Pub. 6 2024 Issue 2

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

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