Cap on local tax asking, additional property tax relief approved

Lawmakers gave final approval Aug. 20 to a bill that limits annual increases in city and county property tax collections and modifies an existing property tax relief program to ensure it benefits more Nebraskans.

Under LB34, introduced by Sen. Tom Brewer of Gordon, a city, county or village may increase its property tax request authority by the product of two factors:
• the prior year’s amount of property taxes levied increased by a percentage that accounts for total property valuation growth due to new construction, improvements and certain other changes, minus any exceptions used; and
• the greater of zero or the annual percentage change in a price index that tracks state and local government expenses.

Among other exceptions to the limit, a political subdivision also may increase its property tax request authority by amounts needed for emergencies, budgeted for public safety services or approved by voters.

Additionally, LB34 creates a new program to “frontload” state funding currently allocated to a refundable income tax credit against school district property taxes paid.

Under the new program, the relief instead will be credited against the amount of property taxes owed to school districts and will appear on property tax statements. The previous credit applies only for tax years beginning before Jan. 1, 2024.

LB34 requires the state treasurer to transfer $750 million in general funds — including the approximately $565 million allocated to the refundable income tax credit program — to the new program in fiscal year 2024-25.

Under the bill, if General Fund net receipts increase by more than 3% annually, the excess amount will be transferred to the new program’s cash fund.

Omaha Sen. Justin Wayne made two unsuccessful motions to return LB34 to select file to consider specific amendments. They would have exempted the sale and purchase of electricity for residential use from state sales and use taxes and increased or imposed taxes on certain items and services.

Wayne said the proposal would have benefited renters and other Nebraskans who receive no direct benefit from LB34.

After two hours of debate on final reading, Brewer offered a motion to invoke cloture, which ends debate and forces a vote on the bill and any underlying motions and amendments. The motion succeeded on a vote of 39-6. Thirty-three votes were needed.

Senators then voted 40-3 to pass LB34. The bill becomes law immediately after being signed by the governor.