further individual estimated Nebraska tax payments or may be able to reduce their third and fourth quarter estimated payments. The owners’ estimated installments and any related penalty is reduced or eliminated due to the PTET credit received from the electing pass-through entity. In addition, Nebraska’s PTET law, like Colorado’s, is retroactive to 2018. Pass-through entities will be able to voluntarily elect to pay prior year income taxes during 2023, 2024, or 2025, which will generate a federal income tax deduction for the year in which taxes for the prior years are paid. A pass-through entity’s payment of these taxes will also generate a refundable credit for its owners equal to their pro rata or distributive share of the Nebraska income tax paid by the electing pass-through entity. The retroactive application of Nebraska’s PTET law will require a method to be implemented by the Nebraska Department of Revenue in order for pass-through entities to elect to pay Nebraska income taxes for tax years 2018-2022. The statute provides that the individuals will claim the retroactive refund in the time and manner as prescribed by the tax commissioner. The statute itself does not specifically require the filing of separate amended returns for each year the pass-through entity makes a retroactive election. The authors believe the most efficient manner to implement the retroactive application of Nebraska’s PTET law is to follow the Colorado Department of Revenue and use a “composite-like” form that allows a pass-through entity to elect and submit payment. Such a form would not permit changes to previous years other than those directly related to the retroactive pass-through entity election. With this approach, the current owners would claim the PTET credit in the year the pass-through entity elects to pay the prior year income taxes. This approach, as opposed to one that requires amended returns, would avoid multiple amended returns that would have to be prepared by taxpayers and processed by the Nebraska Department of Revenue and would also make it much easier for the current owners of many pass-through entities that have undergone ownership changes since 2018 to benefit from the retroactive application of the PTET law. Jeff Schaffart and Nick Bjornson, both business and tax attorneys at Koley Jessen, were deeply involved in the passage of Nebraska’s PTET law. Among other actions, they drafted and submitted proposed legislation to state senators, collaborated with the Omaha and Nebraska Chambers to have this law added as an amendment to LB754, testified in front of the Nebraska Unicameral’s Revenue Committee in support of the PTET law, and published a commentary piece in the Nebraska Examiner advocating for adoption of a PTET law. For further details about Nebraska’s PTET law or to get in touch with them, email jeff.schaffart@koleyjessen.com and nick.bjornson@koleyjessen.com, respectively. NESCPA - Half Page Ad.indd 1 10/26/21 4:33 PM 17 www.nescpa.org
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