Precision Castparts Corp. v. Nebraska Dept. of Rev.

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
Precision Castparts Corp., appellant, v. Nebraska
Department of Revenue and Tony Fulton,
in his official capacity as Tax
Commissioner, appellees.
___ N.W.3d ___
Filed August 30, 2024. 	No. S-23-564.
1. Administrative Law: Taxation: Final Orders: Appeal and Error.
Any final action of the Tax Commissioner may be appealed, and the
appeal shall be in accordance with the Administrative Procedure Act.
2. Administrative 	Law: 	Judgments: 	Appeal 	and 	Error. 	In 	an
Administrative Procedure Act review proceeding, the district court
reviews the agency’s decision de novo on the record of the agency and
may affirm, reverse, or modify the decision of the agency or remand the
cause for further proceedings.
3. ____: ____: ____. In an appeal under the Administrative Procedure Act,
an appellate court may reverse, vacate, or modify the judgment of the
district court for errors appearing on the record.
4. ____: ____: ____. When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the record, the
inquiry is whether the decision conforms to the law, is supported by com-
petent evidence, and is neither arbitrary, capricious, nor unreasonable.
5. Judgments: Appeal and Error. Whether a decision conforms to law
is by definition a question of law, in connection with which an appel-
late court reaches a conclusion independent of that reached by the
lower court.
6. Judgments: Statutes: Appeal and Error. When an appeal calls for
statutory interpretation or presents questions of law, an appellate court
must reach an independent, correct conclusion irrespective of the deter-
mination made by the court below.
7. Statutes. Statutory language is to be given its plain and ordinary
meaning.
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
10/14/2026 08:33 AM CDT

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
8. Statutes: Words and Phrases. Technical words and phrases and such
others as may have acquired a peculiar and appropriate meaning in the
law shall be construed and understood according to such peculiar and
appropriate meaning.
9. Taxation: Statutes: Judicial Construction. Statutes imposing a tax are
strictly construed against the government and in favor of the taxpayer,
while exemptions from taxation are to be strictly construed in favor of
the government and not extended by judicial construction.
10. Federal Acts: Taxation. Income included in federal taxable income pur-
suant to 26 U.S.C. § 965 (2018) does not qualify for deduction as “divi-
dends . . . deemed to be received” under Neb. Rev. Stat. § 77-2716(5)
(Reissue 2018).
Appeal from the District Court for Lancaster County, Kevin
R. McManaman, Judge. Affirmed.
Matthew R. Ottemann and Nicholas K. Niemann, of McGrath
North Law Firm, Michael B. Kimberly, Stephen P. Kranz, and
Abbey Bowe, of McDermott, Will & Emery, L.L.P., pro hac
vice, and Kelly M. Klaus and Rachel G. Miller-Ziegler, of
Munger, Tolles & Olson, L.L.P., pro hac vice, for appellant.
Michael T. Hilgers, Attorney General, Eric J. Hamilton, and
Zachary B. Pohlman for appellees.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Miller-Lerman, J.
NATURE OF CASE
In this appeal, taxpayer Precision Castparts Corp. (Precision
Castparts) 	contends 	that 	the 	income, 	which 	represented
retained earnings of its foreign subsidiaries that were included
on its 2017 federal tax return based on federal law, should
have been deducted from income on its Nebraska return as
“dividends . . . deemed to be received” under Neb. Rev. Stat.
§ 77-2716(5) (Reissue 2018). In a declaratory order, the Tax
Commissioner denied Precision Castparts’ request to amend
its 2017 Nebraska corporation income tax return to claim
a deduction for income included on its federal tax return.

