Nebraska has a foreign tax with a local impact
There have been a lot of tax changes at the state and federal level in the last few years, one of which is the taxation of foreign income, otherwise known as GILTI. GILTI stands for Global Intangible Low-Taxed Income. It’s a category of income that is earned abroad by U.S.-controlled foreign corporations and is subject to special treatment under the U.S. tax code, as well as states that levy a corporate income tax.
You might be asking yourself, why do I care about the taxation of foreign income? Well, Nebraska is home to five Fortune 500 companies, five Fortune 1000 companies, and foreign-owned businesses in the region employ more than 19,000 workers. International trade impacts many of Nebraska’s top industries, including agribusiness, financial services, logistics and warehousing, food products, and life science.
Here is a short video that illustrates why this issue is so important to local businesses.
Historically, most states, including Nebraska, have not taxed foreign income. They have instead treated it as a foreign dividend. Nebraska has always had a foreign dividend deduction. This is the same income, just called by a different name.
However, Nebraska is now taxing GILTI because the Nebraska Department of Revenue determined that GILTI should be included in Nebraska corporate tax returns, instead of being treated as a foreign dividend.
Essentially, Nebraska has begun the collection of a tax the Legislature never authorized.
There was a provision introduced in the Legislature, LB347, to separate Nebraska from the federal code as it relates to GILTI. Unfortunately, this was not advanced by senators and remains a burden to our businesses. Hopefully, the 2022 session will see the restoration of this exemption for local employers.
Find more information about GILTI in Nebraska here: