2017 Economic Development Related Bills
Nebraska Advantage Tier 6 Credit Carryover: Introduced by Sen. Friesen and prioritized by Sen. Smith, LB161 allows businesses making large capital investments under the Nebraska Advantage Act to carry over unused tax credits for a longer period. As amended, the bill extends the income tax credit carryover period under the Act’s Tier 6, extending it from one year to 16 years after the end of the entitlement period. Tier 6 is the Act’s highest tier, aimed at rewarding significant capital investments and the creation of many high-paying jobs. To qualify for Tier 6, companies must invest $10 million and create 75 new jobs, or invest $109 million and create 50 new jobs. Wage thresholds for each new position must be 200% of the county average wage or 150% of the statewide average wage, whichever is greater. Supporters say LB161 will attract a wider range of businesses, helping Nebraska to diversify its economy.
Support for Bioscience Startups: Introduced and prioritized by Sen. Morfeld, LB641 establishes a matching grant program to attract early-stage bioscience startups to Nebraska. The bill will allocate around $2 million to support businesses in fields such as biofuels, biotechnology and pharmaceuticals. Qualifying bioscience businesses would be required to provide a 100% match. As amended, LB641 will have no fiscal impact since it will reallocate federal funds made available by the expiration of a small business federal loan program. LB641 was crafted in response to recommendations made in a 2010 Battelle report and a 2016 SRI International study. Last year’s SRI International report found that Nebraska’s bioscience jobs, on average, pay more than 50% of the statewide average wage, or about $68,000 annually. However, the industry currently represents only about 2% of the state’s employment.
NOTE: LB641 was amended with language from LB230 by Sen. Watermeier to establish a Nebraska Economic Development Task Force. The task force, which will be comprised of nine state lawmakers, will gather input on issues pertaining to economic development, while monitoring policy development and discussing long-range strategic plans to improve economic development statewide.
Reorganization of Nebraska Tourism Commission: Introduced by Sen. Stinner, LB222 expands the state tourism commission’s membership from nine to 11 governor-appointed members. Four of the members are required to have professional, volunteer or public-service experience related to the governance duties of the commission, while seven need to be affiliated with the tourism industry. Thirty days after its effective date, the bill dissolves the current commission membership and creates 11 districts based on geography and tax lodging revenues to ensure statewide representation. Members will serve four-year terms and will be limited to two successive terms. The bill also clarifies administrative duties of the commission.
Held Over to the 2018 Session--
Modernization of Nebraska’s Business Incentives: LB557 by Sen. Harr would replace the current Nebraska Advantage Act with the Great Opportunities Nebraska Act, a system of tax credits for businesses aimed at encouraging new investment and high-wage job growth in Nebraska. LB557 is the result of last year’s discussions between Nebraska Chamber staff, other business interests and state policymakers to find ways to modernize and simplify the Nebraska Advantage Act. While the bill would replace the Nebraska Advantage Act, it would keep the incentive law’s main structure in place, while adding new provisions and giving companies a clearer understanding of what requirements they must meet to receive tax credits. A dozen years have passed since the Legislature’s approval of the Nebraska Advantage Act. Since its implementation, the program has attracted applications representing private sector commitments of nearly $15 billion in investments and around 37,000 new full-time jobs. During that time, Nebraska has maintained one of the lowest jobless rates in the nation, while state GDP has exceeded the U.S. average. Without incentives, the state would often miss new job creation and investments due to Nebraska’s unattractive tax climate.
Nebraska Advantage Application Changes: Introduced by Sen. Watermeier and prioritized by the Legislative Performance Audit Committee, LB543 would amend the Nebraska Advantage Act to redefine terms and gather additional information for evaluation purposes by policymakers. While these changes are intended to improve future evaluations of business incentives, the bill would impose new regulatory burdens and paperwork requirements for businesses.
Ending Local Sales Tax Incentives Under Nebraska Advantage Act: LB592 by Sen. Crawford would end the issuance of refunds of local sales taxes under the Nebraska Advantage Act. The change would apply to all new Nebraska Advantage Act applicants starting January 1, 2018. After that date, refunds of local sales and use taxes paid to municipalities or counties would no longer be available as an incentive, removing a key component of Nebraska’s primary economic development tool.
