ISSUE 2, 2024 OFFICIAL PUBLICATION OF THE NEBRASKA SOCIETY OF CPAS EMBRACING DISCOMFORT TO MAKE FORWARD PROGRESS PAGE 8
■ Corporate Taxation ■ Partnership/LLC/Sub-S Entities ■ Estate & Gift Taxation ■ State & Local Taxation ■ Mergers & Acquisitions ■ Bankruptcy, Reorganizations & Restructuring ■ Tax Protests, Disputes & Litigation ■ Real Estate ■ Individual Taxation ■ Charitable Planning ■ Nonprofit Organizations ■ Employee Benefits & Executive Compensation A partnership that gets everyone where they want to go. You help your clients plot out prudent tax decisions. We can help them navigate the potential pitfalls and opportunities of today’s complex tax environments. Together, we can map out their routes to success. Contact Us Today. 402.390.9500 | koleyjessen.com/services-tax Helping CPAs statewide, Koley Jessen can be your tax law navigator.
BOARD OF DIRECTORS KELLY J. MARTINSON CHAIRMAN (402) 827-2054 Lutz Omaha BRIAN M. KLINTWORTH CHAIRMAN-ELECT (402) 423-4343 HBE LLP Lincoln HEATHER E. BARR DIRECTOR (402) 729-4129 Endicott Clay Products Co. Fairbury LAURIE ANN J. BUHLKE DIRECTOR (308) 382-5720 Contryman Associates PC Grand Island LORRAINE A. EGGER IMMEDIATE PAST CHAIRMAN (402) 965-0328 CyncHealth La Vista MEGAN C. HOLT DIRECTOR (402) 972-4578 Mutual of Omaha Mortgage Omaha JUSTIN M. HOPE DIRECTOR (402) 691-5538 Eide Bailly LLP Elkhorn SHARI A. MUNRO AICPA ELECTED REPRESENTATIVE (402) 963-4316 Frankel LLC Omaha DR. THOMAS J. PURCELL, III DIRECTOR (402) 490-4207 Omaha DANA J. WEBER WEST NEBRASKA CHAPTER PRESIDENT (308) 635-3008 Dana J. Weber, CPA Scottsbluff JONI SUNDQUIST NESCPA PRESIDENT & EXECUTIVE DIRECTOR joni@nescpa.org KELLY EBERT VICE PRESIDENT kelly@nescpa.org MICHELLE LYONS STAFF ACCOUNTANT & OFFICE MANAGER michelle@nescpa.org LORI VODICKA MEMBERSHIP & CPE ASSISTANT lori@nescpa.org OFFICERS BOARD MEMBERS NESCPA STAFF JODI M. ECKHOUT SECRETARY (308) 995-6151 Woods & Durham Chartered CPAs Holdrege GRANT H. BUCKLEY TREASURER (402) 444-1872 Buckley & Sitzman LLP Lincoln CLASSIFIED AD Nebraska Practices for Sale: Gross Shown: $635K Southwest, Nebraska $311K Lincoln, Nebraska For more information Call 1-800-397-0249 or Visit www.APS.net THINKING OF SELLING? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. To learn more about our risk-free & confidential services, call Trent Holmes 1-800-397-0249 or email Trent@apsholmesgroup.com 4 Nebraska CPA
Once again, The Best Lawyers in America® has recognized 46 McGrath North attorneys in the full range of specialty practice areas key to supporting businesses of all sizes across a broad range of industries, and 27 attorneys have been recognized for 10 years or more! McGrath North invests time, energy and resources to build a culture of professional excellence and integrity that produces results for our clients to make lives better. INSPIRED BY EXCELLENCE. COMMITTED TO SUCCESS. SEE THINGS DIFFERENTLY. Collaborating with companies and CPA firms on: State Tax Audits • State Tax Appeals • State Tax Planning • State Tax Incentives State Business Incentives • Site Development Incentives • Property Tax Appeals Nick Niemann, JD State & Local Tax & Incentives Attorney Partner, McGrath North (402) 633-1489 nniemann@mcgrathnorth.com www.mcgrathnorth.com | www.nebraskastatetax.com | www.nebraskaincentives.com Matt Ottemann, JD, LLM State & Local Tax & Incentives Attorney Partner, McGrath North (402) 633-9571 mottemann@mcgrathnorth.com
26 24 C O N T E N T S 13 ©2024 Nebraska Society of Certified Public Accountants | The newsLINK Group, LLC. All rights reserved. The Nebraska CPA is published six times each year by The newsLINK Group, LLC for the Nebraska Society of Certified Public Accountants and is the official publication for this society. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Nebraska Society of Certified Public Accountants, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Nebraska CPA is a collective work and as such some articles are submitted by authors who are independent of the Nebraska Society of Certified Public Accountants. While the Nebraska CPA encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at: 855.747.4003. ISSUE 2, 2024 EDITORIAL: The Nebraska Society of CPAs seeks to reflect news and relevant information to Nebraska and other news and information of direct interest to members of the Nebraska Society of CPAs. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the Nebraska Society of CPAs. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the Nebraska Society of CPAs. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, a bi-monthly publication, is included in membership fees to the Nebraska Society of CPAs. PRESIDENT’S MESSAGE 8 Embracing Discomfort to Make Forward Progress By Joni Sundquist, Nebraska Society of CPAs 12 CPA Candidates Approved to Sit at 120 Hours Starting 1/1/2025 By Dan Sweetwood, Nebraska Board of Public Accountancy & Joni Sundquist, Nebraska Society of CPAs 13 Independence Is a Cornerstone of the Auditing Profession By Joni Sundquist, Nebraska Society of CPAs STATE BOARD REPORT 15 Big Changes Coming to NASBA By Dan Sweetwood, Nebraska Board of Public Accountancy 16 2024 NESCPA Course Calendar STATE TAX BRIEFING 18 2024 Nebraska Tax & Incentive Legislative Update The Governor’s Plan May Be On Hold, But the Legislature Still Made Numerous Improvements By Nick Niemann & Matt Ottemann, McGrath North Law Firm 21 In Memoriam 22 Review Tax Returns to Help Clients Level Up Their Charitable Giving Plans By Kelli Cavey, Vice President of Donor Services, Omaha Community Foundation 24 Strategic Corporate Structures When Do Nebraska Courts Pierce the Corporate Veil? By Katie L. Kalkowski & Hannah Fischer Frey, Baird Holm LLP COUNSELOR’S CORNER 26 Best Practices Structuring Buy-Sell Agreements for Farmers, Ranchers & Other Business Owners Post Connelly v. United States By Craig W. Benson & Rebekah C. Birch, Koley Jessen 28 What Questions Will You Be Asked When Selling a CPA Firm? By Accounting Practice Sales 30 The Burden of Proof Establishing Nonmarital Character of Assets in Nebraska By Bryan P. Robertson 32 Members in the News 34 Welcome New Society Members 35 2024 NESCPA Advertiser Index
