How does an estate or trust recompute the 2006 federal credit for prior year minimum tax to figure the Nebraska minimum tax credit on Form 1041N?

Plain-English summary

This is the fiduciary companion to the 2006 AMT recompute ruling (23-06-1). When an estate or trust paid federal AMT in an earlier year, the federal credit for prior year minimum tax (Federal Form 8801) later lets it recover part of that tax. Nebraska mirrors this with its own Nebraska Minimum Tax Credit for estates and trusts, but the federal credit must first be recomputed under Nebraska rules. This ruling is the year-specific worksheet for 2006 filers of Form 1041N, and its figures feed the 2007 fiduciary credit ruling (23-07-2).

Why a recompute is needed. Under Neb. Rev. Stat. § 77-2717, the federal credit for prior year minimum tax is recomputed using the Nebraska adjustments required by the Nebraska Revenue Act of 1967. Because the credit builds on earlier AMT figures, the recompute uses the 2005 Federal Form 1041, Schedule I, and Form 8801 already recomputed for Nebraska under Revenue Rulings 23-05-1 and 23-05-2, and applies the AMT adjustments in companion Revenue Ruling 23-06-1.

The 2006 line-by-line substitutions (Federal Form 8801). Recalculate all total/computational lines:

• Part I: Line 4 -- use the federal instructions, and follow Revenue Ruling 23-05-1 for any line 8 (tax-exempt interest/dividends) or line 24 (alternative tax NOL) entries on the 2005 Schedule I; Line 11 -- if Part III was used, exclude capital gains deducted on line 8 of the 2005 Nebraska Form 1041N as a special capital gains exclusion; Line 12 -- enter 0. Then recompute the net minimum tax on exclusion items through line 15.
• Part II: Line 19 -- the line 26 amount from the 2005 Federal Form 8801 recomputed under Revenue Ruling 23-05-2; Line 20 -- enter 0; Line 22 -- line 55 from the recomputed 2006 Federal Form 1041, Schedule I; Line 23 -- the line 54 amount from the 2006 Schedule I as recomputed under Revenue Ruling 23-06-1.

Turning the result into the Nebraska credit. Multiply the amount on line 25 of the recomputed 2006 Form 8801 by 29.6 percent (.2960). Then report it on Form 1041N:

• Resident estates and trusts -- enter the result on line 15 and write in "AMT Credit";
• Nonresident estates or trusts -- enter the result on line 30 of Nebraska Schedule I, write in "AMT Credit," enter it as a negative number, subtract it from line 29, and enter the difference on line 31.

The Nebraska Minimum Tax Credit is nonrefundable, and the recomputed Federal Form 8801 must be attached to the 2006 Form 1041N.

What this means for you

Estates and trusts claiming the prior-year minimum tax credit for 2006

Recompute Federal Form 8801 for Nebraska rather than carrying the federal credit across. Work from your Nebraska-recomputed 2005 Schedule I and Form 8801 (per 23-05-1 and 23-05-2) and 2006 Schedule I (per 23-06-1), multiply the line 25 result by 29.6%, and report it in the correct place depending on resident vs. nonresident status.

Filers looking at other tax years

This ruling is specific to 2006, and both the form lines and the 29.6% factor can change year to year. Use the Department's ruling for your actual tax year, paired with the matching AMT-recompute ruling (for 2006, 23-06-1).

Common questions

Q: Is the Nebraska Minimum Tax Credit refundable for estates and trusts?
A: No. It is nonrefundable -- it reduces Nebraska tax but is not paid out beyond the liability.

Q: What factor converts the federal figure to the 2006 Nebraska credit?
A: Multiply line 25 of the recomputed 2006 Federal Form 8801 by 29.6 percent (.2960).

Q: Where does a nonresident estate or trust report it?
A: On line 30 of Nebraska Schedule I, written in as "AMT Credit," entered as a negative number, subtracted from line 29, with the difference on line 31.

