What makes a mainframe business computer qualify for Nebraska's LB 775 personal property tax exemption?

Plain-English summary

Nebraska's Employment and Investment Growth Act (LB 775) exempted certain computer equipment from personal property tax. This ruling defines the mainframe computer side of that exemption — the companion rulings 29-91-1 and 29-91-2 define the peripheral component side.

The holding: mainframe computers must be located in a separately supported, environmentally controlled area to qualify for the personal property tax exemption.

The statute: Neb. Rev. Stat. § 77-4105(2)(b), R.S.Supp. 1988 exempts:

Mainframe business computers used for business information processing which require environmental controls of temperature and power and which are capable of simultaneously supporting more than one transaction and more than one user, plus peripheral components which require environmental controls of temperature and power connected to such computers.

So a qualifying mainframe has to (1) be used for business information processing, (2) require environmental controls of temperature and power, and (3) be capable of simultaneously supporting more than one transaction and more than one user.

Definitions the Commissioner uses:

• Mainframe — the main hardware unit of a computer system, including (but not limited to) the Central Processing Unit (CPU), Random Access Memory (RAM) / main memory, and Input/Output (I/O), disk, and tape controllers. Machines that use a microprocessor as their CPU are considered microcomputers, not mainframes — and so don't qualify as mainframes.
• Business information processing — a system that processes analog or digital data (or a combination) used for business purposes; "information processing" is the totality of operations performed by the computer, involving evaluating, analyzing, and processing data.

Effective date: this ruling is effective for applications filed both before and on or after January 1, 1988 — that is, it applies across the board, unlike the peripheral-component rulings that split at a January 1, 1989 cutoff. Approved in 1989.

Source-quality note: the official PDF is a scanned image and the machine-extracted "Original ruling text" below is partly garbled. The holding, statutory quotation, definitions, and effective date summarized here were checked against the legible portions of the scan.

What this means for you

A company claiming the LB 775 computer exemption for a mainframe

Your mainframe qualifies only if it lives in its own separately supported, environmentally controlled area and meets the statutory profile: used for business information processing, requiring temperature and power controls, and able to serve multiple transactions and users at once. A microprocessor-based machine is a microcomputer, not an exempt mainframe.

Tax and IT staff documenting the exemption

Be ready to show the machine's multi-user/multi-transaction capability and its dedicated environmental support. Pair this with the peripheral-component rulings (29-91-1 for pre-1989 applications, 29-91-2 for applications on or after January 1, 1989) for the attached equipment.

Common questions

Q: What makes a mainframe exempt from Nebraska personal property tax under the Act?
A: It must be located in a separately supported, environmentally controlled area and meet § 77-4105(2)(b): used for business information processing, requiring temperature/power controls, and capable of simultaneously supporting more than one transaction and user.

Q: Does a microcomputer qualify as a mainframe?
A: No. Computers using a microprocessor as their CPU are considered microcomputers, not mainframes.

Q: Which applications does this ruling cover?
A: It is effective for applications filed both before and on or after January 1, 1988.

Citations and references

• Neb. Rev. Stat. § 77-4105(2)(b), R.S.Supp. 1988 — exempts qualifying mainframe business computers plus peripheral components requiring environmental controls.
• Revenue Rulings 29-91-1 and 29-91-2 — the companion rulings defining which peripheral components qualify (pre- and post-January 1, 1989 applications, respectively).

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr298901_mainframe.pdf

Original ruling text

Revenue Ru1ing 29-89-I

Computers. I{AINFR¡{E COI4PUTERS MUST BE LOCÀTED IN À SEPARÀTELY
SUppOnrnp EÌWIRONIIENTALLY CONTROLLED ÀREA TO QUALIFY FOR EXEMPTION FRO!{ PERSONÀL PROPERTY TÀX. THIS RI'LING IS EFFECTIVE FOR
ÀPPI¡ICATIONS FILED BOTH BEFORE AI{D ON OR AFTER JANUARY L, 1988.
Àdvice has been requested as to what conputer systems -may
qualify for the exemftion from personal property tax Provided in
tne Umþfo)zment and Investment Growth Act'.
Section 77-4105(2) (b), R.S.SupP., 1988, provides an exemption
from personal ProPerty tax for:
Mainframe business computers used for
business Ínformation processing which
require environmental controls of temperature and power and whÍch are capable of
simultaneously supporting more than one
transaction ánd more than one user plus
peripheral components which require environmentál controls of I emperature and polter
connected t'o such comPuters.
for the
In determining whether this equipmgnt _ qualifiesdefinitions
following
the
ãxemption from- personal property táx,
wilt be used by the St'ate Tax Commissioner:
IIÀINFR.LI{E The main hardware unit of a computer system,
which includes but is not limited to the Central Processing
memory,
Unit (CPUI, Random Àccess llemory (RÀI'f ) or mainand
Tape
Disk
Controllers'
Controllers,
Input/òutpúi, (I/O)
'Cômþuters
CPU
their
microprocessor-as
a
using
Coätrôffeis.
mainframes.
not
and
shal1 be considereä microcomputers
BUSINESS INFORIíÀTION PROCESSING - The system must Process
thereof which is
analog or digital data or any combinationprocessing,
which
Information
purposes.
used for busíness
computer,
bY
performed
operations
is the totatíty of

" data to
involves evalualing, aña1yzing, and processing

produce usable information.

EIWIRONMENTÀT CONTROLS OF TEMPER.A'TT'RE ÀND POT{ER ThE

mainframe shall be located in a temperature and humidity
controlled environment which is capable of being sustained
within t,he manufacturer's specifications, independent from
the anbient conditions of the surrounding work area. If
the mainframe is located within a building exclusively used
to house the mainframe, the building must, be supported by

Revenue Ruling 29-89-L

Page 2

environmental controls of temperature and humidity capable
of naint,aining the environmental tolerances within the manufacturer's
specifications.
The poerer controls must
maintain controlled levels of voltage within the limits
prescribed by the mainframe manufacturer.

.

SIMT'LTAI{EOUS SUPPORT OF MORE TTI.AN ONE TRÀNSÀCTION AND USER

The mainframe must contain sufficient hardware and software to enable Ít to be used on a "ti:ne-sharing'" basis by
multiple users of the taxpayer. "Time-sharing" is a method
of operation Ín which a computer Ís shared by several users
for different purposes at (apparentfy) the same time.
Àlthough the computer actually se:n¡ices each user in
sequence, the high speed of the computer makes it appear as
though the users are all handled simultaneously. "TÍmesharing" does not include the use of a maj"nframe system by
any third party.
Upon receipt of a Nebraska Personal Properpy Return, Form 775P,
the Nebraska Department of Revenue shall determine whether each
item claimed quali-fies for exemption. This determination will
be made in accordance wÍth sectÍon 77-4105(2) (b), R"S.Supp.,
1988, subJect, to t,he definitions contained in this ruling.
Applicants will be required to provide sufficient explanation
and documentation i-n support of each item's claim for exemption.
ÀPPROVED:

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Jóhn M. Boehm
State Tax Commissioner

June 7tÁ , 1989