The 2022 Legislature in Nebraska adopted meaningful tax relief for small business owners
Despite dealing with many contentious issues, the 2022 Legislature adopted meaningful tax relief for small business owners and individuals and targeted expenditures from available federal funds to assist business owners in their recovery from the pandemic.
Major income and property tax relief will be provided in phases through 2026 under Legislative Bill 873. The bill, when fully implemented, is expected to deliver an additional and record $3.4 billion in tax relief to Nebraskans through tax year 2027. The bill:
- Reduces individual and corporate income tax maximum rates to 5.84% over a five-year period
- Provides income tax credits for property taxes paid to community collages
- Increases total income tax credits provided for property taxes paid to local schools to $548 million in 2022 and $567 million in 2023
- Completely phases out income taxes on Social Security benefits.
Lawmakers adjusted the mainline budget through cash transfers that provided sufficient funding for major tax relief, while maintaining a healthy cash reserve of just over $1.2 billion. Among the budget adjustments were:
- $30 million dollars in rural workforce housing grants
- $20 million in middle-income workforce housing grants
- $20 million to increase employer and student participation in the Intern Nebraska Program
BUSINESS AND LABOR ISSUES
The Legislature also took action on a number of bills supported by NFIB:
LEGISLATIVE BILL 310 – INHERITANCE TAX EXEMPTIONS: Will reduce inheritance taxes when individuals inherit property by increasing the amount exempt from inheritance taxes, reducing the tax rates for certain beneficiaries and eliminating the inheritance tax on beneficiaries aged 21 or younger. Senator Rob Clements (Elmwood) sponsored the legislation.
LEGISLATIVE BILL 450 – INNOVATION HUBS/SMALL BUSINESS ASSISTANCE ACT: Introduced and designated as a priority bill by Senator Terrell McKinney (Omaha), LB 450 will provide support for small business expansions and startups by creating innovation hubs in enterprise zones and economic redevelopment areas to provide counseling and technical assistance to entrepreneurs. LB 450 also contains the provisions of LB 1215, introduced by Senator Suzanne Geist (Lincoln), which will establish the Small Business Assistance Act to provide grants to small businesses with five or fewer employees. The bill will authorize grants of up to $25,000 to individuals looking to start a small business and provide grants of up to $12,500 to individuals who own a small business that has been in existence for no more than five years.
LEGISLATIVE BILL 984 – TAXATION-SALES AND USE TAX COLLECTION FEES: Introduced and designated as a priority bill by Senator Mike Moser (Columbus), will authorize a sales tax collection fee of 3% of the first $5,000 (was 2.5% of the first $3,000) of sales taxes remitted each month as reimbursement for the cost of collecting sales and use tax by merchants. Retailers remitting $5,000 in sales taxes each month will earn $900 in additional revenue over the course of a year.
The Legislature also rejected a number of potentially costly measures promoted by trial lawyers and labor unions, all of which were opposed by NFIB, including the following:
LEGISLATIVE BILL 258 – PAID SICK LEAVE: Introduced by Senator Tony Vargas (Omaha), LB 258 would have allowed employees to accrue a minimum of one hour of paid sick time for every 30 hours worked, with a maximum of 40 hours of paid sick time accrued in a calendar year.
LEGISLATIVE BILL 290 – PAID FAMILY AND MEDICAL LEAVE INSURANCE ACT: Senator Machaela Cavanaugh (Omaha) introduced legislation that would have established a statewide paid family medical leave insurance program similar to Nebraska’s unemployment insurance system, managed by the state Department of Labor
LEGISLATIVE BILL 935 – COUNTY MINIMUM-WAGE OPTION ACT: LB 935, introduced by Senator Eliot Bostar (Lincoln), would have authorized a county, by ordinance, to enact a county minimum-wage that is higher than the minimum wage provided for in the Wage and Hour Act, including different rates for persons compensated by way of gratuities, student-learner employees and training wages. The measure would have authorized an employer able to demonstrate that paying the county minimum-wage to certain employees would be unduly burdensome because such employees perform work in multiple counties to apply to the County Board to be exempted from the ordinance.
LEGISLATIVE BILL 1028 – WAGE AND HOUR ACT – MINIMUM WAGE FOR TIPPED EMPLOYEES: Introduced by Senator Megan Hunt (Omaha), LB 1028 would have required employers of persons compensated by way of gratuities (tipped employees) to make and keep for a period of not less than three years a record of each employee’s: (i) Name, address, and occupation; (ii) Rate of pay; (iii) Amount of pay received each pay period; and (iv) Hours worked each day and each workweek.
LEGISLATIVE BILL 719 – WORKERS’ COMPENSATION – BENEFIT INCREASES: A measure sponsored by Senator Adam Morfeld (Lincoln), would have made a series of changes to the Workers’ Compensation Act that would have increased virtually every benefit available to employees and would have been costly for employers.
Each of the forgoing bills, which were opposed by NFIB, were indefinitely postponed at the end of the 2022 legislative session.