Conversion Chart for Nebraska Schedule II,
Credit for Tax Paid to Another State for Full-year Residents Only
Tax Year 2006

Last Revised 2/20/2007

Schedule II Conversion Chart Special Instructions

Watch for married filing joint accounts that file married filing separate with the other state. If the Line 59 instruction says to use the other state's total W-2 wages, use only the other state's wages of the spouse filing the separate return. DO NOT USE THE WAGES OF BOTH SPOUSES.

If the filing status on the Nebraska return is married filing separate, but a joint return is filed in the other state, the credit must be prorated. If the other state’s return separates the income of both spouses, use the income and tax paid to the other state reported by the spouse who is filing the resident return with Nebraska. If the income is not separately stated, review the account with the Specialist.

If line 59 excludes non-Nebraska S Corporation income or Limited Liability Company income from non-Nebraska sources, lines 59 and 61 should be less than that indicated using the conversion chart. When the taxpayer indicates that the credit has been adjusted because of S Corporation, or Limited Liability Company income, accept lines 59 and 61 as reported. If Line 59 includes a non-Nebraska S Corporation loss from line 46, line 59 should be more than that indicated using the conversion chart. Accept the amounts reported in both cases. (An S-Corp or LLC adjustment on lines 46or 56 are indicators that lines 59 and 61 may reflect an adjusted amount).

Dual State Residents (Schedule II - Special Calculation)

When a taxpayer is a dual state resident whose total income is reported to both states and is claiming credit for tax paid to those states, calculate the credit by using the following formula:

Take the lower tax liability of the two returns and multiply by the ratio of the Nebraska liability, divided by the combined state liabilities on the two returns.

For both returns, the liability referenced in the above formula is the liability after nonrefundable credits, with the exception of the credit claimed for payment of tax to the other state representing the dual state residency.

On fiduciary returns, the tax liability for each separate state is computed on only the portion of the trust's income which is subject to tax in BOTH states. First determine the tax liability for each of the resident returns in order to determine which state has the lower liability. The tax amount is computed on the portion of the trust's income which is subject to tax in both states. If there are any modifications to the other state’s income which are not the same modifications taken on the Nebraska return, (such as an addition for a state income tax refund, etc.), the modification must not be included when determining the portion of the trust's income that is taxed in both states. In most situations, the liability for each state that is used in the formula should be the tax liability after all non-refundable credits except for the credit for tax paid to the other state.

Electronic Filings and Telefile

Treat electronic filing and telefile forms just like any other state form. If it is not on the conversion list, make a copy following the procedure manual.

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