Nebraska Property Tax Incentive Act update sought

The Revenue Committee heard testimony Feb. 17 on a bill that would change the way that a refundable income tax credit is calculated under the Nebraska Property Tax Incentive Act.

The credit, created last year under LB1107, is calculated by multiplying the amount an eligible taxpayer paid in property taxes to their school district during the taxable year by a percentage set by the state Department of Revenue.

For taxable years beginning or deemed to begin during calendar year 2020, the department will set the credit percentage so that the total amount of credits for the taxable year is $125 million.

Plymouth Sen. Tom Brandt, sponsor of LB524, said LB1107 did not take into account the fact that many Nebraskans pay their property taxes in arrears. Therefore, those who paid their 2019 property taxes in 2020 will receive the credit, he said, but those who paid their 2019 taxes by the Dec. 31, 2019, due date will not.

“This is a fairness issue,” Brandt said.

Under LB524, any 2019 school district taxes that were both levied and paid during calendar year 2019 would be deemed to have been paid in calendar year 2020 for purposes of calculating the credit for taxable years beginning or deemed to begin during calendar year 2020.

The department estimates that LB524 would reduce general fund revenue in fiscal year 2021-22 by $7.3 million, assuming that approximately 5.5 percent of property taxes levied in 2019 were paid in 2019, that the credit percentage for 2020 is not changed and affected taxpayers file amended 2020 income tax returns.

Trenton Buhr of the Center for Rural Affairs provided written testimony in support of the bill. He said LB1107 did not state whether the credit would apply to taxes levied in earlier years but paid in 2020 or later.

LB524 would specify that the credit applies to 2019 taxes levied and paid in that year, Buhr said, but it should further clarify that the credit does not apply to taxes paid in arrears after Jan. 1, 2020.

“The credit is designed to give relief to overburdened taxpayers, not to reward delinquency,” he said.

Jon Cannon, executive director of the Nebraska Association of County Officials, also testified in support. He said it would be good tax policy to reward those who paid their 2019 taxes on time.

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