NE 24-91-1 Financial Institution Tax 1991-11-18

How does a bank figure its average deposits for the Nebraska financial institution tax when a merger creates a short tax year?

Short answer: On a partial-year basis. When a merger gives a Nebraska financial institution a short tax year, the acquired institution files a short-period return and computes its average deposits under Neb. Rev. Stat. § 77-3801(2) by totaling the deposits held on the last day of the preceding year, the last day of each complete calendar quarter within the short year, and the last day of the short year, then dividing by the number of amounts added (if the last complete quarter-end is also the last day of the short year, that day counts once). The short-period return and tax are due by the fifteenth day of the third month after the short year ends. After the merger, the acquired bank's deposits become the acquiring bank's deposits for the rest of its year, and the acquiring bank computes its own average deposits normally under § 77-3801(2) with no adjustments.

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This page answers the general question as of 1991. 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Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it.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

Nebraska imposes a financial institution tax measured by a bank's average deposits. This ruling explains how a bank computes that figure when it has a short tax year — most often because it was acquired in a merger partway through the year and has to file a return covering only part of the calendar year.

The rule: average deposits on a short-period return are computed on a partial-year basis under Neb. Rev. Stat. § 77-3801(2). You add together:

the deposits held on the last day of the preceding year,
the deposits held on the last day of each complete calendar quarter that falls within the short tax year, and
the deposits held on the last day of the short tax year,

then divide by the number of amounts you added. If the last complete calendar quarter-end is also the last day of the short year, that single day's deposits count as one amount (you don't count it twice).

Example (from the ruling): Bank A acquires Bank B at the end of the third quarter (September 30). Bank B totals its deposits at the prior December 31, March 31, June 30, and September 30 — four figures — and divides by four to get its average deposits for the short year.

Filing deadline: the short-period return and tax are due by the fifteenth day of the third month after the short taxable year ends (the ruling cross-references Revenue Ruling 24-90-1 on short-period filing requirements).

The acquiring bank: after the merger, the acquired institution's deposits become the acquiring institution's deposits for the rest of its own tax year. At its year-end, the acquiring bank computes its average deposits normally under § 77-3801(2), with no adjustments — its year-end (December 31) figure simply includes both its own deposits and the deposits it picked up from the acquired bank.

Approved by State Tax Commissioner M. Berri Balka on November 18, 1991.

What this means for you

A bank being acquired mid-year

You (the acquired institution) must file a short-period financial institution tax return, because your final period doesn't cover a full calendar year. Compute average deposits by sampling your preceding year-end, each completed quarter-end within the short year, and the short-year end date, then dividing by how many sample dates you used. File and pay by the 15th day of the third month after the short year closes.

A bank making an acquisition

You don't do anything special to your average-deposit math. The deposits you absorb from the acquired bank just roll into your normal year-end deposit figure, and you compute your average deposits under § 77-3801(2) as usual.

Common questions

Q: How does a bank compute average deposits for a short tax year?
A: On a partial-year basis: total the deposits held at the preceding year-end, at each complete calendar quarter-end within the short year, and at the short-year end, then divide by the number of dates used.

Q: What if the last quarter-end and the short-year end are the same day?
A: Then that day's deposits count as a single amount — you don't add it in twice.

Q: When is the short-period return due?
A: By the fifteenth day of the third month after the short taxable year ends (see Revenue Ruling 24-90-1 for short-period filing requirements).

Q: Does the acquiring bank adjust its own deposit calculation?
A: No. The acquired deposits become part of the acquiring bank's deposits, and it computes its average deposits normally under § 77-3801(2) with no adjustments.

Citations and references

Neb. Rev. Stat. § 77-3801(2) — governs how average deposits are calculated, including for short tax years.
Revenue Ruling 24-90-1 (Financial Institution Tax — Filing Requirements of Short-Period Tax Returns) — cross-referenced for the short-period filing and payment deadline.

Source

Original ruling text

Revenue Ruling 24-91-1
November 18, 1991
Financial Institution Tax -- Average Deposits of Short-Period Returns. THE AMOUNT OF AVERAGE
DEPOSITS IN A FINANCIAL INSTITUTION’S SHORT-PERIOD TAX RETURN IS COMPUTED ON
A PARTIAL YEAR BASIS.
Advice has been requested as to how the Nebraska financial institution ltax liability is to be determined
when a financial institution has a short tax year.
One situation that creates a short tax year is the merger of one (acquired) financial institution into another
(acquiring) financial institution. The acquired financial institution must file a return for the resulting short
period since it does not include an entire calendar year.
Average deposits are calculated according to the provisions of Neb. Rev. Stat. section 77-3801(2). In the
case of a short tax year, average deposits shall consist of:
The total of the deposits held on the last day of the precedingt year, the last day of each complete calendar
quarter within the short tax year, and the last day of the short tax year, divided by the number of amounts
added together. If the last day of the last complete calendar quarter within the short tax year is also the last
day of the short tax year itself, the deposits held on this day shall constitute one amount for purposes of this
calculation.
EXAMPLE 1: Two financial institutions, A and B, compute their income on a calendar-year basis.
A acquires B at the end of the third quarter (September 30). B must determine its average deposits
and file a return base upon its short tax year. B must determine its average deposits and file a return
based upon its short tax year. B must total its preceding year-end deposits (December 31), its first
quarter ending deposits (March 31), its second quarter ending deposits (June 30), and its third
quarter ending deposits (September 30). This total would then be divided by four to determine B’s
average deposits.
In a short-period return situation, a financial institution is required to file its tax return and pay its tax liability
by the fifteenth day of the third month after the end of its short taxable year. See Revenue Ruling 24-90-1,
Financial Institution Tax - Filing Requirements of Short-Period Tax Returns, for further information.
After a merger such as that described above takes place, the deposits of the acquired financial institution
become the deposits of the acquiring financial institution for the remainder of the acquiring institution’s
taxable year. At the end of the acquiring financial institution’s taxable year, the calculation of the acquiring
institution’s average deposits will then be computed according the Neb. Rev., Stat. section 77-3801(2)
without any adjustments.
EXAMPLE 2: Two financial institutions, A and B, compute their income on a calendar-year basis. A acquires
B at the end of the third quarter (September 30). To determine its average deposits and its four quarterly
ending deposits and divide the total amount by five. The amount of A’s fourth quarter (December 31) ending
deposits will include both the acquired deposits of B and the fourth quarter ending deposits of A.
APPROVED:

M. Berri Balka
State Tax Commissioner
November 18, 1991

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

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