2020 Nebraska Legislative Changes
50% Exclusion of Military Retirement Income (LB 153 — Operative January 1, 2022)
For tax years beginning on or after January 1, 2022, all military retirees may exclude 50% of his or her military retirement benefits from income subject to Nebraska income tax to the extent included in the federal adjusted gross income. LB 153 removes the requirement that the military retiree submit an election to exclude military retirement benefits within two years of the military retirement date, beginning with the 2022 tax year.
Change the School Readiness Tax Credit Act (LB 266 — Operative January 1, 2020)
LB 266 amends the School Readiness Tax Credit Act for both the nonrefundable and refundable income tax credits. The nonrefundable credit is now available to pass-throughs who own or operate an eligible child care and education program. These entities will distribute the credit in the same manner and proportion as income. Previously, the nonrefundable credit was limited to corporations, individuals, and fiduciaries.
The definition of an “eligible staff member” for the refundable income tax credit includes a self-employed individual providing child care and early childhood education for an eligible program for at least six months of the taxable year and who is listed in the Nebraska Early Childhood Professional Record System and classified as provided in Neb. Rev. Stat. § 71-1962(4).
Provide an income tax exemption for Segal AmeriCorps Education Awards (LB 477 — Operative January 1, 2021)
LB 477 reduces a taxpayer’s federal adjusted gross income by amounts received from a Segal AmeriCorps Education Award to the extent included in federal adjusted gross income, for tax years beginning on or after January 1, 2021.
Expand Provisions Regarding Employer Contribution to the Nebraska Educational Savings Plan Trust (LB 1042 — Operative August 8, 2020)
LB 1042 provides a deduction to an individual’s federal adjusted gross income equal to the amount of any contribution made by the individual’s employer into the employee’s Nebraska education savings trust (NEST) account, to the extent included in federal adjusted gross income. The deduction is limited to $5,000 for married filing separate returns and $10,000 for any other return. The deduction is available for tax years beginning on or after January 1, 2021.
Nebraska Property Tax Incentive Act (LB 1107 — Operative August 18, 2020)
The act provides a refundable income tax credit or credit against franchise tax for any taxpayer who pays school district taxes, which are property taxes levied by a school district or school system, excluding property taxes levied for bonded indebtedness and property taxes levied as a result of an override of limits on property tax levies approved by voters.
Beginning tax year 2020, the credit is equal to the credit percentage announced by DOR multiplied by the amount of school district taxes paid during the tax year. For pass-through entities, the credit will be allocated in the same proportion that income is distributed. The credit percentage is set so the total amount of credits is $125 million. For future years, the credit percentage will be set based on amounts that may increase if net General Fund revenues increase by more than 3.5%. For the 2024 taxable year, the credit percentage is to be set based on a credit amount of $375 million.
Sales and Use Taxes
Change Access to Sales and Use Tax Information for Municipalities with Agreements under the Nebraska Advantage Transformational Tourism and Redevelopment Act (LB 236 — Operative November 14, 2020)
LB 236 allows an individual authorized by a municipality that has an agreement in effect under the Nebraska Advantage Transformational Tourism and Redevelopment Act to request copies of certain tax return information to be sent by electronic transmission, secured in a manner determined by the Tax Commissioner. This provides an exception to confidentiality and disclosure laws requirement that the information is only available for review upon DOR premises.
Change Sales Tax Provisions Relating to Gross Receipts (LB 923 — Operative October 1, 2020)
LB 923 excludes from the definition of gross receipts the gross income received by a political subdivision of this state, an electric cooperative, or an electric membership association for the lease or use of, or by a contractor for the construction of or services provided on, electric generation, transmission, distribution, or street lighting structures or facilities owned by a Nebraska political subdivision, a cooperative, or an electric membership association.
Change Procedures for Tax Credits under the Nebraska Job Creation and Mainstreet Revitalization Act (LB 310 — Operative November 14, 2020)
LB 310 requires DOR, when administrating the Nebraska Job Creation and Mainstreet Revitalization Act, to determine the amount of eligible expenditures, calculate the credit, and issue certificates evidencing the credit within 60 days of receiving an application for calculation of eligible expenses (Part 4 application). The 60-day period can be extended up to an additional 30 days by agreement between DOR and the person filing the application. If DOR does not make these determinations in the prescribed time period, then the credit will be deemed to have been issued in the amount requested in the application, except that the amount must not exceed 110% of the credits allocated by the State Historic Preservation Officer (Officer) and the amount must not change the total credits that can be allocated by the Officer for the year. The determination of eligible expenditures and calculation of the credit can be appealed in accordance with the Administrative Procedure Act.
