Bill Summary – FastDemocracy

LB51                                                                                    LB51
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                               LEGISLATURE OF NEBRASKA
                            ONE HUNDRED EIGHTH LEGISLATURE
                                FIRST SPECIAL SESSION
                       LEGISLATIVE BILL 51
       Introduced by Wayne, 13.
       Read first time July 29, 2024
       Committee: Revenue
  A BILL FOR AN ACT relating to revenue and taxation; to amend section
      77-2716, Revised Statutes Supplement, 2023, as amended by Laws 2024,
      LB937, section 75, Laws 2024, LB1023, section 10, Laws 2024, LB1317,
      section 85, and Laws 2024, LB1394, section 1; to provide an income
       tax adjustment for unrealized capital gains;   and to   repeal the
       original section.
   Be it enacted by the people of the State of Nebraska,
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      Section 1. Section 77-2716, Revised Statutes Supplement, 2023, as
  amended by Laws 2024, LB937, section 75, Laws 2024, LB1023, section 10,
  Laws 2024, LB1317, section 85, and Laws 2024, LB1394, section 1, is
  amended to read:
      77-2716      (1)   The following adjustments to   federal adjusted gross
  income or, for corporations and fiduciaries, federal taxable income shall
  be made for interest or dividends received:
       (a)(i) There shall be subtracted interest or dividends received by
  the owner of obligations of the United States and its territories and
  possessions or of any authority, commission, or instrumentality of the
  United States to the extent includable in gross income for federal income
  tax purposes but exempt from state income taxes under the laws of the
  United States; and
      (ii) There shall be subtracted interest received by the owner of
  obligations of the State of Nebraska or its political subdivisions or
  authorities which are Build America Bonds to the extent includable in
  gross income for federal income tax purposes;
      (b) There shall be subtracted that portion of the total dividends
  and other income received from a regulated investment company which is
  attributable to   obligations described in    subdivision     (a)    of this
   subsection as    reported to    the recipient by    the regulated investment
   company;
      (c) There shall be added interest or dividends received by the owner
  of obligations of the District of Columbia, other states of the United
  States, or their political subdivisions, authorities, commissions, or
   instrumentalities to the extent excluded in the computation of gross
  income for federal income tax purposes except that such interest or
   dividends shall not be added if received by a corporation which is a
   regulated investment company;
      (d) There shall be added that portion of the total dividends and
  other income received from    a regulated investment company which is
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   attributable to     obligations described in    subdivision          (c)     of this
   subsection and excluded for federal income tax purposes as reported to
   the recipient by the regulated investment company; and
         (e)(i) Any amount subtracted under this subsection shall be reduced
   by any interest on indebtedness incurred to carry the obligations or
   securities described in    this subsection or    the investment in     the
   regulated investment company and by   any expenses incurred in     the
   production of interest or dividend income described in this subsection to
   the extent that such expenses, including amortizable bond premiums, are
   deductible in determining federal taxable income.
         (ii) Any amount added under this subsection shall be reduced by any
   expenses incurred in    the production of    such income to   the extent
   disallowed in the computation of federal taxable income.
         (2) There shall be allowed a net operating loss derived from or
   connected with Nebraska sources computed under rules and regulations
   adopted and promulgated by the Tax Commissioner consistent, to the extent
   possible under the Nebraska Revenue Act of 1967, with the laws of the
   United States. For a resident individual, estate, or trust, the net
   operating loss computed on    the federal income tax return shall be
   adjusted by    the modifications contained in       this section.     For     a
   nonresident individual, estate, or trust or for a partial-year resident
   individual, the net operating loss computed on the federal return shall
   be adjusted by   the modifications contained in   this section and any
   carryovers or carrybacks shall be limited to the portion of the loss
   derived from or connected with Nebraska sources.
         (3) There shall be subtracted from federal adjusted gross income for
   all taxable years beginning on or after January 1, 1987, the amount of
   any state income tax refund to the extent such refund was deducted under
   the Internal Revenue Code, was not allowed in the computation of the tax
   due under the Nebraska Revenue Act of 1967, and is included in federal
   adjusted gross income.
