2016 Nebraska Legislative Changes
Income Tax
Long-Term Care Savings Plan Adjustment Terminated (
LB 756 – Operative for taxable years beginning or deemed to begin on or after January 1, 2018)
LB 756 terminates the Long-Term Care Savings Plan Act on January 1, 2018. Account owners will receive the balance in their accounts on that date without penalty.
Nonrefundable Credit for Employing a Parent of a Family that Received Temporary Assistance for Needy Families (TANF) ( LB 774 – Operative for taxable years beginning or deemed to begin on or after January 1, 2017)
Beginning with tax year 2017, LB 774 provides a nonrefundable income tax credit equal to 20% of an employer’s expenditures on eligible employees for tuition at Nebraska public institutions for postsecondary education, for the costs of a high school equivalency program, and for transportation of eligible employees to and from work. The credit may be claimed for two (not necessarily consecutive) tax years. An eligible employee is defined as an individual who is a member of a family that received benefits under the federal TANF program for any nine months of the eighteen-month period immediately prior to the employee’s hiring date. The credit may be taken against individual, corporate, or fiduciary income taxes.
Refundable Individual Income Tax Credit for Volunteer Emergency Responders ( LB 886 – Operative for taxable years beginning or deemed to begin on or after January 1, 2017)
Beginning with tax year 2017, qualified active volunteer emergency responders, rescue squad members, and firefighters receive a refundable income tax credit equal to $250 beginning with the second taxable year in which the qualified active volunteer is included on a certified list. Qualified active volunteers accumulate points for service and emergency service related training and activities. Each city, village, or rural or suburban fire protection district must file a certified list of those volunteers who have qualified as active emergency responders, rescue squad members, or firefighters for the immediately preceding calendar year with the Department of Revenue by each February 15.
School Readiness Tax Credit ( LB 889 – Operative for taxable years beginning or deemed to begin on or after January 1, 2017, and before January 1, 2022)
The act provides two separate income tax credits beginning with tax year 2017. First is a nonrefundable income tax credit to persons who own or operate an eligible child care and education program that serves children who participate in the child care subsidy program established in Neb. Rev. Stat. § 68-1202. The credit to the provider is equal to the average monthly number of subsidy children who attend the provider's program multiplied by a dollar amount based on the quality scale rating of the eligible program: A) $750 for a Step Five program; B) $500 for a Step Four program; C) $250 for a Step Three program; D) $0 for a Step Two program; and E) $0 for a Step One program. This credit is available to individuals, corporations, and fiduciaries.
Second is a refundable income tax credit to staff members who are both employed with an eligible program for at least six months during the taxable year and are classified in the Nebraska Early Childhood Professional Record System. Eligible staff members receive a credit equal to: A) $1,500 for a Level Four classification; B) $1,250 for a Level Three classification; C) $750 for a Level Two classification; and D) $500 for a Level One classification. These credit amounts will be adjusted for inflation.
The providers and staff members must first apply to the Department to receive the credits. The total amount of credits for both programs is limited to $5 million per tax year.
Affordable Housing Tax Credit ( LB 884 – Operative for taxable years beginning or deemed to begin on or after January 1, 2019)
This is a nonrefundable credit that is available to both residents and nonresidents. The owner of an affordable housing project is to apply to the Nebraska Investment Finance Authority (NIFA) for approval of tax credits. The maximum amount of tax credits is the amount of the federal low-income tax credit available to the project. The project must be placed in service after January 1, 2018, and the credit is awarded for the first six years of the credit period as defined in 26 U.S.C. 42(f)(1). The credit period usually begins with the year the building is placed in service, but at the election of the taxpayer, it may begin with the first year following. The Nebraska credit is allocated among some or all of the partners, members, or shareholders of the project in any manner agreed to by these persons.
A taxpayer may assign (sell) all or part of his or her ownership interest, including the Nebraska tax credits. To assign credits, the taxpayer must file a written statement with his or her tax return specifying the amount of credits that were assigned. The credit is available to be used against individual, corporate, and fiduciary income taxes; insurance premium taxes; and financial institutions franchise taxes.
Nebraska Historic Tax Credits (NHTC) Amended ( LB 774 – Operative July 21, 2016)
Use of a NHTC will not cause any insurance retaliatory tax obligation and will be considered a payment of tax for purposes of the insurance premium tax credit against the corporate income tax. LB 774 also requires $4 million of the $15 million annual allocation of NHTCs to be granted to applicants seeking less than $100,000 of tax credits. If the credits reserved for these smaller projects are not fully subscribed by April 1 of each year, they become available for larger projects. This requirement begins in calendar year 2017.
Nebraska Adjustments to Federal Adjusted Gross Income (AGI) Clarified ( LB 776 – Operative for taxable years beginning or deemed to begin on or after January 1, 2016)
Under LB 776, interest earned on Build America Bonds issued by local governments in Nebraska is specifically allowed to be subtracted from Federal AGI. Adjustments decreasing federal AGI for an Achieving a Better Life Experience (ABLE) account, as allowed by LB 591 (2015), are specifically allowed to the person that contributed the amount to the account. Finally, an adjustment increasing federal AGI due to a withdrawal from an ABLE account for nonqualified expenses is limited to the amount previously deducted by the taxpayer.
