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LEGISLATIVE BILL 998
Approved by the Governor April 14, 2026
Introduced by Andersen, 49.
A BILL FOR AN ACT relating to revenue and taxation; to amend section 77-2716,
Revised Statutes Supplement, 2025; to change provisions relating to the
state income tax deduction for members of the Nebraska National Guard; and
to repeal the original section.
Be it enacted by the people of the State of Nebraska,
Section 1. Section 77-2716, Revised Statutes Supplement, 2025, is amended
to read:
77-2716 (1) The following adjustments to federal adjusted gross income or,
for corporations and fiduciaries, federal taxable income shall be made for
interest or dividends received:
(a)(i) There shall be subtracted interest or dividends received by the
owner of obligations of the United States and its territories and possessions
or of any authority, commission, or instrumentality of the United States to the
extent includable in gross income for federal income tax purposes but exempt
from state income taxes under the laws of the United States; and
(ii) There shall be subtracted interest received by the owner of
obligations of the State of Nebraska or its political subdivisions or
authorities which are Build America Bonds to the extent includable in gross
income for federal income tax purposes;
(b) There shall be subtracted that portion of the total dividends and
other income received from a regulated investment company which is attributable
to obligations described in subdivision (a) of this subsection as reported to
the recipient by the regulated investment company;
(c) There shall be added interest or dividends received by the owner of
obligations of the District of Columbia, other states of the United States, or
their political subdivisions, authorities, commissions, or instrumentalities to
the extent excluded in the computation of gross income for federal income tax
purposes except that such interest or dividends shall not be added if received
by a corporation which is a regulated investment company;
(d) There shall be added that portion of the total dividends and other
income received from a regulated investment company which is attributable to
obligations described in subdivision (c) of this subsection and excluded for
federal income tax purposes as reported to the recipient by the regulated
investment company; and
(e)(i) Any amount subtracted under this subsection shall be reduced by any
interest on indebtedness incurred to carry the obligations or securities
described in this subsection or the investment in the regulated investment
company and by any expenses incurred in the production of interest or dividend
income described in this subsection to the extent that such expenses, including
amortizable bond premiums, are deductible in determining federal taxable
income.
(ii) Any amount added under this subsection shall be reduced by any
expenses incurred in the production of such income to the extent disallowed in
the computation of federal taxable income.
(2) There shall be allowed a net operating loss derived from or connected
with Nebraska sources computed under rules and regulations adopted and
promulgated by the Tax Commissioner consistent, to the extent possible under
the Nebraska Revenue Act of 1967, with the laws of the United States. For a
resident individual, estate, or trust, the net operating loss computed on the
federal income tax return shall be adjusted by the modifications contained in
this section. For a nonresident individual, estate, or trust or for a partial-
year resident individual, the net operating loss computed on the federal return
shall be adjusted by the modifications contained in this section and any
carryovers or carrybacks shall be limited to the portion of the loss derived
from or connected with Nebraska sources.
(3) There shall be subtracted from federal adjusted gross income for all
taxable years beginning on or after January 1, 1987, the amount of any state
income tax refund to the extent such refund was deducted under the Internal
Revenue Code, was not allowed in the computation of the tax due under the
Nebraska Revenue Act of 1967, and is included in federal adjusted gross income.
(4) Federal adjusted gross income, or, for a fiduciary, federal taxable
income shall be modified to exclude the portion of the income or loss received
from a small business corporation with an election in effect under subchapter S
of the Internal Revenue Code or from a limited liability company organized
pursuant to the Nebraska Uniform Limited Liability Company Act that is not
derived from or connected with Nebraska sources as determined in section
77-2734.01.
(5) There shall be subtracted from federal adjusted gross income or, for
corporations and fiduciaries, federal taxable income dividends received or
deemed to be received from corporations which are not subject to the Internal
Revenue Code.