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PRESIDENT’S MESSAGE WINNING ORGANIZATIONS AND successful leaders must be able to embrace discomfort. A willingness to step outside our comfort zone helps foster growth and forward progress. The same may be said for the profession. While the skills and competencies needed within the CPA profession advance and the requirements to become a CPA evolve, we all must remember that through the discomfort comes new thinking, creative solutions, and growth opportunities to enhance the profession. Both the AICPA’s National Pipeline Advisory Group and NASBA’s Professional Licensure Task Force have been working hard to address the CPA talent shortage. Both groups have a good mix of representatives from across the U.S. and within the profession, and both are seeking solutions that will maintain substantial equivalency and mobility. The AICPA Regional Council Meetings in March provided a good opportunity for CPAs and State Society CEOs to discuss their ideas and thoughts on the future of the profession and the work of the National Pipeline Advisory Group thus far, with more to come at the AICPA Council Meeting in May. During the recent NASBA Executive Directors Conference in March, the Professional Licensure Task Force presented information on an additional path to licensure—one that would offer education, documented experience, and other elements that would provide an equivalent path within the Uniform Accountancy Act (UAA) for candidates to qualify for licensure, without the need of having a fifth year to complete a 150-hour education program. We will keep you apprised of these efforts as they continue to develop. Formulating a CPE Game Plan While many of you in public accounting have been laser-focused on filing tax returns and extensions, your Society has been diligently working on opportunities for your professional growth as we busily plan this year’s CPE offerings. We held our annual Business, Industry & Innovation Conference on April 24 at the Champions Club in Lincoln, followed by a tour of Memorial Stadium, and are finalizing an exciting lineup of speakers and sessions for our remaining conferences this year. Recognizing the diverse needs of our members, we continue to support traditional in-person learning experiences alongside a robust lineup of online courses. In addition, we recently launched our brand-new OnDemand learning solution, now totaling 140 curated courses covering a wide range of topics in accounting and auditing, tax, technology, and more. These individual courses, along with the option for an OnDemand Annual Subscription at $299 for members, represent significant value. I encourage you to explore these opportunities under the CPE & Events section at nescpa.org. Huddle Up in a Committee As we finalize the membership of our committees for this fiscal year, I invite each of you to consider joining us in these crucial roles. Your participation is vital in shaping the future of our profession and our Society. Sign up today at nescpa.org/committees. Enjoying Halftime at the Legislature This year has been pivotal for the Society in legislative advocacy. Thanks to the joint efforts of the Society and State Board, LB 854 was signed by Governor Jim Pillen on March 11, allowing candidates to sit for the CPA exam with 120 hours of qualifying college credit and a bachelor’s degree beginning in 2025. (Read the joint news release on page 12.) One of the most heated issues taken up by the Legislature this year involved the Governor’s property tax plan, which was met with strong opposition from a broad coalition. The legislation (LB 388) included a significant reduction in property taxes in exchange for increases in the rate of sales tax on various products; the elimination of certain sales tax exemptions; and a new tax on digital advertising. In addition, the EMBRACING DISCOMFORT TO MAKE FORWARD PROGRESS BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs 8 Nebraska CPA
bill would have “front-loaded” property tax credits, rather than having to claim them on income tax returns. The bill also included a cap on revenue growth for cities, villages, and counties. Initially, the proposed plan included raising the overall sales tax rate along with the taxation of accounting services, among other measures. However, the proposal to tax accounting services was not included in the bill that advanced out of the Revenue Committee on Feb. 1, highlighting the importance of the Society’s active engagement in the legislative process and the ongoing, day-to-day work of our lobbyists at Radcliffe, Gilbertson & Brady. In late February, Kymberly Messersmith from KPMG’s Washington, D.C., office joined the Society and Nebraska Chamber at the Capitol to encourage state senators to oppose the taxation of accounting services—yet another effort to ensure the voice of the profession was heard. The Governor has said that he fully intends to call a special session this summer, telling state senators to “enjoy halftime” when he addressed them as they were wrapping up in April. Rest assured, your Society remains vigilant and proactive, ready to participate in any special sessions that may arise this year. Although it was intense, senators still managed to get a lot done during the two‑year sessions of the 108th Legislature. Of the 1,417 bills introduced, the Governor signed 186 bills into law, with six more awaiting his signature or veto at the time of this writing. Those 186 bills encapsulate key provisions from more than 180 other pieces of legislation. In addition to the aforementioned legislative endeavors is a potential ballot initiative, known as the EPIC Option, which would eliminate all property, income, inheritance, and corporate taxes and replace them with a statewide consumption tax, which means a tax on all new products, except for food, and a tax on all services. Soaring property tax burdens are a legitimate concern for many Nebraskans; however, research completed by the independent Tax Foundation has found that the EPIC Option would result in an unprecedented fiscal crisis in our state. As such, the Nebraska Society of CPAs has joined the No New Taxes Nebraska coalition, led by lobbyist Korby Gilbertson, to assist in opposing these efforts. The coalition held a press conference to announce its efforts on March 14 in the Rotunda at the Capitol. Your Society is committed to protecting the profession’s interests and ensuring a favorable business environment in Nebraska. To stay up to date on this effort and other important issues, be sure to visit our new Hot Topics page at nescpa.org/news/updates/hot-topics. Defending