Session Review: Revenue

Revenue bills regarding convention centers, sales tax incentives and grants to combat alcohol problems at Whiteclay were passed by the Legislature in 2010.

Convention centers

Three bills were passed that impact the state’s financing assistance programs for convention centers.

The Convention Center Facility Financing Assistance Act provides a mechanism for using sales tax revenue to fund the construction or enhancement of certain facilities. Sales tax revenue generated by a qualifying facility – and by retailers within a specified vicinity – is “turned back” to assist in paying down the debt incurred to develop and build the facility.

LB779, introduced by Omaha Sen. Steve Lathrop and passed 48-0, extends the use of the turnback mechanism for smaller sports arena facilities with permanent seating capacities of 3,000 to 7,000. Also eligible under the bill is any racetrack enclosure licensed by the state racing commission that is initially occupied on or after July 1, 2010.

Retailers located within 600 yards of an eligible facility will be subject to the turnback formula. Any increase in sales tax revenue from retailers that existed 24 months prior to the facility’s completion and all sales tax revenue collected by retailers that began operation up to 24 months prior to, or 24 months after, completion of the facility can be used for the turnback provision.

Under the formula, 70 percent of turnback revenue can be used to retire bonded indebtedness on the qualifying facility under certain circumstances and 30 percent will be directed to the Local Civic, Cultural and Convention Center Financing Fund, which provides grants for rural community improvement projects.

During the final 10 years of financing, turnback funds cannot exceed the highest amount turned back in any single year of the first 10 years of financing.

Another bill relating to convention centers addresses the 70 percent state sales tax turnback from convention center facilities under the financing assistance act. Ten percent of these revenues must be directed to metropolitan class cities for distribution to areas with a high concentration of poverty. Projects eligible for funding must showcase the area’s cultural or historical significance or attempt to reduce gang violence.

LB975, introduced by Omaha Sen. Jeremy Nordquist and passed 46-0, permits a project located near a high-poverty area to receive funds if the project will be of significant or demonstrable benefit to the high-poverty area.

LB789, sponsored by Omaha Sen. Brad Ashford and approved 48-0, increases the maximum grant amounts allowable to municipalities under the Local, Civic, Cultural and Convention Center Financing Act.

The maximum grant for primary class cities increased from $1 million to $1.5 million and grants for communities with a population of less than 10,000 increased from $200,000 to $250,000. A series of increases for municipalities of other sizes also are authorized.

Tax incentives

Lawmakers approved new tax incentives and extended existing ones this session.

LB1018, introduced by Bellevue Sen. Abbie Cornett and passed 48-0, permits municipalities, after receiving voter approval, to issue refunds of local option sales tax. The bill permits refunds of up to 1.5 percent of the local option sales tax paid within a specific geographic area defined by the municipality on qualified purchases for tourism development or redevelopment projects. If approved, a municipality may offer the refunds for 10 years.

The bill also creates a four-tier system for tourism projects and two tiers for redevelopment projects. Applicants must prove that their projects will be open at least 150 days per year and will result in a net employment increase to the state.

Cornett also introduced LB1081, which creates a reimbursement program for qualified employers who provide job training for teleworkers who work from home.

To qualify, employers must train at least 400 new teleworkers within a year of their application to the job training reimbursement program. Employers must give hiring priority to teleworkers who live in counties with fewer than 100,000 residents or in census tracts where more than 30 percent of the population is below the federal poverty line.

Reimbursements will be $300 for each qualifying teleworker up to a total of 500 employees, resulting in a maximum project reimbursement of $150,000. A maximum of seven projects could be approved during fiscal year 2010-11 for a total of $1,050,000 in reimbursements.

LB1081 was approved 48-0.

Certain businesses providing cloud computing services now qualify for Nebraska Advantage Act tax incentives under LB918. Cloud computing enables users to access and store applications, data and information on the Internet rather than on a personal computer.

