LB754 LB754
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LEGISLATIVE BILL 754
Approved by the Governor May 31, 2023
Introduced by Linehan, 39; Albrecht, 17; Briese, 41; Clements, 2; Jacobson, 42;
Kauth, 31; Sanders, 45; von Gillern, 4; Moser, 22; Ballard, 21;
Lippincott, 34; at the request of the Governor.
A BILL FOR AN ACT relating to revenue and taxation; to amend sections 77-2727,
77-2730, 77-2775, 77-3605, and 77-3606, Reissue Revised Statutes of
Nebraska, and sections 71-1962, 77-2715.03, 77-2715.07, 77-2716, 77-2717,
77-2734.01, 77-2734.02, 77-2734.03, and 77-3604, Revised Statutes Cumulative Supplement, 2022; to adopt the Child Care Tax Credit Act; to reduce individual and corporate income tax rates as prescribed; to provide for certain income tax deductions; to change provisions relating to
taxation of partnerships and small business corporations; to define terms;
to reauthorize tax credits under and change provisions relating to the School Readiness Tax Credit Act; to harmonize provisions; to provide severability; to repeal the original sections; and to declare an
emergency.
Be it enacted by the people of the State of Nebraska,
Section 1. Sections 1 to 5 of this act shall be known and may be cited as
the Child Care Tax Credit Act.
Sec. 2. For purposes of the Child Care Tax Credit Act:
(1) Child means an individual who is five years of age or less;
(2) Department means the Department of Revenue;
(3) Eligible program means a program that is licensed as a family child care home I, family child care home II, child care center, or preschool and operates as a for-profit child care business or is a nonprofit organization under the Internal Revenue Code of 1986, as amended;
(4) Intermediary means any organization that distributes funds for the purpose of supporting an eligible program;
(5) Parent or legal guardian means an individual who claims a child as a dependent for federal income tax purposes;
(6) Qualifying contribution means a contribution in the form of cash,
check, cash equivalent, agricultural commodity, livestock, or publicly traded security that is made:
(a) For the establishment or operation of an eligible program;
(b) For the establishment of a grant or loan program for parents requiring financial assistance for an eligible program;
(c) To an early childhood collaborative or another intermediary to provide training, technical assistance, or mentorship to child care providers;
(d) For the establishment or ongoing costs of an information dissemination program that assists parents with information and referral services for child care;
(e) To a for-profit child care business, including family home providers.
The for-profit child care business must use the proceeds of a qualifying contribution for (i) the acquisition or improvement of child care facilities,
(ii) the acquisition of equipment, (iii) providing services, or (iv) employee retention; or
(f) To an intermediary for the establishment or operation of an eligible program or for the establishment of a grant or loan program for parents requiring financial assistance for an eligible program;
(7) Taxpayer means any person subject to the income tax imposed by the Nebraska Revenue Act of 1986. The term includes resident and nonresident individuals, estates, trusts, and corporations; and
(8) Total household income means federal modified adjusted gross income.
Sec. 3. (1) For taxable years beginning or deemed to begin on or after January 1, 2024, under the Internal Revenue Code of 1986, as amended, a parent or legal guardian shall be eligible to receive a credit against the income tax imposed by the Nebraska Revenue Act of 1967 if:
(a) The parent's or legal guardian's child is enrolled in a child care program licensed pursuant to the Child Care Licensing Act;
(b) The parent's or legal guardian's child receives care from an approved license-exempt provider enrolled in the child care subsidy program pursuant to
sections 68-1202 and 68-1206; or
(c) The parent's or legal guardian's total household income is less than or equal to one hundred percent of the federal poverty level.
(2) The credit provided in this section shall be a refundable tax credit equal to:
(a) Two thousand dollars per child if the parent's or legal guardian's total household income is no more than seventy-five thousand dollars; or
(b) One thousand dollars per child if the parent's or legal guardian's total household income is more than seventy-five thousand dollars but no more than one hundred fifty thousand dollars.
(3) A parent or legal guardian shall not be eligible for a credit under this section if the parent's or legal guardian's total household income is more than one hundred fifty thousand dollars.
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(4) A parent or legal guardian shall apply for the credit provided in this section by submitting an application to the department with the following information:
(a) The number of children for which the parent or legal guardian is
claiming a credit;
(b) Documentation of the parent's or legal guardian's total household income; and
(c) Any other documentation required by the department.
(5) Subject to subsection (6) of this section, if the department determines that the parent or legal guardian qualifies for tax credits under this section, the department shall approve the application and certify the amount of credits approved to the parent or legal guardian.
(6) The department shall consider applications in the order in which they are received and may approve tax credits under this section each year until the total amount of credits approved for the year equals fifteen million dollars.
Sec. 4. (1) For taxable years beginning or deemed to begin on or after January 1, 2024, under the Internal Revenue Code of 1986, as amended, any taxpayer who makes a qualifying contribution during the taxable year shall be
eligible to receive a credit against the income tax imposed by the Nebraska Revenue Act of 1967.
