Property tax circuit breaker proposed

A refundable income tax credit would be available to residential property owners and renters under a bill heard by the Revenue Committee Jan 29.

Under LB186, introduced by Lincoln Sen. Kate Bolz, eligible taxpayers could apply for an income tax credit from the state Department of Revenue if they have lived at their residence for at least six months during the tax year.

Bolz said the credit would provide meaningful and targeted tax relief to families who must reconcile rising property taxes with steady family incomes.

“There are challenges in targeting property tax relief,” she said. “[LB186] provides stability for taxpayers and helps individual taxpayers manage the change [in property taxes] from year to year.”

The amount of tax credit would be equal to either the amount of property taxes paid or 20 percent of rent paid minus:
• 1 percent of adjusted gross income (AGI) if it is $6,000 or less for married filing jointly or $3,000 or less for single filers, with the credit not to exceed $1,200;
• 2 percent of AGI if it is $6,001 to $36,000 for married filing jointly or $3,001 to $18,000 for single filers, with the credit not to exceed $900;
• 3 percent of AGI if it is $36,001 to $58,000 for married filing jointly or $18,001 to $29,000 for single filers, with the credit not to exceed $600; or
• 4 percent of AGI if it is $58,001 to $116,000 for married filing jointly or $29,001 to $58,000 for single filers, with the credit not to exceed $300.

A taxpayer who rents property that is owned by a tax-exempt charitable organization or is exempt from property taxes would not be eligible for the income tax credit.

Renee Fry, executive director of the OpenSky Policy Institute, spoke in favor of the bill, saying that it would provide more relief to taxpayers than the state’s current property tax credit.

“It’s difficult to provide property tax relief and also protect critical services such as education and public safety,” Fry said. “According to the Institute on Taxation and Economic Policy, [LB186] would return $149 million to taxpayers. Unlike the property tax credit, this would benefit renters as well.”

Mark Intermill, representing the American Association of Retired Persons, also supported the bill. He said it would be one step toward property tax relief for all Nebraskans.

“There is support for a progressive or relatively equal balance of taxation across income levels,” he said. “We would like to see this as an option on the table because it can be adapted to fit within the [state] resources available.”

The tax credit would take effect Jan. 1, 2016.

No one testified in opposition to the bill and the committee took no immediate action on it.