valuable services and boost local economies. More often than not, microbusinesses are our essential businesses.
LB 366, introduced by Sen. Tom Briese and designated as a speaker priority by Speaker Mike Hilgers, seeks to not only keep the Nebraska Advantage Microenterprise Tax Credit viable for years to come but also make meaningful improvements. These changes are recommended by small business and economic development stakeholders across Nebraska. Together, they update the credit to current business conditions and remove unnecessary and burdensome restrictions.
First enacted in 2005 with bipartisan support from every corner of the state, the Microenterprise Tax Credit is limited to businesses with five or fewer full-time equivalent employees. To qualify, business owners must commit to generating new income and expanding their economic footprint. This requirement means the credit is available only to the entrepreneurs that have a plan to grow their business.
Investment credits can be earned on expenditures for securing new buildings, repairing or maintaining Nebraska-based property and purchasing needed equipment. Hiring Nebraska residents and increasing wages are also eligible expenditures. Some recipients have even used it to invest in professional services, such as advertising.
Currently, the program offers a 20% refundable tax credit over an applicant’s lifetime for eligible investments. LB 366 would increase the maximum tax credit from $10,000 to $20,000; allow family members to apply the credit to unrelated businesses; ask the Nebraska Department of Revenue to show more transparency when approving new applications; and continue the credit authorization to 2032.
Continuing authorization is the most important change, because the credit will expire unless the Legislature acts. Right now, it is set to sunset at the end of 2022. That creates a world of uncertainty for those entrepreneurs who are looking for anything but. As an entrepreneur myself, I know how important certainty and stability can be in today’s economy.
Because business investment in 2020 was low, the improvements outlined in LB 366 come at an ideal time. Using 2020 as a base year allows businesses to receive credit for the needed improvements they were forced to put off until 2021 or 2022. Knowing this credit is available will also boost the confidence of business owners as they consider ways to make new investments possible.
Microentrepreneurship has proven to be a successful strategy for growing and sustaining local economies across Nebraska. In 2014 alone, the 164 firms that utilized the Microenterprise Tax Credit combined to create between 416 and 472 new jobs. Of these, 55% used the credit to expand an existing business, and 45% were new to the state. These applicants had an estimated cost per job between $2,349 and $10,655.
We applaud Sen. Briese for championing this important legislation and the Revenue Committee for expressing its unanimous support. Its status as a speaker priority ensures the bill will be debated by the full Legislature soon. When the bill appears before them for debate, we encourage state senators to show their support for these essential entrepreneurs by advancing LB 366.