Nebraska Tax Law Alert: LB 775 Agreements Have Bite


by Matt Ottemann

Ottemann, Matthew
mottemann@mcgrathnorth.com
(402) 341-3070

In Farmland Foods v. Dep’t of Revenue, a case released on March 23, the Nebraska Supreme Court considered whether Farmland Foods was entitled to an LB 775 credit refund of Farmland’s Nebraska sales tax.

Under Nebraska’s LB 775, after a company meets minimum levels of new investment and employment, the company may receive LB 775 credits.  The company can use those credits to receive a sales tax refund.  The company must also sign an LB 775 agreement with the State.

Farmland’s LB 775 agreement with the State specified that Farmland could not receive a credit refund of its sales tax until the year after Farmland met its minimum levels of investment and employment.  Farmland’s LB 775 agreement also stated that, if the agreement’s terms conflicted with the LB 775 statutes, the statutes would control.  Farmland argued that the LB 775 statutes did not bar Farmland from claiming a credit refund of its sales tax paid prior to the year after it had attained its minimum levels of investment and employment.  Because the LB 775 statutes did not specifically bar its refund claim, Farmland contended that the LB 775 agreement conflicted with the LB 775 statutes and was invalid.

The Nebraska Supreme Court ruled that the LB 775 statutes did not specify whether a company could claim a credit refund prior to the year after the company met its minimum levels of investment and employment.  Because the statutes were unclear, the Court held that there was no conflict between the agreement’s terms and the LB 775 statutes themselves.  The Court thus rejected Farmland’s argument that the LB 775 agreement conflicted with the LB 775 statutes.  Rather, the Court applied the terms of the contract and denied Farmland its credit refund.

This decision emphasizes that a company’s LB 775 agreement is a binding contract with the State.  A company cannot protest the terms of that agreement once signed, unless the terms clearly violate Nebraska law.

 

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