Proposal to pare back tax credits, exemptions considered

The Revenue Committee heard testimony March 19 on a proposal to eliminate an array of tax incentives to help address the state’s projected revenue shortfall.

Elkhorn Sen. R. Brad von Gillern, who introduced LB650 at the request of Gov. Jim Pillen, said the measure would cut or scale back recently enacted “discretionary” programs.

“While that’s frustrating to many, including me, it’s an unfortunate reality of our responsibilities to manage taxpayer dollars to the best of our abilities,” he said.

Tax credits related to biodiesel sales, food donations, livestock modernization or expansion projects, reverse osmosis systems, shortline railroad maintenance expenditures and renewable chemical production are among those that would be cut or scaled back.

LB650 also would:
• end a sales tax exemption related to the lease of towers used to provide internet access services, agricultural GPS locating services or over-the-air radio and television broadcasting;
• repeal a buyer-based sales tax exemption for purchasing agents;
• end a credit for employers to offset relocation expenses for qualifying employees as well as a one-time income tax exclusion for employees who relocate to Nebraska;
• end applications for state turnback assistance for sports complexes and large public stadiums;
• decrease the amount that retailers are allowed to deduct for collecting and remitting sales tax;
• end an income tax credit for contributions to certain community betterment organizations; and
• end applications for incentives under the Urban Redevelopment Act.

The state Department of Revenue estimates that the bill as introduced would increase state general fund revenue by $18.8 million in fiscal year 2025-26, $70.2 million in FY2026-27 and $77.9 million in FY2027-28.

Von Gillern brought an amendment to the hearing to retain some of the programs the original bill would have eliminated, including a sales tax exemption for net wrap and twine used in commercial agriculture as well as tax credits related to sustainable aviation fuel, movie production and pregnancy help organizations.

As introduced, LB650 also would modify income tax provisions related to nonresident workers and end applications to create “good life districts” under the Good Life Transformational Projects Act. The amendment would strike those changes.

Bruce Rieker of Nebraska Farm Bureau testified in support of the bill. He said Nebraska farmers are willing to forgo certain tax incentives that benefit agriculture for now if that means lawmakers can provide “significant” property tax relief this session along with a balanced budget.

“We all support those [programs], and … we believe that they’re important to economic development,” Rieker said. “But we also believe that the greatest return on investment for economic development is to get our property taxes under control.”

Testifying in opposition to LB650 was Lucas Froeschl, who spoke on behalf of the Nebraska Economic Developers Association. He said the bill as introduced could jeopardize possible investments from companies seeking to produce sustainable aviation fuel and ethanol-based plastic components from Nebraska corn and soybeans.

“Nebraska is leading the way for the bioeconomy initiative,” Froeschl said, “and a reduction in these incentives could stall the momentum our efforts have created.”

Jim Timm testified in opposition to the measure on behalf of the Nebraska Broadcasters Association. By eliminating a tax exemption on the lease of towers and certain equipment used in broadcasting, he said, LB650 could hinder local TV and radio stations’ ability to serve the public, particularly during emergencies.

“At a time when our industry is already facing financial challenges, taxing tower leases could lead to job cuts,” Timm said, “which could lead to reduced local news and weather coverage.”

Patrick Mulhall testified in opposition to LB650 on behalf of Wicklow Companies and the Mulhall family, which operates an Omaha garden center. He said a 2021 measure authorizing the use of turnback tax assistance for sports complexes allowed Omaha to launch an expansion project at Tranquility Park.

The family invested a significant sum to cover infrastructure costs for an associated development that will include new restaurants, hotels, retailers and residences, Mulhall said.

“If the turnback tax is repealed,” he said, “the park expansion project will end — as will our development — and we will have spent $5 million that should not have been spent.”

Also in opposition was Jennifer Creager, who spoke on behalf of the state, Lincoln and Omaha chambers of commerce. Although the amendment would address many of their concerns with the original proposal, she said, businesses would prefer that lawmakers use a more strategic approach when evaluating whether a particular tax incentive program should be cut.

“We would just ask that those decisions also be made with a larger goal or vision in mind rather than just cherry-picking programs when money is tight,” Creager said.

The committee took no immediate action on the bill.