Measure to trim tax credits, exemptions considered

The Revenue Committee heard testimony Feb. 4 on a proposal to eliminate several tax credits and exemptions in an effort to address the state’s budget shortfall.

Elkhorn Sen. R. Brad von Gillern, who introduced LB1109 at the request of Gov. Jim Pillen, said the changes are intended to increase state revenue.

“Some of these exemptions are underutilized or haven’t yielded significant returns,” he said, “while others have served their useful life.”

The bill would repeal sales and use tax exemptions related to:
• sales of mineral oil as a dust suppressant;
• purchases by Wyuka Cemetery in Lincoln;
• sales of game birds subject to permit and regulation by the state Game and Parks Commission;
• sales of personal property for use in a community-based energy development project;
• sales of biochips used for genotyping and certain other activities; and
• tangible personal property and services acquired by a person operating a data center under certain conditions.

The measure also would remove waste treatment and disposal facilities from the list of locations eligible for tax incentives under the ImagiNE Nebraska Act and eliminate a sales and use tax exemption on certain purchases of property by nonprofit organizations.

Von Gillern said those recently enacted provisions were intended to benefit specific projects that have since been completed.

LB1109 also would modify the research tax credit available under the Nebraska Advantage Research and Development Act. The credit still could be used against a taxpayer’s income tax liability, but it would no longer be refundable.

Finally, the proposal would sunset a renewable energy tax credit at the end of June.

The state Department of Revenue estimates that LB1109 would increase state general fund revenue by $15 million in fiscal year 2026-27 and $16 million in FY2027-28.

State budget administrator Neil Sullivan testified in support of the bill, saying it would broaden Nebraska’s tax base and reduce pressure on property taxes by eliminating “special interest exemptions.”

“Every sales tax exemption added to the books was sold as tax relief,” he said. “But what it really did was shift [the] tax base onto our homes and property.”

Testifying in opposition to LB1109 was Adam Feser of the Nebraska Cooperative Council. He said the measure would increase costs on Nebraska’s farmer-owned cooperatives, which use mineral oil as a dust suppressant in grain elevators for safety.

Joshua Vossler testified in opposition to the bill on behalf of Wyuka Funeral Home and Cemetery. He said eliminating Wyuka’s tax-exempt status would make it more difficult to provide affordable burial options to community members.

The committee took no immediate action on the bill.