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
The district court for Lancaster County affirmed that order.
Precision Castparts appeals the decision of the district court.
Given the language of the Nebraska statute and the charac-
terization of the income at issue by the U.S. Supreme Court,
we affirm the order of the district court that affirmed the
Commissioner’s order denying Precision Castparts’ efforts to
claim the income as a deduction.
STATEMENT OF FACTS
In 2017, Congress enacted the Tax Cuts and Jobs Act
(TCJA), which included, inter alia, an overhaul of federal
taxation of U.S. corporations that earn international income.
As part of this overhaul, the TCJA changed the taxation of
the earnings of a controlled foreign corporation (CFC). Prior
to 2017, active business income from a CFC’s offshore busi-
nesses was not generally taxed by the United States when it
was earned, and it was taxable only when the income was
repatriated to the United States, generally through a distribu-
tion to U.S. shareholders. Certain foreign earnings of a CFC
could be taxed through a provision of the federal tax code
referred to as “Subpart F” and codified at 26 U.S.C. § 951 et
seq. (2018). Under 26 U.S.C. § 951, U.S. shareholders who
owned at least 10 percent of a CFC’s voting stock could be
taxed on a proportionate share of specified categories of undis-
tributed earnings.
“The TCJA transformed U.S. corporate taxation from a
worldwide system, where corporations were generally taxed
regardless of where their profits were derived, toward a ter-
ritorial system, where corporations are generally taxed only
on their domestic source profits.” Moore v. U.S., 36 F.4th 930,
933 (9th Cir. 2022), cert. granted ___ U.S. ___, 143 S. Ct.
2656, 216 L. Ed. 2d 1235 (2023). The TCJA “also modified
CFC taxes going forward: effective January 1, 2018, a CFC’s
income taxable under Subpart F includes current earnings
from its business.” Moore, 36 F.4th at 933. “As part of this
change, the TCJA created a new, one-time tax” codified at 26

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
U.S.C. § 965 (Section 965). Moore, 36 F.4th at 933. Section
965(a) generally provides that for the 2017 tax year, “the
subpart F income of such foreign corporation (as otherwise
determined for such taxable year under section 952) shall be
increased by . . . the accumulated post-1986 deferred foreign
income of such corporation.”
Precision Castparts is a corporation based in Oregon that
sells its products in Nebraska and is subject to income tax in
Nebraska. Precision Castparts included income pursuant to
Section 965 in its 2017 federal income tax return. Precision
Castparts did not include Section 965 income in the taxable
base in the original Nebraska corporation tax return it filed
for 2017, but it amended the return in December 2021 to
include it.
In March 2022, Precision Castparts filed a request with
the 	Nebraska 	Department 	of 	Revenue 	seeking 	a 	declara-
tory order authorizing Precision Castparts to amend its 2017
Nebraska return to deduct Section 965 income from its tax-
able base pursuant to § 77-2716(5), which provides a deduc-
tion from taxable income for “dividends received or deemed
to be received from corporations which are not subject to the
Internal Revenue Code.” After briefing and oral arguments, the
Tax Commissioner filed a declaratory order on May 26, 2022,
in which he denied the request on the basis that § 77-2716(5)
did not apply to Section 965 inclusion income.
In the declaratory order, the Tax Commissioner reviewed
relevant federal income tax law and determined that Section
965 income added to Subpart F income “does not meet the
definition of dividend nor is it deemed a dividend in the
[Internal Revenue Code] or related Treasury Regulations.”
The Tax Commissioner cited “Treas. Reg. [§] 1.902-1(a)(11)”
and Rodriguez v. CIR, 722 F.3d 306 (5th Cir. 2013), to deter-
mine that federal tax law makes “a distinction between a
deemed dividend and a deemed inclusion” and that the term
“dividend” includes deemed dividends under certain provi-
sions of the Internal Revenue Code but does not include

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
deemed inclusions under other provisions, including the pro-
vision of 26 U.S.C. § 951(a) at issue. The Tax Commissioner
concluded that Section 965 income was a “deemed inclusion”
rather than a “deemed dividend” and that therefore, it was not
deductible under § 77-2716(5) as “dividends . . . deemed to
be received.”
Precision Castparts petitioned the district court for Lancaster
County for review of the Tax Commissioner’s declaratory
order. The district court affirmed the declaratory order. In its
order, the district court noted that the Nebraska Legislature
had not “legislated with respect to the one-time inclusion of
foreign subsidiary earnings from 1986 into the 2017 federal
tax base, and the special transition taxation of the same.”
The court therefore reviewed how Section 965 income should
be treated under existing Nebraska tax statutes, including
§ 77-2716(5).
The district court stated that it was clear that Section 965
income was not a dividend under federal tax law because
there had been no distribution. Turning to Nebraska law, the
court considered whether Section 965 income qualified as
“dividends . . . deemed to be received” under § 77-2716(5).
The court reasoned that in order to be under this statutory
language, “a legislative body with the power to do so must
. . . ‘deem’ the 965 inclusion income a dividend for it to be
treated as a ‘deemed dividend,’” and that it was “not enough
that Congress merely deem[ed] it as income received.” The
district court agreed with the Tax Commissioner’s reasoning
and its citation in the declaratory order to federal tax law that
made a distinction between a deemed dividend and a deemed
inclusion. The district court reasoned that “Congress knows
how to say a certain inclusion income is to be considered
and treated as a dividend even when it is not,” and it agreed
with the Tax Commissioner’s conclusion that the Section 965
inclusions are income, “but they do not qualify as ‘dividends
. . . deemed to be received’ under [§ 77-2716(5)].” The dis-
trict court concluded that Precision Castparts had “failed

