2021 Nebraska Legislative Changes
Change provisions relating to the taxation of social security benefits (LB 64 – Operative for taxable years beginning on or after January 1, 2021)
LB 64 changed the taxation of benefits received by taxpayers under the federal Social Security Act.
For taxable years beginning on or after January 1, 2021, federal adjusted gross income (AGI) is reduced by a percentage of the social security benefits that are received and included in federal AGI. The applicable percentage for each tax year is listed below:
- 5% for taxable year 2021;
- 20% for taxable year 2022;
- 30% for taxable year 2023;
- 40% for taxable year 2024; and
- 50% for taxable year 2025 and beyond.
For all taxable years beginning on or after January 1, 2021, taxpayers can claim either the percentage reduction enacted by LB 64 or the previously existing exemption for low income recipients, whichever is greater. For tax year 2021, married filing jointly taxpayers with an AGI of $59,960 or less and taxpayers filing any other return with an AGI of $44,460 may continue to reduce the AGI by 100% of the social security benefits included in their AGI. The income thresholds are indexed for inflation for later years.
Change provisions regarding tax credits for school district property taxes paid (LB 181 – Operative May 6, 2021)
- LB 181 amends the refundable income tax credit for school district property taxes paid under Neb. Rev. Stat. § 77-6703. There are four new provisions:
- The requirement in the prior law that the school district property taxes paid by a subchapter S corporation, partnership, LLC, or fiduciary must be passed through to its owners to be claimed is made discretionary and limited to tax year 2020;
- Beginning with tax year 2021, the school district property taxes paid by these pass-through entities must be claimed by the entity;
- For tax year 2021, pass-through entities that did not claim or distribute the school district property taxes paid in 2020 are allowed a 2021 credit for the amount paid in 2020 multiplied by 6%; and
- For fiscal year and short year taxpayers, the credit must be calculated based on the school district property taxes paid during the immediately preceding calendar year.
Change provisions relating to the taxation of military retirement benefits – (LB 387 – Operative January 1, 2022)
For tax years beginning on or after January 1, 2022, LB 387 amended Neb. Rev. Stat. § 77-2716(14) to allow all military retirees to exclude 100% of the military retirement benefits from income subject to Nebraska income tax to the extent included in federal adjusted gross income. No application is necessary.
For tax years beginning on or after January 1, 2022, LB 387 provides that military retirement benefits attributable to service in the uniformed services include military retirement benefits reported on the IRS Form 1099-R, issued by either the U.S. Department of Defense or the U.S. Office of Personnel.
Deduction for Firefighter Cancer Benefits Act (LB 432 – Operative for taxable years beginning on or after January 1, 2022)
LB 432 enacts a new Firefighter Cancer Benefits Act. For taxable years beginning on or after January 1, 2022, federal adjusted gross income is reduced by the amount received by or on behalf of a firefighter for cancer benefits under the Firefighter Cancer Benefits Act to the extent included in federal adjusted gross income.
Stillborn Child Refundable Tax Credit (LB 432 – Operative for taxable years beginning on or after January 1, 2022)
For taxable years beginning on or after January 1, 2022, LB 432 provides a $2,000 refundable tax credit to the parent of a stillborn child in the year the stillbirth occurred. Additional requirements include filing a fetal death certificate, the child advanced to at least the 20th week of gestation, and the child would have been a dependent of the individual claiming the credit.
Changes to the Nebraska College Savings Plan (LB 432 – Operative for taxable years beginning on or after January 1, 2021)
LB 432 amends the definition of “qualified higher education expenses” in the Nebraska College Savings Plan to include costs incurred on or after January 1, 2021 for apprenticeship programs registered and certified with the U.S. Secretary of Labor under 29 U.S.C. 50, as such section existed on January 1, 2021.
Corporate Tax Rate Change (LB 432 – Operative for taxable years beginning on or after January 1, 2021)
LB 432 reduces the corporate tax rate for Nebraska taxable income in excess of $100,000 from 7.81% to 7.50% in tax year 2022, and to 7.25% for tax year 2023 and beyond. The corporate tax rate for the first $100,000 of Nebraska taxable income remains 5.58%.
