Nebraska Governor Enacts Law Tightening Foreign Adversary Tax Incentive Restrictions

LINCOLN, NE – Nebraska Governor Jim Pillen signed Legislative Bill 1096 (LB 1096) into law on April 16, 2026, enacting the Preventing Lethal Agricultural and National Threats Act. This legislation primarily addresses agricultural and critical infrastructure security from foreign adversaries, while also clarifying and tightening restrictions on state tax incentives for companies deemed foreign adversarial entities, building upon prior legislation from 2025. LB 1096 comes as an important refinement to LB 644, a law enacted in June 2025, which initially prohibited foreign adversarial companies from receiving benefits from Nebraska incentive programs. The Nebraska Department of Revenue (DOR) had broadly interpreted the original language of Neb. Rev. Stat. 77-3,114, applying it to any company with a subsidiary in a foreign adversarial country. This broad interpretation led to significant unintended consequences, pausing business incentives for several prominent Nebraska-based companies in sectors like agriculture and construction, including Valmont, Lindsay, and Werner, simply because they had operations or subsidiaries in countries like China. State Senator Eliot Bostar, author of the initial Foreign Adversary and Terrorist Agent Registration Act (LB 644), introduced an amendment to LB 1096 specifically to address these issues and salvage state tax incentives for local companies. The new law aims to provide clearer definitions and application rules, ensuring that the restrictions target the intended entities without unduly penalizing legitimate Nebraska businesses with international footprints. Under the provisions of LB 1096, foreign adversarial companies remain ineligible to receive any benefits from Nebraska incentive programs. This includes a comprehensive list of acts such as the Beginning Farmer Tax Credit Act, the ImagiNE Nebraska Act, the Nebraska Advantage Microenterprise Tax Credit Act, the Nebraska Advantage Research and Development Act, the Nebraska Advantage Rural Development Act, the Nebraska Job Creation and Mainstreet Revitalization Act, the New Markets Job Growth Investment Act, and the Urban Redevelopment Act, as well as any other legislative or executive incentive programs for business recruitment or retention. The law explicitly states that any incentive credits held by foreign adversarial companies on or after October 1, 2025, will be permanently disallowed, even if later transferred to an eligible entity. Similarly, any credits transferred to a foreign adversarial company will become disallowed upon transfer. A key clarification in LB 1096 pertains to combined reporting for unitary groups. It stipulates that a company not classified as a foreign adversarial company may only utilize Nebraska incentives against the income taxes of other members within the same group of companies that are also not foreign adversarial companies. The tax liability for members of a unitary group that are foreign adversarial companies will be determined separately, using the apportionment formula typically applied to calculate tax due. This provision is critical for businesses with complex organizational structures, offering a more nuanced approach than the previous blanket interpretation. Beyond tax incentives, LB 1096 also introduces several other significant measures. It expands protections for critical infrastructure information, establishing a more robust framework for safeguarding sensitive data. Additionally, the law creates penalties for the importation of high-risk agricultural pathogens, underscoring Nebraska's commitment to protecting its vital agricultural sector. Communications providers face new certification requirements, with civil penalties for non-compliance reaching up to $10,000 per day, highlighting increased scrutiny on entities involved in critical communication infrastructure. The implications for small and mid-sized businesses in Nebraska are substantial. Companies that previously had their incentive claims paused or faced uncertainty due to the broad interpretation of LB 644 should re-evaluate their eligibility under the clarified provisions of LB 1096. While the intent is to prevent foreign adversaries from benefiting from state incentives, the initial broad sweep demonstrated how quickly such legislation can impact a wide range of businesses, including those with minimal foreign ties or complex ownership structures. Businesses must now carefully assess their corporate structure, investment portfolios, and any existing or planned incentive applications to ensure compliance and avoid disallowance of credits. The evolving landscape of state tax regulations, especially those targeting national security concerns, presents a complex challenge for many businesses operating across state lines or with international ties. We've seen clients struggle with the ambiguity of initial legislative language and the subsequent need for clarification, which can lead to significant financial disruptions and administrative burdens. Our view is that proactive engagement with tax laws and continuous monitoring of regulatory updates are paramount for maintaining compliance and optimizing financial outcomes. The nuances introduced by LB 1096, particularly concerning unitary groups and the specific disallowance of credits, underscore the critical importance of specialized guidance. Businesses, particularly small and mid-sized companies grappling with these nuanced changes, must proactively assess their eligibility and compliance strategies. For expert guidance on navigating Nebraska's updated tax incentive landscape and ensuring adherence to these new provisions, contact C&S Finance Group LLC at csfinancegroup.com, where our tax preparation and compliance services can help businesses effectively manage these regulatory shifts. Businesses affected by these provisions, particularly those with complex ownership or operational structures, should anticipate additional guidance from the Nebraska Department of Revenue. Staying informed about forthcoming regulations and proactively reviewing their incentive eligibility will be crucial in the coming months as the state implements these refined restrictions.