Tax exemption for ethanol inputs, ag machinery advances

A bill containing several sales and use tax exemptions advanced from general file April 27.

Under LB595, introduced by Thurston Sen. Joni Albrecht, state sales and use taxes could not be imposed on gross receipts from the sale, lease or rental of — and storage, use or other consumption in Nebraska of — enzymes, yeast and related products used to manufacture ethanol.

The state Department of Revenue estimates that LB595 would reduce state general fund revenue by $593,000 in fiscal year 2021-22, $898,000 in FY2022-23 and $907,000 in FY2023-24.

Albrecht said taxing those inputs makes Nebraska’s biofuel industry less competitive with ethanol producers in other states.

“These tax dollars could instead be used by our ethanol producers to invest in efficiency and technology and to improve their carbon index score, which would also result in making this Nebraska product more valuable and sought after,” she said.

A Revenue Committee amendment, adopted 38-0, includes the provisions of LB672, introduced by Glenvil Sen. Dave Murman, and the amended provisions of three other bills heard by the committee this session.

Sales and use tax currently may not be imposed on the gross receipts from the sale, lease or rental of depreciable agricultural machinery and certain equipment used in commercial agriculture.

Under Murman’s proposal, agricultural machinery and equipment would be defined as tangible personal property used directly in cultivating or harvesting a crop, raising or caring for animal life, protecting the health and welfare of animal life or collecting or processing an agricultural product on a farm or ranch.

The measure also would specify that agricultural machinery and equipment includes header trailers, head haulers, header transports and seed tender trailers.

The department estimates the proposal would reduce state general fund revenue by $4 million in FY2021-22, $6.4 million in FY2022-23 and $6.6 in FY2023-24.

The amended provisions of LB182, introduced by Elkhorn Sen. Lou Ann Linehan, would exempt from state sales and use tax the gross income received from the lease or use of towers or other structures primarily used in conjunction with the furnishing of internet access service.

The department estimates that Linehan’s proposal would reduce state general fund revenue by $2.7 million in FY2021-22, $4.5 million in FY2022-23 and $5 million in FY2023-24.

Under the amended provisions of LB350, also introduced by Linehan, the proceeds of sales and use taxes imposed on the sale or lease of motorboats, personal watercraft, all-terrain vehicles and utility-type vehicles would be credited to the state Game and Parks Commission Capital Maintenance Fund until 2027 rather than 2022.

Finally, the amended provisions of LB502, introduced by Sen. Michael Flood of Norfolk, would allow taxpayers who have signed agreements to receive tax incentives under the Nebraska Advantage Act to receive sales and use tax incentives using the process created under the ImagiNE Nebraska Act.

The department estimates that Flood’s proposal would reduce state general fund revenue by $11.7 million in FY2021-22, $5.9 million in FY2022-23 and $2 million in FY2023-24.

Although Flood’s proposal would not reduce overall state tax collections over the long term, Linehan said, it would result in a faster revenue reduction over the next two years than would otherwise occur. For that reason, she introduced an amendment, adopted 27-0, that removed the proposal from the committee amendment.

Bayard Sen. Steve Erdman introduced an amendment that would include provisions of his LB165. They contain several technical changes to legislation passed in 2019 that requires county boards of equalization to adjust the value of destroyed real property in certain circumstances.

The amendment failed on a vote of 23-7. Twenty-five votes were needed.

LB595 advanced to select file on a vote of 35-0.