Introduced by Kearney Sen. Galen Hadley and passed 49-0, LB918 adds companies that sell or deliver these services and products via the Internet or other electronic means to the list of qualified businesses under tiers 1-5 of the Nebraska Advantage Act.

The bill expands the definition of a qualified business under tiers 2-5 to include enterprises performing research, development and maintenance of a data center. Data centers meeting levels of investment and employment for tiers 2 and 5 also are eligible for a personal property tax exemption for computer systems.

Other bills

A list of delinquent taxpayers will be made public under a bill passed by the Legislature 48-0.

LB879, introduced by Cornett, directs the state departments of Labor and Revenue to prepare and publish a list of delinquent taxpayers owing taxes, penalties and costs in excess of $20,000 for which a notice of lien has been filed. The list will be published on either department’s Web site and will include the debtor’s name, address, and type and amount of the tax or fee due.

Other changes made by LB879 include:

• permitting the state Department of Motor Vehicles to provide information to the department, such as Social Security numbers and addresses, about license or state identification card holders;
• eliminating criteria for waiving interest on delinquent payments of motor fuel taxes;
• changing the funding source for the state athletic commissioner’s office expenses from the Charitable Gaming Operations Fund to the State Athletic Commissioner’s Cash Fund;
• authorizing the DMV to disclose taxpayer information to the state Department of Labor to administer the Employment Security Law or the Contractor Registration Act; and
• simplifying sales and use tax refunds under the Nebraska Advantage Act for purchases made by contractors.

The bill incorporates provisions of two other bills introduced by Cornett.

LB1078 updates references in Nebraska law to the most recent version of the federal Internal Revenue Code.

LB878 reduces the threshold from $20,000 to $5,000 for instances in which electronic fund transfers of taxes or fees are required. It also requires employers to deduct and withhold income taxes using the prescribed method of the tax commissioner.

LB879 also changes from March 15 to Feb. 1 the date by which an employer must provide to employees copies of statements detailing taxes withheld on wages or payments subject to withholding.

The bill exempts individual income taxpayers from having to pay a $100 penalty for failing to make a required payment electronically. It also prohibits interest from accruing on tax overpayments if a return is not filed electronically and the tax commissioner has approved and implemented an electronic form or method for filing returns.

A grant program proposed to address problems resulting from alcohol sales in Whiteclay to residents of the Pine Ridge Reservation was approved by the Legislature.

Introduced by Ellsworth Sen. LeRoy Louden and passed 47-1, LB1002 provides $25,000 for economic development, health care and law enforcement grants within a 30-mile radius of a census-designated place. The bill defines a census-designated place as an area situated in a county with fewer than 6,400 residents that lacks a municipal government, resembles an incorporated village and is associated with a reservation.

Political subdivisions or tribal governments may apply for the grants, which are administered by the Commission on Indian Affairs.

Finally, three bills advanced by the committee were debated but not approved.

As amended by a Revenue Committee amendment, LB1079, introduced by Cornett, would have authorized single-commissioner hearings for the Tax Equalization and Review Commission (TERC). The bill also would have changed the burden of proof currently required for TERC hearings from “clear and convincing evidence” to “the greater weight of the evidence.”

After the adoption of the Revenue Committee amendment, LB1079 failed to advance from general file on a 23-18 vote.

LB420, introduced by Hadley, would have offered a sales and use tax exemption to health care clinics owned by a single nonprofit hospital and those receiving federal funds through the U.S. Public Health Service that serve medically underserved populations. The bill had an operative date of July 1, 2013.

After lawmakers approved LB420 on a 42-3 vote, the governor vetoed the bill. A motion to override the governor’s veto was not offered.

LB952, introduced by Omaha Sen. Tom White, would have exempted from sales tax gross income received by public sewer utilities to address combined sewer overflow and water and natural gas infrastructure replacement projects.

During select file debate, a motion to invoke cloture was offered. The motion failed on a 23-22 vote, 10 short of the number needed to cease debate and vote on the bill. It was not rescheduled for debate this session.