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         (4) Federal adjusted gross income, or, for a fiduciary, federal
  taxable income shall be modified to exclude the portion of the income or
  loss received from a small business corporation with an election in
  effect under subchapter S of the Internal Revenue Code or from a limited
   liability company organized pursuant to the Nebraska Uniform Limited
   Liability Company Act that is not derived from or connected with Nebraska
   sources as determined in section 77-2734.01.
         (5) There shall be subtracted from federal adjusted gross income or,
  for corporations and fiduciaries,       federal taxable income dividends
  received or deemed to be received from corporations which are not subject
  to the Internal Revenue Code.
         (6) There shall be subtracted from federal taxable income a portion
  of the income earned by a corporation subject to the Internal Revenue
  Code of 1986 that is actually taxed by a foreign country or one of its
   political subdivisions at a rate in excess of the maximum federal tax
   rate for corporations. The taxpayer may make the computation for each
  foreign country or for groups of foreign countries. The portion of the
  taxes that may be deducted shall be computed in the following manner:
          (a) The amount of federal taxable income from operations within a
  foreign taxing jurisdiction shall be reduced by the amount of taxes
  actually paid to the foreign jurisdiction that are not deductible solely
  because the foreign tax credit was elected on the federal income tax
  return;
          (b) The amount of after-tax income shall be divided by one minus the
   maximum tax rate for corporations in the Internal Revenue Code; and
         (c)   The result of   the calculation in     subdivision   (b)    of this
  subsection shall be subtracted from the amount of federal taxable income
   used in   subdivision        (a)   of this subsection.        The result of   such
  calculation,       if greater than zero,   shall be    subtracted from federal
  taxable income.
         (7) Federal adjusted gross income shall be modified to exclude any
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  amount repaid by the taxpayer for which a reduction in federal tax is
  allowed under section 1341(a)(5) of the Internal Revenue Code.
            (8)(a)      Federal adjusted gross income or,       for corporations and
  fiduciaries,          federal taxable income shall be    reduced,        to the extent
  included, by income from interest, earnings, and state contributions
   received from the Nebraska educational savings plan trust created in
  sections          85-1801   to    85-1817       and any account established under the
  achieving         a better life experience program as    provided in   sections
  77-1401 to 77-1409.
            (b)     Federal adjusted gross income or,       for corporations and
  fiduciaries, federal taxable income shall be reduced by any contributions
   as    a participant in    the Nebraska educational savings plan trust or
   contributions to an account established under the achieving a better life
   experience program made for the benefit of a beneficiary as provided in
  sections 77-1401 to 77-1409, to the extent not deducted for federal
  income tax purposes, but not to exceed five thousand dollars per married
  filing separate return or ten thousand dollars for any other return. With
  respect to a qualified rollover within the meaning of section 529 of the
  Internal Revenue Code from another state's plan, any interest, earnings,
  and state contributions received from the other state's educational
  savings plan which is qualified under section 529 of the code shall
   qualify for the reduction provided in this subdivision. For contributions
  by a custodian of a custodial account including rollovers from another
  custodial account, the reduction shall only apply to funds added to the
  custodial account after January 1, 2014.
            (c) For taxable years beginning or deemed to begin on or after
  January 1, 2021, under the Internal Revenue Code of 1986, as amended,
  federal adjusted gross income shall be reduced, to the extent included in
   the adjusted gross income of    an individual,           by the amount of    any
   contribution made by the individual's employer into an account under the
  Nebraska educational savings plan trust owned by the individual, not to
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   exceed five thousand dollars per married filing separate return or ten
   thousand dollars for any other return.
         (d)    Federal adjusted gross income or,        for corporations and
   fiduciaries, federal taxable income shall be increased by:
         (i) The amount resulting from the cancellation of a participation
   agreement refunded to the taxpayer as a participant in the Nebraska
   educational savings plan trust to the extent previously deducted under
   subdivision (8)(b) of this section; and
         (ii)   The amount of   any withdrawals by    the owner of    an account
  established under the achieving          a better life experience program as
  provided in sections 77-1401 to 77-1409 for nonqualified expenses to the
  extent previously deducted under subdivision (8)(b) of this section.