Citations and references

• Neb. Rev. Stat. § 77-2717 -- directs that the federal credit for prior year minimum tax be recomputed using the Nebraska adjustments required by the Nebraska Revenue Act of 1967.
• Companion 2006 ruling 23-06-1 -- recomputes the 2006 Federal Form 1041, Schedule I (supplying the Part II line 22 and 23 figures used here).
• Prior-year companion rulings 23-05-1 and 23-05-2 -- recompute the 2005 Federal Form 1041 Schedule I and Form 8801 relied on in this computation.

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/rr230602.pdf

Original ruling text

REVENUE RULING 23-06-2
January 11, 2007
Fiduciary Income Tax-Computation of 2006 Credit for Prior Year Minimum Tax. CREDIT FOR
PRIOR YEAR MINIMUM TAX, FEDERAL FORM 8801, IS TO BE RECALCULATED FOR
NEBRASKA FIDUCIARY INCOME TAX PURPOSES TO DETERMINE THE NEBRASKA
CREDIT FOR PRIOR YEAR MINIMUM TAX.
Advice has been requested as to whether the credit for prior year minimum tax computed on
Federal Form 8801 for a taxpayer’s 2006 U.S. Fiduciary Income Tax Return, Federal Form 1041,
must be recalculated in order to compute the Nebraska tax credit.
Section 77-2717 of the Nebraska Revised Statutes directs that the federal credit for prior year
minimum tax be recomputed using the adjustments required by the Nebraska Revenue Act of 1967,
as amended. Further, Nebraska Revenue Ruling 23-06-1 provides the adjustments for alternative
minimum tax computations for Nebraska determinations. This ruling is to be used for purposes of
calculating the Nebraska credit for prior year minimum tax.
The specific line entries and the required adjustments in recomputing the credit for prior year
minimum tax for the 2006 Nebraska Fiduciary Income Tax Return, Form 1041N, are provided
below. Recalculate all total or computational lines to reflect adjustments made pursuant to
this ruling.
In completing the 2006 Federal Form 8801, use the amounts from the 2005 Federal Form 1041,
Schedule I, and Federal Form 8801 recomputed for Nebraska pursuant to Revenue Rulings 23-051 and 23-05-2.
2006 Federal Form 8801:
Part I:
Line 4: Use the federal instructions for calculating the amount to enter on line 4, and follow
Revenue Ruling 23-05-1 when completing any line 8 (tax-exempt interest or dividends) or line
24 (alternative tax net operating loss) entries on the 2005 Federal Form 1041, Schedule I.
Line 11: If Part III of Form 8801 was used to make the line 11 entry, exclude any capital gains
in the calculation that were deducted on line 8 of the 2005 Nebraska Form 1041N as a special
capital gains exclusion.
Line 12: Enter 0.
Follow federal instructions to recompute the net minimum tax on exclusion items through line 15
of the recomputed 2006 Federal Form 8801.
Part II:
Line 19: Enter the line 26 amount from the 2005 Federal Form 8801 recomputed pursuant to
Revenue Ruling 23-05-2.
Line 20: Enter 0.
Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 23-06-2

January 11, 2007

Page 2 of 2

Line 22: Enter line 55 from the recomputed 2006 Federal Form 1041, Schedule I.
Line 23: Enter the line 54 amount from the 2006 Federal Form 1041, Schedule I, as recomputed
pursuant to Revenue Ruling 23-06-1.
Multiply line 25 of the recomputed 2006 Federal Form 8801 by 29.6 percent (.2960). This result is
to be entered on the Nebraska Fiduciary Income Tax Return, Form 1041N, as follows:
(a) Resident estates and trusts are to enter the result on line 15 and write in the phrase, “AMT
Credit”; and
(b) Nonresident estates or trusts are to enter the result on line 30, Nebraska Schedule I, and
write in the phrase, “AMT Credit”. Enter as a negative number, subtract from line 29, and enter
difference on line 31.
The Nebraska Minimum Tax Credit is a nonrefundable credit.
The recomputed Federal Form 8801 must be attached to the 2006 Nebraska Fiduciary Income Tax
Return, Form 1041N, when filed.
APPROVED:

Douglas A. Ewald
State Tax Commissioner
January 11, 2007