July 27 hearing on NFIB-opposed amendment to decouple state tax code from benefits of federal CARES provisions
State Director Bob Hallstrom reports from Lincoln on the small-business legislative agenda for the week ending July 24
While the Legislature failed to make any progress on property tax or economic development incentives legislation, lawmakers continued to process other priority bills at a rapid pace. Budget bills are on the agenda for next Monday with the Nebraska Economic Forecasting Advisory Board having provided better than anticipated news regarding 2020–21 fiscal year’s revenue projections.
Lawmakers debated the two major issues of the 2020 session on Wednesday, without taking a vote on either the property tax relief measure (Legislative Bill 1106) or economic development incentives legislation (Legislative Bill 720). Upon reaching the allotted time for debate on each measure, the bills were pulled from the agenda and will not reappear until supporters show that they can muster the 33 votes required to invoke cloture and end any filibusters.
LB 1106, would boost state aid to K–12 education by $500 million over the next three years, replacing revenue from local property taxes, which would be reduced by lowering valuations of property subject to taxation. The measure would have reduced tax assessed values for agricultural property from 75% to 55% over the next three years and reduce commercial and residential property tax assessed values from 100% to 87% over the same period.
LB 720, the ImagiNE Act, would enact a new business investment incentive program to replace the Nebraska Advantage Act, which expires at the end of the year. An amendment proposed by Sen. Mark Kolterman (Seward) would set aside $300 million in state funds as matching money for the NExT Project at the University of Nebraska Medical Center in Omaha, a proposed $2.6 billion national center for response to pandemics and natural disasters, which would create 8,700 high–paying medical jobs.
Lawmakers are expected to go back to the drawing board to determine if consensus can be reached to allow the property tax relief and economic development incentives measures to advance.
‘Decoupling’ Amendment to Increase Taxes
The Revenue Committee will conduct a public hearing on July 27 to consider Amendment 3093 to Legislative Bill 1074. The proposed amendment would decouple the Nebraska Tax Code with respect to several tax benefits adopted under the federal CARES Act.
Specifically, the proposed “decoupling” would raise state income taxes by:
- Removing the flexibility for small and pass–through business entities (e.g., LLC’s and Sub–S Corporations) which have incurred business losses in recent years to use those losses currently and create liquidity during the crisis
- Requiring retirees taking minimum distributions from their retirement plans to pay tax on distributions that are otherwise exempt under federal law
- Removing the increased charitable deduction limits for individuals and corporations, which were put in place by Congress to provide incentives for increased charitable giving to charitable organizations during the pandemic
- Removing the increased allowance of business net operating losses.
The tax cuts adopted under the CARES Act were designed to provide cash flow and liquidity to individuals and businesses adversely impacted by the pandemic. This boost to the economy will provide a lifeline to individuals and businesses struggling to survive the economic crisis created by COVID–19.
The vast majority of NFIB-member, small-business owners operate as sole proprietors, limited liability companies, or Sub–S corporations. The most significant adverse impact from AM 3093 fall squarely on the shoulders of individuals and businesses operating as “pass–through” entities.
NFIB members have expressed their support for property tax relief but have resisted efforts to do so by simply shifting the tax burden between and among Nebraska taxpayers. Decoupling from the tax benefits associated with the CARES Act and imposing additional taxes on individuals and businesses will undermine the recovery of our economy by adversely impacting the ability of Nebraska to recover from the pandemic. With the economic challenges facing most Nebraska businesses, now is not the time to increase taxes to support more government spending.
NFIB has joined other business organizations in signing a joint letter in opposition to AM 3093 to LB 1074.
Forecasting Board Lowers Revenue Projections
The Nebraska Economic Forecasting Advisory Board met on July 23 and reduced the estimated 2020–21 fiscal year’s tax projections by $196 million, less than many had expected. The reduced revenue projections were based on an anticipated $164 million decrease in individual income tax receipts and a $55 million decrease in sales tax receipts, coupled with a projected $23 million increase in corporate income tax receipts. With the revisions, the Legislature is expected to have approximately $88 million to add to the rainy-day fund (currently at $388 million) or to use for property tax relief, economic development incentives, or other spending measures.
Wage Payment Collection Act Bill Given Final Approval
The Legislature has given final approval to Legislative Bill 1016, a bill introduced by Sen. Matt Hansen (Lincoln) and designated as a priority bill by the Business and Labor Committee. LB 1016 would prohibit retaliation and discrimination for employees who file suit or participate in a proceeding under the Nebraska Wage Payment and Collection Act. As introduced, the bill would have expanded damages provisions under the Nebraska Wage Payment and Collection Act; allowed citations issued under the Act to be admissible in court and available to the public upon request; and allow for names of businesses with more than one citation to be posted on the Department of Labor website.
NFIB played an integral role in modifying the bill from its original form through the adoption of amendments that would retain the current measure of damages (unpaid wages only) and proceedings under the Wage Payment Collection Act; only allow citations “directly related” to the action to be admissible in court and limit the publication of names of businesses on the Department of Labor website to those who have “unpaid” citations.
Other Bills of Interest
Legislative Bill 632 – Prohibition of Local Regulation of Reusable Containers: The Legislature has given first-round approval to a LB 632, designated as a priority bill by the Natural Resources Committee and which contains provisions of legislation supported by NFIB (LB 861). The provisions of interest to NFIB would prohibit a county, municipality, or agency from adopting, enforcing, or otherwise administering an ordinance or resolution that prohibits the use of or that set standards, fees, or requirements, regarding the sale, use, or marketing of consumer merchandise and containers.
Previous Reports and News Releases
- February 21 Report—Bill on State’s Wage Payment and Collection Act Advances After NFIB-Backed Amendment is Adopted