NE 22-07-1 Individual Income Tax 2008-01-31

How do you recompute the 2007 federal alternative minimum tax to figure the Nebraska minimum tax on the Form 1040N?

Short answer: Revenue Ruling 22-07-1 directs that the alternative minimum tax (AMT) figured on a taxpayer's 2007 federal return (Form 6251, or the AMT worksheet in the Form 1040A instructions) must be recalculated for Nebraska to determine the Nebraska minimum tax. Under Neb. Rev. Stat. § 77-2715 the AMT is recomputed by substituting Nebraska amounts and adjusting for items treated differently for Nebraska -- including the § 77-2716 modifications that exclude interest and dividends from U.S. obligations (Reg-22-002.05A), add interest and dividends from non-Nebraska state and local obligations, and exclude non-Nebraska income from an S corporation or LLC (with the associated preference items excluded). The ruling then gives the exact line-by-line substitutions on the 2007 Federal Form 6251 (lines 1, 3, 7, 10, 11, 27, 31, 32, and 34) and the 2007 Form 1040A AMT worksheet (lines 1, 21, and 22). The recomputed result -- line 35 of Form 6251 or line 23 of the 1040A worksheet -- is entered on line 1 of the Nebraska Minimum or Other Tax Worksheet (page 7 of the Form 1040N instructions) to find the amount for line 16 of Form 1040N (or line 74 of Nebraska Schedule III for partial-year residents and nonresidents), and the recomputed federal form must be attached to the Form 1040N. The AMT must be recomputed for all tax years beginning after December 31, 1978; the corresponding rulings for 2006, 2005, and 2004 are 22-06-1, 22-05-1, and 22-04-2.

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This page answers the general question as of 2008. Ezel answers yours, under current Nebraska tax law, with citations.

Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

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Plain-English summary

The federal government charges an alternative minimum tax (AMT) to make sure high-income filers who use a lot of deductions and preference items still pay some tax. Nebraska has its own minimum tax that piggybacks on the federal AMT -- but the federal number has to be recomputed using Nebraska rules first. This ruling is the year-specific worksheet telling 2007 filers exactly how to do that recompute.

Why a recompute is needed. Under Neb. Rev. Stat. § 77-2715, the federal AMT is recomputed by substituting Nebraska taxable income for federal taxable income and adjusting any item that is treated differently for Nebraska. The main § 77-2716 adjustments are:

exclude interest and dividends from U.S. government obligations (see Individual Income Tax Reg-22-002.05A);
include interest and dividends from non-Nebraska state or local obligations; and
exclude any non-Nebraska income from an S corporation or LLC -- and exclude the associated preference items to the same extent.

The 2007 line-by-line substitutions. Recalculate all total/computational lines to reflect these adjustments; every other entry stays the same as the federal AMT computation.

2007 Federal Form 6251: Line 1 (use Nebraska Form 1040N amounts depending on whether you itemized), Line 3 (Schedule A line 9 minus 1040N line 8), Line 7 (enter zero), Line 10 (Nebraska NOL deduction from 1040N Schedule I line 58), Line 11 (only tax-exempt interest from Nebraska private activity bonds issued after August 7, 1986), Line 27 (alternative tax NOL as adjusted for Nebraska), Line 31 (exclude capital gains excluded on 1040N Schedule I line 53 if Part III was used), Line 32 (enter zero), Line 34 (regular federal tax before credits on Nebraska Tax Table Income, without subtracting foreign tax credit).

2007 Form 1040A AMT Worksheet: Line 1 (combine 1040A line 22 with 1040N lines 12 and 13), Line 21 (exclude capital gains excluded on 1040N Schedule I line 53 if lines 9-20 were used), Line 22 (regular federal tax before credits on Nebraska Tax Table Income).

Where the answer goes. Enter line 35 of the recomputed Form 6251 (or line 23 of the recomputed 1040A worksheet) on line 1 of the Nebraska Minimum or Other Tax Worksheet (page 7 of the Form 1040N instructions). Complete that worksheet to find the amount for line 16 of Form 1040N -- or line 74 of Nebraska Schedule III if you file that schedule. Attach the recomputed federal form to your Form 1040N.

What this means for you

2007 Nebraska filers who owed federal AMT

If you had federal AMT for 2007, you cannot just carry the federal number to Nebraska. Recompute Form 6251 (or the 1040A worksheet) using the Nebraska substitutions above, run the result through the Nebraska Minimum or Other Tax Worksheet, and attach the recomputed federal form to your 1040N.

Filers looking at other tax years

This ruling is specific to 2007; the line references change year to year. The Department issues a parallel ruling each year -- for 2006, 2005, and 2004 the rulings are 22-06-1, 22-05-1, and 22-04-2. Use the ruling that matches your tax year rather than copying these 2007 line numbers.

Common questions

Q: I paid federal AMT in 2007 -- do I owe Nebraska minimum tax too?
A: Possibly. Nebraska imposes a minimum tax based on the federal AMT recomputed with Nebraska adjustments. Run the recompute in this ruling to find the Nebraska amount.

Q: What are the biggest Nebraska adjustments?
A: Removing interest/dividends from U.S. obligations, adding interest/dividends from non-Nebraska state and local obligations, and removing non-Nebraska S-corporation/LLC income and its related preference items.

Q: Can I use these line numbers for a different year's return?
A: No. The specific line entries are for the 2007 forms. Use the Department's ruling for your actual tax year, because the form lines and worksheet references drift from year to year.

