Neb. Rev. Stat. § 77-2716

Section 77-2716 requires subtracting interest or dividends on United States obligations from federal taxable income when federal law exempts them from state income tax, and the subtraction applies to the corporate income tax for corporations engaged exclusively in foreign or interstate commerce.

Opinion No. (1983) · filed 1983-02-24

However, Neb.Rev.Stat. § 77-2716 (Reissue 1981) provides that there shall be subtracted from federal taxable income interest or dividends on obligations of the United States and its instrumentalities to the extent includable in gross income for federal tax purposes, but exempt from state income taxes under the laws of the United States. Therefore, we have no problem with respect to individual income taxes. Neb.Rev.Stat. § 77-2734(1) imposes an income tax on corporations whose business within the state consists exclusively of foreign commerce, interstate commerce, or both. Section 77-2716 applies to such tax, so, again, we have no problem.

Section 77-2716(1) allows subtraction of interest or dividends on federal obligations from federal taxable income, but does not allow additional reductions for debt interest and production expenses when the underlying federal-obligation interest is excluded, because that would create a double reduction.

State Ex Rel. Douglas v. Karnes · filed 1984-03-09(1)

With elimination of the condemned phrase “without regard to the modification referred in section 77-2741,” the Nebraska franchise tax is subject to reductions relative to federal taxable income as described in § 77-2716(1). That presents still another tax problem. Availability of a reduction of federal taxable income by subtracting “interest or dividends” from federal obligations and yet another deduction or reduction for debt interest in carrying the interest-producing obligations and expenses in the production of interest or dividend income would afford two reductions under § 77-2716(1) relative to federal taxable income. If interest on federal obligations cannot be included in a corporation’s gross income, reductions cannot be allowed regarding debt interest and other expenses incurred in producing interest income as described in § 77-2716(1). To hold otherwise would result in a possible double reduction relative to taxable income in view of the formula found in § 77-2716(1). An analogous disallowance of interest and expenses relating to tax-exempt income can be found in I.R.C. § 265 (1982); cf. I.R.C. Regs. §§ 1.265-1 and 1.265-2 (1984).

Section 77-2716(5) permits a deduction for dividends received or deemed to be received from corporations not subject to the Internal Revenue Code, but not for Section 965 pass-through income that is neither deemed to be a dividend nor deemed to have been distributed.

Precision Castparts Corp. v. Nebraska Dept. of Rev. · filed 2024-08-30(5)

We conclude that, based on the language of Section 965 and the U.S. Supreme Court’s characterization of Section 965’s operation in Moore v. United States, ___ U.S. ___, 144 S. Ct. 1680, 219 L. Ed. 2d 275 (2024), the income included and taxed pursuant to Section 965 does not qualify as “dividends . . . deemed to be received” under § 77-2716(5) and that, therefore, such income is not deductible in Nebraska.