the Profession In other news, the Nebraska Examiner published an article in February that contained derogatory comments toward the profession made by the Nebraska state auditor. Your Society swiftly responded with a commentary addressing the auditor’s comments, entitled “Independence is a cornerstone of the auditing profession,” which was published in the Nebraska Examiner on March 1. This response underscores the critical role the Society plays in upholding the integrity and public image of the profession. (Read the Society’s commentary on page 13.) Playing Offense by Engaging Candidates This year marks the end of the legislative journey for 15 of Nebraska’s 49 state senators, including Senators Joni Albrecht (Thurston), Carol Blood (Bellevue), Bruce Bostelman (Brainard), Tom Brewer The NASBA Executive Directors Conference in Nashville brought together staff from the Nebraska Board of Public Accountancy and Nebraska Society of CPAs along with their counterparts from across the country. Attendees at the Nebraska Society of CPAs’ Business, Industry & Innovation Conference enjoyed a tour of Memorial Stadium following the event. CONTINUED ON PAGE 10 9 www.nescpa.org
Kymberly Messersmith from KPMG in Washington, D.C., Justin Brady from Radcliffe Gilbertson & Brady, and Joni Sundquist from the Nebraska Society of CPAs discuss the taxation of professional services in the Rotunda of the Nebraska Capitol. (Gordon), Steve Erdman (Bayard), Steve Halloran (Hastings), Lou Ann Linehan (Elkhorn), John Lowe (Kearney), Mike McDonnell (Omaha), Tony Vargas (Omaha), Lynne Walz (Fremont), Justin Wayne (Omaha), and Anna Wishart (Lincoln) due to term limits. Senator Fred Meyer (St. Paul), who was appointed last year, has chosen not to run for election, and Senator Julie Slama (Dunbar) is not seeking reelection. Elections this year will include 25 of the 49 seats. Given Governor Pillen’s comments, the service of these senators may not yet be done. Through the Society’s Political Education Committee (PEC), we can provide direct campaign support to candidates for the Nebraska Legislature who value and understand the CPA profession, regardless of party affiliation. Supporting a legislator’s campaign increases the likelihood of capturing their attention on issues that matter to the profession. By joining forces with fellow NESCPA members through the PEC, you help the Society build alliances with state senators who influence legislation. By law, none of your dues dollars may be allocated toward the PEC. CPAs must make all political contributions voluntarily. Learn more and contribute at nescpa.org/advocacy/contribute. Winning Your Membership If you’re looking to find value as a member, consider your Society’s involvement in the legislative, regulatory, and political process. It takes your membership, the volunteer leadership of numerous Nebraska CPAs, and the courage to “embrace discomfort” to make things happen. There is no doubt that our collective efforts and resilience will define the future success of the CPA profession in Nebraska. Joni Sundquist is president and executive director of the Nebraska Society of CPAs. You may contact her at (402) 476-8482 or joni@nescpa.org. CONTINUED FROM PAGE 9 CALL US TODAY! Selling a business is a tough decision. Timing is everything. Let us help you prepare for the best outcome. Results Business Advisors 12020 Shamrock Plaza #200 Omaha, NE 68154 402.913.9080 www.resultsba.com Scan QR code to watch the Selling video. https://www.resultsba.com/new-blood/ 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 10 Nebraska CPA
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CPA CANDIDATES APPROVED TO SIT AT 120 HOURS STARTING 1/1/2025 BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY & JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs ON MARCH 11, 2024, GOVERNOR JIM Pillen signed LB 854 into law amending the Nebraska Public Accountancy Act after the bill passed in the Nebraska Legislature on a 44-0-5 vote. Commencing on Jan. 1, 2025, Nebraska CPA candidates will be able to sit for the Uniform CPA Examination after completing 120 semester hours (or 180 quarter hours) of qualifying college credit and a bachelor’s degree. Right now, Nebraska requires that a candidate be within 120 days of completing 150 hours of college education before being eligible to take the CPA exam. The Nebraska Board of Public Accountancy (State Board) will commence its rulemaking authority within Nebraska Administrative Code (NAC) Title 288, Chapter 9, to review and amend educational requirements for those candidates who wish to begin testing for the exam with 120 hours of college education. The State Board’s Education Advisory Committee (EAC) will meet soon to review and make recommendations to the State Board for consideration. Changes made to Chapter 9 will require the Board to engage in the rulemaking process, which includes a public hearing followed by review and approval by the State Attorney General’s Office and the Governor’s Policy Research Office. The goal is to have the regulations in place before the law takes effect on Jan. 1, 2025. The initiative to make this change to Nebraska law began during the review and subsequent recommendations of the 2023 CPA Exam Task Force led by State Board Chairman Melissa Ruff, CPA, who served as chairman of the task force, and Nebraska Society of CPAs 2023 Chairman Lorraine Egger, CPA, who served as the task force’s vice chairman. Other members of the task force included State Board Vice Chairman Jeff Kanger, State Board Education & Examination Chairman Sarah Borchers, CPA, Nebraska Society of CPAs 2024 Chairman Kelly Martinson, CPA, and Society Board member Dr. Thomas Purcell, CPA. “Through the information presented to the task force, we learned that the vast majority of jurisdictions are already allowing candidates to sit for the exam at 120 hours. This includes our neighboring states, where several Nebraska candidates are sitting,” said State Board Chairman Ruff. “The change to 120 hours gives candidates the flexibility to decide when it’s best for them to complete the exam. Although some concern was expressed about candidates’ ability to successfully pass the exam without completing the required 150 hours of education, no strong evidence was found to support this assertion, so the task force decided to move forward with a bill.” “The Nebraska