         (9)(a) For income tax returns filed after September 10, 2001, for
   taxable years beginning or deemed to begin before January 1, 2006, under
   the Internal Revenue Code of 1986, as amended, federal adjusted gross
   income or, for corporations and fiduciaries, federal taxable income shall
   be increased by eighty-five percent of any amount of any federal bonus
   depreciation received under the federal Job Creation and Worker
   Assistance Act of 2002 or the federal Jobs and Growth Tax Act of 2003,
   under section 168(k) or section 1400L of the Internal Revenue Code of
   1986, as amended, for assets placed in service after September 10, 2001,
   and before December 31, 2005.
         (b)    For   a partnership,        limited liability company,        cooperative,
   including any cooperative exempt from income taxes under section 521 of
   the Internal Revenue Code of     1986,      as amended,      limited cooperative
  association, subchapter S corporation, or joint venture, the increase
  shall be distributed to the partners, members, shareholders, patrons, or
   beneficiaries in the same manner as income is distributed for use against
   their income tax liabilities.
         (c) For a corporation with a unitary business having activity both
  inside and outside the state,    the increase shall be   apportioned to
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  Nebraska in the same manner as income is apportioned to the state by
  section 77-2734.05.
          (d) The amount of bonus depreciation added to federal adjusted gross
  income or, for corporations and fiduciaries, federal taxable income by
  this subsection shall be subtracted in a later taxable year. Twenty
   percent of the total amount of bonus depreciation added back by this
   subsection for tax years beginning or deemed to begin before January 1,
   2003,    under the Internal Revenue Code of    1986,    as amended,     may be
   subtracted in the first taxable year beginning or deemed to begin on or
  after January 1, 2005, under the Internal Revenue Code of 1986, as
  amended, and twenty percent in each of the next four following taxable
   years. Twenty percent of the total amount of bonus depreciation added
   back by this subsection for tax years beginning or deemed to begin on or
  after January 1, 2003, may be subtracted in the first taxable year
   beginning or deemed to begin on or after January 1, 2006, under the
   Internal Revenue Code of 1986, as amended, and twenty percent in each of
   the next four following taxable years.
         (10) For taxable years beginning or deemed to begin on or after
   January 1, 2003, and before January 1, 2006, under the Internal Revenue
  Code of   1986,      as amended,     federal adjusted gross income or,     for
  corporations and fiduciaries, federal taxable income shall be increased
   by the amount of any capital investment that is expensed under section
   179 of the Internal Revenue Code of 1986, as amended, that is in excess
   of twenty-five thousand dollars that is allowed under the federal Jobs
   and Growth Tax Act of   2003.   Twenty percent of   the total amount of
  expensing added back by this subsection for tax years beginning or deemed
   to begin on or after January 1, 2003, may be subtracted in the first
   taxable year beginning or deemed to begin on or after January 1, 2006,
   under the Internal Revenue Code of 1986, as amended, and twenty percent
   in each of the next four following tax years.
         (11)(a)    For taxable years beginning or   deemed to   begin before
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   January 1, 2018, under the Internal Revenue Code of 1986, as amended,
   federal adjusted gross income shall be reduced by contributions, up to
   two thousand dollars per married filing jointly return or one thousand
   dollars for any other return, and any investment earnings made as a
   participant in the Nebraska long-term care savings plan under the Long-
   Term Care Savings Plan Act, to the extent not deducted for federal income
   tax purposes.
       (b) For taxable years beginning or deemed to begin before January 1,
   2018,   under the Internal Revenue Code of   1986,   as amended,    federal
   adjusted gross income shall be increased by the withdrawals made as a
   participant in the Nebraska long-term care savings plan under the act by
   a person who is not a qualified individual or for any reason other than
   transfer of funds to a spouse, long-term care expenses, long-term care
   insurance premiums, or death of the participant, including withdrawals
   made by reason of cancellation of the participation agreement, to the
   extent previously deducted as a contribution or as investment earnings.
       (12) There shall be added to federal adjusted gross income for
   individuals,    estates,   and trusts any amount taken as   a credit for
   franchise tax paid by a financial institution under sections 77-3801 to
   77-3807 as allowed by subsection (5) of section 77-2715.07.
       (13)(a) For taxable years beginning or deemed to begin on or after
   January 1, 2015, and before January 1, 2024, under the Internal Revenue
   Code of 1986, as amended, federal adjusted gross income shall be reduced
   by the amount received as benefits under the federal Social Se