S TAT E TA X B R I E F I N G 2022 BROUGHT SEVERAL SIGNIFICANT NEBRASKA STATE AND local tax developments that are likely to affect many of your clients. We’ve highlighted some key statutory changes and case developments you will want to know. Income Tax Social Security Income Exemption. In 2021, Nebraska passed a bill that would exempt a portion of the Social Security benefits received by Nebraska seniors. The exemption percentage would increase through 2025, until 50% of those benefits were exempt from Nebraska tax. In 2022, the Legislature stepped up that exemption, so that 100% of Social Security benefits would be exempt fromNebraska income tax by 2025. Individual Income Tax Rate Reductions. In 2022, the Legislature acted to gradually reduce the top income tax rates paid by individuals and fiduciaries. For individuals and fiduciaries, the top rate will be decreased from its current 6.84% to 5.84% for 2027 and later years, via an annual reduction of 0.2% beginning in 2023. Corporate Income Tax Rate Reductions. The Legislature also acted to gradually reduce the top income tax rates paid by corporations. For corporations, the top rate will be decreased from its current 7.81% to 5.84% via a series of annual reductions beginning in 2023. Military Retirement Income. In an attempt to incent retired military members to stay in Nebraska, the Legislature acted to exempt 100% of military retirement benefits from Nebraska income tax. Department of Revenue Residency Challenges. The Nebraska Department of Revenue has continued to focus on the tax residency of persons who maintain homes in multiple states. In the Dec. 9, 2022, decision in Acklie v. Department of Revenue, the Nebraska Supreme Court decided the Acklies remained Nebraska residents for tax purposes for several reasons, including their travel schedule. In the Acklie decision, the Nebraska Supreme Court declined to review, and thus did not overturn, a Department of Revenue test for determining the number of days spent in a location when a person is traveling. This leaves undecided how the Department of Revenue should count partial days. We like to use a “Declaration of Abandonment” in pre-planning when a client decides to change residency. Foreign Income. The Department has continued to press its position, which is an outlier among states, that Nebraska should be able to tax a percentage of income earned by an international company’s foreign subsidiaries (so-called 965 income and GILTI income). The Department’s position is being challenged in a case filed in 2022: Precision Castparts Corp. v. Department of Revenue. Nebraska State Taxes: 2022 Year In Review BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM I S S U E 6 , 2 0 2 2 20 nebraska cpas
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