Citations and references

Neb. Rev. Stat. § 77-2715 -- requires the federal additional/minimum taxes to be recomputed by substituting Nebraska taxable income and adjusting items reflected differently for Nebraska.
Neb. Rev. Stat. § 77-2716 -- the Nebraska income modifications applied in the recompute (U.S.-obligation exclusion, non-Nebraska state/local obligation inclusion, non-Nebraska S-corp/LLC income exclusion).
Individual Income Tax Reg-22-002.05A -- exclusion of interest or dividends from U.S. obligations.
Prior-year companion rulings -- 22-06-1 (2006), 22-05-1 (2005), and 22-04-2 (2004).

Source

Original ruling text

REVENUE RULING 22-07-1
January 31, 2008
Individual Income Tax-Computation of 2007 Alternative Minimum Tax to Determine Nebraska
Minimum Tax for the 2007 Nebraska Return. ALTERNATIVE MINIMUM TAX--INDIVIDUALS,
FEDERAL FORM 6251, AND THE ALTERNATIVE MINIMUM TAX WORKSHEET, FEDERAL
FORM 1040A, SHALL BE RECALCULATED FOR NEBRASKA INDIVIDUAL INCOME TAX
PURPOSES TO DETERMINE THE NEBRASKA MINIMUM TAX.
Advice has been requested as to whether the alternative minimum tax computed for a taxpayer’s
2007 U.S. Individual Income Tax Return, Federal Forms 1040 or 1040A, must be recalculated in
order to compute the Nebraska income tax.
Nebraska law imposes a tax on the federal alternative minimum tax recomputed to take into account
the adjustments required by the Nebraska Revenue Act of 1967, as amended. Section 77-2715 of the
Nebraska Revised Statutes provides that the additional taxes shall be recomputed by substituting
Nebraska taxable income for federal taxable income and adjusting the Nebraska alternative
minimum tax calculations for any items which are reﬂected differently in the determination of
federal taxable income for Nebraska purposes. This applies to any federal schedules or other forms,
the results of which are used in calculating the federal alternative minimum tax.
Among the adjustments provided by section 77-2716 of the Nebraska Revised Statutes are the
exclusion from federal adjusted gross income of interest or dividends from U.S. obligations as set
forth in Individual Income Tax Reg-22-002.05A and the inclusion of interest or dividends from nonNebraska source state or local obligations. Section 77-2716 also provides for the exclusion from
Nebraska taxable income of any non-Nebraska income from an S-corporation or LLC. Therefore,
any associated preference item derived from the S-corporation or LLC included in the alternative
minimum tax calculations should be excluded to the same extent in the Nebraska computation.
The speciﬁc line entries and the required adjustments in re-computing the minimum tax for the
2007 Nebraska Individual Income Tax Return, Form 1040N, are provided below. Recalculate all
total or computational lines to reﬂect adjustments made pursuant to this ruling. All other
entries must be the same as for the federal minimum tax computation.
2007 Federal Form 6251:
Line 1.

If you itemized deductions, enter the amount from line 14, Nebraska Form 1040N
and go to line 2, Form 6251. Otherwise, enter line 5, plus line 12 minus line 13 from
Nebraska Form 1040N, and skip to line 7, Form 6251.

Line 3.

Enter line 9 from Federal Schedule A, minus line 8, Form 1040N.

Line 7.

Enter zero.

Line 10.

Enter any Nebraska net operating loss deduction included on line 58, Schedule I, Form
1040N.

Line 11.

Enter only the tax-exempt interest from Nebraska private activity bonds issued after
August 7, 1986.

Line 27.

Enter the alternative tax net operating loss deduction as adjusted for Nebraska
purposes.

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 22-07-1

January 31, 2008

Page 2 of 2

Line 31.

If Part III of Form 6251 was used to make the line 31 entry, exclude any capital gains
in the calculation that were excluded on Line 53 of Nebraska Schedule I.

Line 32.

Enter zero.

Line 34.

Compute the regular federal income tax before credits on the Nebraska Tax Table
Income, line 14, Form 1040N. The same federal tax method used to complete line 44,
Federal Form 1040, is to be used. Enter the computed amount without subtracting any
foreign tax credit.

2007 Federal Form 1040A, Alternative Minimum Tax Worksheet:
Line 1.

Add the amount from line 22, Form 1040A, and the amount from line 12, Form 1040N.
Subtract the amount entered on line 13, Form 1040N. Enter the result on line 1.

Line 21.

If Lines 9 through 20 were used to make the line 21 entry, exclude any capital gains in
the calculation that were excluded on Line 53 of Nebraska Schedule I.

Line 22.

Compute the regular federal income tax before credits on the Nebraska Tax Table
Income, line 14, Form 1040N. The same federal tax method used to complete line 28,
Federal Form 1040A, is to be used.

Line 35 of the recomputed Federal Form 6251 or line 23 of the recomputed Federal Form 1040A,
Alternative Minimum Tax Worksheet, is to be entered on line 1 of the Nebraska Minimum or
Other Tax Worksheet found on page 7 of the instructions for Form 1040N. The worksheet is to be
completed to determine the amount to enter on line 16 of the Form 1040N, or, for taxpayers ﬁling
Nebraska Schedule III, the amount to enter on line 74 of the Nebraska Schedule III.
A copy of the recomputed Federal Form 6251 or Federal Form 1040A Worksheet must be attached
to the Nebraska Individual Income Tax Return, Form 1040N, when ﬁled.
The alternative minimum tax is to be recomputed for all taxable years beginning after December 31,
1978. Other rulings involving re-computation of Federal Form 6251 or the Federal Form 1040A,
Alternative Minimum Tax Worksheet, are shown for the preceding three years:
Tax Year

Revenue Ruling
Reference

2006

22-06-1

2005

22-05-1

2004

22-04-2

APPROVED:

Douglas A. Ewald
State Tax Commissioner
January 31, 2008

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