Society of CPAs conducted a survey of our members in November 2023,” noted Society Chairman Martinson. “The survey results reflected a mix of concerns about the educational and experience requirements to become a CPA, with a call to reduce barriers to entry and to consider a new approach to education and the 150hour requirement. LB 854 is a step in the right direction, allowing candidates to accelerate their goal of becoming a CPA. It also ensures that Nebraska remains competitive within the U.S. accounting landscape while maintaining the integrity and excellence of our profession.” LB 854 was submitted before the 108th Legislature on behalf of the Nebraska Society of CPAs by Sen. Mike Jacobson, District 42, of North Platte. The State Board and Nebraska Society extend our gratitude to Sen. Jacobson, his office, the members of the Banking, Commerce, and Insurance Committee, and Banking Committee Legal Counsel Joshua Christolear, for their pivotal support in securing the passage of LB 854. 12 Nebraska CPA
INDEPENDENCE This article was originally published in the March 1, 2024, Nebraska Examiner. THE RECENT CONTROVERSY IN NEBRASKA, INVOLVING AN attempt by the Department of Health and Human Services (DHHS) to hire a CPA firm to perform the statewide federal single audit, underscores a critical debate about the role of external auditors in governmental auditing. However, this incident should not be seen as an indictment of the CPA profession or the use of licensed accounting firms. Instead, it highlights the need for a nuanced understanding of the important role these professionals play in ensuring transparency, accountability, and the compliant use of taxpayer funds. In fact, more than 40,000 federal single audits are performed annually on states, local governments, and not-for-profit organizations, the vast majority of which are performed by CPA firms. Further, thousands of governmental financial statement audits are also performed by firms annually. First, it’s important to recognize the value that certified public accountants bring to the table. CPAs must undergo rigorous educational preparation and continuing education requirements, pass a national entrance exam and adhere to high ethical standards and professional guidelines set by the U.S. Government Accountability Office, the American Institute of Certified Public Accountants, and the Nebraska Board of Public Accountancy. These standards are designed to ensure that auditors maintain independence, objectivity, and a commitment to the public interest—and apply to all CPAs, regardless of whether they are in public practice or are employees of an agency such as the State Auditor’s Office. The suggestion by State Auditor Mike Foley that a licensed CPA firm in public practice would inherently lack independence or expertise is a misunderstanding of the profession and its regulatory framework. (See the Feb. 21, 2024, Nebraska Examiner article, “Nebraska auditor says state agency was seeking to replace him and hire a ‘hand-picked’ CPA firm.”) Licensed CPA firms play a crucial role in the auditing world, offering services that complement those of public auditors. They bring specialized expertise, innovative auditing techniques, and the capacity to handle complex financial and compliance landscapes. This diversity in the auditing sector enriches the quality of audits and can lead to more effective identification of noncompliance, fraud, and misstatements of funds. The concern raised by State Auditor Foley regarding the independence of a “hand-picked” CPA firm can be addressed through stringent CONTINUED ON PAGE 14 IS A CORNERSTONE OF THE AUDITING PROFESSION BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAs 13 www.nescpa.org
procurement processes, oversight, and the ethical obligations of CPAs themselves. Independence is a cornerstone of the auditing profession, and reputable CPA firms are diligent in maintaining this independence, regardless of who the client is. The assumption that a CPA firm’s audit would automatically be less stringent or sweep issues “under the rug” does not reflect the professional integrity that characterizes the CPA profession. In response to State Auditor Foley’s concerns about cost and the possibility of his office losing a major funding source, the goal should always be to ensure the best possible use of taxpayer resources, whether that involves internal audits, external audits, or a combination of both. Finally, the public’s trust in the auditing process is paramount. This trust can be maintained not by limiting the auditing function to a single office or individual but by ensuring that all auditors, whether public or private, adhere to the highest standards of independence, transparency, and professionalism. Any legislative measures in Nebraska should aim to strengthen, not weaken, these principles — and any political concerns should be resolved through normal political processes, not in the public condemnation of an entire respected profession. In conclusion, while the issue of whether CPA firms should be allowed to perform single audit engagements in the state of Nebraska is understandable, the Nebraska state auditor’s comments are troubling. The words of an elected Nebraska official should not lead to a blanket distrust of the CPA profession or the use of CONTINUED FROM PAGE 13 WE TAKE THE STRESS OUT OF YOUR JOB SEARCH ^ Pre-Screening Interview ^ Reference Checks ^ Facilitate Interview(s) with Potential Employers ^ Ensure Long-Term + Culture Fit ^ Guaranteed Confidentiality LEARN MORE TODAY AT WWW.LUTZ.US/TALENT licensed CPA firms in governmental auditing. With proper safeguards, ethical standards, and a commitment to the public interest, the involvement of licensed CPA firms can enhance, rather than undermine, the financial integrity of public institutions. Joni Sundquist is president and executive director of the Nebraska Society of Certified Public Accountants, representing approximately 2,600 member CPAs. A native of Oakland, Neb., she is a graduate of the University of Nebraska-Lincoln College of Journalism and previously worked for the Nebraska Bankers Association for two decades. Scan this QR code to read the Feb. 21, 2024, Nebraska Examiner article. https://nebraskaexaminer.com/2024/02/21/nebraskaauditor-says-state-agency-was-seeking-to-replace-himand-hire-a-hand-picked-cpa-firm Scan this QR code to read the Nebraska Society’s March 1, 2024, Commentary. https://nebraskaexaminer.com/2024/03/01/ independence-is-a-cornerstone-of-the-auditingprofession/ 14 Nebraska CPA
