Section 316-24-251 - PASS-THROUGH ENTITIES; SCHEDULE REQUIRED NEBRASKA SCHEDULE K-1N251.01Schedule Required. A pass-through entity having income from Nebraska sources or having a resident owner must provide the Department and each owner a schedule listing the amounts and character of the income, guaranteed payments, deductions, adjustments, modifications, and credits that are to be included in each owner's Nebraska income tax return. 251.01A For tax years beginning before January 1, 2012, and for pass-through entities that are not required to file a Nebraska return, the schedule must include specific Nebraska information and adjustments. The Federal Schedule K-1 is acceptable if it has been modified to reflect the Nebraska information and adjustments.251.01B For all tax years beginning on or after January 1, 2012, the pass-through entity required to file a Nebraska return must use a Nebraska Schedule K-1N (K-1N).251.01C The K-lN must be included with the Nebraska Return of Partnership Income, Form 1065N, or the Nebraska S Corporation Income Tax Return, Form 1120-SN.251.02Preparing the K-1N. The K-1N must include the owner's entire share of the pass-through entity's income, deductions, modifications, and credits derived from Nebraska sources. (See Reg-22-003, Income of Nonresident Individual Subject to Nebraska Income Tax.)251.02A Character of income, gain, loss, or deduction. Each item of a pass-through entity's income, gain, loss, or deduction has the same character for the owner individually, for the purposes of the Nebraska income tax, as it has for federal income tax purposes. If the item is not characterized for federal income tax purposes, it has the same character for the owner individually as if the owner realized it directly from the source from which it was realized by the pass-through entity.251.02A(1) In determining a nonresident owner's income, an agreement which characterizes payments to the owner as compensation for services or as a return on capital cannot be considered.251.02A(2) Similarly, an agreement which allocates to a nonresident owner a greater share of the income or gain from sources outside Nebraska than would be the nonresident owner's share of income from all sources cannot be considered. In addition any agreement which allocates to a nonresident owner a greater share of any loss or deduction connected with Nebraska sources than the owner's share for federal purposes cannot be considered.251.02A(3) If a pass-through entity has income from business activities that is taxable both in Nebraska and in another state, it will determine its Nebraska income by apportioning its entire income as provided in Reg-24-301 through Reg-24-381. A pass-through entity engaged in business in Nebraska which is not subject to tax in any other state cannot apportion its income, but must report its entire taxable income to Nebraska.251.02B Adjustments. 251.02B(1) The adjustments provided in Reg-24-235. Nebraska Adjustments to Taxable Income, must be reported as modifications on the K-1N.251.02B(2) The non-Nebraska sourced income of an S corporation or LLC must be reported on the K-IN .Business entities organized as partnerships do not report this adjustment.251.02C Credits. A pass-through entity must report each owner's share of credits that are distributed by the pass-through entity on the K-1N or another appropriate form.316 Neb. Admin. Code, ch. 24, § 251
Adopted effective 7/5/2020