A bill containing more than two dozen tax-related proposals advanced to final reading May 23 after senators amended it to reduce the fiscal impact on state revenue.
LB727, sponsored by Elkhorn Sen. Lou Ann Linehan, was amended on general file to include measures that would exempt baling wire and twine from state sales tax, impose a tax on electronic nicotine delivery systems and allow for the creation of special retail districts where transactions are subject to a reduced state sales tax rate, among others.
The state Department of Revenue estimates that, as amended, the bill would reduce state general fund revenue by $32 million in fiscal year 2023-24, $48 million in FY2024-25 and $53 million in FY2025-26.
On select file, Linehan introduced an amendment, adopted 38-0, that she said is a “negotiated resolution” intended to fit the package into the state budget, which the Legislature passed last week.
“Everybody had to give a little bit,” she said.
Among other changes, the amendment removed a provision that would have allowed Nebraska educational savings plan trust accounts to be used for elementary or secondary school tuition.
Linehan’s amendment also would cap a proposed sales tax credit for retail dealers that sell biodiesel at $1 million per year, rather than $5 million as originally proposed.
Under another of the bill’s provisions, $12 million in credits could be allocated each year under the Nebraska Job Creation and Mainstreet Revitalization Act. The amendment would reduce that amount to $2 million.
Sen. Mike Moser of Columbus said the amendment also would address another provision’s potential conflict with the state constitution.
LB727 would authorize the state highway commission to issue bonds to accelerate completion of highway construction projects. Under the proposal, any bonds issued would be special obligations of the state payable only from the State Highway Capital Improvement Fund and any other funds specifically pledged by the commission.
The State Highway Capital Improvement Fund currently is funded with state sales tax revenue, Moser said, but the state constitution requires highway bonds to be paid off using revenue that is closely related to highway use, such as motor vehicle fuel taxes and registration fees.
Linehan’s amendment would ensure that those revenue sources, and not sales taxes, are used to repay the bonds, he said.
Finally, the amendment added provisions of LB524, introduced by Omaha Sen. John Fredrickson, but would not direct any funding to the proposal.
The measure would allow grocery stores, restaurants and agricultural producers to apply for a nonrefundable state income tax credit equal to 50 percent of the value of food they donate to food banks, pantries or rescues. The credit would be limited to $2,500 per year.
After voting 39-0 to adopt a technical amendment by Sen. Christy Armendariz of Omaha, lawmakers advanced LB727 to final reading by voice vote.