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January 27, 2021

Nebraska revenue department revises GILTI guidance, while Legislature considers making GILTI and repatriated income eligible for state dividends-received deduction

The Nebraska Department of Revenue (Department) announced new guidance on Nebraska's tax treatment of global intangible low-taxed income under IRC Section 951A (GILTI), the related GILTI deduction and the deduction for foreign-derived intangible income (FDII) under IRC Section 250. In addition, during the opening weeks of 2021, members of the Nebraska legislature introduced legislation that, if enacted, would clarify that GILTI and repatriated income are eligible for the state's deduction for foreign dividends or deemed1 foreign dividends (foreign DRD) under in Neb. Rev. Stat. Section 77-2716(5).

General Information Letter (GIL) 24-20-1

In GIL 24-20-1 (issued November 19, 2020), the Department updated guidance on Nebraska's income tax treatment of GILTI, the GILTI deduction and the related FDII deduction. The guidance supersedes the Department's previous guidance on these matters contained in GIL 24-19-3, which was issued in December 2019. The guidance is advisory in nature but binding on the Department until amended.

GIL 24-20-1 reiterates the position the Department took in GIL 24-19-3 on the treatment of GILTI's corporate income tax base. The guidance includes GILTI in Nebraska income and allows the related IRC Section 250 deductions for GILTI and FDII. The guidance also does not consider GILTI to be eligible for the state's foreign DRD.

The Department's position on apportionment treatment in GIL 24-20-1 differs from that in GIL 24-19-3. In GIL 24-19-3, the Department characterized GILTI as investment income and included the entire amount of GILTI in the denominator of the sales factor. GILTI thus should be sourced to the location where the entity's investment, management and record keeping activities occur, with the presumption being that such activities occur at the entity's commercial domicile.2 GIL 24-20-1 changes the prior sales factor apportionment calculation by sourcing GILTI to Nebraska in a manner that fairly represents the extent of the taxpayer's business activity in Nebraska. While recognizing that there is no "uniform way"3 to identify how much activity is associated with Nebraska, GIL 24-20-1 states that "part or all of the GILTI amount included in the denominator should be included in the numerator of the sales factor to the extent that part or all of the intangible value that gives rise to GILTI is connected with and fairly attributable to developing or maintaining the intangible property in Nebraska."

Proposed legislation on GILTI

On January 13, 2021, LB 347 was introduced in the Nebraska unicameral legislature. If enacted, LB 347 would amend Neb. Rev. Stat. Section 77-2716(5) to allow taxpayers to deduct GILTI (net of the deduction in IRC Section 250(a)(1)(B)) under the foreign DRD. The legislation is expressly intended to clarify existing law and would apply to returns filed before, on or after the legislation's effective date. Similar legislation, LB 1203, was introduced in last year's COVID-19-interrupted legislative session but did not pass.

IRC Section 965 update

In GIL 24-19-1 (issued September 2019), the Department maintained that taxpayers cannot deduct repatriation income as a foreign dividend or deemed foreign dividend under Neb. Rev. Stat. Section 77-2716(5) (see Tax Alert 2019-1639). The Department has been assessing taxpayers that deducted IRC Section 965 income, with some taxpayers contesting the Department's position in appeals.

On November 13, 2020, the Council on State Taxation4 (COST) filed a petition for declaratory judgment in the Nebraska District Court (Lancaster County) against the Department, seeking to have GIL 24-19-1 declared invalid and to enjoin the Department from implementing or enforcing it.5 In response, the Department filed a motion to dismiss the matter; a hearing on the motion to dismiss is scheduled for February 3, 2021.

LB 347 would also amend Neb. Rev. Stat. Section 77-2716(5) to allow repatriation income under IRC Section 951(a) (net of the deduction under IRC Section 965(c)) to qualify for the foreign DRD.


The Department's position on these issues should be analyzed by taxpayers in preparing original or amended corporate income tax returns. Taxpayers should also monitor the progress of LB 347. The Nebraska Legislature just started its two-year session, with the 90-day session for 2021 scheduled to adjourn on June 10, 2021. Any legislation not passed or withdrawn by that date will carry over when the legislature reconvenes in January 2022. Accordingly, it is possible this issue may not be legislatively resolved during 2021. Taxpayers should also continue to monitor developments in the COST litigation, which could take years before a final judgement is rendered.

Taxpayers with open appeals should consider how these provisions might impact the appeals process.

EY will continue to monitor this area and provide updates on future developments.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Bill Nolan (


1 The Department's guidance states that GILTI is not a foreign dividend, except for IRC Section 78 dividends attributed to GILTI under IRC Section 250(a)(1)(B)(ii). The Department further states that "there is no exclusion for GILTI income as a foreign dividend or a deemed foreign dividend." The guidance, however, does not explain why GILTI would not be a "deemed" foreign dividend under Neb. Rev. Stat. Section 77-2716(5).

2 If Nebraska is the entity's commercial domicile, GIL 24-19-3 requires GILTI to be included in the numerator of its sales factor unless the entity provides evidence to rebut the presumption that the relevant activities occur at its commercial domicile. If the entity's commercial domicile is not Nebraska, GILTI should not be included in the numerator of the sales factor unless the company conducts the relevant activities in Nebraska.

3 The Department states that GILTI is intangible value generated by US operations but realized by a controlled foreign corporation. In reviewing Nebraska's sourcing rules, the Department noted that its rules specifically capture GILTI. Accordingly, the Department relies on a catch-all sourcing provision, Neb. Rev. Stat. Section 77-2734.14(3)(k), to require sourcing of GILTI to Nebraska in a manner that fairly represents the extent of the taxpayer's business activity in Nebraska.

4 COST filed the action under agency standing on behalf of its members.

5 Council on State Taxation v. Neb. Dept. of Rev., Case No. D02CI200004124, pet. for declaratory judgment (Neb. Dist. Ct. (Lancaster Cty) (Nov. 13, 2020).