How did Nebraska treat GILTI, the federal section 250 deduction, and GILTI receipts for income-tax apportionment?

Plain-English summary

GILTI included in a taxpayer's federal tax base also entered Nebraska taxable income. For corporations, Nebraska started with federal taxable income as adjusted; for individuals, it started with federal adjusted gross income.

For domestic corporations, the IRC § 250(a) deductions for portions of GILTI and FDII were already reflected in federal taxable income. They were not deducted a second time on the Nebraska return.

Foreign-dividend deduction

Nebraska permitted a deduction for qualifying foreign dividends or deemed dividends included in the federal base. The Department concluded that GILTI generally was not a foreign dividend.

The exception was IRC § 78 dividends attributed to GILTI under IRC § 250(a)(1)(B)(ii). Apart from those amounts, the GIL did not allow a foreign-dividend exclusion for GILTI.

Sales-factor treatment

The entire GILTI amount belonged in the denominator of a corporate taxpayer's sales factor.

For the Nebraska numerator, no specific sourcing subdivision addressed GILTI. The GIL therefore applied Neb. Rev. Stat. § 77-2734.14(3)(k): include part or all of GILTI in the numerator to the extent the intangible value producing it was connected with and fairly attributable to developing or maintaining intangible property in Nebraska.

Common questions

Q: Could a taxpayer remove GILTI from Nebraska income merely because it came from a controlled foreign corporation?

A: No. GILTI in federal taxable income or adjusted gross income also entered the Nebraska tax base.

Q: Did a corporation claim the federal section 250 deduction again on its Nebraska return?

A: No. The deduction was already included through the federal-taxable-income starting point.

Q: Was all GILTI treated as a deductible foreign dividend?

A: No. The GIL recognized only the described IRC § 78 dividends attributed to GILTI as qualifying for that treatment.

Q: How much GILTI entered Nebraska's sales-factor numerator?

A: The portion connected with and fairly attributable to developing or maintaining the relevant intangible property in Nebraska; the GIL said there was no uniform method for determining that amount.

Citations and references

• IRC §§ 951A and 250(a) — GILTI inclusion and domestic-corporation deductions
• IRC § 78 and § 250(a)(1)(B)(ii) — dividends attributed to GILTI
• Neb. Rev. Stat. §§ 77-2716(5) and 77-2734.04(23) — foreign-dividend deduction
• Neb. Rev. Stat. §§ 77-2734.04(20) and 77-2734.05 through 77-2734.15 — sales-factor rules
• Neb. Rev. Stat. § 77-2734.14(3)(k) — fairly representative sourcing for otherwise unaddressed sales
• Nebraska GIL 24-20-1 — superseded GIL 24-19-3

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/general-information-letters-gils
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/gil/GIL-24-20-1_Global_Intangible_Low-Taxed_Income.pdf

Original ruling text

GIL 24-20-1    Income Tax: Global Intangible Low-Taxed Income and Foreign‑Derived
Intangible Income
Supersedes GIL 24-19-3, issued December 10, 2019

