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
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