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The Nebraska Department of Revenue (NDOR) recently issued guidance on Nebraska’s pass-through entity tax (PTET) law, introducing 36 Frequently Asked Questions (FAQs) accessible via its website: Nebraska Department of Revenue PTET FAQs. This information is now available to help businesses, individuals and their tax advisors navigate the complexities of Nebraska’s PTET law.

In both May and September, we published alerts discussing the PTET law and the forms released by the NDOR.  The forms remain available on a PTET specific website, with a portal to upload the forms. 

The FAQs provide information on several important topics, including withholding, losses, changes in ownership, tax-exempt partners or shareholders claiming the PTET credit and estates or trusts claiming the PTET credit on their allocable income and distributing the remaining PTET credit to their beneficiaries. A significant point addressed within these FAQs pertains to the retroactive election process. Notably, the NDOR will issue a separate Form 1099-G for each year (2018 through 2022) related to a retroactive PTET election.

Pivotally, we understand that the NDOR’s position regarding the timing of credits associated with PTET payments has favorably evolved. The revised approach now allows for the PTET credit corresponding to the 2023 PTET to offset partners’ or shareholders’ 2023 Nebraska taxable income so long as the pass-through entity makes its PTET payment to the NDOR no later than when it files its Form 1065N or 1120SN in 2024, which would allow 2023 PTET payments to be made until the extended September 16, 2024 filing deadline for these forms. This results in the 2023 PTET credit being reported on the corresponding K-1N to the owners. This applies even if the payment wasn’t deducted on the 2023 IRS Form 1065 or Form 1120S.

The NDOR’s FAQs also note that the NDOR does not anticipate a delay in processing individual Forms 1040N claiming a PTET credit.

Nebraska’s PTET law and the NDOR’s FAQs are taxpayer friendly developments for owners of pass-through entities that do business in Nebraska.

The authors of this alert were deeply involved in the passage of Nebraska’s PTET law and will continue to work with the NDOR to address any additional questions as they arise.

For any questions regarding Nebraska's PTET law, feel free to contact one of our business tax attorneys in our Tax Practice.