Suspension of Business Incentive Programs: Introduced by Sen. Krist, LB467 would place a two-year suspension on important business incentive programs, including the New Markets Job Growth Investment Act, the Nebraska Job Creation and Mainstreet Revitalization Act, and the Nebraska Advantage Act. For the Nebraska Advantage Act, the state’s primary job-creation incentive, the Tax Commissioner would be prohibited from approving any applications between July 1, 2017 and June 30, 2019.
Incentives Reporting: Introduced by Sen. McCollister, LB565 is an attempt to improve transparency and the State Treasurer’s website, StateSpending.Nebraska.gov. The bill would require the state treasurer to add tax incentive program data to the website. Data on seven existing incentive programs, including the Nebraska Advantage Act, and any future tax incentive programs meant to recruit or retain businesses in the state would be included. The information would be searchable by awardee, key word and the name of program. To address confidentiality concerns raised by the Nebraska Chamber and others, Senator McCollister announced he was offering an amendment, AM650, to improve the bill.
Replacing Incentives with Corporate Tax Credit: Introduced by Sen. Schumacher, LB374 would provide a non-refundable income tax credit to corporate taxpayers equaling 100% of corporate income taxes paid. However, the corporation could not use the credit against its own income tax liability. Instead, the credit would need to be distributed as follows: 50% to shareholders of the corporation who are natural persons in the same manner as dividends are distributed; and 50% to all employees of the corporation with the amount to be distributed in a formula as prescribed by the bill. Corporations receiving the tax credit under LB374 would not be eligible for incentives under the Angel Investment Tax Credit Act; the Nebraska Advantage Act; the Nebraska Advantage Research and Development Act; and other programs.
Early Termination of Nebraska Advantage Act: LB572 by Sen. Friesen would, among other things, change the deadline for new project applications to the Nebraska Advantage Act to December 31, 2019. In 2016, the Legislature passed and the governor signed Chamber supported legislation that extended the sunsets of the Nebraska Advantage Act to December 31, 2020. This was an important step to ensure more certainty for businesses and continue the promotion of Nebraska’s incentive programs.
Enhancement of Mainstreet Revitalization Act: LB272 by Sen. Vargas would amend the Nebraska Job Creation and Mainstreet Revitalization Act by requiring that the Department of Revenue determine the amount of eligible expenditures incurred by an applicant, and issue authorized tax credits within 60 days after receiving notice of final approval for the project by the State Historic Preservation Officer. Under the bill, this period could be extended by mutual agreement but it could not exceed an additional 30 days. If the Department failed to make a determination within the original period or the extended period, the credits would be deemed approved in the amount requested, but could not exceed 110% of the credits allocated by the Preservation Officer. The Department of Revenue indicated that LB272 would have no fiscal impact to the General Fund. Enacted in 2014, the act provides up to $15 million a year in tax credits for the rehabilitation, preservation and restoration of historically significant buildings. A recent study by UNL’s Bureau of Business Research found that the Nebraska Historic Tax Credit generated more than $120 million in economic activity and 1,635 full-time jobs in 2015, its inaugural year. Additional key findings of the study included $53.4 million in wages for Nebraska workers and $69.8 million added to the state’s gross product.
Termination of Mainstreet Revitalization Act: LB475 by Sen. Schumacher would terminate the Nebraska Job Creation and Mainstreet Revitalization Act. Enacted in 2014, the act provides up to $15 million a year in tax credits for the rehabilitation, preservation and restoration of historically significant buildings. Credits for individual projects are capped at $1 million. The current sunset date for the act is Dec. 31, 2022. In 2016, the historical society received 16 applications from Omaha projects and 14 from the rest of the state, including rural areas.
