I am writing this article on the afternoon of Sunday, August 11. The legislature adjourned on Thursday and is scheduled to reconvene at 1:00 on Monday, August 12. It’s expected that the Revenue Committee will be ready to formally introduce a committee amendment during the Monday session, likely to LB9.

The Revenue Committee had hoped to advance LB9 with AM51 as the committee amendment last week; however, there were several errors to correct and other changes to be made on Thursday in order to gain more votes. AM51 was 140 pages and it’s important all of the provisions are correct before it’s advanced to the full Legislature for scrutiny and debate. I have received many emails from constituents who are concerned about parts of the bill. I appreciate the feedback, and also encourage everyone to carefully read whatever amendment is formally put forward. I’m hopeful that many of those concerns will be resolved once the errors in the amendment are corrected and further changes are made.

Senator Linehan, chair of the Revenue Committee, held a briefing for Senators and the media on Thursday morning to outline the intended changes to LB9, which will incorporate some of the concepts from LB1 and a number of other bills introduced during the special session. During the briefing, Senator Linehan indicated that the changes would include an excise tax on delivery services, increase in the Earned Income Tax Credit from 10% to 20% (to offset any impact of new sales taxed for low income households), transfer District Court clerks costs from counties to the State, a tax on alternative nicotine products, a sales tax exemption on residential electricity, and have the State fund the operating costs of the Natural Resource Districts (much like Community College funding).

As many of you already know, the primary strategy to reduce property taxes is to significantly increase the State’s portion of public school funding. The plan is to lower the maximum levy that a public school can assess from $1.05 to $.25 plus an additional $.10 for a building fund. Schools would also be allowed to assess for existing bond debt service. The balance of the funding would come from the State. This would begin with the 2025-26 school year and be based on existing funding levels for every public school. The TEEOSA formula would then be modified to eliminate the “resources” side of the calculation, while keeping the “needs” side to account for growth in costs. Should the State fail to fully fund the plan, property taxes would be there for a backstop. No public school would go backward from existing funding levels.

To fund the costs for these changes, several items would be added to the sales tax roles including many that were once on the sales tax rolls but exempted by previous Legislatures over the years. However, there are several exemptions the committee has decided to leave in place after hearing testimony on LB1, including: legal services, non-Nebraska S-corp. exclusion, all motor vehicle repairs, accounting services, natural gas used as a denaturant by Nebraska ethanol facilities, molds and dies, all repair of real property, tax return preparation, bullion or currency, personal care services, massage services, net metering of electricity, film rentals, admission to statewide sporting events (except 501(c)(3)s), local rail road transportation, syndicated programming, and investment services. To be clear, each of these items will not be taxed.

It should also be noted that the plan would include an increase in the cigarette tax to $1.36/pack up 72 cents. This will put us on par with Iowa. The tax on spirits change to a two-tier system where products from those producing less than 100,000 gallons annually would be taxed at $2.70/gallon instead of $3.75/gallon, and those producing 100,000 gallons annually would have the tax increased to $7.00/gallon. The plan also calls for a 2% sales tax on new (not used) agricultural and manufacturing equipment while exempting such equipment from personal property tax.

Property tax relief will come to Nebraskans in the form of a tax credit. The State currently spends $395 million on tax credit to each property taxpayer through the Property Tax Incentive Act (Tier 1); this credit is shown on your annual property tax statement. The LB1107 Income Tax Credit for property taxes paid (Tier 2) amounts to $560.7 million annually and must be claimed on your income tax form. The new proposal is to funnel the LB1107 funding to the Property Tax Incentive Act (Tier 1) program. In addition, the Community College Future Fund, which supplements the $246.5 million annually in property taxes previously paid to Community Colleges, will continue. The total amount of these credits amount to $1.2 billion annually.

There could be other changes to the bill and the amendment, as negotiations will continue until a consensus of 33 Senators can be reached. I anticipate it will be another busy week.

I look forward to continuing to hear from you regarding issues that are important to you. It is a privilege to serve as your State Senator, and I will continue to give my full effort to make a positive difference for the District and the State. You can reach me at mjacobson@leg.ne.gov or 402-471-2729.