Full expensing provisions clear final round

Lawmakers approved a bill April 18 intended to incentivize Nebraska businesses to invest in new equipment and technology.

Sen. R. Brad von Gillern
Sen. R. Brad von Gillern

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, requiring businesses to deduct their expenditures over a period of several years.

Under LB1023, introduced by Elkhorn Sen. R. Brad von Gillern, state income tax deductions for business assets and research or experimental expenditures are allowed beginning with tax year 2026. The former deduction is limited to 60% of the cost of expenditures for certain business assets in the tax year in which the property is placed in service.

As amended, LB1023 includes provisions of five other bills heard by the Revenue Committee this session, including two that relate to income earned by nonresidents.

Under the amended provisions of LB173, sponsored by Sen. Eliot Bostar of Lincoln, and LB416, introduced by Omaha Sen. Kathleen Kauth, compensation paid to a nonresident individual does not constitute income derived from sources within Nebraska under certain conditions.

The provisions of LB1049, also sponsored by Bostar, decrease the maximum occupation tax on receipts from the sale of telecommunications service from 6.25% to 4% beginning Oct. 1, 2024.

Under the amended provisions of LB1113, introduced by Sen. Fred Meyer of St. Paul, business equipment used primarily for the capture and compression of carbon dioxide is eligible for a personal property tax exemption under the ImagiNE Nebraska Act.

Finally, LB1023 allows an employer that pays relocation expenses for a qualifying employee to apply to the state Department of Revenue for a refundable state income tax credit of up to $5,000 per employee.

The credit also can be used to offset premium and related retaliatory taxes and franchise taxes.

The state Department of Revenue estimates that LB1023 will reduce state general fund revenue by $10.5 million in fiscal year 2024-25, $31.5 million in FY2025-26 and $38.7 million in FY2026-27.

The bill passed on a vote of 49-0.

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