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
to establish it is entitled to use the deduction found in . . .
§ 77-2716(5) for that inclusion income.” The district court
therefore affirmed the Tax Commissioner’s declaratory order.
Precision Castparts appeals the order of the district court.
ASSIGNMENT OF ERROR
Precision 	Castparts 	claims 	that 	the 	district 	court 	erred
when it concluded Section 965 income is not “dividends . . .
deemed to be received” pursuant to § 77-2716(5) and therefore
not deductible from federal taxable income to determine the
Nebraska taxable income base.
STANDARDS OF REVIEW
[1,2] Any final action of the Tax Commissioner may be
appealed, and the appeal shall be in accordance with the
Administrative Procedure Act. Crow v. Nebraska Dept. of Rev.,
316 Neb. 154, 3 N.W.3d 881 (2024). In an Administrative
Procedure Act review proceeding, the district court reviews
the agency’s decision de novo on the record of the agency and
may affirm, reverse, or modify the decision of the agency or
remand the cause for further proceedings. Crow, supra.
[3-5] In an appeal under the Administrative Procedure Act,
an appellate court may reverse, vacate, or modify the judg-
ment of the district court for errors appearing on the record.
Crow, supra. When reviewing an order of a district court
under the Administrative Procedure Act for errors appearing
on the record, the inquiry is whether the decision conforms
to the law, is supported by competent evidence, and is neither
arbitrary, capricious, nor unreasonable. Crow, supra. Whether
a decision conforms to law is by definition a question of law,
in connection with which an appellate court reaches a conclu-
sion independent of that reached by the lower court. Big Blue
Express v. Nebraska Dept. of Rev., 309 Neb. 838, 962 N.W.2d
528 (2021).
[6] When an appeal calls for statutory interpretation or pre-
sents questions of law, an appellate court must reach an inde-
pendent, correct conclusion irrespective of the determination

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
made by the court below. Konsul v. Asensio, 316 Neb. 874, 7
N.W.3d 619 (2024).
ANALYSIS
[7,8] The issue in this appeal is a matter of statutory inter-
pretation: whether the income included in Precision Castparts’
federal income pursuant to Section 965 qualifies for deduction
under § 77-2716(5), which provides, “There shall be sub-
tracted from federal adjusted gross income or, for corporations
and fiduciaries, federal taxable income dividends received
or deemed to be received from corporations which are not
subject to the Internal Revenue Code.” We therefore apply
general rules of statutory construction, including that statutory
language is to be given its plain and ordinary meaning, Syring
v. Archdiocese of Omaha, ante p. 195, 9 N.W.3d 445 (2024),
and that technical words and phrases and such others as may
have acquired a peculiar and appropriate meaning in the law
shall be construed and understood according to such peculiar
and appropriate meaning, In re Guardianship of Patrick W.,
316 Neb. 381, 4 N.W.3d 833 (2024).
[9] In addition to the general rules of statutory construc-
tion, we have set forth standards specific to tax statutes. We
have generally stated that statutes imposing a tax are strictly
construed against the government and in favor of the taxpayer,
while exemptions from taxation are to be strictly construed
in favor of the government and not extended by judicial con-
struction. Big Blue Express, supra. There appears to be no
dispute in this case that Section 965 income was properly
included in federal taxable income, which provides the start-
ing point for determining Nebraska taxable income. Section
77-2716(5) provides a deduction from federal adjusted gross
income to determine Nebraska taxable income, and it effec-
tively exempts the deducted amount from taxation.
Neb. Rev. Stat. § 77-2714 (Reissue 2018) provides in part,
“Any term used in sections 77-2714 to 77-27,123 shall have
the same meaning as when used in a comparable context

