Corporate tax cut proposal amended, advanced

Lawmakers gave second-round approval May 11 to a bill that would reduce Nebraska’s top corporate income tax rate after amending it to phase in a smaller cut over two years.

As amended on general file, LB432, introduced by the Revenue Committee, would cut the state’s top corporate income tax rate to 6.84 percent beginning Jan. 1, 2022.

Corporations currently pay a state income tax rate of 5.58 percent on the first $100,000 of taxable income and 7.81 percent on income in excess of that amount.

Elkhorn Sen. Lou Ann Linehan, the committee’s chairperson, said the change would put the top corporate rate in line with the top individual income tax rate paid by passthrough entities. She said the proposal is a “baby step” toward more comprehensive tax reform next session.

Sen. Michael Flood of Norfolk supported LB432, saying the rate cut would help Nebraska compete for business investment with neighboring states that either do not impose income tax or have lower rates.

Omaha Sen. John Cavanaugh opposed the cut and introduced an amendment to remove it from the bill. He said Nebraska could attract companies and workers more effectively by investing in workforce training, infrastructure and education.

“I don’t think that the evidence is clear that [LB432] would actually increase business investment in Nebraska,” he said.

Sen. Curt Friesen of Henderson said a corporate rate cut should be part of a larger debate that includes property tax relief and school funding reform. He said corporations do not decide to locate or expand based only on tax rates and that the cut likely would not result in economic growth.

Cavanaugh later withdrew his amendment, saying he had worked with Linehan and other senators on a compromise amendment.

That amendment, introduced by Linehan and adopted 45-0, would cut the top corporate rate to 7.5 percent for tax years beginning on or after Jan. 1, 2022, and before Jan. 1, 2023. The rate would fall to 7.25 percent for tax years beginning on or after that date.

The proposal would state the intent of the Legislature to further reduce the rate to 7 percent for tax years beginning on or after Jan. 1, 2024, and before Jan. 1, 2025, and to 6.84 percent for tax years beginning on or after that date.

Linehan said the original proposal likely did not have enough votes for a successful cloture motion, which ends a filibuster by ceasing debate and forcing a vote on a bill and any pending amendments.

“I think it’s better to take half … than to risk not getting to cloture and not getting anything,” she said.

Sen. John Cavanaugh supported the amendment. He said it would reduce the original proposal’s cost while also showing that the Legislature is willing to lower the top corporate rate.

“If, over the course of the next two years, I become convinced that taking it down to 6.84 [percent] would actually accomplish the stated objective,” Cavanaugh said, “I would probably bring that bill.”

Flood supported the amendment but said the provision including legislative intent “means nothing.”

“If we really want to make changes … and we want to be more competitive, we should pick one thing and do it all,” he said.

LB432 also would create a $2,000 refundable state income tax credit for the parent of a stillborn child if a fetal death certificate is filed for the child, the child had advanced to at least the 20th week of gestation and would have been a dependent of the individual claiming the credit.

Omaha Sen. Machaela Cavanaugh introduced an amendment that would replace the proposed credit with a grant program under which parents of stillborn children could receive up to $10,000 to pay for funeral costs.

Her proposal would provide parents immediate help rather than force them to wait until they file their taxes the following year, Cavanaugh said.

“This makes it easier and less traumatic for families to get those financial resources that they need to have a memorial for their loss,” she said.

The amendment failed on a vote of 5-23.

Cavanaugh later introduced another amendment that would remove the stillborn tax credit from the bill. It failed on a vote of 8-20.

LB432 also would allow any rural or suburban fire protection district, airport authority, city, village or nonprofit corporation to provide and maintain enhanced cancer benefits for paid and volunteer firefighters.

Sen. Mike McDonnell of Omaha introduced an amendment that would, among other changes, require a firefighter to serve for 24 consecutive months rather than 12 to be eligible for benefits under the bill.

A qualifying firefighter also would have to have been actively engaged in fire suppression at an actual fire or training event and have worn all available personal protective equipment when fighting any fire.

Senators voted 45-0 to adopt McDonnell’s amendment.

Gothenburg Sen. Matt Williams also introduced an amendment, adopted 37-0, that includes provisions of his LB254, which would extend the sunset date for the Beginning Farmer Tax Credit Act from Dec. 31, 2022, to Dec. 31, 2025.

After adopting a technical amendment, senators advanced LB432 to final reading by voice vote.