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LEGISLATURE OF NEBRASKA
ONE HUNDRED SIXTH LEGISLATURE
SECOND SESSION
LEGISLATIVE BILL 1042
Introduced by La Grone, 49; McDonnell, 5.
Read first time January 16, 2020
Committee: Revenue
1 A BILL FOR AN ACT relating to the Nebraska educational savings plan
2 trust; to amend sections 77-3,110, 85-1808, and 85-1810, Reissue
3 Revised Statutes of Nebraska, and sections 77-2716, 85-1802, and
4 85-1807, Revised Statutes Supplement, 2019; to change provisions
5 relating to the Department of Revenue Miscellaneous Receipts Fund
6 and the College Savings Plan Expense Fund; to provide tax deductions
7 for certain contributions to the Nebraska educational savings plan
8 trust as prescribed; to provide that certain contributions to the
9 Nebraska educational savings plan trust not be recognized as income
10 for certain purposes; to redefine qualified higher education
11 expenses for purposes of the Nebraska educational savings plan
12 trust; to harmonize provisions; to repeal the original sections; and
13 to declare an emergency.
14 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Section 77-3,110, Reissue Revised Statutes of Nebraska,
2 is amended to read:
3 77-3,110 (1) All funds received pursuant to sections 77-3,109 and
4 77-3,118 shall be remitted to the State Treasurer for credit to the
5 Department of Revenue Miscellaneous Receipts Fund which is hereby
6 created.
7 (2) On or before July 15, 2020, the State Treasurer shall transfer
8 fifty-nine thousand one hundred eighty-eight dollars from the College
9 Savings Plan Expense Fund to the Department of Revenue Miscellaneous
10 Receipts Fund.
11 (3) All money in the Department of Revenue Miscellaneous Receipts
12 Fund fund shall be administered by the Department of Revenue and shall be
13 used as follows:
14 (a) Any money transferred to the fund under subsection (2) of this
15 section shall be used by the Department of Revenue to defray the costs
16 incurred to implement this legislative bill; and
17 (b) All other funds shall be used to defray the cost of production
18 of the publications listed in section 77-3,109 or of the listings
19 described in section 77-3,118 and to carry out any administrative
20 responsibilities of the department.
21 (4) Transfers , except that transfers may be made from the fund to
22 the General Fund at the direction of the Legislature. Any money in the
23 Department of Revenue Miscellaneous Receipts Fund available for
24 investment shall be invested by the state investment officer pursuant to
25 the Nebraska Capital Expansion Act and the Nebraska State Funds
26 Investment Act.
27 Sec. 2. Section 77-2716, Revised Statutes Supplement, 2019, is
28 amended to read:
29 77-2716 (1) The following adjustments to federal adjusted gross
30 income or, for corporations and fiduciaries, federal taxable income shall
31 be made for interest or dividends received:
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1 (a)(i) There shall be subtracted interest or dividends received by
2 the owner of obligations of the United States and its territories and
3 possessions or of any authority, commission, or instrumentality of the
4 United States to the extent includable in gross income for federal income
5 tax purposes but exempt from state income taxes under the laws of the
6 United States; and
7 (ii) There shall be subtracted interest received by the owner of
8 obligations of the State of Nebraska or its political subdivisions or
9 authorities which are Build America Bonds to the extent includable in
10 gross income for federal income tax purposes;
11 (b) There shall be subtracted that portion of the total dividends
12 and other income received from a regulated investment company which is
13 attributable to obligations described in subdivision (a) of this
14 subsection as reported to the recipient by the regulated investment
15 company;
16 (c) There shall be added interest or dividends received by the owner
17 of obligations of the District of Columbia, other states of the United
18 States, or their political subdivisions, authorities, commissions, or
19 instrumentalities to the extent excluded in the computation of gross
20 income for federal income tax purposes except that such interest or
21 dividends shall not be added if received by a corporation which is a
22 regulated investment company;
23 (d) There shall be added that portion of the total dividends and
24 other income received from a regulated investment company which is
25 attributable to obligations described in subdivision (c) of this
26 subsection and excluded for federal income tax purposes as reported to
27 the recipient by the regulated investment company; and
28 (e)(i) Any amount subtracted under this subsection shall be reduced
29 by any interest on indebtedness incurred to carry the obligations or
30 securities described in this subsection or the investment in the
31 regulated investment company and by any expenses incurred in the
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1 production of interest or dividend income described in this subsection to
2 the extent that such expenses, including amortizable bond premiums, are
3 deductible in determining federal taxable income.