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
in the laws of the United States relating to federal income
taxes, unless a different meaning is clearly required.” The
federal tax statute 26 U.S.C. § 316(a) (2018) generally defines
the term “dividend” to mean “any distribution of property
made by a corporation to its shareholders . . . out of its earn-
ings and profits.” There does not appear to be any contention
in this case that the Section 965 inclusion should be consid-
ered a “dividend,” per se, because no actual distribution was
made by Precision Castparts’ CFCs or received by Precision
Castparts. The issue instead is whether Section 965 income
qualifies as “dividends . . . deemed to be received” under
the language of § 77-2716(5). Precision Castparts argues
that Section 965 income represented “dividends . . . deemed
to be received” under § 77-2716(5), whereas the district
court agreed with the Tax Commissioner’s determination that
Section 965 income is not “dividends . . . deemed to be
received” under § 77-2716(5).
The parties’ arguments regarding the proper interpretation
of the phrase “dividends . . . deemed to be received” under
§ 77-2716(5) focus in large part on whether the word “deemed”
within the phrase modifies “dividends” or “received.” The Tax
Commissioner focuses on whether the income inclusion under
Section 965 was deemed to be a dividend, and he contends
that nothing in the language of Section 965 deems the inclu-
sion to be a dividend. Precision Castparts focuses on whether
Section 965 deemed it to have received income properly clas-
sified as a dividend. Precision Castparts argues that Section
965 deemed it to have received a distribution of retained earn-
ings from its CFCs and that such distribution, thus received,
would have been a dividend.
For purposes of this appeal, however, we need not resolve
whether one reading is more proper than the other. For pur-
poses of this appeal, we consider whether Section 965 income
may accurately be described in Nebraska law as “dividends
. . . deemed to be received” under § 77-2716(5). Arguably,
the phrase “dividends . . . deemed to be received” could

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
encompass income that has been received that would not oth-
erwise be considered a dividend but is treated by statute as a
dividend, and it could also encompass income deemed to have
been received when such income would be a dividend if it
were received. As discussed below, we determine that Section
965 income is not “dividends . . . deemed to be received”
either as nondividend income that is deemed to be dividends
or as income deemed to be received that would be dividends
if received.
Initially, we agree with the district court’s observation and
the Tax Commissioner’s argument that the language of Section
965 did not explicitly deem the income inclusion to be divi-
dends. “[W]hen Congress decides to treat certain inclusions as
dividends, it explicitly states as much.” Rodriguez v. CIR, 722
F.3d 306, 311 (5th Cir. 2013) (determining that Congress did
not intend to deem certain inclusions pursuant to 26 U.S.C.
§ 951 to be dividends and contrasting those to other statutory
sections in which Congress explicitly deemed other income
inclusions to be dividends). Unlike the other statutory provi-
sions cited in Rodriguez, supra, we see nothing in the lan-
guage of Section 965 that explicitly states the inclusion is to
be considered or treated as dividends. In that sense, Section
965 did not deem the income inclusion to be dividends.
Precision Castparts generally contends that Section 965
deems shareholders to have received distributions from their
CFCs and that such distributions, if received, would be
dividends, and Precision Castparts argues therefore that the
Section 965 inclusion qualifies as “dividends . . . deemed
to be received” under § 77-2716(5). Precision Castparts’
argument has some appeal in that prior to the changes made
by the TCJA in 2017, earnings of CFCs were generally not
taxed to shareholders unless and until they were distributed
to shareholders, and such distributions received by sharehold-
ers would meet the definition of dividends. However, there
is nothing in the language of Section 965 that leads us to
conclude that the statute operates by deeming the retained

