15 nebraska society of cpas W W W . N E S C P A . O R G Nebraska offers a number of meaningful incentives for companies that are expanding in Nebraska. This includes companies that are building a new facility, adding a new business or product line, or moving an existing business into Nebraska. 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. See their websites at www.NebraskaStateTax.com and www.NebraskaIncentives.com for more information. For a copy of their publication, The Anatomy of Resolving State Tax Matters, or their Nebraska Business Expansion Decision Guide, please visit their websites or contact them at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively. defines the qualifying business activities from the outset or be challenged later. • Base-Year Employment&Investment: If the base-year employment and qualifying types of investment at a project are not addressed at the outset, this can result in audit uncertainty in the future. • Manufacturing Equipment Sales Tax Exemption: This is a different result depending on whether an Option 1, 2, or 3 installation contractor is used. • ConstructionContracts: Construction cont racts general ly need to have certain tax and incentive provisions in order to help a company qualify for the full amount of expected project incentives. Former Residents Keeping a Home in Nebraska The Department of Revenue has been focusing on the tax residency of persons who moved out of Nebraska but kept a house or condominium here. In the past year, a couple of new cases have been decided by Nebraska courts on this issue. Continued focus by the Department of Revenue on this issue is expected. Some issues include: • Documenting Location: A number of cases have turned on the number of days that taxpayers are in—and out of—Nebraska. Documenting these, particularly when tax assessments can go back several years, is an issue. Clients who plan to have multiple homes need to keep good records. • Domicile Consistency: A person’s “domici le” is dependent on many factors. The Department of Revenue has been looking beyond just those factors listed in its published guidance. • Mea s u r i ng Days I n & Out of Nebraska: At issue in recent cases has been the methodology for counting the number of days a person is in Nebraska. The Department of Revenue (incorrectly, we believe) wants to treat a travel day, in which a person travels into or out of Nebraska, as being in Nebraska for a full day. Depending upon a person’s travel schedule, this can have a significant impact on the question of residency. Companies Owning Foreign Subsidiaries Companies have been going global at an ever-increasing rate. The passage of the Federal Tax Cuts and Jobs Act of 2017 created two new types of income for companies with foreign subsidiaries: Section 965 Income (taxed under Internal Revenue Code Section 965) and GILTI (Global Intangible Low-Taxed Income). Nebraska companies and advisors should be aware of what’s occurring now: • Department of Revenue Wants to Include This Income in Nebraska Taxable Income: As conf i rmed i n r ecent pronouncement s , t he Department of Revenue proposes that Section 965 Income and GILTI—even though gained from foreign sources— must be included in a corporation’s Nebraska Taxable Income. Thi s can have a signif icant tax impact for international companies doing business in Nebraska. This position is being challenged. • Appor t ionment Fac tor s: The Department of Revenue has proposed that companies with Sect ion 965 Income andGILTI should use a special apportionment formula that does not allow companies to include the sales that generated this foreign income in the denominator of the apportionment formula. This position is also being challenged. • Overr iding Defenses: Based on the unusual way the Depar tment of Revenue i ssued t he Ba l ance Due Notices regarding Section 965 Income and GILTI, we have raised two other over r iding defenses to t he Depa r tment ’s proposed t ax assessments. I f successf ul , these create a full line of defense against the Department’s Section 965 Income and GILTI tax assessments. The Nebraska Department of Revenue continues to aggressively audit and assess Nebraska taxpayers. This ar t icle has brief ly highlighted a few of the areas we are seeing. Our guides, the Anatomy of Resolving State Tax Matters and the Nebraska Business Expansion Decision Guide, contain other examples.
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