BIG CHANGES COMING TO NASBA BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY Governor Makes State Board Appointments Governor Jim Pillen recently appointed Donald Neal Jr. of Omaha to a four-year term as a public member of the State Board. Neal is the chief financial strategist for the University of Nebraska at Omaha and the senior tax director for the University of Nebraska System and Nebraska Medicine. In addition, he is licensed as an enrolled agent for the IRS. Previously, he was employed as a senior tax manager within the Omaha office of KPMG. Neal holds a bachelor’s degree in business and accounting from the University of NebraskaLincoln and an MBA from Bellevue University. Neal replaces Ken Brauer of Lincoln, who served two four-year terms on the State Board. Governor Pillen also appointed Melissa Ruff, CPA of Lincoln, to serve a second four-year term on the State Board. Ruff is currently chairman of the State Board and serves on the Executive, Legislative, and Licensing Committees. She is also a current member of NASBA’s Administration & Finance Committee. Ruff is a managing director with Deloitte & Touche LLP. The Nebraska Board of Public Accountancy administers public accountancy law in Nebraska. Its mission is to protect the welfare of the citizens of the state of Nebraska by assuring the competency of persons licensed as Certified Public Accountants. For more information, contact State Board Executive Director Dan Sweetwood at (402) 471-3595 or dan.sweetwood@nebraska.gov. STATE BOARD REPORT AS MANY OF YOU KNOW, I HAVE BEEN ACTIVE IN OUR NATIONAL regulatory association, known as the National Association of State Boards of Accountancy, or NASBA. This includes stints as chairman of the Executive Directors Committee and the Accountancy Licensing Database (ALD) Task Force and serving on various committees over the years. I count this service as one of the highlights of my long career as your State Board executive director. As a result, I have been able to assist and provide direct input on many important regulatory functions that directly impact the CPA profession, both in Nebraska and nationally. I have also gained a long list of colleagues and associates whom I can consult before making decisions and/or recommendations to the State Board. Many of these folks are also my friends, and I have had the chance to develop strong relationships with individuals from all over the country. It has been a great experience! I bring this up because “Big Changes” are soon coming to NASBA, including the retirement this year of CEO/President Ken Bishop. Ken and I share a common bond based on our previous careers in law enforcement before transitioning to the accounting regulatory world. Ken has positively navigated many significant issues during his 12-year tenure with NASBA, making him a well-known figure within the accounting profession. More information will be forthcoming regarding Ken’s well-deserved retirement and his excellent work over the course of his career. In any organization, a change in leadership provides the opportunity for reflection and reassessment. Since last year, the NASBA Board of Directors has been involved in the important search for the association’s new leader. We are excited to announce that Dan Dustin, CPA, has been selected as NASBA’s next president and CEO. I have had the opportunity to work with Dan on numerous occasions over the years and know he will provide outstanding leadership in this new role. Of course, many other changes are happening today in Nebraska, including the rollout of the new CPA Examination, the State Board’s decision regarding the Credit Relief Program for CPA candidates, a change to the Nebraska Public Accountancy Act that will allow candidates to sit for the CPA exam with 120 semester hours of qualifying college credit and a bachelor’s degree, and a few other changes to the State Board’s regulations. If you would like to discuss these changes or have other questions or concerns regarding the profession, never hesitate to reach out to me directly. 15 www.nescpa.org
2024 NESCPA COURSE CALENDAR DATE TYPE EVENT TITLE VENDOR LOCATION CPE/ ETHICS HOURS JUNE 3-6 MA Level V: Advanced Management and Leadership Essentials AHI Associates Inc. Online 16 6 MA Level IV: Management and Leadership Essentials Training AHI Associates Inc. Online 8 13-14 K2’s 2024 Standard Technology Conference Nebraska Society of CPAs Online 16 14 MA CFO/Controller’s Roadmap to Success: Integrated Planning, Forecasting and Budgeting Surgent Online 8 17 AA/MA/ TX Not-For-Profit & Governmental Accounting Conference - 1st DAY ONLY Nebraska Society of CPAs Nebraska Innovation Campus, Lincoln 8/2 17-18 AA/MA/ TX Not-For-Profit & Governmental Accounting Conference Nebraska Society of CPAs Nebraska Innovation Campus, Lincoln 16/2 19 IT Business Intelligence, Featuring Microsoft’s Power BI Tools K2 Enterprises Online 8 19 AA Performing Effective and Efficient Audit Sampling and Analytical Procedures Surgent Online 4 19 AA Testing and Documenting ICFR and ITGCs Surgent Online 4 20 IT K2’s Accountant’s Artificial Intelligence Conference Nebraska Society of CPAs Online 8 20 TX Insurance Industry Conference (Co-Sponsor w/ISCPA) Iowa Society of CPAs Online 7+1/1+1 20 IT Excel PivotTables for Accountants K2 Enterprises Online 8 20 ET Ethical Considerations for CPAs Surgent Online 4/4 20 AA Understanding Blockchain, Bitcoin, and Digital Assets, and Their Accounting Intricacies Surgent Online 2 21 IT Excel Best Practices K2 Enterprises Online 8 21 TX Complying With the Corporate Transparency Act: A Guide for Client Protection Werner-Rocca Online 2 21 TX Cybersecurity Issues for the Professional Werner-Rocca Online 2 24 IT Accountant’s Guide to QuickBooks Online K2 Enterprises Online 8 25 IT Better Productivity Through Artificial Intelligence K2 Enterprises Online 4 25 IT Emerging Technologies for Accountants, Including Blockchain and Cryptocurrencies K2 Enterprises Online 4 25 AA Guide and Update to Compilations, Reviews, and Preparations Surgent Online 4 25 AA Preparing and Reviewing Client Prepared Financial Statements and General Attest Engagements Surgent Online 4 25 AA AI and Data Analytics for Auditing - The Big Picture AHI Associates Inc. Online 2 25 MA Level V: Advanced Management and Leadership Essentials AHI Associates Inc. Online 2 26 TX Interstate Insights: Regional Perspectives on Multistate Tax Trends Multistate Societies Online 4 26 IT Paperless Office K2 Enterprises Online 8 26 AA Auditing Complex Management Estimates Surgent Online 4 27 IT Ethics and Technology K2 Enterprises Online 4/4 27 IT Mastering Advanced Excel Functions K2 Enterprises Online 4 27 AA Accounting Data Analytics AHI Associates Inc. Online 2 28 IT Technology for CPAs - Don’t Get Left Behind K2 Enterprises Online 8 28 TX 2024 Mid-Year Individual Tax Update Werner-Rocca Online 4 28 TX 2024 Mid-Year Business Tax Update Werner-Rocca Online 4 16 Nebraska CPA
