Full expensing proposal scaled back, advanced

A bill intended to incentivize Nebraska businesses to invest in new equipment and technology advanced to the final round of debate April 10 after lawmakers amended it to reduce its cost.

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.

LB1023, introduced by Elkhorn Sen. R. Brad von Gillern, would decouple Nebraska’s tax code from both federal provisions, reinstating the immediate deductions for state income tax purposes.

On select file, von Gillern introduced an amendment, adopted 33-0, that instead would allow businesses to deduct 60% of the cost of expenditures for certain business assets.

Deductions for business assets and research or experimental expenditures would be allowed beginning with tax year 2026 rather than tax year 2025, as originally proposed.

Von Gillern said the changes, which match those made at the federal level, were necessary to reduce the measure’s impact on state tax revenue.

The state Department of Revenue estimates that the full expensing provisions in LB1023 — without von Gillern’s amendment — would reduce state general fund revenue by $28.6 million in fiscal year 2025-26 and $44.6 million in FY2026-27.

As amended on general file, the bill also would allow 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.

Von Gillern introduced another amendment, adopted 34-0, under which the credit also could be used to offset premium and related retaliatory taxes and franchise taxes.

The department estimates that the proposed relocation incentives would reduce state general fund revenue by $8 million in fiscal year 2024-25 and $23.3 million in FY2025-26.

After voting 34-0 to adopt a technical amendment offered by Sen. Eliot Bostar of Lincoln, senators advanced LB1023 to final reading by voice vote.