Session Review: Revenue
Senators passed legislation this session that will give municipalities increased taxing authority while also providing a number of tax exemptions to spur economic development.
Tax adjustments
Senators overrode a gubernatorial veto on LB357, introduced by Omaha Sen. Brad Ashford, which allows local option sales taxes to be levied at 1.75 percent and 2 percent, with 70 percent approval of the members of the municipality’s governing body. The proposal then would be submitted to voters for approval. The bill was first debated in 2011 and was carried over from last session.
The bill requires that cities of the metropolitan and primary classes designate proceeds from any increased sales tax revenue to projects completed under interlocal agreements. Omaha is the state’s only metropolitan city and Lincoln is the state’s only primary class city.
Increased sales tax revenue in cities of the metropolitan class must be used to:
• reduce existing taxes with the first 0.25 percent of additional revenue;
• fund public infrastructure projects with the next 0.125 percent of additional revenue; and
• fund projects under interlocal agreements with the next 0.125 percent of additional revenue.
For cities of the primary class, the first 15 percent of additional tax revenue must be dedicated to funding nonpublic infrastructure projects under interlocal agreements. The remaining proceeds will be designated for public infrastructure projects related to economic development.
Cities of the first class, second class and villages will dedicate all increased sales tax revenue to funding public infrastructure projects.
Senators had passed the bill on a 30-15 vote. In his veto letter, Gov. Dave Heineman said the bill would allow cities to levy taxes up to an additional 33 percent.
Ashford filed a motion to override the veto, saying the increases would go into effect only with voter approval and called the bill an important tool.
Senators voted 30-17 to pass the bill notwithstanding the objections of the governor.
Bellevue Sen. Abbie Cornett introduced LB970, passed 39-9, which establishes new individual income tax brackets that will lower income taxes slightly. Existing tax rates were adjusted to the following rates for 2013:
• 2.46 percent for an individual making up to $2,400 or a married couple making up to $4,800;
• 3.51 percent for an individual making between $2,400 and $17,500 or a married couple making between $4,800 and $35,000;
• 5.01 percent for an individual making between $17,500 and $27,000 or a married couple making between $35,000 and $54,000; and
• 6.84 percent for an individual making more than $27,000 or a married couple making more than $54,000.
For a married couple filing a joint return with a taxable income of $50,000, it is estimated the reduction would equate to a savings of $40 in 2013 and $68 in 2014, compared to 2011.
Valentine Sen. Deb Fischer introduced LB745, passed 46-0, which requires that any proposed occupation tax be subject to a vote of the people, have a specific purpose and indicate a sunset date. Any change in the rate of a current occupation tax also will be subject to a vote. The bill does not eliminate occupation taxes currently in place.
Municipalities will be able to adjust the rate of an occupation tax imposed for a specific project which is not deposited in the municipality’s general fund or to terminate an existing occupation tax without submitting it to a public vote.
Tax credits
LB1128, introduced by Columbus Sen. Paul Schumacher, provides tax credits to entities that invest in low-income rural and urban areas. Under the bill, community development entities must be certified by the state tax commissioner to receive the credit.
The credit may be used against the financial institutions’ tax, insurance premium tax and income taxes. 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 cannot exceed $15 million in any fiscal year.
Senators passed the bill on a 41-0 vote.
Cornett introduced LB1118, passed 48-0, which offers tax incentives to a company investing at least $200 million in qualified property for the purpose of building a data center and creating 30 or more new jobs. The bill authorizes the state to reclaim property taxes, plus interest, if a company fails to meet established benchmarks.
LB983, introduced by Cornett, increases from four years to 20 years the carry-forward period during which Nebraska’s research and development tax credit can be claimed.
Senators passed the bill on a 47-0 vote.
Under LB209, introduced by Cornett, cities of the first and second class, as well as villages, can delay payment of job credit tax refunds by one year. An installment repayment option is allowed for any refund exceeding 25 percent of a city’s total sales tax receipts. Cities will be notified of pending job credit tax refunds one year in advance.
Senators passed the bill on a 49-0 vote.
Tax exemptions
Under LB1097, introduced by Omaha Sen. Pete Pirsch and passed 43-0, purchases made by nonprofit mental health centers are not subject to sales and use taxes.
Biochips used for genetic and protein analysis of livestock are exempt from sales tax under LB830, introduced by Kearney Sen. Galen Hadley. The bill categorizes biochips as an agricultural input, which is not subject to state sales taxes.
Senators passed the bill on a 49-0 vote.
Hadley introduced LB40, passed 49-0, which exempts nonprofit health clinics from paying sales and use taxes. Clinics must meet two requirements to qualify for the exemption. First, the clinic must be owned by one or more hospitals operating the clinic as a nonprofit. Second, the health clinic must be licensed under the Health Care Facility Licensure Act.
LB902, introduced by Omaha Sen. Burke Harr, provides property and sales tax exemptions for nonprofit entities created by local governments to utilize a lease-purchase agreement that requires transfer of title to the local government upon completion of all payments due under the lease-purchase agreement. The bill requires a public vote for any project exceeding established spending thresholds. Any project costing more than $50,000 or 0.6 percent of total or actual value of real and personal property of the governmental subdivision is subject to voter approval.
Senators passed the bill on a 44-0 vote.
Other bills
LB750, introduced by Cornett and passed 48-0, clarifies the types of property that can be used as comparable lands for the purpose of valuating farm home sites. The bill specifies that residential land located within a platted and zoned residential subdivision is not comparable to land that is part of a farm home site.
Sales of land that do not include a farm home site will not constitute a comparable sale when determining the actual value for farm home sites. The state Department of Revenue will be required to conduct an annual analysis on market premiums to ensure accurate valuation of farm home sites.
Under LB822, introduced by York Sen. Greg Adams, notifications of property valuation will no longer feature the median value figure currently included on notices.
Senators passed the bill on a 49-0 vote.
LB370, introduced by Lexington Sen. John Wightman, eliminates the ability of county treasurers to issue tax deeds without a public sale. The ability to begin foreclosure of the tax certificate to gain ownership is not affected.
Senators passed the bill on a 48-1 vote.
Cornett introduced LB727, passed 49-0, which updates current state statute and establishes new provisions as they relate to the department. The bill:
• eliminates certain motor fuels tax collection commissions if a notice of a deficiency assessment issued has become a final assessment;
• changes the due date for motor fuel producers, suppliers, distributors, wholesalers, importers and exporters to file their motor fuel tax returns to the 20th day;
• changes the source of data required to update the department’s calculation of the wholesale price of gasoline
• changes the due date for the department to update its biennial tax burden study to Dec 1, 2013, and every two years thereafter;
• clarifies the sales tax exemption for sales of prepared food by parent or student organizations at elementary or secondary schools;
• repeals the state statute that currently requires the department to appoint a committee to oversee the operation of the motor fuel trust fund;
• eliminates statutory requirements that the department must use certified mail for mailing certain notices, including a notice of a proposed deficiency determination;
• adds first-class mail to the list of authorized forms of mail that the department can use whenever it is required to give any notice under the Nebraska Revenue Act; and
• includes an emergency clause.
The bill incorporates provisions from LB903, also introduced by Cornett, which exempts fees paid to participate in youth sports events and youth competitive educational activities from sales and use taxes.
