LUTZ BUSINESS INSIGHTS
Nebraska Taxes for Nonprofit Organizations
LINDSAY ROUSE, tax manager
Although charities and other types of nonprofit organizations are generally exempt from federal income tax, they may be subject to various state taxes. Below is a summary of taxes that may apply to nonprofit organizations in Nebraska.
Business Income Tax
- Organizations exempt from federal income tax are also exempt from Nebraska income tax.
- Federal returns must be filed annually, but no separate Nebraska return is due in most cases.
- An exception to this general rule is for organizations with unrelated business taxable income (UBTI) that file Form 990-T for Federal purposes. These organizations must also file a Nebraska return (Form 1120N for corporations or Form 1041N for trusts) and would be subject to Nebraska income tax on their Federally-taxable unrelated business income.
- Nonprofit organizations are usually subject to both federal & state payroll taxes.
- Nebraska does offer an exemption from state unemployment tax (SUTA) to small 501(c)(3) organizations that have three or fewer employees.
Sales & Use Tax
- Most nonprofit organizations are not exempt from sales & use tax in Nebraska.
- Purchases made by churches, schools, hospitals, and government agencies are generally exempt.
- These organizations must apply for the exemption by submitting Form 4 to the Nebraska Department of Revenue.
- All other nonprofit organizations must pay sales tax when purchasing taxable goods or services. If a vendor does not charge sales tax, the organization is liable for reporting and paying use tax.
- Sales made by nonprofit organizations are commonly not exempt from tax. These organizations must collect & remit sales tax on their sales of taxable goods & services.
- Fundraising events are often subject to sales tax.
- Selling tickets to an event is a taxable admission. If any portion of the ticket price is considered a donation for federal tax purposes, that portion is not subject to sales tax.
- Silent auctions are also subject to sales tax. The organization must collect and remit tax on any taxable products or services sold at auction.
- Property tax exemptions (for both real estate tax and personal property tax) are available to the following types of nonprofit organizations in Nebraska:
- Agricultural & Horticultural Societies
- Educational Organizations
- Religious Organizations
- Charitable Organizations
- Cemetery Organizations
- Qualifying organizations must generally file an annual exemption application Form 451 (or Form 451A for reaffirmation) with the county assessor by December 31st each year.
- Qualifying organizations may also be exempt from paying motor vehicle tax. Form 457 must be filed with the county treasurer in the county where the vehicle is located. This form is due annually in the month the vehicle registration is due.
- Organizations that own real and tangible personal property, and do not qualify for the exemption (or have not applied for the exemption), are subject to property taxes.
- Real property is assessed by the county assessor in the county where the property is located. The property value is determined annually by the assessor. No forms/returns are required to be filed by the taxpayer.
- Most depreciable tangible property is subject to personal property tax. This includes items such as computers, equipment, office furniture, etc. It does not include inventory, livestock, intangible assets or vehicles. Taxpayers must file Personal Property Tax Returns annually with the county assessor in the county where the property is located.
- Personal Property Tax Returns are due by May 1st each year, and failure to file timely will result in a penalty of up to 25% of the assessed tax due.
- Nonprofit organizations may be required to register for a license/permit and remit taxes on revenue from bingo, keno, pickle cards, lotteries and raffles.
- Gaming is a heavily regulated industry, so it is crucial to follow all federal and state laws when engaging in these activities.
Please contact us or reach out to your Lutz representative with any questions. You can also learn more about our State and Local Tax and nonprofit services.
ABOUT THE AUTHOR
LINDSAY ROUSE + TAX MANAGER
Lindsay Rouse is a Tax Manager at Lutz with over 15 years of experience in taxation. She specializes in all areas of state and local tax, audit defense and sales and use tax consulting.
AREAS OF FOCUS
- Sales & Use Tax
- State and Local Tax (SALT)
- Audit Defense
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- BSBA in Accounting, Finance, and Banking, University of Nebraska, Omaha, NE
- Pine Creek PTO, Treasurer
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