Retirement Income Exemptions One hundred percent of Nebraskans’ Social Security income is now exempted from state income tax beginning in tax year 2024 rather than 2025. In addition, federal retirees may now exclude federal pension benefits from Nebraska taxation. Impact of This Change: The more that Nebraska is attractive to retirees, the more it is attractive to companies to build their employment base here. These revised retirement exemptions will encourage more retirees, and near retirees, to stay in Nebraska, improving Nebraska’s overall competitiveness. Changes to Nebraska Property Tax Credits Nebraska increased the minimum amount of property tax credits for 2023 from $275 million to $360 million, with subsequent increases in later years. In addition, Nebraska eliminated the prior 5% cap on the school district tax credit’s allowable growth percentage for future years. Limitation on School District Budget Increases Nebraska now limits the amount by which a school district may increase its property tax request from one year to the next by 3%. There are exceptions based on a district’s growth in student enrollment, the number of limited English proficiency students in the district, and the number of students in poverty in that district. Notwithstanding this limitation, a district may exceed its property tax request authority by an amount approved by a 60% majority of voters at a special election. A school board may also vote to exceed a district’s property tax request authority by 4% to 7%, depending on the number of students enrolled, if at least 70% of its members approve. Community College Levy Eliminated Nebraska ended the ability of community colleges to levy property taxes after fiscal year 2023-2024. After that year, the state of Nebraska will distribute funds to community colleges to offset their lost property tax revenue. Impact of These Changes: Nebraska has long been known in business climate discussions as a high property tax state. All of these property tax changes are intended to reduce the cost of property tax for both businesses and individuals, which directly reduce the cost of doing business and the costs of living and working in Nebraska. Incentive Changes Impacting Nebraska’s Competitive Business Climate Reinstated the Nebraska Advantage R&D Credits The Nebraska Advantage Research and Development Act, which provides state tax credits for companies that conduct research and development in Nebraska, had been closed to new applicants at the start of 2023. The state reopened the program for new applicants. In doing so, the state also eliminated the prior 21-year cap on credits, so companies conducting research and development in Nebraska can continue to claim credits for the life of their research and development activities. Fixed E-Verify Requirements to Obtain Research & Development Credits The Nebraska Advantage Research and Development Act previously contained certain provisions which the Department of Revenue was interpreting to mean that, if a company failed to perform a verification under the federal E-Verify system on each and every newly hired employee in Nebraska within a few days of hire, that company would lose its entire research and development credits for that year. This was true even if a non-verified employee had nothing to do with the company’s research and development activities. The Legislature amended the Nebraska Advantage Research and Development Act to extend the timeframe for E-Verify verification to 90 days and to confirm that this E-Verify requirement only applied to employees engaged in research and development. In addition, the penalty for failure to E-Verify an employee will become a loss of the credit for the wages of that employee—not a loss of all credits for all Nebraska activities. As initially proposed, this legislative fix would have applied retroactively, to confirm that companies may claim incentives they may have improperly lost in prior years due to the prior provision. The retroactivity provision was ultimately amended out of the final bill. Based on the ambiguous wording of the prior statute, and the audit appeals we are working on, a number of defenses exist to the Department of Revenue’s “one strike and you’re out” E-Verify approach. For more detail, see our article in Issue 2, 2023 of the Nebraska CPA magazine. Impact of These Changes: Companies across the board realize the need to continually develop, create, and change. As a state, we need the mindset that recognizes this. Both of these changes help with that important image and will encourage existing companies to conduct research and development in Nebraska. Good Life Transformational Projects Act The Legislature passed the Good Life Transformational Projects Act, which allows the Nebraska Department of Economic Development to approve applications to enact “Good Life Districts.” Such districts would have to meet certain development cost and job creation thresholds. In addition, for districts in counties with at least 100,000 inhabitants, an applicant must show that at least 20% of sales would go to non-Nebraska residents, that the project will attract retail businesses not yet in the market, and that the project would attract at least 3 million visitors annually. Retail sales occurring within a Good Life District would incur a reduced state sales tax rate of 2.75%. The remaining 2.75% of tax would go toward financing the development of the district. Impact of This Change: This change is intended to attract big developments, along with retailers not previously in the Nebraska market, with the potential to enhance Nebraska’s quality of life. 21 www.nescpa.org
RkJQdWJsaXNoZXIy MTg3NDExNQ==