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Legislative Resolution 444 was introduced by the Legislative Performance Audit Committee during the 2014 legislative session. I serve as the vice-chair of this committee.
LR 444 created the Tax Incentive Evaluation Committee, which was tasked with developing recommendations on specific and measurable goals for our tax incentive programs. Furthermore, the committee is to recommend a process for regular evaluation of tax incentives and determine who should conduct the evaluations, what type of metrics should be used, and how often the evaluations should be conducted. The committee is to issue a report to the Executive Board of the Legislature by December 15.
A report issued by the Audit Office in 2013 on Nebraska Tax Incentive Programs found that the program goals expressed by the Legislature were too general to permit a meaningful evaluation of whether the programs were accomplishing what the Legislature intended them to accomplish. The audit focused on the Nebraska Advantage Act, the Nebraska Advantage Rural Development Act, the Nebraska Advantage Microenterprise Act, and the Nebraska Advantage Research and Development Act. Furthermore, for two of the programs, the Legislature set no limit on the program’s costs. In response to the Audit’s findings, the Performance Audit Committee committed to work with the Revenue Committee to initiate a comprehensive review of Nebraska’s tax incentive programs to assess whether the programs are producing the results the Legislature intended and, if so, whether they are doing so at a cost the Legislature can support. As a result, LR 444 was introduced.
The LR 444 Tax Incentive Evaluation Committee met this past week. I was elected vice-chair of the committee, which is chaired by Senator John Harms of Scottsbluff. Robert Zahradnik, from the Pew Center of the States, developed a presentation, which was delivered by Martha Carter, the Legislative Auditor. Mr. Zahradnik will attend the next committee meeting in July.
The six tax incentive programs that LR 444 specifically addresses are:
+Angel Investment Act – provides refundable state income tax credits to qualified
investors that invest in qualified early-stage companies.
+Beginning Farmer Tax Credit Act – rewards agricultural asset owners for their contributions that assist starting farmers and ranchers.
+Nebraska Advantage Act – provides comprehensive economic development incentives for expanding or relocating businesses.
+Nebraska Advantage Rural Development Act – similar to the Advantage Act but aimed at businesses in less populated counties.
+Nebraska Advantage Microenterprise Act – provides persons actively involved in microbusinesses a refundable individual income tax credit based on demonstrated growth of their business over two tax years.
+Nebraska Advantage Research and Development Act – provides tax credits to business firms that incur research and experimental expenditures.
Although this past week’s hearing was limited to invited testimony, the LR 444 Tax Incentive Evaluation Committee plans to hold additional hearings where the public will be allowed to testify. The public hearings will be held in Kearney on August 27 from 1:30 to 4:30 p.m. and in Lincoln from 9:00 a.m. to noon on August 28. I encourage those interested in our state’s tax incentive programs to attend.