Opportunity Scholarship Act
General Information
The Opportunity Scholarship Act (Act) established by LB 753 (2023) was repealed by LB 1402 (2024), effective October 31, 2024. With the enactment of LB 1402, the State Treasurer shall establish a program to provide education scholarships to eligible students. More information on the new program that replaced the Act, can be found on the State Treasurer’s website.
With the repeal of the Act, the Nebraska Department of Revenue (DOR) is no longer accepting the Opportunity Scholarship Act Notification of Intended Tax Credit, Form NSGO-IC to reserve tax credits under the Act.
For the taxable year beginning on or after January 1, 2024, individuals and entities that made cash contributions to a certified scholarship-granting organization (SGO) between January 1, 2024 and October 30, 2024 may qualify for a nonrefundable tax credit under the Act. Taxpayers were required to notify the SGO of their intent to make a contribution and the amount to be claimed as a tax credit. Upon DOR’s verification of available credits, the taxpayer must have made the contribution within 60 days of notifying the SGO of their intent to contribute and prior to October 31, 2024.
The nonrefundable tax credit issued to an individual, corporate taxpayer, estates, trusts, or to any partnership, limited liability company (LLC), or subchapter S corporation that is carrying on rental activity or carrying on any trade or business for which deductions would be allowed under IRS § 162; equals the lesser of:
(a) The total amount of the contributions made to the scholarship-granting organizations during the tax year;
(b) 50% of the income tax liability of the taxpayer for such year; or
(c) $100,000, or $1 million for estates and trusts.
Any of the approved nonrefundable tax credit unused on the return may be carried forward and applied against the taxpayer’s income tax liability for the next five years immediately following the tax year in which the credit is first allowed.
A taxpayer may only claim a credit on the portion of the contribution that was not claimed as a charitable contribution on their federal return.
The 50% tax liability limitation is computed on the total tax liability before any nonrefundable credits, refundable credits, withholding, or payments are applied. The total tax liability is multiplied by 50% to determine the credit limitation. If the donor taxpayer is not subject to income tax, the credit will be zero and cannot be distributed.
This credit can be claimed by an S corporation or partnership electing to pay tax. If a shareholder, beneficiary, or member is claiming the credit based on a distribution from the pass-through entity, the credit is first limited by the tax lability of the pass-through entity. If the pass-through entity has not made the election to be subject to Nebraska income tax, the tax credit will be zero and cannot be distributed.
