REPRINT OF THIS MATERIAL BY PERMISSION ONLY March 24, 2017 (Twelfth Week) Full-Day Floor Debate Begins Next Week Nebraska lawmakers have concluded their 53 rd day of the 90-day session, as well as committee hearings on more than 650 measures introduced earlier this year. When senators return Tuesday, March 28, following their four-day recess, they will begin full-day floor debate as they continue to consider priority legislation. From now until the sine die adjournment, set for June 2, the Legislature will work until approximately 5 p.m., except for the last day of the workweek and designated late night sessions. For the remainder of the session, the Legislature s attention will be focused mostly on priority bills and the two-year budget. Lawmakers Begin Discussing Comprehensive Tax Relief Plan Earlier this week, news media outlets reported that the Legislature s Revenue has begun discussing proposals that could be included in a comprehensive tax relief plan. Among the possible changes being considered is the suspension of the state s property tax credit program, which has utilized state revenues from income and sales taxes to subsidize the payment of local taxes, but has done nothing to address local spending increases. According to news reports, Papillion Senator Jim Smith, chairman of the Revenue, outlined a possible plan that would: reduce the corporate income tax; lower the top individual income tax rate over several years (similar to governor s LB337); consolidate individual income tax brackets and phase out personal exemption credits; increase the state earned income tax credits; change the method of valuing ag land (similar to the governor s LB338); increase state aid to schools; and lower the maximum school property tax levy from $1.05 per $100 of valuation to $1.00.
Also this week, Senator Smith spoke to representatives of the business community at the State Chamber s Public Affairs Council meeting. During his visit, he discussed the ideas being considered for a comprehensive tax package and called this an opportunity year to enact tax relief, in large part because the Unicameral must pass the upcoming two-year state budget. Senator Smith said a comprehensive tax plan would likely be sent to the full Legislature as LB461 currently a so-called shell bill that would be amended with the Revenue s compromise. The senator noted that he would not support any final proposal that did not include income tax relief. Senator Smith also told the Public Affairs Council that LB44 legislation that would require out-ofstate online retailers to collect and remit Nebraska sales tax would be kept separate from the comprehensive tax plan. Regarding the modernization of Nebraska s business incentives, he said a proposal to improve the Nebraska Advantage Act would likely need to wait until 2018. Senators Give First-Round Approval To Rural Workforce Housing Bill On March 22, the Legislature voted 41-0 to give first-round approval to LB518, legislation that would establish a workforce housing grant program for rural Nebraska. The Nebraska Chamber supports LB518 as a way to help communities address workforce housing shortages. Introduced by Gothenburg Senator Matt Williams and prioritized by the Business and Labor, the bill as amended by AM424 and AM716 would utilize $7.3 million from the Affordable Housing Trust Fund to establish a grant program to support workforce housing development in rural Nebraska. The grants would be available to communities in counties of fewer than 100,000 people. Non-profit development organizations could apply for grants, which would be awarded by the DED director on a competitive basis until funds were no longer available. The grants would apply to the construction of single family homes and rental housing, as well as housing rehabilitation. Grants could not exceed $1 million to any single non-profit development organization over a two-year period, and would require a one-to-one matching fund. In his floor remarks, Senator Williams said the matching requirement would help ensure that communities had skin in the game. Those receiving grants would first need to demonstrate an ongoing housing need; be a community or region with low unemployment that is having difficulty attracting workers; be a community or region that exhibits commitment to housing growth; develop housing projects that can reasonably be ready for occupancy in a two-year period; and demonstrate the ability to grow and manage a workforce housing investment fund. LB518 now awaits action on Select File, the second of three rounds of consideration by the full Legislature.
Lawmakers Advance Bill To Reduce Red Tape For Highway Projects On March 22, the Legislature voted 42-0 to give first-round approval to LB271, a bill that would reduce red tape for Nebraska s state roads projects, thereby speeding up completion time and saving valuable infrastructure funding. The Nebraska Chamber supports LB271. Introduced by Lincoln Mike Hilgers and prioritized by Lincoln Senator Suzanne Geist, LB271, would authorize the Nebraska Department of Roads (NDOR) to assume responsibility to conduct environmental reviews for proposed transportation projects from the U.S. Department of Transportation. The reviews currently are conducted at the federal level under the National Environmental Policy Act (NEPA). Senator Hilgers said the state s assumption of the federally-mandated review process would expedite the planning and development phase, reducing pre-construction costs. In exchange for assuming total responsibility for the review process, the NDOR would sign a limited waiver of sovereign immunity, which would provide the state s consent to federal jurisdiction in any case concerning compliance with and enforcement of federal guidelines established under NEPA. The Nebraska Department of Roads estimates that the agency would save as much as $19 million annually if the bill were enacted, while trimming as much as a year off the timeline for roads projects, which can be held up several years in the regulatory pipeline. During her floor statement, Senator Geist said the projected annual savings could be reinvested and distributed to other pending projects, such as improving our roads and bridges. LB271 now awaits action on Select File, the second of three rounds of debate by the Legislature. Legislature Passes Unemployment Insurance Reform On March 23, the Legislature voted 47-0 to pass LB203, introduced by Senator John Kuehn of Heartwell and prioritized by the Business and Labor, to tighten restrictions on Unemployment Insurance (UI) benefits for those who leave a job without good cause. The State Chamber supports LB203. Under LB203, UI recipients would be ineligible for UI benefits until they have returned to insured work and earned at least four times their weekly benefit amount. Claimants would be required to requalify for UI benefits. The provisions are aimed at curtailing abuse of the UI system. LB203 would save an estimated $3.7 million in 2018 and nearly $5 million in 2019. In 2015, Nebraska employers paid more than $107 million in UI taxes, which does not include federal unemployment taxes. Nebraska s 2015 UI costs were $30 million higher compared to 2002. Like Workers Comp, the UI program is fully funded by employers. LB203 now goes to Governor Ricketts, who is expected to sign the bill into law.
