A major property tax relief measure passed, the first since 2007

LINCOLN, Neb. — A major tax bill that impacts all Nebraskans passed today in the Nebraska Legislature.

LB1107 passed with 41 of the 49 state senators voting in support of the bill and Gov. Pete Ricketts is expected to sign the bill into law.

LB1107 includes the first new property tax relief measure since 2007 called the Nebraska Property Tax Incentive Act.

• Funding for the first year will be $125 million, growing to $375 no later than 2025
• Between 2022 and 2024
• Half the annual state revenue growth over 3.5% is dedicated to the new refundable credit, if the Cash Reserve Fund is below $500 million
• If the Cash Reserve Fund is above $500 million, all excess annual revenue above 3.5% is committed to the new refundable credit
• After reaching $375 million, the amount available for the new credit will increase each year by the percentage increase in statewide property valuation increases, with a maximum of 5%
• The new property tax relief measure comes in the form of a refundable income tax credit
• The credit based on the amount of school district property taxes paid
• Taxes paid for bonds and levy overrides are not included in this amount
• The credit will be available to all property taxpayers, even those without income tax liability

The existing Property Tax Credit Fund will also be ensured by the LB1107 and will continue to provide property tax relief at no less than $275 million per year plus 70% of any gaming tax revenues generated by the expanded gambling petition, if approved by the voters in November.

The bill will also replace the expiring Nebraska Advantage Act for tax incentives with the ImagiNE Nebraska Act.

The ImagiNE Act is more transparent and will reassure a livable wage.

The new incentive programs include a rural investment and job creation tier and a key employer retention program. Funding for the Act includes:

• $25 million each for the first two years
• $100 million each for years 3 and 4
• $150 million for year 5
• After the 2025, the cap will be equal to 3% of state net tax receipts
• If the dollar caps are exceeded in any year, then claims to use credits will be approved on a first-come, first-served basis

Funding is provided for the Nebraska Transformational Projects Act, also known as the NExt Act. The University of Nebraska Medical Center (UNMC) in Omaha may be selected as a location for a federal biocontainment and research project:

• If selected, UNMC would receive more than $1 billion from the federal government
• Private contributions of $300,000,000 would be required
• The state would also contribute $300,000,000 if UNMC is selected for participation in the federal program
• No transfer of funds will occur before the FY 2025-2026 or the new Nebraska Property Tax Incentive Act is funded at $375 million

Steve Nelson, president of the Nebraska Farm Bureau, in response to the passing of the bill said,

Today is a good day for Nebraska taxpayers. We greatly appreciate the Legislature’s work to find compromise and deliver on providing property tax relief with the passage of LB 1107. A heart-felt thank you to those state senators who supported this critical legislation. This bill takes a major step forward to provide significant, meaningful, and much needed property tax relief for Nebraskans. It is important Nebraskans know the relief provided by LB 1107 reflects the largest investment by the Legislature in targeted property tax relief since the body first established the state’s Property Tax Credit Fund in 2007. While we must continue to look for long-term solutions to alleviate pressure on property taxes, this is clearly positive progress in delivering relief. We look forward to continuing to work with our elected leaders toward those ends and helping deliver more wins for Nebraska taxpayers.

State Senator Tom Briese, one of the main driving forces behind property tax relief in Nebraska, reacted today to the Legislature approving LB1107.

The passage of LB 1107 represents the culmination of a nearly two year effort to put together a package deal on property taxes and business incentives. The marrying of the components into a package has accomplished what couldn’t be done individually. The package concept has enabled all parties to come together, through considerable negotiation, to arrive at a compromise that will move our state forward.” Briese continued, “The passage of this bill facilitates the long-awaited property tax relief Nebraskans deserve. The statutory guarantee in the property tax credit fund, coupled with the newly created Property Tax Incentive Fund, will provide meaningful and substantial relief for all. LB 1107 is critical to economic growth in our state, and is a win for all Nebraskans.

The Americans for Prosperity-Nebraska (AFP-NE) is opposed to the tax bill.

On Aug. 12, AFP-NE called on legislators to reject LB1107.

AFP-NE argues that the proposed measure would increase future spending and use taxpayer dollars to prop up certain industries.

AFP-NE State Director Jessica Shelburn in response to the tax bill said,

This report shows that it is time we make significant changes to our tax code. Our lawmakers should focus on comprehensive tax reform rather than failed short term fixes to improve Nebraska’s economic future. If the legislation passes this year, Nebraskans will see $400 million in property tax relief – only 9 percent of the property taxes levied in 2019 – but we will continue to see our property taxes increase in the long run.’

‘Instead of building nearly $1 billion in corporate welfare incentives into our state budget, lawmakers should address funding for K-12 schools and lower the sales tax, income tax rates for families, and corporate income taxes. We could have made significant changes to our tax code by using the funds built into the budget for property tax credits and business incentives to help level the playing field so all Nebraskans can thrive. We encourage our senators to reject this bill and deliver real tax relief for Nebraskans that will put our state on the path to economic recovery.