Legislative Developments 2014 Legislative Session

1. Federal IRC Conformity (eff. 4/10/2014)

LB 739 is the annual bill designed to update references in all Nebraska statutes to the most recent version of the Federal Internal Revenue Code as it exists on the effective date of the bill.

2. Constitutional Challenges (eff. 4/10/2014)

LB 558 permits a taxpayer to challenge a tax or penalty as unconstitutional within the 12 months after such tax or penalty was assessed. Prior to this change, the taxpayer could only challenge the assessment as unconstitutional within the tax year in which the tax or penalty was assessed.

3. Tax Incentives Sunset Extension (eff. 4/9/2014)

LB 1067 extends from 2015 to 2017 the sunset date for tax incentives offered under the Nebraska Advantage Act, the Nebraska Advantage Research and Development Act, and the Nebraska Advantage Microenterprise Tax Credit Act.

1. Federal IRC Conformity (eff. 03/07/2013)

LB 24 is the annual bill designed to update references in all Nebraska statutes to the most recent version of the Internal Revenue Code as it exists on the effective date of the bill.

2. Net Operating Losses (eff. 01/01/2014)

LB 308 allows net operating losses incurred in taxable years beginning or deemed to begin on or after January 1, 2014 to be carried over for 20 years. Any such losses incurred before January 1, 2014 can only be carried over for 5 years.

2012 Legislative Session

1. Market-Based Sourcing Rule (eff. 01/01/2014)

LB 872 amended the state’s income apportionment scheme to adopt a market-based sourcing rule for sales of other than tangible personal property. Under the new law, business revenue from services and intangibles are attributed to the state where the customer is located or uses the intangible rather than the state in which the income-producing activity is performed.

2. Tax Rate Reduction (eff. 01/01/2013)

LB 970 as signed into law reduced the top corporate income tax rate from 7.81% to 5.58% for the first one hundred thousand dollars of income, effective for tax years after January 1, 2013.

The bill also reduced tax rates for middle class individual taxpayers for years beginning January 1, 2013 and expanded brackets for years beginning January 1, 2014.

3. New Markets Job Growth Investment Act

LB 1128 entitled “The New Markets Job Growth Investment Act,” provides a nonrefundable, nontransferable credit for investment in a “qualified community development entity.” See Neb.

Rev. Stat. §§ 77-1101 through 77-1119. Such credit may be used against income tax, franchise tax (financial institutions) or the premiums tax (insurance companies).

4. Federal IRC Conformity (eff. 03/07/2012)

LB 725 is the annual bill designed to update references in all Nebraska statutes to the most recent version of the Federal Internal Revenue Code as it exists on the effective date of the bill.

2011 Legislative Session

1. Income Tax Notice in Bankruptcy Proceedings (eff. 05/26/2011)

LB 210 gives the Department of Revenue additional time to send a notice of demand to collect or pay taxes to a responsible corporate officer of a corporation when the corporate tax liability is the subject of a federal bankruptcy proceeding.

2. Income Tax Credits to Qualified Investors and Qualified Funds (eff. 05/24/2011) LB 389 adopts the Angel Investment Tax Credit Act as part of the Governor’s biennial budget

recommendations. The new law provides a refundable state income tax credit of up to 40 percent of a qualified investment to qualified investors and qualified funds investing in early-stage companies; the

will not be carried forward to subsequent years. Funding for the bill in FY 2012 will be derived from unused tax credits in the Nebraska Rural Advantage program.

3. Renewable Electric Generation Facilities (eff. 05/11/2011)

LB 360 provides a energy tax credit for utilities producing electricity in new renewable-energy facilities. Qualifying facilities must have been placed into service after July 14, 2006 and must produce electricity by means of wind, water, sunlight, geothermal energy, fuel cells, methane gas, or photovoltaics exclusively. The renewable-energy credit may be used for income tax liability or sales and use tax refunds.

C. Judicial Developments

No significant judicial developments related to corporate income taxes.

D. Administrative Developments

1. Disclosure of Department Responses to Taxpayers, Revenue Ruling 99-14-1 (issued 07/21/2014)

Revenue Ruling 99-14-1 updates and clarifies the Department’s procedures for issuing responses to taxpayer inquiries. Depending on a variety of factors, the Department may issue either (1) a General Information Letter that either provides a procedure to follow or merely cites applicable statutes, regulations or rulings; (2) a revenue ruling with applicability to all taxpayers; or (3) a taxpayer ruling specific to the taxpayer making the inquiry.

2. Rate of Interest for Delinquent Taxes, Revenue Ruling 99-12-1 (issued 10/1/2012).

For the two-year period beginning January 1, 2013, the rate of interest on delinquent payments of any taxes or special assessments owing to the State of Nebraska will be 3 percent per year, revised down from 5 percent. This decision superseded Revenue Ruling 99-10-1 (issued 10/21/2010).

3. Enhanced Research Tax Credits, Rev. Ruling No. 29-10-2 (issued 05/10/2010) Revenue Ruling 29-10-2 clarified various definitions related to the research tax credits adopted in LB 555. LB 555 amended the Nebraska Advantage Research and Development Act to provide enhanced research tax credits if the research or experimental activity takes place “on the campus of a college or university in this state or at a facility owned by a college or university in this state.” If the research activity meets this standard, the business firm is eligible to receive a research tax credit equal to 35 percent of the federal credit allowed by Internal Revenue Code § 41, instead of the 15 percent of the federal credit applicable if the research activity is not for on-campus activity.

4. Electronic Funds Transfer Required (guidance issued 07/01/2011)

As of July 1, 2011, Nebraska’s tax commissioner began requiring the use of electronic funds transfer for all payments of taxes or fees for tax programs, such as income or sales and use tax, if the taxpayer had made tax or fee payments above $16,000 for that same tax program in a prior tax year.