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2022 Nebraska Legislative Session – Select Tax Changes

on Tuesday, 9 August 2022 in The Closer - M&A, Securities & Corporate Counsel: Kevin P. Tracy, Editor

Last week, the Nebraska Department of Revenue published a summary of the numerous tax changes resulting from the most recent Nebraska Legislative Session.

Income Tax

The maximum individual and fiduciary income tax rate was reduced to 6.84%, which will take effect January 1, 2023.  The corporate maximum tax rate was reduced initially to 6.50% for taxable years beginning January 1, 2024. This rate applies to income in excess of $100,000 and will take effect January 1, 2024, further decreasing in the three following years.

The Nebraska Property Tax Incentive Act was amended to establish an allowable growth percentage for future years and to amend the total amount of credits for property taxes paid in 2022 and 2023.  Additionally, the Act now provides a refundable tax credit for any taxpayer who pays community college property taxes, excluding taxes levied for: (1) bonded indebtedness; and (2) resulting from an override on property tax levies approved by the voters.  The total amount of credits for each taxable year in 2022 and 2023 varies between school district property taxes and community college property taxes.

Sales and Use Tax

As for sales and use tax, Legislative Bill 927 amended the Convention Center Facility Financing Assistance Act by allowing state assistance to be used to finance “nearby parking facilities.”  Likewise, the Sports Arena Facilities Financing Assistance Act was amended to allow state assistance to be used to finance “nearby parking facilities.”  Additionally, state assistance was increased to $100 million, up from $50 million, and the 20-year limit for state assistance was eliminated.

Legislative Bill 1150 amended the Nebraska Advantage Act to allow taxpayers with a Tier 2 Large Data Center project and a sequential Tier 5 Large Data Center project to receive a direct pay permit and sales tax exemption in place of a direct refund of sales and use taxes for purchases made during the entitlement period.  

The ImagiNE Nebraska Act was amended pursuant to Legislative Bill 1150. First, the amendment provides that the base year for calculating employment is 2019 if the year of application is 2021 or 2022 and the applicant increased staffing in 2020 or 2021 in response to the COVID-19 pandemic.  Second, the ImagiNE Nebraska Act now allows time spent by employees who perform services for a taxpayer at a qualified location and in their Nebraska residence to be considered working at a qualified location for services performed at the employee’s Nebraska residence.  Third, applications to the state will require participating taxpayers to provide: (1) the most recent tax valuation and levy rate for all qualified locations; (2) a program schedule of the job training activities related to credits used for job training payments; and (3) the city and state of residence of recruited employees related to credits used for talent recruitment payments.  Lastly, the ImagiNE Act amendments clarify the following: the time of investment for real estate improvements is on a percentage of completion basis; the withholding credit calculation when the taxpayer uses an employee leasing company; and applications on the wait list will retain the same application date and base year as if they had been approved at the time of the application.

Inheritance Tax

Legislative Bill 310 increased the exemption amounts and reduced the inheritance tax rates for decedents dying on or after January 1, 2023.  With the inheritance tax reduction, siblings and lineal descendants related to the decedent will have an exemption amount of $100,000 instead of $40,000 and a continued tax rate of 1%.  Remote relatives will have an exemption amount of $40,000 instead of $15,000 with a tax rate of 11% instead of 13%. Lastly, nonrelatives will have an exemption amount of $25,000 instead of $10,000 with a tax rate of 15% instead of $18%.  Furthermore, no inheritance tax is imposed on any beneficiary who is less than 22 years old.  The new law requires personal representatives to submit a report on inheritance taxes to the county treasurer after distributing assets of an estate.  Then, each county must send a report to the Department of Revenue with the number of beneficiaries and the amount received for each class of beneficiary.  

If you have any questions regarding Nebraska’s recent tax changes or other aspects of tax law, please contact a Baird Holm LLP attorney.

Hannah Fischer Frey

Zohar Nadler, Summer Associate

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500