Sales and Use Taxes
Sales and Use Tax Exemption for Residential Water Services (LB 26 – Operative October 1, 2021)
LB 26 provides an exemption from sales and use taxes on the gross receipts from the sale, lease, or rental of and the storage, use, or other consumption of residential water service. See GIL 1-21-1 for more information.
Change provisions regarding the Convention Center Support Fund and the Sports Arena Facility Financing Assistance Act (LB 39 – Operative May 26, 2021)
LB 39 amends the Sports Arena Facility Financing Assistance Act to include additional definitions in Neb. Rev. Stat. § 13-3102:
- Multipurpose field means a rectangular field of grass or synthetic turf which is primarily used for competitive field sports, including, but not limited to soccer, football, flag football, lacrosse, or rugby.
- Sports complex means a facility that includes indoor areas, outdoor areas, or both; is primarily used for competitive sports and, depending upon where the facility is located, a specific number of sports venues.
- Sports venue includes but is not limited to: a baseball field; a softball field; a multipurpose field; an outdoor stadium primarily used for competitive sports; or an enclosed temperature-controlled building primarily used for competitive sports.
- Project completion date for projects involving the acquisition or construction of an eligible sports arena facility, the date of initial occupancy of the facility following the completion of the acquisition or construction. For all other projects, the project completion date is the date which state assistance is received.
- LB 39 also adds language to the definition of eligible sports facility to include concession areas, parking facilities, and onsite administrative offices connected with operating the sports complex.
- New state sales tax revenue is split into two parts. For an eligible sports arena facility that is not a sports complex, the definition of “new state sales tax revenue” is retained except that LB 39 uses “project completion date” instead of the date of “occupancy” in the calculation. For an eligible sports arena that is a sports complex, “new state sales tax revenue” is limited to “one hundred percent of the state sales tax revenue that is collected by a nearby retailer that commenced collecting state sales tax during the period of time beginning on the date that the project commenced and ending forty-eight months after the project completion date of the eligible sports arena facility” and is sourced under sections 77-2703.01 to 77-2703.04 to the program area.
In addition, LB 39 allows counties to apply for state assistance and allows nonprofit entities to apply for state assistance jointly with a municipality or county.
LB 39 amends Neb. Rev. Stat. § 13-3108(9) to provide that the 30% of state sales tax revenue remaining after appropriations from the Sports Arena Facility Support Fund in § 13-3108(3) will be appropriated by the Legislature and transferred quarterly as follows:
- If the revenue relates to a sports complex and is approved for state assistance pursuant to § 13-3106 on or after May 26, 2021, then 83% of the revenue is transferred to the Support the Arts Cash Fund, and 17% is transferred to the Convention Center Support Fund.
- If the revenue relates to any other eligible sports arena facility, then all the revenue is transferred to the Civic and Community Center Financing Fund.
Finally, LB 39 expands the locations where a sports complex may be located to include areas outside the corporate boundaries of a municipality, in an economic redevelopment area, or in an opportunity zone as provided in the Tax Cuts and Jobs Act of 2017. In addition, a single enclosed, temperature-controlled building can qualify as a sports complex if it contains more than one multipurpose field, court, swimming pool, or other facility primarily used for competitive sports.
Change Sales Tax Provisions Relating to Gross Receipts (LB 595 – Operative October 1, 2021)
LB 595 excludes from the definition of gross receipts the gross income received leasing or using towers and other structures primarily used in conjunction with furnishing:
- Internet access services;
- Agricultural global positioning system locating services; or
- Over-the-air radio and television broadcasting licensed by the Federal Communications Commission including antennas and studio transmitter link systems. Studio transmitter link system means a system which serves as a conduit to deliver audio from its origin in a studio to a broadcast transmitter.
Definition of agricultural machinery and equipment (LB 595 – Operative October 1, 2021)
LB 595 adds a definition for agricultural machinery and equipment in Neb. Rev. Stat. § 77-2704.36. Agricultural machinery and equipment means tangible personal property used directly in:
- Cultivating or harvesting a crop;
- Raising or caring for animal life;
- Protecting the health or welfare of animal life; and
- Collecting or processing of an agricultural product on a farm or ranch.
