Important Change to Personal Property Tax Returns for Nebraska Nonprofit Organizations

Krystal Siebrandt, CPA, CFE, CGMA

 

Nonprofit organizations that have qualified for a personal property tax exemption* no longer need to list assets purchased during the year on their personal property tax return. Rather, they must only report new taxable leases.

LEASE REPORTING CONSIDERATIONS

Lease List and Return. All leased taxable personal property must be listed and returned at the lessor’s Nebraska adjusted basis and date of acquisition. If a lessee is unable to list and return a leased item because the Nebraska adjusted basis cannot be determined, the lessee must file a description of the property and the name and address of the lessor.

  • Contracts made between lessor and lessee will not be recognized in determining tax responsibility. An assessor may require the listing of leased taxable personal property if it is necessary for compliance.

Tangible Personal Property. Tangible personal property leased by tax-exempt entities is subject to personal property taxation at its net book value.

Lease vs. Conditional Sale. A lease does not include a transaction intended to finance a purchase, even though the signed agreement is called a lease. This type of transaction is a form of “conditional sale” and not a lease. When a conditional sale exists, ownership of the personal property rests with the lessee/buyer, whose tax status will determine the taxability of the property.

A conditional sale is an agreement that has one or more of the following characteristics:

  1. The lease is characterized as a capital lease rather than an operating lease under generally accepted accounting principles;
  2. Portions of the periodic payments are attributable to an equity to be acquired by the lessee;
  3. The lessee/buyer is bound for a fixed term and will obtain the title at the of the lease, or has the option to buy for a nominal amount;
  4. The agreed periodic payment materially exceeds the current fair rental value of the item; or
  5. A portion of the payments are identified or readily identifiable as interest.

*As a reminder, to qualify for a personal property tax exemption, charitable organizations must apply for the exemption using Form 451. This form must be filed on or before the December 31 immediately preceding the year for which the exemption is sought. After an exemption has been approved, a new application must be filed for every year evenly divisible by four. For those years not evenly divisible by four, the Statement of Reaffirmation of Tax Exemption (Form 451A) must be filed on or before the December 31 immediately preceding the year for which the exemption is sought.  

 For additional information on property tax exemptions regulations, please refer to the Nebraska Department of Revenue, Property Assessment Division.

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