DATE TYPE EVENT TITLE VENDOR LOCATION CPE/ ETHICS HOURS JULY 10 AA Audits of School Districts Nebraska Society of CPAs Fonner Park Conference Center, Grand Island 8 15-18 AA Level I: Basic Staff Training AHI Associates Inc. Online 24 16 IT Microsoft 365/Office 365 - All the Things You Need to Know K2 Enterprises Online 8 16 TX Farm Taxation Update Paul Neiffer Online 8 17 IT Small Business Internal Controls, Security, and Fraud Prevention and Detection K2 Enterprises Online 8 18 IT Excel Charting and Visualizations K2 Enterprises Online 4 18 IT Best Word, Outlook, and PowerPoint Features K2 Enterprises Online 4 23 AA AI and Data Analytics for Auditing - The Big Picture AHI Associates Inc. Online 2 23 MA Level V: Advanced Management and Leadership Essentials AHI Associates Inc. Online 2 25 AA Accounting Data Analytics AHI Associates Inc. Online 2 30 IT An Accountant’s Guide to Blockchain and Cryptocurrency K2 Enterprises Online 4 30 IT Artificial Intelligence for Accounting and Financial Professionals K2 Enterprises Online 4 31 IT Advanced QuickBooks Tips and Techniques K2 Enterprises Online 4 31 IT Case Studies in Fraud and Technology Controls K2 Enterprises Online 4 AUGUST 8 AA Yellow Book: Staying Compliant With Government Auditing Standards AICPA Online 8 14 TX 2024 Agriculture Tax & Accounting Conference (Co‑Sponsor w/ISCPA) Nebraska Society of CPAs Online 8 15 AA/TX Critical Issues That CPAs in Industry Will Need to Face This Year Surgent Online 4 15 AA Accounting for Changes in Accounting Principles and Error Corrections Surgent Online 2 20 IT Business Continuity - Best Practices for Managing the Risks K2 Enterprises Online 8 20 AA Construction Industry GAAP Review and Contract WIP Reporting & Analytics (Co-Sponsor w/ISCPA) Nebraska Society of CPAs Online 4 21 IT Microsoft Access - Tables, Queries, and Beyond K2 Enterprises Online 8 21 MA Create Reports That Matter The Knowledge Institute Online 8 21 TX Key Tax Issues Facing Business & Industry Van Der Aa Tax Ed Round the Bend, Ashland 8 22 IT QuickBooks for Accountants K2 Enterprises Online 8 22 TX Partnership & S Corporation Essentials: Reporting Basis and More Van Der Aa Tax Ed Round the Bend, Ashland 8 23 TX Year-End Tax Planning: Thinking Outside the Box Van Der Aa Tax Ed Round the Bend, Ashland 8 26 PD Women’s Leadership Series: Women’s Equality Day Virginia Society of CPAs Online 1 26 TX The Inflation Reduction Act’s Changes to Auto and EnergyRelated Tax Credits Surgent Online 2 26 TX Update on the SECURE 2.0 Act Surgent Online 2 27 TX Real Estate Taxation: Critical Considerations Surgent Online 4 27 TX What Practitioners Need to Know About Estate Planning and Administering a Client’s Estate Surgent Online 3 27 AA AI and Data Analytics for Auditing - The Big Picture AHI Associates Inc. Online 2 27 MA Level V: Advanced Management and Leadership Essentials AHI Associates Inc. Online 2 28 MA Women In Accounting Summit Nebraska Society of CPAs Riverview Lodge, Ashland 6 29 AA Accounting Data Analytics AHI Associates Inc. Online 2 17 www.nescpa.org
STATE TAX BRIEFING 2024 NEBRASKA TAX & INCENTIVE LEGISLATIVE UPDATE THE GOVERNOR’S PLAN MAY BE ON HOLD, BUT THE LEGISLATURE STILL MADE NUMEROUS IMPROVEMENTS BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM IN OUR “NEBRASKA BUSINESS Expansion Decision Guide,” we identify the 22 state and local site selection features most commonly considered by companies when deciding where to locate or expand a business. These 22 features collectively establish the framework for a state’s business climate. While this year’s Nebraska legislative session was noteworthy for a number of reasons, it was particularly noteworthy in regard to the state’s tax and incentive policies. The Legislature enacted several significant tax and incentive changes, which collectively improved the state’s business climate for attracting and retaining new business. These changes positively impact at least eight of the 22 state and local site selection features: Business State & Local Tax System Workforce Costs Quality of Life State & Local Incentives Skilled Workforce Personal State & Local Tax System Area Cost of Living Workforce Development Below we review some of the most significant tax and incentive changes passed this year. 2024 was a significant legislative session for taxes and incentives in Nebraska, both for the bills that passed the Legislature and one that did not. While the focus of this article will be on the tax changes that did pass the Legislature this year—and became law—we would be remiss if we failed to also mention the Governor’s Property Tax Reform package that did not become law. Governor’s Proposed Property Tax Reform As many know from following media coverage, LB 388 represented the Governor’s plan (as amended through the legislative process) to reduce property taxes by subjecting additional items to sales tax, taxing vaping products, raising taxes on cigarettes, and imposing a tax on digital advertising. LB 388 also would have increased Nebraska’s earned income tax credit, instituted certain caps on local government spending, and removed Nebraska’s property tax credit that was claimed on Nebraska income tax returns. LB 388 did not include an increase in Nebraska’s sales tax rate, although the Governor had initially proposed that. LB 388 failed to pass on its Final Reading at the Legislature. The Governor has repeatedly stated that he would call a Special Session for the Legislature to continue work on his proposed reforms. The timing on that Special Session is unclear, as the Governor has also stated that he would not call the session until he has the necessary votes to pass his plan. The Governor has been touring Nebraska to