4 (ii) Any amount added under this subsection shall be reduced by any
5 expenses incurred in the production of such income to the extent
6 disallowed in the computation of federal taxable income.
7 (2) There shall be allowed a net operating loss derived from or
8 connected with Nebraska sources computed under rules and regulations
9 adopted and promulgated by the Tax Commissioner consistent, to the extent
10 possible under the Nebraska Revenue Act of 1967, with the laws of the
11 United States. For a resident individual, estate, or trust, the net
12 operating loss computed on the federal income tax return shall be
13 adjusted by the modifications contained in this section. For a
14 nonresident individual, estate, or trust or for a partial-year resident
15 individual, the net operating loss computed on the federal return shall
16 be adjusted by the modifications contained in this section and any
17 carryovers or carrybacks shall be limited to the portion of the loss
18 derived from or connected with Nebraska sources.
19 (3) There shall be subtracted from federal adjusted gross income for
20 all taxable years beginning on or after January 1, 1987, the amount of
21 any state income tax refund to the extent such refund was deducted under
22 the Internal Revenue Code, was not allowed in the computation of the tax
23 due under the Nebraska Revenue Act of 1967, and is included in federal
24 adjusted gross income.
25 (4) Federal adjusted gross income, or, for a fiduciary, federal
26 taxable income shall be modified to exclude the portion of the income or
27 loss received from a small business corporation with an election in
28 effect under subchapter S of the Internal Revenue Code or from a limited
29 liability company organized pursuant to the Nebraska Uniform Limited
30 Liability Company Act that is not derived from or connected with Nebraska
31 sources as determined in section 77-2734.01.
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1 (5) There shall be subtracted from federal adjusted gross income or,
2 for corporations and fiduciaries, federal taxable income dividends
3 received or deemed to be received from corporations which are not subject
4 to the Internal Revenue Code.
5 (6) There shall be subtracted from federal taxable income a portion
6 of the income earned by a corporation subject to the Internal Revenue
7 Code of 1986 that is actually taxed by a foreign country or one of its
8 political subdivisions at a rate in excess of the maximum federal tax
9 rate for corporations. The taxpayer may make the computation for each
10 foreign country or for groups of foreign countries. The portion of the
11 taxes that may be deducted shall be computed in the following manner:
12 (a) The amount of federal taxable income from operations within a
13 foreign taxing jurisdiction shall be reduced by the amount of taxes
14 actually paid to the foreign jurisdiction that are not deductible solely
15 because the foreign tax credit was elected on the federal income tax
16 return;
17 (b) The amount of after-tax income shall be divided by one minus the
18 maximum tax rate for corporations in the Internal Revenue Code; and
19 (c) The result of the calculation in subdivision (b) of this
20 subsection shall be subtracted from the amount of federal taxable income
21 used in subdivision (a) of this subsection. The result of such
22 calculation, if greater than zero, shall be subtracted from federal
23 taxable income.
24 (7) Federal adjusted gross income shall be modified to exclude any
25 amount repaid by the taxpayer for which a reduction in federal tax is
26 allowed under section 1341(a)(5) of the Internal Revenue Code.
27 (8)(a) Federal adjusted gross income or, for corporations and
28 fiduciaries, federal taxable income shall be reduced, to the extent
29 included, by income from interest, earnings, and state contributions
30 received from the Nebraska educational savings plan trust created in
31 sections 85-1801 to 85-1817 and any account established under the
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1 achieving a better life experience program as provided in sections
2 77-1401 to 77-1409.