Adopt the ImagiNE Nebraska Act, Key Employer and Jobs Retention Act, Renewable Chemical Production Tax Credit Act, Customized Job Training Act, Nebraska Transformational Projects Act, and Nebraska Property Tax Incentive Act; and Change and Provide Other Related Provisions (LB 1107 — Operative January 1, 2021)
LB 1107 adopts the ImagiNE Nebraska Act, the Key Employer and Jobs Retention Act, the Renewable Chemicals Production Tax Credit Act, Customized Job Training Act, Nebraska Transformational Projects Act, and the Nebraska Property Tax Incentive Act. The bill also amends provisions of the Property Tax Credit Act and eliminates the Personal Property Tax Relief Act for tax year 2020 and thereafter.
ImagiNE Nebraska Act — Operative January 1, 2021. The act provides for tax incentives for qualifying taxpayers at qualified locations.
The taxpayer must apply with the Nebraska Department of Economic Development (DED), requesting an agreement. The application fee is $5,000. There are no new applications filed after December 31, 2030.
If DED approves the application, they negotiate an agreement. Upon agreement, the taxpayer obtains a direct pay permit, but continues to pay sales tax on qualified property until they reach levels, at which time qualified property can be purchased sales tax-exempt.
The levels of investment and employment that qualify for incentives are:
- 20 new employees;
- Investment of $250,000 to $1,000,000 and 5 new employees within economic redevelopment areas;
- Investment of $1 million and 10 new employees;
- Investment of $5 million and 30 new employees;
- Investment of $250 million and 250 new employees; and
- Investment of $50 million.
To be counted in the number of new employees, the employees must be Nebraska residents, full-time employees, offered an ACA-qualified health care plan and additional benefits as required by DED, be e-verified within 90 days, and be paid 70% to 200% of the average weekly wage in the county of the qualified location.
At each level, the taxpayer is eligible for some or all of the following: wage credits, investment tax credits, sales tax refunds, personal property tax exemptions, and real property tax refunds.
For certain levels, wage credits and investment credits are increased by 1% if the qualified location is in an extremely blighted area. For all levels, the wage credits and investment credits are increased by 1% if the taxpayer is a public benefit organization.
Once the required levels of investment and employment are reached, the taxpayer may start claiming the credits without a qualification audit. Errors in calculating benefits can be recovered later through audit and assessment by DOR.
DOR must notify municipalities liable for refunds exceeding $1,500 by March 1 each year and deduct the refund in monthly installments beginning the following January if total annual refunds exceed $1 million or 25% of the municipality’s sales and use tax receipts. Qualifying businesses who filed an application to receive incentives under the Employment and Investment Growth Act, the Nebraska Advantage Act, and the ImagiNE Nebraska Act must provide to each municipality, on or before June 30 annually, in aggregate data, the maximum amount the business is eligible to receive in sales and use tax refunds for the previous year and an estimate of sales and use taxes the business intends to claim.
Nebraska Revolving Loan Fund: LB 1107 creates the ImagiNE Nebraska Revolving Loan Fund, administered by DED, to offer workforce training or infrastructure development loans to taxpayers with applications under the ImagiNE Act. Qualifiers under the ImagiNE Nebraska Act may use credits earned to repay loans from the Revolving Loan Fund.
Key Employer and Jobs Retention Act — Operative January 1, 2021. The act provides a wage retention credit for a key employer, which is defined as a taxpayer that employs at least 1,000 equivalent employees, offers insurance and benefits, enforces a policy against discrimination, electronically verifies work eligibility, has gone through a change in ownership in the previous 24 months, is at risk of moving more than 1,000 equivalent employees out of the state, is a qualified business, and retains at least 90% of its base-year employment.
Applications must be filed with DED on or before May 31, 2021.
Renewable Chemical Production Tax Credit Act — Operative January 1, 2021. LB 1107 creates a refundable tax credit equal to 7.5 cents per pound of chemical produced greater than the amount produced in the year prior to application for eligible renewable chemical businesses. Eligible businesses must produce at least one million pounds of renewable chemicals in the state the year the tax credit is sought and must meet location and application requirements.
The maximum credit per business per year is $1.5 million and is not available for chemicals produced prior to 2022. Applications can be approved for up to $3 million in credits per year for 2022 and 2023, and up to $6 million in credits per year in 2024 and thereafter.
Customized Job Training Act: LB 1107 creates a grant program to reimburse employers for job training expenses. Grants are available to employers creating net new jobs or jobs resulting in a net increase in wages per employee. DED is required to create an application, approve applications, authorize the total amount of grants awarded, and submit an annual report to the Legislature including certain information.
Nebraska Transformational Projects Act: The act allows Nebraska postsecondary institutions with a college of medicine to apply for matching funds for a federally awarded project. Applications are due December 31, 2023, and the institution must enter into an agreement with DED. The institution is entitled to matching funds of up to $300 million of the total $1.6 billion investment if: (1) the commitments of investment of $1 billion of federal dollars and private contributions of $300 million have been secured; (2) the institution is selected for participation in the required federal program; and (3) the total amount of credits under the Nebraska Property Tax Refund Act reaches $375 million.