(6) There shall be subtracted from federal taxable income a portion of the
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income earned by a corporation subject to the Internal Revenue Code of 1986
that is actually taxed by a foreign country or one of its political
subdivisions at a rate in excess of the maximum federal tax rate for
corporations. The taxpayer may make the computation for each foreign country or
for groups of foreign countries. The portion of the taxes that may be deducted
shall be computed in the following manner:
(a) The amount of federal taxable income from operations within a foreign
taxing jurisdiction shall be reduced by the amount of taxes actually paid to
the foreign jurisdiction that are not deductible solely because the foreign tax
credit was elected on the federal income tax return;
(b) The amount of after-tax income shall be divided by one minus the
maximum tax rate for corporations in the Internal Revenue Code; and
(c) The result of the calculation in subdivision (b) of this subsection
shall be subtracted from the amount of federal taxable income used in
subdivision (a) of this subsection. The result of such calculation, if greater
than zero, shall be subtracted from federal taxable income.
(7) Federal adjusted gross income shall be modified to exclude any amount
repaid by the taxpayer for which a reduction in federal tax is allowed under
section 1341(a)(5) of the Internal Revenue Code.
(8)(a) Federal adjusted gross income or, for corporations and fiduciaries,
federal taxable income shall be reduced, to the extent included, by income from
interest, earnings, and state contributions received from the Nebraska
educational savings plan trust as provided in sections 77-1415 to 77-1430 and
any account established under the achieving a better life experience program as
provided in sections 77-1401 to 77-1409.
(b) Federal adjusted gross income or, for corporations and fiduciaries,
federal taxable income shall be reduced by any contributions as a participant
in the Nebraska educational savings plan trust, any contributions to an account
established under the achieving a better life experience program made for the
benefit of a beneficiary as provided in sections 77-1401 to 77-1409, or any
contributions to the Give to Enable Support Cash Fund as provided in the Give
to Enable Support Act, to the extent not deducted for federal income tax
purposes, but not to exceed five thousand dollars per married filing separate
return or ten thousand dollars for any other return. With respect to a
qualified rollover within the meaning of section 529 of the Internal Revenue
Code from another state's plan, any interest, earnings, and state contributions
received from the other state's educational savings plan which is qualified
under section 529 of the code shall qualify for the reduction provided in this
subdivision. For contributions by a custodian of a custodial account including
rollovers from another custodial account, the reduction shall only apply to
funds added to the custodial account after January 1, 2014.
(c) For taxable years beginning or deemed to begin on or after January 1,
2021, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income shall be reduced, to the extent included in the adjusted gross
income of an individual, by the amount of any contribution made by the
individual's employer into an account under the Nebraska educational savings
plan trust owned by the individual, not to exceed five thousand dollars per
married filing separate return or ten thousand dollars for any other return.
(d) Federal adjusted gross income or, for corporations and fiduciaries,
federal taxable income shall be increased by:
(i) The amount resulting from the cancellation of a participation
agreement refunded to the taxpayer as a participant in the Nebraska educational
savings plan trust to the extent previously deducted under subdivision (8)(b)
of this section; and
(ii) The amount of any withdrawals by the owner of an account established
under the achieving a better life experience program as provided in sections
77-1401 to 77-1409 for nonqualified expenses to the extent previously deducted
under subdivision (8)(b) of this section.
(9)(a) For income tax returns filed after September 10, 2001, for taxable
years beginning or deemed to begin before January 1, 2006, under the Internal
Revenue Code of 1986, as amended, federal adjusted gross income or, for
corporations and fiduciaries, federal taxable income shall be increased by
eighty-five percent of any amount of any federal bonus depreciation received
under the federal Job Creation and Worker Assistance Act of 2002 or the federal
Jobs and Growth Tax Act of 2003, under section 168(k) or section 1400L of the
Internal Revenue Code of 1986, as amended, for assets placed in service after
September 10, 2001, and before December 31, 2005.
