Immediate deduction of equipment, R&D expenses considered

The Revenue Committee heard testimony Jan. 25 on a proposal intended to incentivize Nebraska businesses to invest in new equipment and technology.

Elkhorn Sen. R. Brad von Gillern, sponsor of LB1023, said the 2017 Tax Cuts and Jobs Act enacted by Congress allowed businesses to fully and immediately deduct expenses for certain business machinery and equipment, as well as research or experimental expenditures. Those two tax breaks have since expired, he said, requiring businesses to deduct their expenditures over a period of several years.

LB1023 would decouple Nebraska’s tax code from both federal provisions, reinstating the immediate deductions for state income tax purposes.

Allowing Nebraska businesses to keep more of their money up front would allow them to reinvest it in their operations, benefiting local economies, von Gillern said.

“Anything we can do to help business entities keep Nebraska competitive and encourage research and development is a win for our state,” he said.

The state Department of Revenue estimates that the bill would reduce state general fund revenue by $28.6 million in fiscal year 2025-26, $44.6 million in FY26-27 and $53.5 million in FY27-28.

Bryan Slone testified in support of LB1023 on behalf of the Nebraska Chamber of Commerce and Industry, the Greater Omaha Chamber and the Lincoln Chamber of Commerce. He said the proposal is “urgent” at a time when technology is becoming more integral to each of Nebraska’s core industries.

Slone said the state’s software companies were especially hard hit by the recent federal change requiring them to amortize their expenses over five years rather than fully deduct them in the current year.

“Should Congress take action on this, [LB1023] would not be required,” he said, “but we simply cannot wait.”

Dawn Caldwell testified in support of the bill on behalf of Renewable Fuels Nebraska, the Nebraska Corn Growers Association and the Nebraska Soybean Association. She said LB1023 would make the state more attractive to companies that are deciding where to invest capital and help Nebraska businesses upgrade their facilities.

“Nebraska’s ethanol … soybean crush and renewable fuels plants are all continually analyzing options for efficiency, value-added products, carbon capture and more,” Caldwell said. “This bill will be crucial to executing projects that are currently just possibilities.”

No one testified in opposition to LB1023 and the committee took no immediate action on it.