Revenue omnibus amended, advanced to final reading

A package of measures increasing state revenue advanced to the final round of debate March 18 after lawmakers amended it to include a proposed tax on the sale of kratom products in Nebraska.

The Revenue Committee introduced LB901 as a shell bill. As amended on general file, it would eliminate certain sales tax exemptions, require the state Department of Revenue to add a collection fee to delinquent tax claims and create tax credits for nonprofits that provide services to domestic violence and human trafficking victims.

The measure also would increase application and decal fees for cash devices under the Mechanical Amusement Device Tax Act. It would increase the tax on cash devices from 5% of net operating revenue to 10% and change how the revenue is distributed.

The state Department of Revenue estimates that the amended bill would increase state general fund revenue by $23 million in fiscal year 2026–27 and $25 million in FY2027-28.

Elkhorn Sen. R. Brad von Gillern, committee chairperson, said the additional revenue is “critical” to addressing the current state budget deficit.

On select file, Sen. Kathleen Kauth of Omaha introduced an amendment, adopted 36-0, making further adjustments to the distribution of cash device revenue.

The amendment would reduce the distribution to the General Fund from 65.25% to 46.75% and increase the distribution to the Property Tax Credit Cash Fund from 6.5% to 20%.

Von Gillern said the change would maintain an approximately $2.9 million annual distribution to the Property Tax Credit Cash Fund.

As amended on general file, LB901 would direct 3.75% of cash device revenue to the Behavioral Health Services Fund and require that it be allocated to the behavioral health authority of the behavioral health region with the lowest per-capita spending.

Under Kauth’s amendment, revenue instead would be allocated to the region in which the cash device is located.

Her amendment also would reinstate an allocation to the Nebraska Tourism Commission Promotional Cash Fund that the committee amendment would have eliminated.

The committee amendment would have required the department to adjust the cash device fees and the occupation tax on other devices annually for inflation beginning in 2028.

Lincoln Sen. Danielle Conrad offered an amendment, adopted 43-0, to eliminate those provisions. She said the Legislature has a responsibility to review taxes and fees on a regular basis and should not allow them to increase automatically.

Sen. Stan Clouse of Kearney introduced another amendment, adopted 43-0, striking a provision in the committee amendment that would have allowed the department to examine and audit any retail establishment operating a cash device without prior notice.

He said existing regulations make the proposed requirement unnecessary.

Syracuse Sen. Bob Hallstrom also introduced an amendment, adopted 36-1, to include provisions of his LB873. They would impose a 10% state excise tax on the retail sale of kratom products beginning in 2027.

Hallstrom said the measure would generate approximately $1.5 million in revenue per year.

The amendment also would revise the Kratom Consumer Protection Act, which prohibits the sale of adulterated kratom products in Nebraska.

Hallstrom said the proposal would prohibit the sale of any kratom product undergoing testing until the results verify that it is not adulterated. If an adulterated product is sold in violation of the act, the state Department of Revenue would be required to remove it from the list of registered products on its website.

After four hours of second-round debate, von Gillern filed a motion to invoke cloture, which ends debate and forces a vote on the bill and any pending amendments.

The motion succeeded on a vote of 37-4. Thirty-three votes were needed.

Senators then advanced LB901 to final reading by voice vote.