(b) For a partnership, limited liability company, cooperative, including
any cooperative exempt from income taxes under section 521 of the Internal
Revenue Code of 1986, as amended, limited cooperative association, subchapter S
corporation, or joint venture, the increase shall be distributed to the
partners, members, shareholders, patrons, or beneficiaries in the same manner
as income is distributed for use against their income tax liabilities.
(c) For a corporation with a unitary business having activity both inside
and outside the state, the increase shall be apportioned to Nebraska in the
same manner as income is apportioned to the state by section 77-2734.05.
(d) The amount of bonus depreciation added to federal adjusted gross
income or, for corporations and fiduciaries, federal taxable income by this
subsection shall be subtracted in a later taxable year. Twenty percent of the
total amount of bonus depreciation added back by this subsection for tax years
beginning or deemed to begin before January 1, 2003, under the Internal Revenue
Code of 1986, as amended, may be subtracted in the first taxable year beginning
or deemed to begin on or after January 1, 2005, under the Internal Revenue Code
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of 1986, as amended, and twenty percent in each of the next four following
taxable years. Twenty percent of the total amount of bonus depreciation added
back by this subsection for tax years beginning or deemed to begin on or after
January 1, 2003, may be subtracted in the first taxable year beginning or
deemed to begin on or after January 1, 2006, under the Internal Revenue Code of
1986, as amended, and twenty percent in each of the next four following taxable
years.
(10) For taxable years beginning or deemed to begin on or after January 1,
2003, and before January 1, 2006, under the Internal Revenue Code of 1986, as
amended, federal adjusted gross income or, for corporations and fiduciaries,
federal taxable income shall be increased by the amount of any capital
investment that is expensed under section 179 of the Internal Revenue Code of
1986, as amended, that is in excess of twenty-five thousand dollars that is
allowed under the federal Jobs and Growth Tax Act of 2003. Twenty percent of
the total amount of expensing added back by this subsection for tax years
beginning or deemed to begin on or after January 1, 2003, may be subtracted in
the first taxable year beginning or deemed to begin on or after January 1,
2006, under the Internal Revenue Code of 1986, as amended, and twenty percent
in each of the next four following tax years.
(11)(a) For taxable years beginning or deemed to begin before January 1,
2018, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income shall be reduced by contributions, up to two thousand dollars per
married filing jointly return or one thousand dollars for any other return, and
any investment earnings made as a participant in the Nebraska long-term care
savings plan under the Long-Term Care Savings Plan Act, to the extent not
deducted for federal income tax purposes.
(b) For taxable years beginning or deemed to begin before January 1, 2018,
under the Internal Revenue Code of 1986, as amended, federal adjusted gross
income shall be increased by the withdrawals made as a participant in the
Nebraska long-term care savings plan under the act by a person who is not a
qualified individual or for any reason other than transfer of funds to a
spouse, long-term care expenses, long-term care insurance premiums, or death of
the participant, including withdrawals made by reason of cancellation of the
participation agreement, to the extent previously deducted as a contribution or
as investment earnings.
(12) There shall be added to federal adjusted gross income for
individuals, estates, and trusts any amount taken as a credit for franchise tax
paid by a financial institution under sections 77-3801 to 77-3807 as allowed by
subsection (5) of section 77-2715.07.
(13)(a) For taxable years beginning or deemed to begin on or after January
1, 2015, and before January 1, 2024, under the Internal Revenue Code of 1986,
as amended, federal adjusted gross income shall be reduced by the amount
received as benefits under the federal Social Security Act which are included
in the federal adjusted gross income if:
(i) For taxpayers filing a married filing joint return, federal adjusted
gross income is fifty-eight thousand dollars or less; or
(ii) For taxpayers filing any other return, federal adjusted gross income
is forty-three thousand dollars or less.
(b) For taxable years beginning or deemed to begin on or after January 1,
2020, and before January 1, 2024, under the Internal Revenue Code of 1986, as
amended, the Tax Commissioner shall adjust the dollar amounts provided in
subdivisions (13)(a)(i) and (ii) of this section by the same percentage used to
adjust individual income tax brackets under subsection (3) of section
77-2715.03.
