Bill would encourage investment in low-income areas

Investors certified as community development entities could receive income, corporate and premium tax credits under a bill advanced from general file March 20.

LB1128, introduced by Columbus Sen. Paul Schumacher, would provide tax credits to entities that invest in low-income rural and urban areas. Schumacher said the bill is patterned after the federal New Markets Tax Credit program and would stimulate job growth in underdeveloped areas.

“Studies have shown having a state-based program boosts development in low-income communities,” Schumacher said. “This would provide job-creating small businesses with increased access to growth capital.”

Under the bill, community development entities must be certified by the state tax commissioner to receive the tax credit. To achieve certification, the development entity must provide:
• evidence of its certification as a qualified community development entity;
• a copy of the allocation agreement executed by the entity;
• a description of the proposed amount, structure and purchaser of the equity investment or long-term debt security; and
• a nonrefundable application fee of $5,000.

The tax credit could be used against the financial institutions’ tax, insurance premium tax and income taxes. Credits could not be claimed for the first two years of investment, but could be claimed for the next five years.

Certified development entities would receive a 7 percent tax credit during the third year and an 8 percent tax credit for the next four years. The total amount of credits awarded by the state could not exceed $15 million in any fiscal year.

Omaha Sen. Brenda Council supported the bill, saying it would create jobs statewide.

“This removes a major barrier by providing means for businesses located in low-income communities to access growth capital,” Council said. “This makes Nebraska far more attractive for these kinds of investments.”

Senators advanced the bill on a 36-0 vote.