(2) The credit provided in this section shall be a nonrefundable credit equal to either one hundred percent or seventy-five percent of the taxpayer's qualifying contribution made during the taxable year, except that the credit for a taxpayer shall not exceed one hundred thousand dollars for any single taxable year.
(3) The credit shall be equal to one hundred percent of the qualifying contribution if:
(a) The eligible program that receives the contribution has a physical presence in an opportunity zone in this state designated pursuant to the federal Tax Cuts and Jobs Act, Public Law 115-97; or
(b) The eligible program that receives the contribution has at least one child enrolled in the child care subsidy program established pursuant to
sections 68-1202 and 68-1206 and the child care provider is actively caring and billing for the child as verified by the Department of Health and Human Services. Attracting child care providers into the child care subsidy program and retaining providers in the program are directly connected to the administration of the program. Verifying that the child care provider is
actively caring and billing for an eligible child is in furtherance of the child care subsidy program. The Department of Revenue shall not use any verification information obtained from the Department of Health and Human Services except for purposes directly connected with the administration of the Child Care Tax Credit Act.
(4) The credit shall be equal to seventy-five percent of the qualifying contribution if subsection (3) of this section does not apply.
(5) A taxpayer shall not be eligible for the credit provided in this section if the taxpayer claimed a charitable contribution deduction for the qualifying contribution on the taxpayer's federal income tax return.
(6) A taxpayer shall apply for the credit provided in this section by
submitting an application to the department with the following information:
(a) Documentation to show that the contribution is a qualifying contribution; and
(b) Any other documentation required by the department.
(7) Subject to subsection (8) of this section, if the department determines that the taxpayer qualifies for tax credits under this section, the department shall approve the application and certify the amount of credits approved to the taxpayer.
(8) The department shall consider applications in the order in which they are received and may approve tax credits under this section each year until the total amount of credits approved for the year equals two million five hundred thousand dollars.
(9) If a taxpayer's credit under this section exceeds the total tax due,
the taxpayer may carry forward the excess credit for up to five taxable years after the taxable year in which the credit was first allowed, but the taxpayer must use the carryover credit in the earliest taxable year possible.
(10) A contribution shall not qualify for a credit under this section if
the contribution is made to a child care provider in which the taxpayer or a person related to the taxpayer has a financial interest, unless the contribution is part of a bona fide arm's length transaction.
Sec. 5. The department may adopt and promulgate rules and regulations to
carry out the Child Care Tax Credit Act.
Sec. 6. Section 71-1962, Revised Statutes Cumulative Supplement, 2022, is amended to read:
71-1962 (1) Not later than March 1, 2014, the State Department of
Education shall create and operate the Nebraska Early Childhood Professional Record System. The system shall be designed in order to:
(a) Establish a database of Nebraska's early childhood education workforce;
(b) Verify educational degrees and professional credentials held and relevant training completed by employees of participating applicable child care and early childhood education programs; and
(c) Provide such information to the Department of Health and Human Services for use in evaluating applications to be rated at a step above step one under section 71-1959.
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(2) When an applicable child care or early childhood education program participating in the quality rating and improvement system developed pursuant to section 71-1955 applies under section 71-1959 to be rated at a step above step one, the child care or early childhood education program shall report the educational degrees and professional credentials held and relevant training completed by its child care and early childhood education employees to the Nebraska Early Childhood Professional Record System for the program to be eligible for a quality scale rating above step one.
(3) Any child care or early childhood education provider residing or
working in Nebraska may report his or her educational degrees and professional credentials held, relevant training completed, and work history to the Nebraska Early Childhood Professional Record System.
(4) The State Department of Education shall develop a classification system for all eligible staff members as defined in section 77-3603 who are employees of or who are self-employed individuals providing services for applicable child care and early childhood education programs listed in the Nebraska Early Childhood Professional Record System. The classification system shall be based on the eligible staff members' educational attainment degrees and professional credentials held, relevant training completed, and work history and shall be made up of five four levels, with level one being the least qualified and level five four being the most qualified. In order to meet the minimum qualification for classification as level one, an eligible staff member must be employed with, or be a self-employed individual providing services for, an eligible program as defined in section 77-3603 and complete at
least twelve hours of in-service training at a licensed child care facility.
The minimum qualification for an eligible staff member to be classified as
level one shall be a Child Development Associate Credential or a one-year certificate or diploma in early childhood education or child development. The classification system shall be used for purposes of the tax credit granted in
section 77-3605 under the School Readiness Tax Credit Act.