(c) For taxable years beginning or deemed to begin on or after January 1,
2021, and before January 1, 2024, under the Internal Revenue Code of 1986, as
amended, a taxpayer may claim the reduction to federal adjusted gross income
allowed under this subsection or the reduction to federal adjusted gross income
allowed under subsection (14) of this section, whichever provides the greater
reduction.
(14)(a) For taxable years beginning or deemed to begin on or after January
1, 2021, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income shall be reduced by a percentage of the social security benefits
that are received and included in federal adjusted gross income. The pertinent
percentage shall be:
(i) Five percent for taxable years beginning or deemed to begin on or
after January 1, 2021, and before January 1, 2022, under the Internal Revenue
Code of 1986, as amended;
(ii) Forty percent for taxable years beginning or deemed to begin on or
after January 1, 2022, and before January 1, 2023, under the Internal Revenue
Code of 1986, as amended;
(iii) Sixty percent for taxable years beginning or deemed to begin on or
after January 1, 2023, and before January 1, 2024, under the Internal Revenue
Code of 1986, as amended; and
(iv) One hundred percent for taxable years beginning or deemed to begin on
or after January 1, 2024, under the Internal Revenue Code of 1986, as amended.
(b) For purposes of this subsection, social security benefits means
benefits received under the federal Social Security Act.
(c) For taxable years beginning or deemed to begin on or after January 1,
2021, and before January 1, 2024, under the Internal Revenue Code of 1986, as
amended, a taxpayer may claim the reduction to federal adjusted gross income
allowed under this subsection or the reduction to federal adjusted gross income
allowed under subsection (13) of this section, whichever provides the greater
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reduction.
(15)(a) For taxable years beginning or deemed to begin on or after January
1, 2015, and before January 1, 2022, under the Internal Revenue Code of 1986,
as amended, an individual may make a one-time election within two calendar
years after the date of his or her retirement from the military to exclude
income received as a military retirement benefit by the individual to the
extent included in federal adjusted gross income and as provided in this
subdivision. The individual may elect to exclude forty percent of his or her
military retirement benefit income for seven consecutive taxable years
beginning with the year in which the election is made or may elect to exclude
fifteen percent of his or her military retirement benefit income for all
taxable years beginning with the year in which he or she turns sixty-seven
years of age.
(b) For taxable years beginning or deemed to begin on or after January 1,
2022, under the Internal Revenue Code of 1986, as amended, an individual may
exclude one hundred percent of the military retirement benefit income received
by such individual to the extent included in federal adjusted gross income.
(c) For purposes of this subsection, military retirement benefit means
retirement benefits that are periodic payments attributable to service in the
uniformed services of the United States for personal services performed by an
individual prior to his or her retirement. The term includes retirement
benefits described in this subdivision that are reported to the individual on
either:
(i) An Internal Revenue Service Form 1099-R received from the United
States Department of Defense; or
(ii) An Internal Revenue Service Form 1099-R received from the United
States Office of Personnel Management.
(16) For taxable years beginning or deemed to begin on or after January 1,
2021, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income shall be reduced by the amount received as a Segal AmeriCorps
Education Award, to the extent such amount is included in federal adjusted
gross income.
(17) For taxable years beginning or deemed to begin on or after January 1,
2022, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income shall be reduced by the amount received by or on behalf of a
firefighter for cancer benefits under the Firefighter Cancer Benefits Act to
the extent included in federal adjusted gross income.
(18) There shall be subtracted from the federal adjusted gross income of
individuals any amount received by the individual as student loan repayment
assistance under the Teach in Nebraska Today Act, to the extent such amount is
included in federal adjusted gross income.
(19) For taxable years beginning or deemed to begin on or after January 1,
2023, under the Internal Revenue Code of 1986, as amended, a retired individual
who was employed full time as a firefighter or certified law enforcement
officer for at least twenty years and who is at least sixty years of age as of
the end of the taxable year may reduce his or her federal adjusted gross income
by the amount of health insurance premiums paid by such individual during the
taxable year, to the extent such premiums were not already deducted in
determining the individual's federal adjusted gross income.
