Taxes in Nebraska > Sources of Major State and Local Taxes > Income Tax > Corporate Income Taxes > Chronology of Changes in Corporate Income Tax Policy Since 1982


Scroll below to view the entire chronology, or click on a year below to go directly to that year. Please note that information may not be available for all years.

1982 | 1983 | 1984 | 1985 | 1986 | 1987
1990 | 1991 | 1992 | 1995 | 1996
2000 | 2001 | 2003 | 2005

1982 - LB 760 - Increased the corporate income tax thresholds and the higher rate. Prior to LB 760, corporate income tax rates were 25% of the individual rate, or 3.75% at that time on the first $25,000 of taxable income and 27.5% (4.05%) on income greater than $25,000. After LB 760, the rates were 25% of the individual rate on the first $50,000 of taxable income and 35% (5.25%) on amounts more than $50,000. It was expected that the increase would generate an additional $13 million in revenue

1983 - LB 169 - Provided that the Legislature is to set the sales and income tax rates, beginning Jan. 1, 1984. Prior to this time, the State Board of Equalization set the sales and income tax rates on or before each Nov. 15 so that revenue would be sufficient to fund the enacted budget and so that the two taxes raised similar amounts for the General Fund.

1984 - LB 1124 - Adopted provisions changing the apportionment of the income of a multi-state, unitary business in accordance with the provisions of the Uniform Distribution of Income for Tax Purposes Act (UDITPA) from worldwide to nationwide combined reporting. Included in the statutes both before and after LB 1124 were an equally-weighted three-factor apportionment formula and a throw back rule.

Prior to a Nebraska Supreme Court case involving Kelloggs, income was apportioned on a worldwide basis with the worldwide income being calculated on sales, property and payroll in the state compared to all sales, payroll and property worldwide. In the case the Nebraska Supreme Court held that Nebraska could not tax the net income of foreign subsidiaries, but allowed the company to apportion domestic income while factoring in the sales, payroll and property of those foreign subsidiaries. The bill was adopted in response to this case and was designed to retain $10 - $20 million annually of income tax revenue that would otherwise have been lost.

Under LB 1124 the unitary income of any corporation and its subsidiaries was divided, or apportioned to the states where the company does business based on the amount or sales in the state compared to the amount of sales in the U.S., the amount of payroll in the state as compared to the nationwide payroll, and the value of the property located in the state as compared to the value of all property in the U.S. A unitary business is any business that is conducted as a single economic unit whether conducted by one or many separate corporations, that has common ownership.

1985 - LB 282 - Struck the requirement that the Legislature set the sales and income tax rates so as to generate similar amounts of money for the General Fund and the requirement that income tax rates be changed in increments of one percent and sales tax rates in increments of one-half percent.

LB 344 - Repealed Nebraska's participation in the Multistate Tax Compact.

1986 - LB 774 - Enacted the Financial Institutions Deposit Tax in lieu of imposing the income tax on banks and other savings institutions. Problems had arisen because states are prohibited from taxing earnings attributable to United States securities. First, such earnings were excluded from the tax base. This reform instead taxed deposits at a rate pegged to the income tax rate, the tax not to exceed an amount of tax based on net income.

LB 1124 - Enacted the Employment Expansion and Investment Incentive Act. This act grants incentives to businesses that increase employment by two employees and invest at least $75,000. The incentives are $1,500 for each new employee and $1000 for each $75,000 in investment. In 2000, total credits claimed under the Act (as amended by LB 270 (1987)) were $4.5 million.

1987 - LB 772 - Phased in sales only apportionment of the unitary income of multi-state corporations for corporate income tax purposes. Prior to LB 772, the unitary income of multi-state corporations was apportioned to Nebraska based on three, equally weighted factors, the property in the state, the payroll in the state and the sales in the state. LB 772 shifted the weighting by 20% each of the five succeeding years so that by 1992, sales in the state was the only determining factor. The reduction in revenue was estimated to be $7 million when fully implemented.

LB 775 - Enacted the Employment and Investment Growth Act. This grants income tax credits, and sales tax refunds for companies that hire at least 30 new employees and invest at least $3 million. The income tax credits are equal to 5% of the increased payroll at the project for five years and 10% of the investment in the project. The benefits also include a refund of any sales taxes paid on equipment or other taxable property purchased in connection with the project. LB 775 also repealed the two-year-old sales tax refund for purchases of industrial machinery and equipment for plant expansions. For projects promising at least $10 million in new investment and 100 new employees, qualifying companies may also receive a 15 year personal property tax exemption for mainframe computers, certain aircraft, and agricultural processing equipment used in connection with the project. For 2000, the cost of the program is estimated to be between $30 to $150 million depending on the percentage of the jobs claimed that can be assumed to have been in the state regardless of the credit.

1990 - LB 1059 - Increased the sales tax rate from 4% to 5% and the income tax rates by 8.5% for 1990 and an additional 8.5% for 1991 to fund the Tax Equity and Educational Support Act. This landmark school finance legislation dramatically increased state aid distributed to schools in an "equalized" manner. School costs were calculated per student within nine "tiers" or groups of similarly-sized schools and the formula enabled each school district to finance the average cost per student for the tier with a combination of state aid and property taxes at a defined "local effort rate". The rate varied based on the amount of appropriation available. LB 1059 also "rebated" 20% of the income tax paid by residents of the school district to the district. Total cost when fully implemented was about $210 million.

