350 Neb. Admin. Code, ch. 20, § 001

Current through September 17, 2024

Section 350-20-001 - DEFINITIONS

001.01 Personal property shall include all property other than real property or franchises.

001.01A Tangible personal property shall include all personal property possessing a physical existence, but excluding money. Tangible personal property also includes trade fixtures, such as machinery and equipment used directly in commercial, manufacturing or processing activities conducted on real property regardless of whether the real property is owned or leased.

001.01A(1) Operational software which is necessary for computer hardware to function is defined as tangible personal property.

001.01B Intangible property shall include property that has no intrinsic value by itself, but is representative or evidence of value, such as stocks, bonds, promissory notes, contract rights, bank accounts, money, and other such property.

001.01B(1) Application software which is not necessary for computer hardware to function, is defined as intangible personal property.

001.02 Depreciable tangible personal property is subject to personal property taxation at its net book value. Depreciable tangible personal property shall mean tangible personal property which is used in a trade or business or used for the production of income, and which has a determinable life of longer than one year.

001.02A Depreciable tangible personal property shall also include tangible personal property which is eligible for depreciation for purposes of federal income tax, but which the owner chooses not to depreciate.

001.02B Depreciable tangible personal property shall also include all other tangible personal property for which a taxpayer is claiming depreciation, amortization, or section 179 deductions for purposes of federal income tax.

001.02C Depreciable tangible personal property shall also include capital expenses incurred because of major repairs, parts, labor and installation costs that prolong the useful life and increase the value of an asset or adapt the asset for a different use.

001.02D Pursuant to the Federal Soldiers and Sailors Relief Act, personal property owned by a nonresident military person who is stationed in Nebraska shall be subject to property taxation only if used in a trade or business. Thus, depreciable tangible personal property owned by a nonresident military person is subject to taxation in the same manner as all other depreciable tangible personal property in Nebraska.

001.03 Nebraska adjusted basis shall mean the adjusted basis of tangible personal property as determined under the Internal Revenue Code of 1986, as amended, as the code exists on the assessment date, increased by the total amount allowed under the code for depreciation or amortization or pursuant to an election to expense depreciable property under section 179 of the code, as amended. Generally, this is the original cost of the item of property and includes any cost incurred in purchasing and placing the item in service such as sales or excise taxes, freight charges, and installation and testing charges.

001.03A The Nebraska adjusted basis of tangible personal property transferred as a gift or devise or as part of a transaction which is not a purchase shall be the previous owner's Nebraska adjusted basis.

001.03B The Nebraska adjusted basis of tangible personal property acquired as replacement property for converted tangible personal property shall be the Nebraska adjusted basis of the converted property, unless insurance proceeds are payable by reason of the conversion.

001.03B(1) If insurance proceeds are payable by reason of the conversion the Nebraska adjusted basis shall be the remaining federal adjusted basis of the converted property plus any additional taxpayer costs for the replacement property.

001.03C The Nebraska adjusted basis of tangible personal property acquired through a trade-in situation shall be the remaining federal adjusted basis in the property being traded, plus cash paid.

001.03C(1) The Nebraska adjusted basis of tangible personal property acquired through a trade-in situation in which no cash was paid shall be the remaining federal basis in the property traded.

001.03C(2) The Nebraska adjusted basis of tangible personal property acquired through a trade-in when the remaining federal adjusted basis is $0 (zero) either through a Section 179 election to expense or in a year exceeding the recovery period shall be the cash paid for the replacement item only.

001.04 The taxable value of tangible personal property shall be the net book value of the property.

001.05 Net book value shall be the Nebraska adjusted basis of tangible personal property multiplied by the appropriate Nebraska depreciation factor. Net book value as a percentage of Nebraska adjusted basis is premised upon the 150 percent declining balance method, switching to straight line, with a one-half-year convention.

