Given the Public Law 86-272 protections, we will review the applicability of the Public Law 86-272 “guardrail” whenever we confront the claim by a state taxing authority that a nonresident company selling tangible personal property owes state income tax. PRIVILEGES & IMMUNITIES CLAUSE: U.S. CONSTITUTION This constitutional “guardrail” prohibits a state from imposing higher tax rates, or additional taxes, on nonresidents than the state imposes on residents. Courts have, in the past, used this “guardrail,” for example, to prohibit a “commuter income tax” which applied only to nonresidents working in the state or to prohibit the application of a property tax credit to only farms owned by residents. UNIFORMITY & CLASS DEFINITIONS IN PROPERTY TAX: NEBRASKA CONSTITUTION Property taxes in Nebraska have additional constitutional “guardrails” that should be considered. Article VIII, Section 1 of the Nebraska Constitution establishes that taxes must be levied uniformly on real property in Nebraska: “Taxes shall be levied by valuation uniformly and proportionately upon all real property and franchises as defined by the Legislature except as otherwise provided in or permitted by this Constitution.” There are certain exceptions to this general rule, of course. Article VIII, Section 2 of the Nebraska Constitution establishes certain exemptions for real property. In addition, Article VIII, Section 1 establishes that “agricultural and horticultural land” shall constitute a “separate and distinct class of property for purposes of taxation.” This provision allows for agricultural and horticultural land to be assessed at 75% of its fair market value. For personal property, Article VIII, Section 1 of the Nebraska Constitution establishes: “Tangible personal property ... shall all be taxed at depreciated cost using the same depreciation method with reasonable class lives, as determined by the Legislature, or shall all be taxed by valuation uniformly and proportionately.” Article VIII, Section 2 of the Nebraska Constitution again establishes exemptions for certain types of personal property, including “household goods and personal effects,” livestock, and business inventories. When evaluating a property tax case, we review whether Nebraska’s constitutional “guardrails” for property tax are being interpreted and applied properly. If the application of Nebraska’s law by the taxing authority goes outside of these property tax “guardrails,” we will adopt a defense accordingly. At the invitation of the Nebraska Chamber of Commerce, we presented a program on Nebraska tax policy to our state’s business leaders, tax advisors, and legislative leaders. As part of that presentation, we highlighted key “guardrail” defenses to preserve the state’s tax integrity. To learn more, view the presentation video on McGrath North’s website (mcgrathnorth.com) under the State and Local Taxation and Incentives practice area, or watch it directly at https://youtu.be/aUHmA9vjixI. Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. Go to www.NebraskaStateTax.com and www.NebraskaIncentives.com for more information and for a copy of their publications, The Anatomy of Resolving State Tax Matters and the Nebraska Business Expansion Decision Guide. You may also reach them at (402) 341-3070 or email nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com. CONTINUED FROM PAGE 19 Tax and accounting manager wanted immediately for Omaha CPA firm. Knowledge of tax, accounting, and auditing concepts required. Send resume to Berger, Elliott & Pritchard, CPAs, L.L.C., 1301 S. 75th Street, Suite 200 or email to info@bepcpa.com. BETTER TAX SEASON BETTER FIRM BETTER PLACE TO WORK TAX AND ACCOUNTING MANAGER 20 Nebraska CPA
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