Passive activities for federal income tax purposes include those activities in which the taxpayer doesn't materially participate. All rental activities are treated as passive activities [Code Sec. 469(c)(2)], except for certain real estate professionals.
The federal term "materially participate" is equivalent to "actively engaged in the Nebraska Advantage Microenterprise Credit Act".
For federal passive activity determinations, an individual materially participates in an activity for a tax year if, and only if, the individual meets at least one of the following tests: (References are to federal income tax regulations.)
(1) The individual participates in it for more than 500 hours during the year. [Reg § 1.469-5T(a)(1)]
(2) The individual's participation in the activity for the tax year is substantially all of the participation in it by all individuals (including nonowner individuals) for the year. [Reg § 1.469-5T(a)(2)]
(3) The individual participates in the activity for more than 100 hours during the tax year and the participation is not less than that of any other individual (including nonowners) for that year. [Reg § 1.469-5T(a)(3)]
(4) The activity is a “significant participation activity” for the tax year, and the individual's aggregate participation in all significant participation activities that year exceeds 500 hours. A “significant participation activity” is a trade or business in which the individual significantly participates (for more than 100 hours), but in which he or she doesn't otherwise materially participate. [Reg § 1.469-5T(a)(4), Reg § 1.469-5T(c)]
(5) The individual materially participated in the activity for any five tax years (consecutive or not) during the 10 immediately preceding tax years. [Reg § 1.469-5T(a)(5)]
(6) The activity is a personal service activity, and the individual materially participated in the activity for any three tax years (consecutive or not) before the tax year. [Reg § 1.469-5T(a)(6) , Reg § 1.469-5T(d)]
(7) The individual participates on a regular, continuous, and substantial basis during the year, based on all the facts and circumstances. An individual who participates in the activity for 100 hours or less during the year doesn't meet this test. [Reg § 1.469-5T(a)(7) ) Reg § 1.469-5T(b)(2)(iii)]