Senator Burke Harr, Legislative District 8, introduced a bill to change provisions relating to sales
and property tax exemptions for a 63-20 Corporation (“63-20 Corporation,” as defined below).
The Property Assessment Division of the Nebraska Department of Revenue (the “Department”)
revised existing law regarding exemption from sales and property taxes. The Department
determined that a 63-20 Corporation is not property of the government nor its governmental
subdivision and therefore, not entitled to an exemption from sales and property taxes.
A 63-20 Corporation is a private, non-stock corporation formed under the Nebraska Nonprofit
Corporation Act. A nonprofit corporation must be for a lawful purpose other than for pecuniary
profit, including, without limitation, any charitable, benevolent, educational, civic, or scientific
purpose. Charitable purposes include “lessening the burdens of government,” which can be
accomplished when a nonprofit corporation provides a benefit or service traditionally offered by
the State or its governmental units. Like other nonprofit corporations, no dividends are paid and
no part of the income or profit of a 63-20 Corporation may be distributed to its members,
trustees, or officers. A 63-20 Corporation is regulated by the State Attorney General for
compliance with the Nonprofit Act, by State tax authorities for compliance with the requirements
relating to their state income tax exemption, and by the Internal Revenue Service for compliance
with the requirements relating to their federal income tax exemption and the issuance of taxexempt
A 63-20 Corporation issues bonds to generate money to acquire, construct, and equip public
buildings, which are then leased to the sponsoring governmental unit in exchange for lease
payments sufficient in amount to pay the debt service on the bonds. When the bonds are paid at
maturity, which coincides with the expiration of the lease, title to the building must be
transferred to the governmental unit.
The Department’s determinations contradict current case law and research has found no other
state that interprets a 63-20 Corporation’s sales and property tax exemptions in this manner.
Cities rely on this manner of financing for the construction of public buildings, including
hospitals, libraries, auditoriums, convention centers, city halls, court houses, and schools.
Without this bill, the City of Omaha estimates the city and MECA will pay at least an extra $7.5
million dollars in sales and property taxes per year. The City of Norfolk estimates that they
would have to pay an additional $24,000 to $36,000 per year in property taxes for 20 years if its
lease-purchased city hall is subject to property tax.