(20) For taxable years beginning or deemed to begin on or after January 1,
2024, under the Internal Revenue Code of 1986, as amended, an individual may
reduce his or her federal adjusted gross income by the amounts received as
annuities under the Civil Service Retirement System which were earned for being
employed by the federal government, to the extent such amounts are included in
federal adjusted gross income.
(21)(a) (21) For taxable years beginning or deemed to begin on or after
January 1, 2025, and before January 1, 2027, under the Internal Revenue Code of
1986, as amended, an individual who is a member of the Nebraska National Guard
may exclude one hundred percent of the income received from any of the
following sources to the extent such income is included in the individual's
federal adjusted gross income:
(i) (a) Serving in a 32 U.S.C. duty status such as members attending
drills, annual training, and military schools and members who are serving in a
32 U.S.C. active guard reserve or active duty for operational support duty
status;
(ii) (b) Employment as a 32 U.S.C. federal dual-status technician with the
Nebraska National Guard; or
(iii) (c) Serving in a state active duty status.
(b) For taxable years beginning or deemed to begin on or after January 1,
2027, under the Internal Revenue Code of 1986, as amended, an individual who is
a member of the Nebraska National Guard may exclude one hundred percent of the
income received from any of the following sources to the extent such income is
included in the individual's federal adjusted gross income:
(i) Serving in a 10 U.S.C. or 32 U.S.C. military duty status while a
member of the Nebraska National Guard;
(ii) Employment as a 32 U.S.C. federal dual-status technician with the
Nebraska National Guard; or
(iii) Serving in a state active duty status.
(22)(a) For taxable years beginning or deemed to begin on or after January
1, 2024, under the Internal Revenue Code of 1986, as amended, an individual may
reduce his or her federal adjusted gross income by the amount of interest and
principal balance of medical debt discharged under the Medical Debt Relief Act,
to the extent included in such individual's federal adjusted gross income.
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(b) For taxable years beginning or deemed to begin on or after January 1,
2024, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income or, for corporations and fiduciaries, federal taxable income shall
be reduced by the amount of contributions made to the Medical Debt Relief Fund,
to the extent not deducted for federal income tax purposes.
(23) For taxable years beginning or deemed to begin on or after January 1,
2025, under the Internal Revenue Code of 1986, as amended, an individual who is
a qualifying employee as defined in section 77-3108 may reduce his or her
federal adjusted gross income by the amount allowed under section 77-3111.
(24) For taxable years beginning or deemed to begin on or after January 1,
2026, under the Internal Revenue Code of 1986, as amended, federal adjusted
gross income or, for corporations and fiduciaries, federal taxable income shall
be reduced by the amounts allowed to be deducted pursuant to section 77-27,242.
(25) There shall be added to federal adjusted gross income or, for
corporations and fiduciaries, federal taxable income for all taxable years
beginning on or after January 1, 2025, the amount of any net capital loss that
is derived from the sale or exchange of gold or silver bullion to the extent
such loss is included in federal adjusted gross income except that such loss
shall not be added if the loss is derived from the sale of bullion as a taxable
distribution from any retirement plan account that holds gold or silver
bullion. For the purposes of this subsection, bullion has the same meaning as
in section 77-2704.66.
(26) There shall be subtracted from federal adjusted gross income or, for
corporations and fiduciaries, federal taxable income for all taxable years
beginning on or after January 1, 2025, the amount of any net capital gain that
is derived from the sale or exchange of gold or silver bullion to the extent
such gain is included in federal adjusted gross income except that such gain
shall not be subtracted if the gain is derived from the sale of bullion as a
taxable distribution from any retirement plan account that holds gold or silver
bullion. For the purposes of this subsection, bullion has the same meaning as
in section 77-2704.66.
Sec. 2. Original section 77-2716, Revised Statutes Supplement, 2025, is
repealed.
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