Ongoing tax incentive evaluations recommended

Members of the Revenue Committee heard testimony Feb. 25 on a bill that would require regular evaluation of the state’s tax incentive programs.

LB538, introduced by the Performance Audit Committee, would create an ongoing evaluation process for all current and future tax incentive programs enacted for the purpose of recruiting or retaining businesses in Nebraska.

Syracuse Sen. Dan Watermeier, chairperson of the committee, said it found that many of the performance audit goals were too broad to achieve meaningful audits of tax incentive programs.

“Over the interim, we worked with citizens, stakeholders and the Pew Charitable Trusts to craft recommendations for the tax audit process,” he said. “[LB538] will help us draw clear conclusions about how well tax incentives are benefitting Nebraska’s economy and meeting its goals.”

The Legislature’s Performance Audit Office would develop and publish a schedule for conducting the evaluations, ensuring that each program is reviewed at least once every three years.

Each evaluation of a tax incentive program would include analyzing program-specific goals, economic and fiscal impacts of the program and recommendations for changes to evaluation procedures that would allow for easier evaluation in the future.

In addition to future tax incentive programs, eight current programs would be evaluated under LB538, including the:
• Angel Investment Tax Credit Act;
• Beginning Farmer Tax Credit Act;
• Nebraska Advantage Act;
• Nebraska Advantage Microenterprise Tax Credit Act;
• Nebraska Advantage Research and Development Act;
• Nebraska Advantage Rural Development Act;
• Nebraska Job Creation and Mainstreet Revitalization Act; and
• New Markets Job Growth Investment Act.

Robert Zahradnik, representing the Pew Charitable Trusts, spoke in favor of the bill, saying that states need to regularly review tax incentive programs and make adjustments as needed.

“Despite the importance of tax incentive programs, they have rarely been studied on a continual basis [in most states],” he said. “Incentive program evaluation can help support economic development for the state and also point out ways that incentives can work better.”

Platte Institute Director of Research Dick Clark also supported the bill.

“This bill would help policymakers and the public understand the return on investment Nebraska gets from these incentive programs,’ he said.

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