3 (b) Federal adjusted gross income or, for corporations and
4 fiduciaries, federal taxable income shall be reduced by any contributions
5 as a participant in the Nebraska educational savings plan trust or
6 contributions to an account established under the achieving a better life
7 experience program made for the benefit of a beneficiary as provided in
8 sections 77-1401 to 77-1409, to the extent not deducted for federal
9 income tax purposes, but not to exceed five thousand dollars per married
10 filing separate return or ten thousand dollars for any other return. With
11 respect to a qualified rollover within the meaning of section 529 of the
12 Internal Revenue Code from another state's plan, any interest, earnings,
13 and state contributions received from the other state's educational
14 savings plan which is qualified under section 529 of the code shall
15 qualify for the reduction provided in this subdivision. For contributions
16 by a custodian of a custodial account including rollovers from another
17 custodial account, the reduction shall only apply to funds added to the
18 custodial account after January 1, 2014.
19 (c) For taxable years beginning or deemed to begin on or after
20 January 1, 2021, under the Internal Revenue Code of 1986, as amended,
21 federal adjusted gross income shall be reduced, to the extent included in
22 the adjusted gross income of an individual, by the amount of any
23 contribution made by the individual's employer into an account under the
24 Nebraska educational savings plan trust owned by the individual, not to
25 exceed five thousand dollars per married filing separate return or ten
26 thousand dollars for any other return.
27 (d) (c) Federal adjusted gross income or, for corporations and
28 fiduciaries, federal taxable income shall be increased by:
29 (i) The amount resulting from the cancellation of a participation
30 agreement refunded to the taxpayer as a participant in the Nebraska
31 educational savings plan trust to the extent previously deducted under
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1 subdivision (8)(b) of this section; and
2 (ii) The amount of any withdrawals by the owner of an account
3 established under the achieving a better life experience program as
4 provided in sections 77-1401 to 77-1409 for nonqualified expenses to the
5 extent previously deducted under subdivision (8)(b) of this section.
6 (9)(a) For income tax returns filed after September 10, 2001, for
7 taxable years beginning or deemed to begin before January 1, 2006, under
8 the Internal Revenue Code of 1986, as amended, federal adjusted gross
9 income or, for corporations and fiduciaries, federal taxable income shall
10 be increased by eighty-five percent of any amount of any federal bonus
11 depreciation received under the federal Job Creation and Worker
12 Assistance Act of 2002 or the federal Jobs and Growth Tax Act of 2003,
13 under section 168(k) or section 1400L of the Internal Revenue Code of
14 1986, as amended, for assets placed in service after September 10, 2001,
15 and before December 31, 2005.
16 (b) For a partnership, limited liability company, cooperative,
17 including any cooperative exempt from income taxes under section 521 of
18 the Internal Revenue Code of 1986, as amended, limited cooperative
19 association, subchapter S corporation, or joint venture, the increase
20 shall be distributed to the partners, members, shareholders, patrons, or
21 beneficiaries in the same manner as income is distributed for use against
22 their income tax liabilities.
23 (c) For a corporation with a unitary business having activity both
24 inside and outside the state, the increase shall be apportioned to
25 Nebraska in the same manner as income is apportioned to the state by
26 section 77-2734.05.
27 (d) The amount of bonus depreciation added to federal adjusted gross
28 income or, for corporations and fiduciaries, federal taxable income by
29 this subsection shall be subtracted in a later taxable year. Twenty
30 percent of the total amount of bonus depreciation added back by this
31 subsection for tax years beginning or deemed to begin before January 1,
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1 2003, under the Internal Revenue Code of 1986, as amended, may be
2 subtracted in the first taxable year beginning or deemed to begin on or
3 after January 1, 2005, under the Internal Revenue Code of 1986, as
4 amended, and twenty percent in each of the next four following taxable
5 years. Twenty percent of the total amount of bonus depreciation added
6 back by this subsection for tax years beginning or deemed to begin on or
7 after January 1, 2003, may be subtracted in the first taxable year
8 beginning or deemed to begin on or after January 1, 2006, under the
9 Internal Revenue Code of 1986, as amended, and twenty percent in each of
10 the next four following taxable years.
11 (10) For taxable years beginning or deemed to begin on or after
12 January 1, 2003, and before January 1, 2006, under the Internal Revenue
13 Code of 1986, as amended, federal adjusted gross income or, for
14 corporations and fiduciaries, federal taxable income shall be increased
15 by the amount of any capital investment that is expensed under section
16 179 of the Internal Revenue Code of 1986, as amended, that is in excess
17 of twenty-five thousand dollars that is allowed under the federal Jobs
18 and Growth T