develop those votes and explain his proposal to voters. So, we remain on hold as to the Governor’s plans for a Special Session. Tax Changes Impacting Nebraska’s Competitive Business Climate A number of significant tax changes did become law in Nebraska. These include the following: EMPLOYEES WORKING REMOTELY FOR A NEBRASKA COMPANY Beginning in 2025, LB 1023 amends Nebraska’s “Convenience of the Employer” rule. This rule had subjected to Nebraska income tax the income earned by a nonresident individual who worked for Nebraska companies and whose service, except for the individual’s convenience, could have been performed in Nebraska. LB 1023 amends this provision to state that such rule shall only apply if the individual is present in Nebraska, in connection with such business, trade, or profession, for more than seven days during a year. If a nonresident is taxed under the amended “Convenience of the Employer” rule, only compensation paid to the individual for services performed within Nebraska will be subject to tax. So, the impact of the rule will be much lower than in the past. 18 Nebraska CPA
In addition, LB 1023 amends Nebraska law to specifically state that compensation paid to a nonresident individual shall not constitute Nebraska source income if: (a) the compensation is paid for employment duties performed by the individual while present in this state to attend a conference or training; (ii) the individual is present in the state for seven or fewer employment duty days in the taxable year; (iii) the individual performed employment duties in more than one state during the taxable year; and (iv) total compensation while in the state does not exceed $5,000 in the taxable year. LB 1023 also specifies that a nonresident is not subject to Nebraska income tax on compensation that is paid to an individual who serves on the board of directors or similar governing body of a business and that relates to board or governing body activities taking place in this state. Insight on These Changes: While these changes are intended to ease the burden on companies with remote employees (and those employees themselves), LB 1023 did not change the “Base of Operations” rule, which is still present in Nebraska law. The “Base of Operations” rule states that income earned by a nonresident individual is Nebraska source income if some of the individual’s service is performed in Nebraska and the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in Nebraska. So, we cannot be sure that the change to Nebraska’s “Convenience of the Employer” rule of LB 1023 will solve all the tax challenges faced by Nebraska employers who use remote employees. Of course, we recognize that LB 1023 will have very positive effects for Nebraska companies using remote employees. NEW LIMIT ON TELECOMMUNICATIONS OCCUPATION TAX LB 1023 places a new limitation on the Occupation Tax that may be imposed on telecommunications service by cities. Beginning Oct. 1, 2024, the tax may no longer exceed 4%, down from 6.25%. Insight on This Change: In late 2022, Nebraska was ranked as having the fourth highest cell phone taxes in America. This rule is certainly intended to help reduce those taxes and improve Nebraska’s ranking. This will reduce taxes collected by Nebraska cities. Omaha estimated such losses at $2 million annually, while Lincoln estimated the impact at $1 million annually. INCREASED IMMEDIATE DEDUCTION FOR NEW BUSINESS ASSETS Beginning in 2026, taxpayers may receive a Nebraska income tax deduction (in excess of any federal deduction) for the cost of business assets that are qualified property or qualified improvement property as defined under Section 168 of the Internal Revenue Code. This deduction is limited to 60% of the full cost of such expenditures in the tax year in which the property is placed in service. The remaining 40% could be depreciated over a five-year irrevocable term. Insight on This Change: Nebraska has intentionally decoupled from federal law to encourage Nebraska businesses to invest in additional equipment. The Legislature believes that such increased investment will have a multiplier effect that will help to offset any temporary tax reductions from this provision. DEDUCTION OF RESEARCH & DEVELOPMENT EXPENSES Also beginning in 2026, taxpayers may elect to treat research or experimental expenditures that are paid or incurred by the taxpayer during the taxable year in connection with the taxpayer’s trade or business as deductible expenses, notwithstanding any changes to the Internal Revenue Code related to the amortization of such research or experimental expenditures. Such a deduction would be allowed only to the extent that such research or experimental expenditures have not already been deducted in determining federal income. If a taxpayer does not fully deduct the research or experimental expenditures in the taxable year in which the expenditures are paid or incurred, the taxpayer could elect to amortize the expenditures over a five-year irrevocable term. Insight on This Change: Nebraska is looking to encourage firms to invest in research and development in Nebraska, recognizing that having dynamic companies with innovative products is the best way to have a strong economy. CARETAKER TAX CREDIT ACT The Caretaker Tax Credit Act, passed as part of LB 937, allows family caregivers of those needing assistance to receive a nonrefundable tax credit for eligible expenses of 50% of those expenses, with a maximum credit amount of either $2,000 or $3,000, depending on the status of the family member, from their Nebraska income tax. The credit is capped at $1.5 million annually and has an income limitation of $100,000. Insight on This Change: The Legislature wanted to support caregivers, who are often sacrificing their own income, by providing them with a Nebraska tax credit. EXCISE TAX ON COMMERCIAL ELECTRIC VEHICLE CHARGING STATIONS LB 1317 imposes a new excise tax, beginning in 2028, of 3 cents per kilowatt hour on the electric energy used to charge the battery of a motor vehicle at a commercial electric vehicle charging station. The Legislature also created a sales and use tax exemption for electric energy when stored, used, or consumed by a motor vehicle and the electricity was subject to the excise tax described above. Insight on These Changes: As the use of electric vehicles grows, and vehicles use less fuel, the revenue generated by fuel tax will need to be replaced. Incentive Changes Impacting Nebraska’s Competitive Business Climate The Legislature also made a number of significant changes to Nebraska’s incentive programs. These include the following: GOOD LIFE DISTRICT ECONOMIC DEVELOPMENT ACT The Good Life District Economic Development Act, passed as part of LB 1347, was meant as an overlay to the existing Good Life Transformational Projects Act, passed last year by the Legislature. (We previously discussed the Good Life Transformational Projects Act in articles appearing in 2023 Issue No. 3 and 2024 Issue No. 1 of the Nebraska CPA journal.) CONTINUED ON PAGE 20 19 www.nescpa.org
