Governor Jim Pillen signed LB754 into law. LB754 has two features included in this article:
- LB754 adds a retroactive to the 2018 pass-through entity tax, or PTET, law.
- The bill also schedules gradual reductions to Nebraska’s top individual and corporate income tax rates to 3.99% by tax year 2027.
PTET Law:
- PTET allows pass-through entities (partnerships or subchapter S corporations) to elect to pay state income taxes on behalf of their owners.
- This helps bypass the “SALT cap” and creates deductible business expenses, resulting in potential federal income tax savings.
- Although the law is retroactive to 2018, pass-through entities can elect to pay prior-year taxes in 2023 without amending tax returns, generating deductions and refundable credits.
- The election will be made on an annual basis going forward.
- The tax rate will be the highest individual income tax rate.
- For nonresident partners/shareholders, the election is intended to satisfy a Nebraska return filing at the partner/shareholder level.
- The NE Department of Revenue anticipates the necessary forms and procedures for making the PTET election will be available by the end of 2023.
Income Tax Rate Reductions:
- LB754 will gradually reduce Nebraska’s top individual and corporate income tax rates over the coming years.
- Individual rates will decrease from 6.84% to 3.99% by 2027.
- Corporate rates will decrease from 7.5% to 3.99% by 2027.
We will continue to monitor the guidance as more is available for the NE DOR. Please contact us if you have any questions.