Refundable Credits Deemed to be Overpayments ( LB 776 – Operative for taxable years beginning or deemed to begin on or after January 1, 2016)
LB 776 provides that refundable income tax credits are considered overpayments, even if the taxpayer has no income tax liability. It also changes the part of LB 851 (2014) that provided for a different statute of limitations for refundable credits than was applicable to overpayments generally. Unless there is no original return filed, the statute of limitations to claim a refundable credit is three years from the date the return was filed, or two years from the date the tax was paid, whichever is later. If no return is filed, the statute of limitations for claiming a refundable credit remains three years from the original due date of the return.
Facilitating Business Rapid Response to State Declared Disasters Act ( LB 913 – Operative July 21, 2016)
When the Governor or the President declares a disaster or emergency, out-of–state businesses which conduct operations in Nebraska to repair, renovate, or install infrastructure relating to public utilities, communications networks, natural gas distribution systems, or water pipelines are not required to register with the Secretary of State to do business, withhold Nebraska income taxes from employees, pay Nebraska income taxes on income earned, or remit use taxes with respect to equipment brought into the state temporarily. Also, their nonresident employees are not considered to have established residence in Nebraska and are not subject to Nebraska income tax withholding or income taxes.
These exemptions are limited to the disaster period, which begins ten days before the declaration and ends 60 days after the expiration in the declaration. Activities by the out-of-state business or nonresident employee outside the disaster period or pursuant to a proposal or bid request are not protected. An out-of-state business is to provide notice to the Nebraska Department of Revenue within ten days of entry into Nebraska.
Sales and Use Taxes
Community-Based Energy Development (C-BED) ( LB 736 – Operative July 21, 2016)
LB 736 changes the definition of “electric utility” to “electric supplier,” defined as a public power district, a municipality, a group of municipalities, an electric membership association, or a cooperative. The former definition of an electric utility required it to have transmission lines and more than 200 megawatts of generating capacity.
Substance Abuse Treatment Centers and Centers for Independent Living ( LB 774 – Operative October 1, 2016)
Under LB 774, nonprofit substance abuse centers and nonprofit centers for independent living (institutions that provide services to persons with developmental disabilities) are exempt from paying sales and use taxes on their purchases.
Energy Used in Manufacturing, Processing, or Refining ( LB 774 – Operative October 1, 2016)
LB 774 provides that processing includes drying and aerating grain in commercial agricultural facilities.
County Agricultural Societies ( LB 774 – Operative October 1, 2016)
County agricultural societies are exempt from paying sales and use taxes on their purchases.
Museums ( LB 774 – Operative October 1, 2016)
The sales and use tax exemption for fine art purchased by a museum is expanded to include purchases of any displays by any type of museum.
Streamlined Compliance ( LB 776 – Operative October 1, 2016)
LB 776 carves out an allowable exception to the definition of “prepared food” for food that requires additional cooking, like take-and-bake pizza, and updates Nebraska’s acceptance of the Streamlined Sales and Use Tax Agreement to adopt changes to the Agreement since 2010.
Tax Incentives
Nebraska Historic Tax Credit (NHTC) ( LB 774 – Operative July 21, 2016)
Use of a NHTC will not cause any insurance retaliatory tax obligation and will be considered a payment of tax for purposes of the insurance premium tax credit against the corporate income tax. LB 774 also requires $4 million of the $15 million annual allocation of NHTCs to be granted to applicants seeking less than $100,000 of tax credits. If the credits reserved for these smaller projects are not fully subscribed by April 1, they become available for larger projects. This requirement begins in calendar year 2017.
Sunsets for Tax Incentive Programs ( LB 1022 – Operative July 21, 2016)
This bill postpones the sunset dates for several tax incentives programs from those previously established by LB 538 (2015).
Tax Incentive Current Sunset LB 1022 Sunset Angel Investment Tax Credit Dec. 31, 2019 Dec. 31, 2022 Beginning Farmer Tax Credit Dec. 31, 2019 Dec. 31, 2022 Nebraska Advantage Act — All Tiers Dec. 31, 2017 Dec. 31, 2020 Nebraska Advantage Microenterprise Tax Credit Act Dec. 31, 2019 Dec. 31, 2022 Nebraska Advantage Research & Development Act Dec. 31, 2019 Dec. 31, 2022 Nebraska Advantage Rural Development Act Dec. 31, 2019 Dec. 31, 2022 Nebraska Historic Tax Credit Dec. 31, 2019 Dec. 31, 2022 New Markets Tax Credit Dec. 31, 2019 Dec. 31, 2022
Office of Legislative Audit ( LB 1022 – Operative July 21, 2016)
LB 1022 provides that the Office of Legislative Audit has direct access to databases of the Nebraska Department of Revenue to perform its function. Also, when conducting a performance audit of a tax incentive program, the Office of Legislative Audit may either examine all returns or a statistically random sample of returns. The confidentiality exception that still applies to the Auditor of Public Accounts requires a statistically random sample.