001.06 The Nebraska depreciation factor is the percentage of the Nebraska adjusted basis that is taxable. The following table provides the depreciation factors, based on year acquired and recovery period:

NEBRASKA DEPRECIATION FACTORS

Year	Recovery Period (in years)
	3	5	7	10	15	20
1	75.00	85.00	89.29	92.50	95.00	96.25
2	37.50	59.50	70.16	78.62	85.50	89.03
3	12.50	41.65	55.13	66.83	76.95	82.35
4	0.00	24.99	42.88	56.81	69.25	76.18
5		8.33	30.63	48.07	62.32	70.46
6		0.00	18.38	39.33	56.09	65.18
7			6.13	30.59	50.19	60.29
8			0.00	21.85	44.29	55.77
9				13.11	38.38	51.31
10				4.37	32.48	46.85
11				0.00	26.57	42.38
12					20.67	37.92
13					14.76	33.46
14					8.86	29.00
15					2.95	24.54
16					0.00	20.08
17						15.62
18						11.15
19						6.69
20						2.23
21						0.00

001.06A In the table, the factor shown for year 1 shall be the percentage used for January 1 of the year following the year of acquisition of the property. The factor shown for year two shall be the percentage used January 1 of the second year following the year of acquisition of the property, etc. When property becomes depreciable in a year other than the year it is acquired, it shall be subject to taxation on the first assessment date following the date it became depreciable. The net book depreciation factor for such property shall be based on the year acquired.

001.07 Recovery period is the period over which the Nebraska adjusted basis of tangible personal property will be depreciated for property tax purposes. The applicable recovery period shall be determined as follows:

001.07A Three-year property shall include property with a class life of four years or less;

001.07B Five-year property shall include property with a class life of more than four years and less than ten years;

001.07C Seven-year property shall include property with a class life of ten years or more but less than 16 years;

001.07D Ten-year property shall include property with a class life of 16 years or more but less than 20 years;

001.07E Fifteen-year property shall include property with a class life of 20 years or more but less than 25 years; and

001.07F Twenty-year property shall include property with a class life of 25 years or more.

001.08 Class life shall be based upon the anticipated useful life of a class of property and shall be determined by the Property Tax Administrator under the Internal Revenue Code, as the code exists on the assessment date. When necessary, the Property Tax Administrator will establish the appropriate class life for a class of property.

001.09 Purchase shall include taking by sale, discount, negotiation, or any other transaction for value creating an interest in property except liens. Purchase shall not include transfers for stock or other ownership interests upon creation, dissolution, or any other income tax-free reorganization of any corporation, partnership, trust, or other entity.

001.10 Date acquired shall be the date the owner acquired the property, except that for property transferred as a gift or devise or as part of a transaction which is not a purchase, the date acquired shall be the acquisition date of the previous owner.

001.10A The date acquired for tangible personal property acquired as replacement property for converted tangible personal property shall be the acquisition date of the converted property, unless insurance proceeds are payable by reason of the conversion.

001.10A(1) If insurance proceeds are payable by reason of the conversion the date acquired shall be the date the replacement property was acquired.

001.11 Greater portion of the calendar year shall mean 50 percent or more of the tax year for which the property is assessed.

001.12 Omitted property shall mean all taxable tangible personal property which has not been reported to the assessor for taxation.

001.13 Failure to file shall mean that a taxpayer has failed to timely file a personal property return.

001.14 Converted property shall mean tangible personal property which is involuntarily changed as a result of its destruction in whole or in part, stolen, seizure, requisition or condemnation, or the threat or probability thereof and no loss or gain is recognized for income tax purposes.

001.15 Replacement property shall mean tangible personal property acquired within two years after the close of the calendar year to replace converted property and which is substantially the same as the converted property.

001.16 Trade fixture shall mean an item of machinery or equipment, used in commercial, manufacturing, or processing activities. The degree of attachment shall have no influence towards classifying the machinery or equipment as real property. Trade fixtures are items of personal property which are placed upon or affixed to real property for the sole purpose of carrying on a trade or business. Since having failed to meet the criteria outlined in REGS 10-001.01A(1) through 10-001.01A(3), trade fixtures are not considered to become part of the real property nor do they constitute capital improvements to the real property.

350 Neb. Admin. Code, ch. 20, § 001