Income tax deduction proposed for employers of felons

Companies that hire felons would receive a state income tax deduction under a proposal heard Feb. 17 by the Revenue Committee.

Under LB917, introduced by Omaha Sen. Justin Wayne, a company’s federal adjusted gross income or federal taxable income would be reduced by 65 percent of the wages paid to an individual who has been convicted of a felony.

The deduction would apply to wages paid during the first 12 months of the individual’s employment, and the total deduction per employee could not exceed $20,000.

Wayne said the bill is intended to reduce Nebraska’s recidivism rate by incentivizing companies to hire felons within the first year after they are released from prison.

“The quickest and easiest way to reduce recidivism is to get people a good-paying job as soon as they come out,” he said.

Employers of felons generally pay higher insurance premiums, Wayne said, and the proposed tax deduction would help offset those costs.

The state Department of Revenue estimates that LB917 would reduce general fund revenue by $2.6 million in fiscal year 2023-24 and $2.6 million in FY2024-25.

Danielle Conrad testified in support of the bill on behalf of the ACLU of Nebraska. She said it would complement a federal tax credit for employers of felons and help address overcrowding in Nebraska’s prisons.

“Every single investment that we can make to ensure successful reentry and reduce recidivism helps to address our ongoing challenges related to mass incarceration and racial injustice, which is literally busting our budgets and burdening our taxpayers,” Conrad said.

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