The Revenue Committee heard testimony Feb. 4 on a bill that would end a tax credit program intended to help small businesses.
LB74, introduced by Lincoln Sen. Suzanne Geist, would end the application period for the Nebraska Advantage Microenterprise Tax Credit Act in December 2021. The program provides tax credits tied to new investment and employment at small businesses that have five or fewer employees at the time of application.
Geist said the bill’s intent is to direct the $2 million saved each year to the state Department of Economic Development for the Business Innovation Act, starting in fiscal year 2022-23.
The act provides financial and technical assistance to startup companies in high-growth, high-technology industries such as biosciences and value-added agriculture.
Geist said she introduced a similar bill last year after touring several startup companies funded by Invest Nebraska, which works with the department and receives funding under the Business Innovation Act.
“Invest Nebraska has opened many doors to investors and provided the extra credibility that a startup needs to break into an industry,” she said.
Joseph Young, Invest Nebraska chairman, testified in support of the bill. The Business Innovation Act has a much higher return on investment for taxpayers than the microenterprise credit, which is underutilized, he said.
In 2020, Young said, the Business Innovation Act had a $517 million impact on the state’s economy and generated $11.7 million in state and local taxes. Invest Nebraska recently launched an incubator program on the Nebraska Innovation Campus that supports food and agriculture startups, he said.
“As we come out of the fog of this pandemic,” Young said, “we need to make sure that Nebraska is a leader in the high-growth businesses that attract capital and that attract people.”
Eric Zeece, CEO of Thyreos, also testified in support, saying the vaccine startup received $750,000 in an initial round of investment led by Invest Nebraska. He said the funding will assist the development and testing of a vaccine that protects cattle against a herpes virus that reduces milk production and fertility, costing the industry more than $1 billion a year.
Without that support, Zeece said, the company probably would not have located in Nebraska.
Trenton Buhr of the Center for Rural Affairs testified in opposition to LB74, saying the underuse of the microenterprise credit stems from a lack of promotion and awareness, not a lack of interest.
He said eliminating the program to increase funding for the Business Innovation Act would be inappropriate when just two years ago the Legislature ended another tax credit program and directed its $4 million in funding to the Business Innovation Act, starting this year.
More than 80 percent of Nebraska small businesses fit into the microenterprise category, Buhr said, and the credit provides support that is unavailable to those businesses in other state tax incentive programs.
“It may not have many flashy-type businesses,” he said, “but when you consider where the recipients are, this makes a tremendous difference in their communities for a relatively small investment.”
Lauren Sheridan-Simonsen of Neligh also testified in opposition. Eliminating the microenterprise credit would exacerbate economic decline and depopulation in the state’s rural areas, she said.
“I think it’s important to realize the benefits that the program has in rural, small communities,” Sheridan-Simonsen said.
The committee took no immediate action on the bill.