On May 26, 2021, Nebraska Gov. Pete Ricketts signed Legislative Bill 432, reducing the state’s top corporate income tax rates over the next two years. The new law comes on the heels of earlier tax changes providing property tax relief, phasing out the tax on Social Security benefits, and exempting military retiree pensions from tax.
The law will reduce the corporate income tax rate on income over $100,000 from 7.81% to 7.5% for tax years beginning on or after Jan. 1, 2022. The rate will be further reduced to 7.25% for tax years beginning on or after Jan. 1, 2023. In both years, the first $100,000 of income will continue to be taxed at 5.58%. Interestingly, the legislature has indicated in the bill that it will consider separate measures to further reduce the corporate tax rate to 7% for tax years beginning on or after Jan. 1, 2024, and to 6.84% for tax years starting on or after Jan. 1, 2025.
All corporate entities doing business in Nebraska should be aware of the new law as their tax burdens are likely to lessen. The Nebraska measure is the latest of a series of corporate tax reductions occurring primarily in the Midwest. A pending bill in Iowa would also reduce corporate and individual tax rates and several other states, including Missouri, Montana, and Oklahoma, have reduced business and personal income tax rates or are considering proposals to reduce tax rates. Consult your state and local tax professional for more information.