Nebraska Administrative Code
Topic - REVENUE, DEPARTMENT OF
Title 316 - NEBRASKA DEPARTMENT OF REVENUE
Chapter 25 - PARTNERSHIP INCOME TAX REGULATIONS
Section 316-25-003 - TAXATION OF NONRESIDENT PARTNERS

Universal Citation: 316 NE Admin Rules and Regs ch 25 ยง 003

Current through September 17, 2024

003.01 Partners' liability for Nebraska income tax. If a Nebraska partnership has either a resident partner or income derived from sources within Nebraska, then the partners of such partnership shall be liable for income tax on their proportionate shares of the partnership income.

003.02 Nonresident partner agreement to file return and pay tax. If any partner of such a partnership is a nonresident, he or she must file a Nebraska income tax return which includes that portion of the partnership's Nebraska source income which is allocable to his or her interest in the partnership. The nonresident partner should execute and forward to the partnership, on or before the original due date of the Nebraska partnership return, an agreement, Form 12N, which states that he or she will file a Nebraska income tax return and pay income tax on all income derived from sources in the State of Nebraska. Form 12N should be attached to the partnership's Nebraska return, Form 1065, for the reporting year.

003.03 Nonresident partner withholding. If such an agreement, Form 12N, is not attached to the partnership's return, then Form 14N should be completed and attached to the partnership's Nebraska return, Form 1065N, and the partnership should remit with its Nebraska return a portion of the nonresident partner's income which was derived from Nebraska sources. The amount of this remittance shall be a percentage equal to the highest individual income tax rate of the nonresident partner's share in the partnership income which was attributable to Nebraska sources. The nonresident partner can also be provided with a copy of Form 14N in order that he or she may properly take credit for the tax withheld on his or her Nebraska Individual Income Tax Return, Form 1040N, but no form need be provided unless requested by the partner.

003.03A Publicly traded partnerships (as defined by section 7704 (b) of the Internal Revenue Code and which do not file as corporations) are not required to withhold and remit tax on nonresident individuals provided such partnerships file an annual information return with the Department of Revenue. The information return must report the name, address, taxpayer identification number, and other information requested by the Department of Revenue for each individual nonresident partner with Nebraska income in excess of five hundred dollars.

003.04 Nonresident individual partners do not have to file an individual income tax return if their only connection with the state is conduct of the business activities of the partnership, and the partnership has remitted tax from all the Nebraska income attributable to the nonresident's share of the partnership's income pursuant to Reg-25-003.03. The full amount of the withholding is, at the taxpayer's option, retained in lieu of the filing of an individual income tax return. Any nonresident who so desires can still file a return and claim a refund if there is one due. Any nonresident who files Form 12N to avoid withholding or who has income from a publicly traded partnership which did not withhold and remit tax for such nonresident, must file a Nebraska income tax return.

003.05 Nonresident partner; Nebraska source income. In determining the taxable income of a nonresident partner of a Nebraska partnership, there must be included only that portion of the partnership income which was derived from sources within Nebraska. This would include a nonresident partner's distributive share of all items of partnership income, gain, loss, and deduction entering into his or her federal taxable income as determined under the general rules in section 77-2733 of the Nebraska Revised Statutes, and Reg-22-003.

003.05A This amount will be modified by a deduction for interest and dividend income received on any United States savings bonds or other federal obligations. Any modification for United States bond interest shall be determined in accordance with the nonresident partner's distributive share, for federal purposes, of the partnership income. The partnership income shall be adjusted by applying the amount of U.S. bond interest in the same manner as though the partnership were an individual. It should be noted that any modification for U.S. bond interest shall be limited to the proportion of such interest as is derived from Nebraska sources pursuant to section 77-2733 of the Nebraska Revised Statutes.

003.05B In determining the sources of a nonresident partner's income, no effect shall be given to any provision of a partnership agreement which characterizes payments to the partner as being compensation for services or as being a return on capital. Similarly, no effect shall be given to any provision in a partnership agreement which allocates to the nonresident partner a greater share of the income or gain from sources outside Nebraska than would be the nonresident partner's share in respect to income from all sources. In addition, any partnership agreement provision which allocates to a nonresident partner a greater proportion of any loss or deduction connected with Nebraska sources than his or her proportionate share for federal purposes shall be disregarded in determining the Nebraska tax liability.

003.05C If the Nebraska partnership has income from business activities that is taxable both within and without Nebraska, it will determine its Nebraska income by use of the formula apportionment method set forth in Reg-24-023 and Reg-24-056. A partnership engaged in business in Nebraska which is not subject to tax in another state does not apportion its income, but reports its entire taxable income to Nebraska.
003.05C(1) If the apportionment provisions do not fairly represent the taxable income reasonably attributed to Nebraska business operations, the partnership may, in unique and nonrecurring factual circumstances, request, or the Tax Commissioner may require, alternative methods of income attribution to produce an equitable apportionment of the partnership's income.

003.05D The Tax Commissioner may authorize the use of other methods of determining a nonresident partner's share of partnership income derived from Nebraska sources if such a method is requested by a taxpayer and if it more clearly and fairly reflects the amount of income of the nonresident partner which is derived from the State of Nebraska.

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