As you may recall, under the Good Life Transformational Projects Act, the Nebraska Department of Economic Development was authorized to approve applications to enact “Good Life Districts.” Such districts would have to meet certain development cost and job creation thresholds. 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, although the Good Life Transformational Projects Act did not create a direct way to use those tax funds. The Good Life District Economic Development Act was intended to fill that hole. Under this Act, a city may establish a Good Life District Economic Development program if approved by voters in the city. If a city establishes a Good Life District Economic Development program, the city may issue bonds that would be used to pay for the financing of the development of the Good Life District in that city. To pay off those bonds, the city may establish one or more of the following local taxes: 1. Additional City Sales Tax. The city may establish a local option sales and use tax upon the same transactions that are sourced for sales tax purposes within the Good Life District. The amount of this tax may be the greater of: a) the difference between the normal state sales tax rate and the rate levied on transactions within a good life district, or b) 2.75%. 2. Occupation Tax. The city may impose an occupation tax on all businesses within the Good Life District. 3. Use of City’s Existing Sales Tax. The city may also choose to use the revenue from its existing sales tax on transactions occurring within the Good Life District. If a city imposes an additional sales tax in a Good Life District (option 1 above), those funds cannot be later refunded under the Imagine Nebraska Act or another state incentive program. Insight on These Changes: The Legislature was looking to provide Good Life Districts with another tool for financing the developments that the Legislature enacted the Good Life Transformational Projects Act to incent. RELOCATION INCENTIVE ACT Beginning in 2025, LB 1023 creates incentives for both employers hiring people who move into Nebraska and new residents moving to Nebraska. For employers, the Relocation Incentive Act creates a refundable income tax credit for employers who pay relocation expenses for a qualifying employee who moves to Nebraska for the purpose of accepting a position of employment. The credit is equal to 50% of the relocation expenses and is limited to $5,000 per qualifying employee. An employee must make between $70,000 and $250,000 per year for the employer to qualify for the credit. The credit will be recaptured if the employee moves out of Nebraska within two years after the credit is claimed. In addition, total credits are capped at $5 million per year. For employees, the Act allows new residents to make a one-time election, within two years of becoming a Nebraska resident, to exclude all Nebraska-sourced wage income from an employer if that employee makes between $70,000 and $250,000 per year. The employee must pay those taxes back to Nebraska if the employee moves out of Nebraska within two years after the exclusion is taken. Insight on These Changes: Nebraska has taken a concrete step forward to incent persons to move to Nebraska—and for employers to attract persons to move to Nebraska. Nebraska has realized that it cannot just create new jobs. Nebraska must have ways to attract people to fill those jobs as well. AMENDMENTS TO IMAGINE NEBRASKA ACT LB 1023 amended the Imagine Nebraska Act to specifically allow a property tax exemption for business equipment used primarily for the capture and compression of carbon dioxide, such as at an ethanol plant. LB 1317 also amended the Imagine Nebraska Act to specifically allow property tax exemptions for business equipment used for the manufacturing of liquid fertilizer, other chemicals applied to agricultural crops, and liquid additives for farm vehicle fuel. Insight on This Change: Nebraska continues to recognize the importance of this program in attracting new industry to Nebraska. As needed, amendments are made to the program to maintain its value. PROPERTY TAX EXEMPTION FOR ADDITIONAL LOW-INCOME HOUSING DEVELOPMENTS LB 1326 amended Nebraska law to allow a property tax exemption for the real and personal property of a controlled affiliate of a local housing agency, removing a requirement that such affiliate be wholly owned by the housing agency. Insight on This Change: As many housing developments for low-income individuals are built in a public-private partnership, this will allow more developments to be exempt and thus hopefully increase the supply of housing in Nebraska. ADDITIONAL PROPERTY TAX EXEMPTIONS LB 1317 amended Nebraska law to also allow a property tax exemption for nursing and assisted living facilities, in proportion to the number of beds occupied by Medicaid recipients. For example, if 50% of the beds were used for Medicaid recipients, the facility would receive a 50% exemption. LB 1317 also created a property tax exemption for charitable organizations operating student housing, equivalent to the square footage of the common areas of the housing. Insight on This Change: These changes were intended to help increase the supply of nursing and assisted living facilities in Nebraska, as well as student housing. Another Active Legislative Session While the Governor’s proposed Property Tax Reform package did not pass, the Legislature was still very active in shaping Nebraska’s tax and incentive policies— generally for the better. We acknowledge and appreciate the leadership of the Nebraska business community in making those changes, particularly such groups as CONTINUED FROM PAGE 19 20 Nebraska CPA
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