Hears Bill To End Tax Competitiveness Provisions, Incentives, Roads Funding On March 22, the Revenue heard testimony related to a wide-ranging bill that would repeal several recently enacted tax provisions that have made Nebraska more competitive, while also terminating the state s business incentives and the popular Build Nebraska Act, which was enacted in 2011 to dedicate a quarter cent of the state s sales tax to roads funding. Introduced by Columbus Senator Paul Schumacher and prioritized by the Planning which the senator chairs LB373 aims to produce additional revenue at a time when senators face a funding shortfall based on the state s current $4.4 billion in annual General Fund spending. Specifically, LB373 would repeal or terminate the following: The Build Nebraska Act; The Personal Property Tax Relief Act, as well as the Property Tax Credit Act; The sales tax exemption for molds and dies used in manufacturing; The sales tax exemption for C-BED wind energy development projects; The sales tax exemption on repair and replacement parts for agricultural machinery; The sales tax refund for agricultural machinery repair parts; The expansion of the sales tax exemption on contractor labor; The income tax exclusion from AGI for Social Security and military retirement benefits; The exclusion of extraordinary dividends and capital gains income; and The sales tax exemption for certain sporting events and youth development organizations. Additionally, LB373 would prohibit new applications for the Nebraska Advantage Act; the Sports Arena Facility Financing Assistance Act; the New Markets Job Growth Assistance Act; and the Nebraska Job Creation and Mainstreet Revitalization Act. The bill would return ag land valuation to 80% of value, while reinstating the estate tax and generation-skipping transfer tax. Regarding Nebraska s income tax, the bill would: Return brackets and rates to the levels in effect in 2007; Strike the requirement that brackets be indexed for inflation; Phase out personal exemptions, the standard deduction and itemized deductions; Reduce the Earned Income Tax Credit from 10% to 8% of the federal credit; Limit net operating losses to five years, instead of 20 years; End the special capital gains exclusion and apportionment of sales of intangible services; Eliminate the decreasing adjustment for income of a pass-through entity that is not Nebraskasourced income for a resident; Reinstate the alternative minimum tax. Scott Gubbels, managing director for tax & innovation hub at Nelnet, testified in opposition to LB373 on behalf of the State Chamber. He noted that many provisions of the bill would discourage economic growth and reverse the work done in recent years to make Nebraska more competitive. No immediate action was taken on LB373 by the Revenue.
At A Glance: Noteworthy Workforce & Housing Related Legislation The State Chamber is monitoring hundreds of bills introduced in the Legislature this year, including bills related to Nebraska s workforce development. Below are summaries of selected proposals offered in the 2017 legislative session to enhance Nebraska s workforce and workforce housing: Bill Summary Status LB174 Apprentice Training: Would provide for a non-refundable income tax credit to an employer for wages paid to apprentices as part of a qualified apprenticeship training program. The credit would be equal to $1 for each hour worked by an apprentice, and would be capped at the lesser of $2,000 or 50% of the wages paid to the apprentice. The program would be capped at $2.5 million a year. The State Chamber supports the concept of LB174. In Revenue LB248 Future Workforce Development Grants: Would adopt the Youth Opportunities in Learning and Occupations Act to increase workplace skills particularly soft skills and training for in-demand occupations among young Nebraskans ages 16-24. As amended, $2.5 million in matching funds would be provided to employers and non-profit corporations to fulfill LB248 s objectives. The State Chamber supports LB248. General File (Sen. Harr priority bill) LB496 TIF for Workforce Housing: Would help address Nebraska s housing shortage by allowing workforce housing projects to be eligible for tax increment financing (TIF) a method of financing public costs associated with private development projects. Municipalities would be required to, among other things, conduct a housing study; adopt an incentive plan for housing construction; and hold a public hearing to receive public comments on the incentive plan (separate from the public hearing on the TIF redevelopment plan). The State Chamber supports LB496. General File (Sen. Williams priority bill) LB518 Rural Workforce Housing: As amended, would utilize $7.3 million from the Affordable Housing Trust Fund to establish a dollar-for-dollar matching grant program to support workforce housing development in rural Nebraska. The grants would be available to communities in counties of fewer than 100,000 people. Non-profit development organizations could apply for grants, which would apply to construction of single family homes and rental housing, as well as housing rehabilitation. The State Chamber supports LB518. Select File (Business & Labor Priority Bill) LB599 New Construction As Business Inventory: Under LB599, new, unoccupied housing or commercial real estate would be considered business inventory, which is exempt from taxation under Nebraska s Constitution. This would help encourage construction of workforce housing, especially in rural communities faced with housing shortages. The State Chamber supports LB599. In Revenue