1991 - LB 829 - Exempted all personal property from the property tax for 1991 only and reimbursed local governments for the loss using a series of revenue-raising proposals including a depreciation surcharge, a corporate income tax surcharge, a temporary reduction in the sales tax collection fee, extending the sales tax to manufacturing energy, and a one-year increase in the corporate occupation tax.. The total cost was $120 million.

1992 - LB 1240 - Enacted the Enterprise Zone Act. This act grants larger investment tax credits under the Employment Expansion and Investment Incentive Act for projects located in five designated areas in the state. Jobs credits available under the act are also larger if the project employs residents of the enterprise zone.

1995 - LB 559 - Provided for the phase out of the throw back rule for apportioning corporate income for tax purposes over three years. From 1998 forward, sales of a multistate corporation shipped from Nebraska to a customer in another state where the company has no nexus (and therefore cannot be taxed by that state) are no longer considered Nebraska sales for purposes of apportioning multistate income. Cost $2.6 million.

LB 829 - Adopted the Quality Jobs Act. This act allows companies the promise to increase employment and investment by either (1) $50 million in investment and 500 new jobs, or (2) $100 million in investment and 250 new jobs to retain the withholding of employees up to 5% of the increased payroll, such withholding to be spent on employee benefit programs. The act terminated in 2000.

1996 - LB 1368 - Amended the Quality Jobs Act by providing for an alternate method for claiming the wage benefit credit allowed by the act. The alternative is a sliding scale corporate income tax credit depending on the average wage of the new jobs.

2000 - LB 936 - Enacted the Rural Economic Opportunities Act. The act provides credits against income tax for businesses that (1) increase employment by at least 0.5% of the labor force in the county and pay at least 125% of the average wage in the county or 100% of the average wage in the region and (2) invest an amount of at least $50,000 times the required number of new employees if the county has a population of 300 or less or $100,000 times the required number of new employees in larger counties. The credits are 5% of the increased payroll at the project and 10% of the investment.

2001 - LB 433 - Granted an income tax credit to businesses equal to 30% of the subsidized costs of providing child care services to its employees. The credit is generally available for three years and cannot exceed 50% of the firm's tax liability. During the special session of 2001, the operative provisions of the act were delayed until 2003.

LB 620 - Adopted the Invest Nebraska Act to replace the expired Quality Jobs Act. Essentially, the benefits are like the Quality Jobs Act provisions that grant a sliding scale credit of 3% of the increased payroll at the project to 5% based on the average wage at the project. This credit may be taken against the withholding obligation of the employer. There is also a smaller qualification threshold of $10 million in investment and 25 new employees in counties with a population of 100,000 or less. In this level of qualification, the jobs must pay at least the average annual wage in the state. For those companies qualifying with the old Quality Jobs Act thresholds, the jobs must pay at least 110% of the state's average wage. Finally, a "super tier" level of qualification is provided for companies promising to invest at least $200 million and employ at least 500 new employees at least 120% of the state's average wage. Such qualifiers receive either the wage benefit credit allowed the other qualifiers or a 15% investment credit.

2003LB 596 – This bill requires that taxpayers add back to federal adjusted gross income or for corporations, federal taxable income, the amount of any additional bonus depreciation or any section 179 capital expensing that is in excess of $25,000 that is allowed because of the federal Jobs and Growth Tax Act of 2003. It also placed the 2003 federal standard deduction amounts in the Nebraska statute and provided that they be adjusted for inflation in future years.

2005 - LB 28 - Created a new tax credit for planned contributions into certain trusts or direct contributions made by corporations. A resident individual or a pass-through entity is allowed an income tax credit equal to 30% of the present value of a planned gift in the year the planned gift is made to a trust for the benefit of a 501(c)(3) organization, not to exceed tax liability or $10,000.

For a C-corporation, the credit is 20% of a direct contribution to the 501(c)(3) organization, limited to $10,000. Individuals, pass-through entities and corporations may not receive a credit for any contribution that was deducted for income tax purposes. An individual contribution may be a planned gift, but a corporate contribution must be an actual gift to the foundation to be eligible for the credit.

LB 312 - In addition to sunsetting the Employment and Investment Growth Act and replacing it with the Nebraska Advantage Act, LB 312 exempted manufacturing machinery and equipment from the sales tax. The bill defined "manufacturing machinery and equipment" very broadly to include:

  1. equipment used by the manufacturer for transporting raw materials or components like assembly lines or mill rolls,
  2. molds and dies for forming cast or injected products and its packaging material,
  3. machinery to maintain the integrity of the product or environmental conditions, such as climate control or clean room equipment,
  4. testing equipment for quality control,
  5. computers that control a manufacturing process,
  6. machinery used to produce power or energy, such as steam turbines, or catalysts, solvents, and other solutions even if they do not become part of the finished product, and
  7. repair or replacement parts purchased for repairing or maintaining manufacturing machinery, such as refractory brick.

The exemption also includes all repair and service performed on such equipment from sales taxes.