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
earnings to have been distributed. Section 965 does not
explicitly state as such, and we note that rather than stating
that the inclusion should be taxed in the manner and at the
rates applicable to dividends, Section 965 sets forth specific
rates of taxation and other specific requirements for the
income included pursuant to the statute.
In Moore v. United States, ___ U.S. ___, 144 S. Ct. 1680,
219 L. Ed. 2d 275 (2024), the U.S. Supreme Court consid-
ered a challenge to the constitutionality of Section 965. The
Court ultimately rejected the constitutional challenge, and in
so doing, it considered how Section 965 operates. In its analy-
sis of the operation of Section 965, the Court indicated that
Section 965 does not operate by deeming a distribution to have
been made to shareholders. Instead, Section 965 treats the
inclusion as pass-through income and attributes the retained
earnings of a CFC to its shareholders.
The Court stated that the TCJA, through Section 965,
“imposed a new, one-time pass-through tax on some American
shareholders of American-controlled foreign corporations.”
Moore, 144 S. Ct. at 1686. The Court further stated that
Section 965 “attributes the undistributed income of American-
controlled foreign corporations to their American sharehold-
ers, and then taxes the American shareholders on that income,”
and that “[b]y doing so, [Section 965] operates in the same
basic way as Congress’s longstanding taxation of partner-
ships, S corporations, and subpart F income.” Moore, 144 S.
Ct. at 1696.
The Court described such pass-through treatment as fol-
lows: “For tax purposes, Congress has long treated some
corporations and partnerships as pass-throughs: Congress does
not tax the entity on its income, but instead attributes the
undistributed income of the entity to the shareholders or
partners and then taxes the shareholders or partners on that
income.” Id., 144 S. Ct. at 1684-85. “Instead of the entity
itself paying taxes, income is attributed to the entity’s owners,
such as shareholders or partners, who then pay taxes on the

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
income of the entity even if the entity has not distributed any
money or property to them.” Id., 144 S. Ct. at 1685.
In Moore, the Court contrasted pass-through treatment to
treatment of other entities that pay taxes on the income and
whose “shareholders are ordinarily not taxed on that income”
and “[i]nstead, the shareholders typically pay taxes either
when the corporation distributes money, stock, or other prop-
erty to them as a dividend or when the shareholders sell
their shares and have capital gains.” 144 S. Ct. at 1685. The
Court further acknowledged that prior to the TCJA in 2017,
through Subpart F, Congress had “likewise treated American-
controlled foreign corporations as pass-throughs” with respect
to “a small portion of the foreign corporation’s income, mostly
passive income.” Moore, 144 S. Ct. at 1685.
The Court stated that the tax imposed pursuant to Section 965
addressed one of the problems that had arisen under the
old system: For decades before the 2017 Act, American-
controlled foreign corporations had earned and accu-
mulated trillions of dollars in income abroad that went
almost entirely untaxed by the United States. The foreign
corporations themselves were not taxed on their income.
And other than subpart F, which applies mostly to pas-
sive income, the undistributed income of those foreign
corporations was not attributed to American shareholders
for the shareholders to be taxed.
Moore, 144 S. Ct. at 1686. The Court stated that Section 965
“attributed the long-accumulated and undistributed income of
American-controlled foreign corporations to American share-
holders, and then taxed those American shareholders on their
pro rata shares of that long-accumulated income.” Moore, 144
S. Ct. at 1686.
The U.S. Supreme Court’s characterization of Section 965
indicates that the statute does not operate by deeming share-
holders to have received a distribution of retained earnings
from CFCs. Instead, Section 965 employs pass-through treat-
ment, which does not require a distribution of earnings to

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Nebraska Supreme Court Advance Sheets
317 Nebraska Reports
PRECISION CASTPARTS CORP. v. NEBRASKA DEPT. OF REV.
Cite as 317 Neb. 481
shareholders and instead attributes earnings realized by CFCs
to the shareholders without regard to whether those earnings
are distributed to the shareholders. We determine that such
pass-through treatment does not operate by deeming a distribu-
tion to have been received by the shareholder and that, there-
fore, the operation of Section 965 does not qualify the income
included as “dividends . . . deemed to be received” under
§ 77-2716(5).
[10] We determine that the language of Section 965 does not
deem the income included to be dividends, and we determine
that Section 965 employs pass-through treatment to attribute
earnings to shareholders without deeming a distribution to
have been made to shareholders. We therefore conclude that
income included in federal taxable income pursuant to Section
965 does not qualify for deduction as “dividends . . . deemed
to be received” under § 77-2716(5).
CONCLUSION
We conclude that, based on the language of Section 965 and
the U.S. Supreme Court’s characterization of Section 965’s
operation in Moore v. United States, ___ U.S. ___, 144 S.
Ct. 1680, 219 L. Ed. 2d 275 (2024), the income included and
taxed pursuant to Section 965 does not qualify as “dividends
. . . deemed to be received” under § 77-2716(5) and that,
therefore, such income is not deductible in Nebraska. The dis-
trict court therefore did not err when it similarly determined
that the Section 965 inclusion did not qualify for the deduction
and affirmed the declaratory order of the Tax Commissioner
to the same effect. We reject Precision Castparts’ appeal and
affirm the order of the district court.
Affirmed.