Sec. 7. Section 77-2715.03, Revised Statutes Cumulative Supplement, 2022,
is amended to read:
77-2715.03 (1) For taxable years beginning or deemed to begin on or after January 1, 2013, and before January 1, 2014, the following brackets and rates are hereby established for the Nebraska individual income tax:
Individual Income Tax Brackets and Rates Bracket Single Married, Head of Married, Estates Tax Number Individuals Filing Household Filing and Rate Jointly Separate Trusts
1 $0-2,399 $0-4,799 $0-4,499 $0-2,399 $0-499 2.46%
2 $2,400- $4,800- $4,500- $2,400- $500-
17,499 34,999 27,999 17,499 4,699 3.51%
3 $17,500- $35,000- $28,000- $17,500- $4,700-
26,999 53,999 39,999 26,999 15,149 5.01%
4 $27,000 $54,000 $40,000 $27,000 $15,150
and Over and Over and Over and Over and Over 6.84%
(2)(a) (2) For taxable years beginning or deemed to begin on or after January 1, 2014, the following brackets and rates are hereby established for the Nebraska individual income tax:
Individual Income Tax Brackets and Rates Bracket Single Married, Head of Married, Estates Tax Number Individuals Filing Household Filing and Rate Jointly Separate Trusts
1 $0-2,999 $0-5,999 $0-5,599 $0-2,999 $0-499 2.46%
2 $3,000- $6,000- $5,600- $3,000- $500-
17,999 35,999 28,799 17,999 4,699 3.51%
3 $18,000- $36,000- $28,800- $18,000- $4,700- Rate
28,999 57,999 42,999 28,999 15,149 Three
4 $29,000 $58,000 $43,000 $29,000 $15,150 Rate
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and Over and Over and Over and Over and Over Four
3 $18,000- $36,000- $28,800- $18,000- $4,700-
28,999 57,999 42,999 28,999 15,149 5.01%
4 $29,000 $58,000 $43,000 $29,000 $15,150
and Over and Over and Over and Over and Over Top Rate
(b) For purposes of this subsection, rate three shall be:
(i) 5.01% for taxable years beginning or deemed to begin on or after January 1, 2014, and before January 1, 2026;
(ii) 4.55% for taxable years beginning or deemed to begin on or after January 1, 2026, and before January 1, 2027; and
(iii) 3.99% for taxable years beginning or deemed to begin on or after January 1, 2027.
(c) For purposes of this subsection, the top rate four shall be:
(i) (a) 6.84% for taxable years beginning or deemed to begin on or after January 1, 2014, and before January 1, 2023;
(ii) (b) 6.64% for taxable years beginning or deemed to begin on or after January 1, 2023, and before January 1, 2024;
(iii) 5.84% (c) 6.44% for taxable years beginning or deemed to begin on or after January 1, 2024, and before January 1, 2025;
(iv) 5.20% (d) 6.24% for taxable years beginning or deemed to begin on or after January 1, 2025, and before January 1, 2026;
(v) 4.55% (e) 6.00% for taxable years beginning or deemed to begin on or after January 1, 2026, and before January 1, 2027; and
(vi) 3.99% (f) 5.84% for taxable years beginning or deemed to begin on or after January 1, 2027.
(3)(a) For taxable years beginning or deemed to begin on or after January
1, 2015, the minimum and maximum dollar amounts for each income tax bracket provided in subsection (2) of this section shall be adjusted for inflation by
the percentage determined under subdivision (3)(b) of this section. The rate applicable to any such income tax bracket shall not be changed as part of any adjustment under this subsection. The minimum and maximum dollar amounts for each income tax bracket as adjusted shall be rounded to the nearest ten-dollar amount. If the adjusted amount for any income tax bracket ends in a five, it shall be rounded up to the nearest ten-dollar amount.
(b)(i) For taxable years beginning or deemed to begin on or after January
1, 2015, and before January 1, 2018, the Tax Commissioner shall adjust the income tax brackets by the percentage determined pursuant to the provisions of
section 1(f) of the Internal Revenue Code of 1986, as it existed prior to
December 22, 2017, except that in section 1(f)(3)(B) of the code the year 2013
shall be substituted for the year 1992. For 2015, the Tax Commissioner shall then determine the percent change from the twelve months ending on August 31,
2013, to the twelve months ending on August 31, 2014, and in each subsequent year, from the twelve months ending on August 31, 2013, to the twelve months ending on August 31 of the year preceding the taxable year. The Tax Commissioner shall prescribe new tax rate schedules that apply in lieu of the schedules set forth in subsection (2) of this section.
(ii) For taxable years beginning or deemed to begin on or after January 1,
2018, the Tax Commissioner shall adjust the income tax brackets based on the percentage change in the Consumer Price Index for All Urban Consumers published by the federal Bureau of Labor Statistics from the twelve months ending on
August 31, 2016, to the twelve months ending on August 31 of the year preceding the taxable year. The Tax Commissioner shall prescribe new tax rate schedules that apply in lieu of the schedules set forth in subsection (2) of this section.
(4) Whenever the tax brackets or tax rates are changed by the Legislature,
the Tax Commissioner shall update the tax rate schedules to reflect the new tax brackets or tax rates and shall publish such updated schedules.
(5) The Tax Commissioner shall prepare, from the rate schedules, tax tables which can be used by a majority of the taxpayers to determine their Nebra