This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR)
until amended. A guidance document does not include internal procedural documents that only affect the
internal operations of DOR and does not impose additional requirements or penalties on regulated parties
or include confidential information or rules and regulations made in accordance with the Administrative
Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on
regulated parties, you may request a review of the document.
This guidance document may change with updated information or added examples. DOR recommends you
do not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get
updates on your topics of interest.
November 19, 2020
Dear XXXX,
This guidance document is in response to several inquiries regarding Nebraska’s treatment of Global
Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII).
Based on the information provided in those inquries, we are providing this General Information Letter
(GIL). GILs address general questions; provide analysis of issues; and direct taxpayers to the Nebraska
statutes, DOR regulations, revenue rulings, or other sources of information to help answer a question. A GIL
is a statement of current DOR policy, and taxpayers may rely on DOR to follow the principles or procedures
described in a GIL until it is rescinded or superseded. Current regulations, revenue rulings, information
guides, taxpayer rulings, and other GILs that may be helpful to you are available at revenue.nebraska.gov.
The Tax Cuts and Jobs Act (TCJA), enacted in 2017, created sections 951A and 250 of the Internal Revenue
Code (IRC). Section 951A requires taxpayers who are United States shareholders of a controlled foreign
corporation (CFC) to include the taxpayer’s GILTI in the taxpayer’s gross income. GILTI is calculated as
the taxpayer’s net CFC tested income over the taxpayer’s net deemed tangible income return. Section 250(a)
allows domestic corporations to claim a deduction against a portion of GILTI from its gross income. Section
250(a) also allows a deduction from gross income of a portion of a domestic corporation’s FDII. Nebraska
law conforms with IRC sections 951A and 250(a).
United States shareholders of CFCs must include GILTI in their gross income for each taxable year and
report GILTI on the applicable federal return. Federal Taxable Income (FTI), as adjusted, for corporate
entities and federal adjusted gross income (AGI) for individuals are the Nebraska tax bases. Because GILTI
is included in FTI, as adjusted, and AGI, GILTI is also included in Nebraska taxable income and must
be reported on the appropriate Nebraska return. For domestic corporations, the FTI amount includes the
IRC section 250(a) GILTI and FDII deductions (§ 250(a) Deductions) as reported on the U.S. Corporation
Income Tax Return, Form 1120.
IRC Sections 951A and 250(a) on the Nebraska Tax Return
Any IRC section 951A income included in the taxpayer’s federal return as FTI, as adjusted, for corporations
or AGI for individuals must also be included in the Nebraska tax return. For domestic corporations, the
§ 250(a) Deductions are included in the calculation of federal taxable income. As FTI is the starting point for
calculating Nebraska Taxable Income (NTI), the § 250(a) Deductions are already included in the calculation
of NTI and are not separately deducted on the Nebraska tax return.

GIL 24-20-1

Page 2 of 2

Foreign Dividends Deduction on Nebraska Tax Returns
Nebraska law allows a deduction from FTI and federal AGI, to the extent so included, for any dividends
or deemed dividends from corporations that do not meet the requirements of IRC § 243 (Neb. Rev.
Stat. §§ 77‑2716(5) and 77-2734.04(23)). Examination of the IRC and related Treasury Regulations
establish that GILTI is not a foreign dividend except for IRC § 78 dividends that are attributed to
GILTI pursuant to IRC § 250(a)(1)(B)(ii). Therefore, under Nebraska law, with the exception of these
IRC § 78 dividends attributed to GILTI, there is no exclusion for GILTI income as a foreign dividend
or deemed foreign dividend.
Apportionment
If a corporate taxpayer is taxable in both Nebraska and one or more other states, the income of the
corporate taxpayer must be apportioned to Nebraska based on the Nebraska receipts as compared to all
receipts as provided by Neb. Rev. Stat. §§ 77-2734.05 to 77-2734.15. Sales includes all gross receipts
of the taxpayer. Neb. Rev. Stat. § 77-2734.04(20). Neb. Rev. Stat. § 77-2734.10 instructs that the
“sales factor shall include income from intangibles.” Thus the denominator of the sales factor should
include the entire amount of GILTI.
Generally, GILTI is intangible value generated by United States operations but realized by a CFC.
This activity may include research and development of patents and trademarks, or generating brand
recognition that is tied to marketing and selling products in the United States. Sales other than sales of
tangible personal property are in the numerator of the apportionment formula as provided in Neb. Rev.
Stat. § 77-2734.14(3)(a) through (k). Subdivisions (a) through (j) deal with sales of services, interest
and dividends from intangible assets held in connection with a treasury function, interest and fees from
loans, credit cards and other financial instruments, and licenses and rentals. Since GILTI income is not
derived from intangible assets held in connection with a treasury function, none of these subdivisions
apply in the case of GILTI. Subdivision (k) states “Sales other than sales of tangible personal property
not specifically addressed in this subsection must be sourced so as to fairly represent the extent of the
taxpayer’s business activity in this state.”
There does not appear to be a uniform way to identify how much activity that results in GILTI is
associated with Nebraska to “fairly represent the extent of the taxpayer’s business activity in this
state.” Neb. Rev. Stat. § 77-2734.14(3)(k). However, a part or all of the GILTI amount included in
the denominator should be included in the numerator of the sales factor to the extent that part or all of
the intangible value that gives rise to GILTI is connected with and fairly attributable to developing or
maintaining the intangible property in Nebraska.
For the Tax Commissioner

                        George Kilpatrick
                        Manager, Tax Policy
                        Nebraska Department of Revenue