Lottery/Charitable Gaming/Athletic Commission
Banned Substances List for Athletic Commission Contestants ( LB 823 – Operative April 6, 2016)
This bill authorizes the State Athletic Commissioner to adopt a list of banned substances, which mixed martial arts and boxing contestants are prohibited from using. It also allows the Athletic Commissioner to require contestants to submit to a test for banned substances and provides a graduated scale of fines and suspensions for failing these tests.
Miscellaneous
Sports Arena Financing ( LB 285 – Operative July 21, 2016)
The Nebraska Department of Economic Development must notify the State Treasurer of the amount of any unobligated balance in the Civic and Community Center Financing Fund that is in excess of $1 million. This amount is then transferred by the State Treasurer to a new fund, the Political Subdivision Recapture Cash Fund. Any money in that fund is to be distributed by the following October 1 to those municipalities that have been approved for assistance under either the Convention Center Facility Financing Assistance Act or the Sports Arena Facility Financing Assistance Act. Each recipient is to receive an amount proportional to contributions made to the Civic and Community Center Financing Fund attributable to each municipality during the previous fiscal year.
Sports Arena Financing Expanded ( LB 884 – Operative October 1, 2016)
LB 884 makes four changes to the Sports Arena Facility Financing Assistance Act. The bill:
- Allows the applicant municipality to issue or commit to issuing a revenue bond to help finance the sports arena instead of only a general obligation bond;
- Excludes the unbuildable property from the turnback area if it is 25% or more of the area within the 600 yard radius otherwise applicable for new applicants. The turnback area would shift to include other areas outside the 600 yard radius, so long as the total area is the same;
- Provides that for new applications for assistance, no more than 50% of the funding may come from the turnback revenue; and
- Extends the time during which a nearby retailer would be considered “new,” thus allowing all of its state sales taxes collected to be turned back to the city, from 24 months after occupancy of the sports arena facility, to 48 months after occupancy, or the effective date of the bill, whichever is later.
Convention Center Financing Expanded ( LB 884 – Operative October 1, 2016)
LB 884 makes three changes to the Convention Center Facility Financing Assistance Act. The bill:
- Expands the distance from the convention or meeting center in the definition of an “associated hotel” from 200 (or 450) yards to 600 yards from the exterior walls of the convention or meeting center. This expansion of the program area is applicable for all existing beneficiaries. The existing beneficiaries are to provide a map of the 600-yard area;
- Allows the turnback revenue to pay for capital improvements to the convention or meeting center in addition to servicing the debt; and
- Allows 10% of the funds for a primary class city to be used to provide low-income housing in areas with a high concentration of poverty.
Regulation Process Reformed ( LB 867 – Operative January 1, 2017)
LB 867 changes the definition of “rule or regulation” (subject to the Nebraska Administrative Procedures Act [APA] process) to mean any standard of general application, excluding internal procedural documents, forms and instructions, and guidance documents. “Guidance documents” are defined as any statement which provides information to the public, but lacks the force of law. A guidance document is binding on an agency until amended or withdrawn, but does not create any legal duty, nor is it treated as authority. Guidance documents must be available at a public location and on the agency’s website. Each agency must also maintain an index of all guidance documents on its website. Guidance documents must include a notice stating that the guidance document is advisory only, but is binding on the agency. Any person may request in writing that a guidance document be repealed or changed into a regulation. The agency must respond to the request within 60 days.
The bill also provides an emergency rulemaking procedure to replace the current process for waiving the 30-day notice requirement. The justifications for emergency rulemaking include imminent peril to public health or safety, or preventing substantial financial loss to the state. Emergency regulations are exempt from the notice, and hearing requirements and are valid for 90 days, renewable for another 90 days.
Regulation changes that merely alter the style or form of the regulation, correct a technical error, or alter a citation or reference are exempt from the Nebraska APA requirements. Also exempt are security policies which should not be made public.
Legislative Auditor ( LB 1022 – Operative July 21, 2016)
LB 1022 provides that the Office of Legislative Audit has direct access to databases of the Nebraska Department of Revenue to perform its function. Also, when conducting a performance audit of a tax incentive program, the Office of Legislative Audit may either examine all returns or a statistically random sample of returns. The confidentiality exception that still applies to the Auditor of Public Accounts requires a statistically random sample.
Petroleum Release Remedial Action Act ( LB 887 – Operative January 1, 2016)
LB 887 extended the date for eligible reimbursement claims under the Petroleum Release Remedial Action Act from June 30, 2016 to June 30, 2020. The Petroleum Release Remedial Action Reimbursement Fund was established to help pay remediation costs of owners and operators of facilities that have leaking petroleum tanks.
