Department Of Revenue’s Proposed Reg. 1-107 Is Again Withdrawn

by McGrath North Tax Group

(402) 341-3070

Long time readers of the Newsletter will recall that we have been monitoring the Department of Revenue’s proposed Reg. 1-107 for some time. This regulation would govern Nebraska’s Manufacturing Machinery and Equipment Exemption.

Proposed Reg. 1-107 would limit availability of the exemption to companies who derive more than 50% of revenue from their manufacturing operations. This 50% test is not part of the statutory exemption. The proposed regulation would further establish that the following activities are not considered “manufacturing”: a) mining, quarrying, and any other activity performed in severing raw materials from the ground; and b) sorting, cleaning, or repackaging property without any related manufacturing. These limitations are also not contained within the statutory exemption.

Recently, the Department had (for a second time) formally proposed this regulation and held a hearing on this and other proposed regulations. Members of the McGrath North Tax Group filed comments to the proposed Reg. 1-107. Following the hearing, the Department sent the group of proposed regulations to the Attorney General’s office for review on June 30.
The Attorney General did not approve these regulations and returned them to the Department. As confirmed in a conversation with the Attorney General’s office, each of the regulations needed revision, but at least one of the regulations required substantive changes and would need another hearing before it could be enacted.

Most of the proposed regulations were resubmitted to the Attorney General and approved on October 20.  However, the proposed Reg. 1-107 was not resubmitted and was not enacted.

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