Agricultural machinery and equipment specifically includes the following tangible personal property:
- Fans, curtains, and climate control equipment within livestock buildings used to protect the health or welfare of animal life; and
- Header trailers, head haulers, header transports, and seed tender trailers.
Sales and Use Tax Exemption for Certain Catalysts, Chemicals, and Materials (LB 595 – Operative October 1, 2021)
Sales of catalysts, chemicals, and materials used in manufacturing ethyl alcohol and its coproducts are exempt from sales and use taxes.
Beginning Farmers Tax Credit Act (LB 432 – Operative August 28, 2021)
LB 432 changed the sunset date of the Beginning Farmer Tax Credit incentive program from December 31, 2022 to December 31, 2025.
Change provisions relating to equivalent employees and qualified locations under the ImagiNE Nebraska Act (LB 18 – Operative May 26, 2021)
LB 18 amends two provisions of the ImagiNE Nebraska Act. First, the bill removes the requirement that an employee be a resident of Nebraska to be included in the equivalent employee calculation. Second, two business activities are added to the definition of a qualified location in Neb. Rev. Stat. § 77-6818: Postharvest Crop Activities (except Cotton Ginning) under NAICS code 115114; and processing tangible personal property. Processing is defined to mean “to subject to a particular method, system, or technique of preparation, handling, or other treatment designed to prepare tangible personal property for market, manufacture, or other commercial use which does not result in the transformation of such property into a substantially different character.”
Redefine terms relating to tax incentive performance audits and the ImagiNE Nebraska Act ((LB 84 – Operative August 28, 2021)
LB 84 adds nuclear energy as a renewable energy source for qualified locations that produce electricity for sale from one or more renewable energy sources. In addition, LB 84 amends Neb. Rev. Stat. § 50-1209(4)(g) to add NAICS code 221113, nuclear electric power generation, to the definition of a renewable energy firm.
Change the Nebraska Advantage Microenterprise Tax Credit Act (LB 366 – Operative August 28, 2021)
LB 366 extends the sunset date for the Nebraska Advantage Microenterprise Tax Credit Act from December 31, 2022 to December 31, 2032. In addition, the following changes apply to Nebraska Advantage Microenterprise Tax Credit Act applications received on or after August 28, 2021:
- The limit on the total lifetime microenterprise tax credits that can be claimed by the taxpayer and any related person increased to $20,000; and
- Spouses, siblings, ancestors, and lineal descendants except for minor sons or daughters are eliminated from the definition of related persons.
Adopt the Urban Redevelopment Act and provide tax incentives (LB 544 – Operative January 1, 2022)
To participate in the program, beginning January 1, 2022, taxpayers must file an application with the Department of Economic Development (DED) and submit a $500 application fee. If the application is approved, DED will authorize the amount of credits the taxpayer expects to earn and enter into a written agreement with the taxpayer. DED cannot accept applications once expected credits for approved projects total $8 million. No new applications may be accepted after December 31, 2031.
The taxpayer must meet the minimum requirements of one of two options:
- Option 1- to earn a credit equal to $3,000 for each new equivalent employee (an additional $1,000 is earned for each equivalent employee who resides in an economic development area) and $2,750 for each $50,000 increase in investment, taxpayers must invest $150,000, hire five new equivalent employees, and pay a minimum qualifying wage of 70% of the Nebraska statewide average hourly wage to new equivalent employees; or
- Option 2- to earn a credit equal to 5% of investment, taxpayers must invest $50,000.
If a taxpayer reaches the minimum employment and investment levels within two years of the date of application they are entitled to receive tax benefits, up to a maximum of $50,000 for each project. Credits may be earned for each year of the performance period where they have maintained levels. The taxpayer may request that DOR certify base-year employment levels.
