316 Neb. Admin. Code, ch. 24, § 225 - INCOME TAX RETURNS; PASS-THROUGH ENTITIES; INCOME TAX WITHHOLDING FROM NONRESIDENT INDIVIDUAL OWNERS

225.01 Nonresident Individual Owner Income Tax Returns and Withholding. Nonresident individual owners of a pass-through entity must file a Nebraska income tax return and include in Nebraska adjusted gross income that portion of the pass-through entity's Nebraska source income, as adjusted and as apportioned, if appropriate, that is proportionate to his or her interest in the pass-through entity, with any other Nebraska source income.

225.01A Each nonresident individual owner must execute a Nebraska Nonresident Income Tax Agreement, Form 12N, which must be attached to the Form 1120-SN or Form 1065N. By executing a Form 12N, the owner promises to file a Nebraska income tax return and pay income tax on the owner's share of the income, gain, loss, or deduction of the pass-through entity.

225.01B If a nonresident individual owner's executed Form 12N is not attached to the Form 1120-SN or Form 1065N, the pass-through entity must withhold and remit an amount equal to the highest individual income tax rate on each nonresident owner's share of the pass-through entity's taxable income which was derived from or attributable to sources within this state.

225.01B(1) The amount withheld from each nonresident individual owner must be reported on each appropriate Nebraska Schedule K-1N; and

225.01B(2) The total amount withheld from all nonresident individual owners must be reported on Form 1120-SN or Form 1065N and remitted to the Department.

225.01C Nonresident individual owners do not have to file a Nebraska income tax return if their only connection with the state is the conduct of the business activities of the pass-through entity, and the pass-through entity has withheld Nebraska income tax from all the Nebraska income attributable to the nonresident's share of the pass-through entity's income. The frill amount of the income tax withholding is, at the taxpayer's option, retained in lieu of filing an individual income tax return. Any nonresident individual may still file a return and claim a refund if there is one due. Any nonresident individual who files a Form 12N to avoid income tax withholding must file a Nebraska Individual Income Tax Return, Form 1040N.

225.02 Publicly traded partnerships, as defined by IRC § 7704 (b), which do not file as corporations, are not required to withhold and remit income tax for nonresident individual partners if these partnerships fife an annual information return with the Department. The information return must report the name, address, taxpayer ID number, and other information requested by the Department for each nonresident individual partner with Nebraska source income in excess of $500.

225.03 Nonresident individual includes a nonresident grantor of a grantor trust.

Notes

316 Neb. Admin. Code, ch. 24, § 225

Adopted effective 7/5/2020