The 2012 Nebraska legislative session is in the books and the Nebraska Legislature made a number of significant tax changes. We thought a review of several significant Nebraska tax law changes made by the Legislature was in order.
- Individual Income Tax Rate Reduction and Bracket Adjustments (LB 970 – Operative Date: January 1, 2013)
Currently, for taxpayers who are married filing jointly, tax rates are 2.56% for the first $4,800 in income; 3.57% for $4,800 through $35,000; 5.12% for $35,000 through $54,000; and 6.84% for more than $54,000 in income. For 2013 and later tax years, Nebraska’s bottom three individual income tax rates are reduced from 2.56%, 3.57%, and 5.12% to 2.46%, 3.51%, and 5.01%. In addition, the individual income tax brackets were expanded under LB 970 beginning in 2014. Beginning in 2014, tax rates and brackets for taxpayers who are married filing jointly will be 2.46% for the first $6,000 in income; 3.51% for $6,000 through $36,000; 5.01% for $36,000 through $58,000; and 6.84% for more than $58,000 in income.
- Apportionment of Intangibles and Services (LB 872 – Operative Date: January 1, 2014)
A corporate taxpayer (except communications companies) will apportion income from the sale of intangibles and services to the location of the customer (market-based apportionment) rather than the location where the income-producing activity is performed (cost of performance apportionment).
- New Market Income Tax Credit (LB 1128 – Operative Date: January 1, 2012)
Individuals, pass-through entities, and corporations are eligible for a nonrefundable, nontransferable credit for investments in businesses located in a qualified active low-income community area. The credit may be used against income tax or sales and use taxes and is based on a percentage of the investment and the year in which the investment is made.
Sales and Use Tax
- Local Option Sales Tax Increase (LB 357 – Operative Date: July 19, 2012)
A municipality may impose a local option sales tax of 1.75% or 2.0% if the rate increase is approved by at least 70% of the municipality’s governing board and by a vote of the voters residing in the municipality.
- Sales and Use Tax Exemption for Youth Sports (LB 727 – Operative Date: July 1, 2012)
Admissions and fees charged to participate in youth sports events, leagues, or competitive educational activities are exempt from sales and use tax. Memberships remain exempt from sales and use tax.
- Sales and Use Tax Exemption for Shipments Out-of-State by Data Centers (LB 1080 – Operative Date: January 1, 2013)
Any tangible personal property acquired by a person operating a data center located in Nebraska, which is then incorporated into other tangible personal property for subsequent use outside the state by the same person operating a data center in this state, is exempt from sales and use tax.
- Local Option Sales Tax Refunds by Cities and Villages (LB 209 – Operative Date: January 1, 2014)
The State will not deduct a refund of local option sales tax under the Nebraska Advantage Act (LB 312) or Employment and Investment Growth Act (LB 775) from the local option sales tax receipts of a village or first or second class city for at least one year after that refund is paid by the State. Omaha is a metropolitan class city, so it is not affected by this bill.
Nebraska Advantage Incentives
- Tier 2 Large Data Center Projects (LB 1118 – Operative Date: March 7, 2012)
A taxpayer who invests at least $200 million and creates 30 new jobs at a data center project is eligible for a 10-year personal property tax exemption for the project, in addition to the benefits currently available for other Tier 2 projects.
- New or Increasing Municipal Occupation Taxes (LB 745 – Operative Date: July 19, 2012)
A municipality may not impose a new occupation tax or increase the rate of an occupation tax without approval by a majority of the municipality’s voters, except that a municipality may increase an existing occupation tax without a vote if the projected revenue from the increase does not exceed certain dollar thresholds.