Adjustment to New Markets Act: LB528 by Sen. Harr would amend the New Markets Job Growth Investment Act, which aims to encourage more private investment in businesses and real estate projects located in low-income rural and urban areas. The law currently allows individuals, corporations, estates and trusts, financial institutions, and insurance companies to claim non-refundable, non-transferable tax credits for investments in a qualified community development entity. The credits may be used against income tax, the premium tax imposed on insurance companies, or the franchise tax imposed on financial institutions. LB528 would amend the New Markets Job Growth Investment Act to allow Nebraska financial institutions and insurance companies without a federal allocation agreement to participate in the Act; expand the type of businesses that are eligible for a qualified equity investment; and allow the Nebraska Investment Finance Authority to support economic-impact projects financed through the Act. Because of these changes, LB528 would allow a qualified low-income community business to be financed through only the state tax credit without a federal tax credit, while removing the requirement for a community development entity to have a federal allocation agreement in effect.
TIF Oversight: LB262 by Sen. Groene would negatively affect the local use of tax increment financing (TIF) by amending the Community Development Law. The bill would restrict the use of TIF by preventing its use for the acquisition, planning, and preparation for development or disposal of vacant land. In addition, undeveloped vacant land could not be declared or designated as blighted and substandard for use of TIF unless the land meets the definition of blighted under current law.
Early Sunsets for Nebraska Advantage Act: Sen. Groene’s LB126 would do the following: change the sunset date for accepting new applications filed under the Nebraska Job Creation and Mainstreet Revitalization Act, from December 31, 2022, to December 31, 2020. Change the sunset dates for applications for each of the tiers of the Nebraska Advantage Act. The last day for accepting new project applications for benefits under each tier would be changed from December 31, 2020, to December 31, 2018.
Nebraska Advantage Act Administration: LB546 by Sen. Watermeier would attempt to simplify the administration of the Nebraska Advantage Act. It would not affect the tiers available or the benefits that may be earned by qualifiers, but would change the administration of the Nebraska Advantage Act application process and the verification process.
Community Development Law: LB489 by Sen. Groene would alter the Community Development Law by amending the definition of “redevelopment project” to remove language that allows a redevelopment project to include in its plans a program of voluntary or compulsory repair, rehabilitation, or demolition of other improvements. Such repair, rehabilitation, or demolition would be restricted to buildings only.
Startup Incentives: LB616 by Omaha Senator Justin Wayne would add the Startup Nebraska Program Act and provide an exemption from income, sales, and use taxes.
Removal of LB840 Cap on Taxable Valuation: LB614 by Sen. Wayne would remove one of the caps in state law on an economic development program available to cities. Since 1991, the Local Option Municipal Economic Development Act – also known as the LB840 program – has authorized incorporated cities and villages to collect and appropriate local tax dollars (sales and/or property tax) if approved by the local voters, for economic development purposes. Under current law, communities using the LB840 program face a cap of 0.4% of the taxable valuation of a city on locally derived funds to be used for economic development programs. LB614 would remove the cap based on taxable valuation while leaving in place a second, flat-dollar spending cap. Supporters of LB614 say the flat-dollar spending cap would be sufficient, noting that the taxable valuation cap has become a burden on cities.
Extension of TIF Repayment Period: Under LR16CA by Sen. Wayne, the Legislature would be authorized to extend the maximum repayment period for TIF indebtedness from 15 to 20 years if more than half of the property in a project area was designated as extremely blighted. The measure would first need to be approved by Nebraska voters. Many surrounding states have longer standard repayment periods, which can serve as an incentive to focus developers on extremely blighted areas.
Indefinitely Postponed (Killed)
TIF Oversight: LB597, offered by Sen. Groene, would have impacted the local use of tax increment financing (TIF), which provides a means of encouraging private investment in deteriorating and underdeveloped areas by allowing local governments to use future property tax revenues to finance the current infrastructure costs needed to attract development. LB597 would have shifted more decision-making power to the state by amending current law and adding language to require that any governing body seeking to use TIF must submit an application to the county assessor. If LB597 had been enacted, the state Tax Commissioner would have determined the eligibility of the governing body, the redevelopment plan, and the parcel or parcels of land for TIF.