Credit for Income Taxes Paid by a Resident to Another State, Political Subdivision of Another State, or the District of Columbia

011.01 Residents are allowed a credit against the Nebraska individual income tax for income taxes paid to another state of the United States, or local subdivision. The amount of the credit allowable cannot exceed the Nebraska individual income tax due on the income subject to tax in the other state. The portion of the Nebraska tax that is due on the income subject to tax in the other state is calculated by multiplying the Nebraska individual income tax liability by a fraction, the numerator of which is the adjusted gross income subject to tax in both states and the denominator of which is the entire federal adjusted gross income as modified by the adjustments in Reg-22-002.04.

011.02 The credit is limited to income taxes actually paid to the other state. The credit may not be claimed on account of interest or penalties paid or for any nonrefundable credits used to satisfy the liability to another state. The credit may not be applied against any interest or penalties due. The credit may be applied against the Nebraska individual income taxes due for the same year.

011.03 The credit may be taken either at the time of filing the Nebraska returns or later and may be applied against the entire tax until the credit is exhausted. However, no credit will be allowed on account of income taxes imposed by another state until those taxes are actually paid.

011.03A A copy of the return or returns, upon which the taxes are assessed must be filed with the Nebraska Department of Revenue at the time the credit is claimed. 011.03B A statement showing the taxes withheld may be used for any jurisdiction that does not require a return. 011.03C If credit is claimed on account of a deficiency assessment made by another state, a certified copy of the notice assessing or proposing to assess a deficiency, a receipt showing the payment of the deficiency, and a statement conceding the accuracy of the deficiency, must be filed.

011.04 If, for any reason, the Nebraska taxes due have been paid before the credit is claimed, a refund claim accompanied by a copy of the return or returns upon which the taxes were assessed must be filed. If the refund claim is approved, the amount of the claim will either be allowed as a credit against the taxes due or refunded to the taxpayer.

011.05 If the taxpayer's return is changed, corrected, or amended, the taxpayer must file an amended return with the Nebraska Department of Revenue. See Reg-22-018.

011.06 A credit is only allowable for taxes that are properly paid to another state. If a taxpayer voluntarily files and pays a tax when not required to do so by the laws of the other state, the taxpayer has not properly paid a tax in another state.

011.07 If a husband and wife file separate Nebraska returns and also file separate returns in another state, neither may claim a credit on account of taxes paid by the other spouse to such state. If a husband and wife file a joint Nebraska return, the entire amount of taxes, subject to the limitations in this regulation, paid by either or both to another state may be claimed as a credit, regardless of whether the husband and wife file a joint return or separate return in such other state. If husband and wife file separate Nebraska returns but file a joint return in another state, each is entitled to credit for that portion of the total tax paid to such other state as the net income of each spouse that is taxed by such other state bears to the total net income taxed by such other state.

(Sections 77-2730, and 77-2788(8), R.R.S. 1996. November 11, 1998.)