State And Local Tax Update: Two Significant Proposals Are Not Passed By Nebraska Legislature

We wanted to update you on two Nebraska tax proposals which the Legislature did not pass as well as keep you informed regarding South Dakota’s remote sales tax collection statute (which is being challenged now in the South Dakota courts).

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Nebraska Legislature Keeps Capital Gains Exclusion For Nebraska Owners and Nebraska Advantage Act

Many of you may have been keeping track of LB 373 as introduced in the Nebraska Legislature this term. LB 373 would have eliminated Nebraska’s capital gains exclusion for shareholders, reinstated Nebraska’s estate tax and generation-skipping transfer tax, reinstated Nebraska’s alternative minimum tax and prohibited new Nebraska Advantage applications after January 1, 2018, among other changes. In effect, this bill would have repealed many of the favorable tax changes which Nebraska has enacted over the past decade (and beyond). Nebraska adopted the capital gains exclusion for shareholders to incent shareholders of Nebraska based businesses, who received their stock while employed, to stay in Nebraska upon retirement. Nebraska was losing many of these residents to other states for tax reasons.

Wisely, the Nebraska Legislature chose not to pass LB 373 during this legislative session. While LB 373 did not pass, this does not mean that Nebraska’s favorable tax rules, including Nebraska’s special capital gains exclusion and the Nebraska Advantage Act, are secure. The Department of Revenue, over the past several months, has been pushing a number of new legal theories that, in practice, reduce the value of many favorable provisions for Nebraska’s taxpayers. If you, or your client, have been affected by the Department’s tax positions, please contact a member of the McGrath North Tax Group to discuss this further.

Nebraska Legislature Decides Not To Require Remote Sellers To Collect Nebraska Sales Tax

Another bill generating significant interest during this past legislative session was LB 44. This bill would have required remote sellers who do not have physical presence in Nebraska to collect and remit sales tax on purchases made by persons in Nebraska if the remote seller’s gross revenue in Nebraska exceeds $100,000 or the remote seller’s sales in the state comprise 200 or more separate transactions.

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