Credits may be used to: 1) obtain a refundable income tax credit; 2) obtain a refund of sales or use tax; 3) reduce income tax withholding liability; or 4) obtain a payment from the State equal to the real property taxes due, after the year levels are met, for real property at a qualified location that is acquired by the taxpayer after the date of application. Credits may be distributed to a partner, limited liability member, shareholder, or beneficiary and used against the income tax liability of the recipient. Employment and investment levels must be maintained through the third year following the year levels are met. A percentage of benefits will be recaptured if levels are not maintained for the required period.
Taxpayers may not earn benefits under both options, and no taxpayer can qualify for benefits under this program if they are receiving any benefits under any other Nebraska tax incentive program.
Base year is defined as the year prior to the year of application, investment is equal to the value of qualified property incorporated into or used at the qualified location, and year means the taxable year of the taxpayer.
The Urban Redevelopment Act also requires DOR to notify each municipality of the amount and identity of the taxpayer for each refund of local option sales and use tax within 30 days after the refund is allowed or approved. Deduction of a refund of local option sales and use tax made pursuant to this act is delayed as required by Neb. Rev. Stat. § 77-27,144. DOR will notify each municipality of a refund exceeding $1,500 by March 1 of each year beginning in 2022. For municipalities with annual refunds exceeding $1 million or 25% of the municipality's total sales and use tax receipts for the prior fiscal year, DOR will deduct the refund over a period of one year in equal monthly amounts beginning in January following the notification.
Changes to the New Markets Job Growth Investment Act (NMTC Act) (LB 682 – Operative May 25, 2021)
The LB 682 changes all relate to the allocation awards issued by the Community Development Financial Institutions Fund (CDFI Fund) in 2021. With regard to the 2021 awards, the following provisions apply.
The definition of qualified equity investment (QEI) was amended. The issuer of a QEI must use 100% of the cash purchase price to make qualified active low-income community investments (QLICIs). The Nebraska QEIs must be designated by the issuer as a QEI under section 45D of the IRC (federal QEI).
- DOR will begin accepting applications for certification of proposed QEIs from 30 to 45 days after the CDFI Fund announces allocation awards in 2021. The application must include a screen shot from the CDFI Fund’s Allocation Tracking System that shows the applicant’s remaining federal QEI authority. The applicant must agree to designate the certified QEIs as a federal QEI.
- DOR may certify proposed QEIs equaling up to $15 million of credits in any year. DOR will prorate the requested QEIs if the total requested by all applicants exceeds $15 million.
- The applicant must issue the Nebraska QEIs and designate them as federal QEIs within 30 days after DOR’s certification or the certification will lapse.
- Qualified active low-income community investment (QLICI) will be considered maintained if investments returned are reinvested in a QLICI by the end of the following calendar year.
- Community development entities that received a Nebraska certification must issue an annual report to the Tax Commissioner. The report is due on or before the last day of February of each year from 2023 to 2028.
- The Tax Commissioner must submit an annual report to the Legislature on or before April 1 of each year from 2022 through 2028.
Correlate provisions of Laws 2019, LB538, with Initiative Law 2020, No. 430, regarding mechanical amusement devices (LB 1 – Operative March 17, 2021)
LB 1 changes the Mechanical Amusement Device Tax Act to alphabetize the definitions in the Act, and to clarify that “Mechanical amusement device does not mean… gaming devices or limited gaming devices as defined in and operated pursuant to the Nebraska Racetrack Gaming Act.”
Change provisions relating to certain public statements of the Tax Commissioner and certain estimates of General Fund net receipts (LB 180 – Operative August 28, 2021)
LB 180 requires the Tax Commissioner to include in the monthly public statement of actual net receipts, a comparison of the actual General Fund net receipts to the estimated net receipts from the most recent forecast of the Nebraska Economic Forecasting Advisory Board, and a comparison of the actual net receipts to the monthly actual net receipts for the same month of the previous fiscal year. The Tax Commissioner is also required to include in the annual public statement of actual General Fund net receipts and estimated General Fund net receipts for the fiscal year and a comparison of actual General Fund net receipts for fiscal year to actual General Fund net receipts for previous fiscal year.
See the Property Assessment 2021 Legislative Summary (not yet available).