Good life district fixes approved

Lawmakers passed a bill June 2 making several updates to a state initiative intended to spur large retail developments.

The Good Life Transformational Projects Act, passed by the Legislature in 2023, authorizes the state Department of Economic Development to create “good life districts” in which transactions are subject to a state sales tax rate of 2.75%, half the current rate of 5.5%.

Elkhorn Sen. R. Brad von Gillern, sponsor of LB707, has said the measure is intended to close “loopholes” in the program that could have drained state coffers.

Beginning Oct. 1, it repeals the current rate reduction and instead imposes a state sales tax rate that is 50% of the current rate on transactions by good life district applicants or retailers that physically occur in a district. Sales of motor vehicles, motorboats, ATVs and certain other vehicles are excluded.

A good life district applicant or retailer will be eligible for a refund of 50% of the state sales tax paid on development costs for a new business, an additional good life district retailer or a relocated good life district retailer, within certain limits.

Once a city has established an economic development program for its good life district, the state tax commissioner is required to allocate 50% of the state sales taxes from qualifying transactions to the city. The allocated taxes will be a local source of revenue for the program.

LB707 eliminates a city’s ability to adopt a local option sales tax to fund development in a district, but a city still may establish a business occupation tax as a local source of revenue.

The bill also:
• limits the amount of allocated state sales taxes that may be generated by existing retailers;
• accounts for the relocation of existing businesses to a good life district; and
• defines new-to-market retailers as those that did not exist within 40 miles of a district prior to its creation.

Before a good life district is approved, an applicant must submit a report to the department and the city that will include the district. The report must include evidence that the project is financially viable and that the applicant owns land within the proposed boundaries of the district, among other information.

LB707 also allows for the creation of up to six project areas within a good life district. Once the department approves a project area, the applicant, the department and the city must enter into a memorandum of understanding requiring that local sources of revenue derived from within a project area be used for eligible costs within the project area.

Under the bill, a political subdivision that is an approved good life district applicant is not exempt from sales tax on building material purchases for a new business that will offer taxable sales in the district.

The state Department of Revenue estimates that LB707 will increase state general fund revenue by $1.1 million in fiscal year 2025-26, $1.3 million in FY2026-27 and $696,000 in FY2027-28.

The bill passed on a vote of 49-0 and takes effect immediately.