Which nonresident rail carrier employees are exempt from Nebraska income tax when they work in more than one state?

Plain-English summary

Federal law protects certain multistate rail workers from being taxed by every state they pass through. This ruling explains how Nebraska applies that protection.

The rule. Compensation paid to rail carrier employees who regularly work on the railroad in more than one state cannot be taxed except by the employees' state of residence — the exemption comes from federal law, 49 U.S.C. §11502. So a nonresident rail carrier employee who performs regularly assigned duties on a railroad in more than one state can be taxed only by their home state, not by Nebraska.

The limit — office workers don't qualify. The exemption is for work on the "railroad." Nonresident employees of a rail carrier who work both in Nebraska and outside the state in an office or location — and not on the "railroad" — do not qualify for the exemption. For those employees, the employer must withhold Nebraska income tax on the compensation.

Note: this page is drawn from an OCR-converted scan of the ruling. The holding, the federal statute, and the office-worker limitation above are legible in the source, but some surrounding wording (including the ruling's detailed description of what counts as the "railroad") is degraded. Confirm those details against the Department's official PDF before relying on them.

What this means for you

A railroad employing multistate crews

For a nonresident employee who regularly works on the railroad across state lines, don't withhold Nebraska income tax — under 49 U.S.C. §11502 only their state of residence may tax that pay. But if a nonresident employee works in a Nebraska office or location rather than on the railroad, the exemption doesn't apply and you must withhold Nebraska income tax.

A nonresident rail worker

If your regularly assigned duties are on the railroad in more than one state, only your home state taxes that income. If instead you work in an office (not on the railroad) partly in Nebraska, that Nebraska work can be taxed here.

Common questions

Q: Can Nebraska tax a nonresident rail employee who works the railroad through several states?
A: No. Under 49 U.S.C. §11502 that compensation is taxable only by the employee's state of residence.

Q: Does the exemption cover a rail carrier's office staff?
A: No. Employees working in an office or location and not on the "railroad" don't qualify, and the employer must withhold Nebraska income tax.

Citations and references

• 49 U.S.C. §11502 — the federal law providing that certain rail carrier employees working in more than one state are taxable only by their state of residence.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr229601_rail_carrier.pdf

Original ruling text

More Than One State. COMPENSA TION PAID TO RAIL
REGULARLY WORK ON THE RAILROAD IN MORE THAN ONE STATE CANNOT BE
TAXED EXCEPT BY THE EMPLOYEES' STATE OF RESIDENCE.
Advice has been reqlested as_ lo_whicfllatl^Iogg employees are covered by the exemption from
state income tax under 49 USCS $11502 @ublic I-âw iO+-SS).
Nonresident rail carrier employees who perform regularly assigned duties on a railroad in
more than one state can only be taxed bf their state of reiidenc?.
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facilities, frqight depots, freigþt yards, the
loads gfel by the railroad and owned by it or
operated under an agreement, bridges, car floats, lighteis, ferries, and other interníodal
equipment used in connection with,the railroad.
An employee is
when his or her

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more than one state
least two states on a
state does not include

Nonresident employees of a rail carrier working both in Nebraska and outside the State in a
office or location, and not on the "railroad", would not qualiff for the
aska income tax. Their employer must withhold Nebraskã inc-ome tax on

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APPROVED:

M. Berri
State Tax Commissioner

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