HAPPY FOURTH OF JULY
We want to wish everyone a safe and Happy Fourth of July holiday! Freedom isn’t free and we appreciate all of those who have served and protected our country.
LEGISLATIVE BILL 754
On the 31st of May, 2023, Governor Jim Pillen officially approved Legislative Bill 754, a significant milestone for Nebraska. This newly enacted law introduces a range of tax reductions for numerous Nebraskans, with a specific provision that offers immediate financial advantages for Nebraska businesses taxed as partnerships or subchapter S corporations for federal income tax purposes. It’s worth noting that numerous limited liability companies have chosen to be taxed as partnerships or subchapter S corporations.
The essence of this bill lies in its provision that enables Nebraska partnership or subchapter S corporations to directly pay state and local taxes on behalf of their members or shareholders. This provision serves as a workaround to address a limitation established by the 2017 Tax Cuts and Jobs Act. The Act introduced a cap of $10,000 on itemized deductions for individual taxpayers related to local property taxes and state income taxes. By allowing the Nebraska entity to assume responsibility for these taxes, the state and local tax limitation of $10,000 becomes irrelevant. Nebraska joins the ranks of 35 other states that have enacted similar workarounds to counter the state and local tax limitation.
This newly passed law is retroactive, applying to years starting from January 1, 2018, up until January 1, 2023. Entities now have the option to elect to pay state and local taxes for previous years and claim credits accordingly. To qualify for this retroactive payment and refund, the election must be made by December 31, 2025. In essence, the entity will bear the burden of paying the additional taxes, which will result in a federal income tax deduction for the years preceding January 1, 2023. Moreover, the payment made by the entity will generate a refundable credit for the members or shareholders associated with the entity.
While the Nebraska Tax Commissioner is still finalizing the specific procedures for filing under this new provision, Cada, Cada & Jewson will diligently update its clients on the matter. Clients who stand to benefit from this legislation are strongly advised to reach out to their certified public accountants promptly to begin making arrangements for filing the retroactive election.
OUR TEAM
Linda M. Jewson
Linda was born and raised in Crofton, Nebraska, and is a native of Northeast Nebraska. She graduated from the University of Nebraska Lincoln in 2001 with dual degrees in Political Science and Sociology. She obtained her Juris doctorate from the University of Nebraska College of Law in 2004. She has been with the law firm Cada Law since 2000 and works primarily in the areas of personal injury and civil litigation.
Linda is a member of the American Association for Justice (AAJ), the Nebraska State Bar Association (NSBA), the Nebraska Association of Trial Attorneys (NATA), the Lincoln Independent Business Association (LIBA), and has been appointed to serve as an appraiser on the Lancaster County Condemnation Board.
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