Ongoing tax incentive evaluations advanced

Senators gave first-round approval March 24 to a bill that would require regular evaluation of the state’s tax incentive programs.

LB538, introduced by the Performance Audit Committee, would create an ongoing evaluation process for all current and future tax incentive programs enacted for the purpose of recruiting or retaining businesses in Nebraska.

Syracuse Sen. Dan Watermeier, chairperson of the committee, said that work conducted by a special tax incentive evaluation committee in 2014 found that regular evaluation of current incentive programs was needed.

“The study found that the goals of the Nebraska tax incentive programs are too broad to permit meaningful program evaluation,” he said. “[LB538] would allow lawmakers to draw conclusions about how tax incentive programs are working and meeting their intended goals.”

The Legislature’s Performance Audit Office would develop and publish a schedule for conducting the evaluations, ensuring that each program is reviewed at least once every three years.

Each evaluation of a tax incentive program would analyze program-specific goals and economic and fiscal impacts of the program and recommend changes to evaluation procedures that would allow for easier evaluation in the future.

In addition to future tax incentive programs, eight current programs would be evaluated under LB538, including the:
• Angel Investment Tax Credit Act;
• Beginning Farmer Tax Credit Act;
• Nebraska Advantage Act;
• Nebraska Advantage Microenterprise Tax Credit Act;
• Nebraska Advantage Research and Development Act;
• Nebraska Advantage Rural Development Act;
• Nebraska Job Creation and Mainstreet Revitalization Act; and
• New Markets Job Growth Investment Act.

Watermeier introduced an amendment, adopted 34-0, which would establish a sunset date of Dec. 31, 2019, for certain incentives under the Nebraska Advantage Act, Nebraska Advantage Rural Development Act and the New Markets Job Growth Investment Act.

Omaha Sen. Heath Mello spoke in favor of the bill and the amendment, saying that continual evaluation of the state’s tax policy is a proven best practice.

“We go through a process every year with regard to evaluating appropriations we, as a Legislature, choose to make,” he said. “It’s important that we use evidence-based evaluations to determine whether tax incentive programs are meeting their outcomes because we don’t really have that in Nebraska right now.”

Senators advanced the bill to select file on a 37-0 vote.