​2024 Special Session

​The Nebraska Legislature adjourned Sine Die yesterday to conclude its Special Session called by Governor Jim Pillen. The Special Session spanned nearly a month with 17 working days and over 100 bills and Constitutional amendments introduced to address property tax relief. 

In all, the Legislature passed four bills that were sent to Governor Pillen. Those bills are as follows:

• LB 2 introduced by Senator Rob Clements (Elmwood) adjusts the state budget to shift funds from state agencies directed to provide property tax relief. 
• LB 3, also introduced by Senator Clements, redirects accrued interest from various state agency cash funds to provide property tax relief.
• LB 4, introduced by Senator John Arch (LaVista) provides funding for the Special Session in the amount of $126,860.
• Last, LB 34 introduced by Senator Tom Brewer (Gordon) served as the primary legislation for the Special Session. LB 34 accomplishes the following:
  • Adopts the Property Tax Growth Limitation Act to cap local government (counties, cities, and villages) property tax requests by the greater of 0% or the State and Local Consumption Expenditures and Gross Investment rate. Exceptions exist for real growth, personnel costs for public safety or public health, or by a vote of the people at a regularly scheduled election. 
  • Adopts the School District Property Tax Relief Act to retool the existing property tax credits to provide payments directly to school districts in order to “frontload” the tax credits, rather than having to claim the credits on State income tax returns.

Prior to adjournment, there was a contentious debate on LR 2CA introduced by Senator Tom Brandt (Plymouth). LR 2CA would place a Constitutional Amendment on the ballot to allow the Legislature to provide a separate rate for owner-occupied residential real estate, similar to what is currently done for agricultural real estate. Ultimately, the measure failed. 

Following adjournment, Governor Pillen indicated that he did not intend to call an additional special session but indicated his desire to work with the new Legislature in January to accomplish further property tax relief.

Full-Text PDF

The Nebraska Legislature began the first round of debate on LB 34 on Tuesday, which became the new vehicle for Governor Jim Pillen’s property tax plan. LB 34, introduced by Senator Tom Brewer (Gordon), was initially designed as a backup plan, which would freeze real property valuations through 2027. The bill was advanced from the Revenue Committee on a 6-1 vote with a committee amendment that contained the major portions of LB 1, including new taxes and the elimination of certain exemptions for over 60 products and services.

However, after several hours of debate, it became clear that it did not have the support to overcome the 33-vote threshold to invoke cloture and end debate. Senator Lou Ann Linehan (Elkhorn) brought forth AM 84, which significantly pared the bill down to the following provisions:

1. Adopt the Property Tax Growth Limitation Act to cap local government (counties, cities and villages) property tax requests by the greater of 0% or the State and Local Consumption Expenditures and Gross Investment rate. Execptions exist for real growth, personnel costs for public safety or public health, or by a vote of the people at a regularly scheduled election.
2. Adopt the School District Property Tax Relief Act to retool the existing property tax credits to provide payments directly to school districts in order to "frontload" the tax credits, rather than having to claim the credits on State income tax returns.

After eight hours of debate, the Legislature adopted AM 84 to LB 34 and advanced the bill from General File on a vote of 36-8.

The Legislature took up LB 34 again on the second round of Select File debate Thursday evening. Senators voted to adjourn after less than two hours of debate. Efforts were undertaken by supporters of a broader property tax plan to reinsert new sources of revenue via the elimination of sales tax exemptions and new taxes on products and services. However, time ran out and the bill was advanced with only minor amendments on a vote of 39-8 earlier this afternoon.

Additional funds will be needed to provide the property tax credits contained in LB 34, which will come from a General Fund transfer, and additional revenue and transfers through the Appropriations bills, LB2 and LB3, which will continue to be debated this evening (Friday).

​​2024 Special Session

The Nebraska Legislature adjourned Thursday afternoon and is expected to reconvene at 1:00 p.m. on Monday. This came unexpectedly, as the Legislature was originally set to debate all day on Friday and Saturday of this week.
 
The Revenue Committee worked on Monday and Tuesday to craft a compromise amendment for the overall tax plan. LB 1, introduced by Senator Lou Ann Linehan (Elkhorn) on behalf of Governor Jim Pillen, represented the original plan. Due to amendments and motions filed on LB 1, the Revenue Committee now plans to use LB 9 as the primary vehicle to accomplish property tax relief. LB 9 was introduced by Senator Jana Hughes (Seward) and would have reduced the maximum levy authority for school districts from $1.05 to $0.25 per $100 of taxable valuation and made other adjustments to the Tax Equity and Educational Opportunities Support Act (TEEOSA) formula. It is expected that LB 9 will combine many of the provisions of LB 1 and a handful of other bills when the Revenue Committee finally votes to advance the measure.
Initially, the committee amendment to LB 9 was expected to be released and voted on when the Legislature convened on Wednesday. However, due to delays in drafting, it was not released until late Wednesday evening. The amendment was then sent back for corrections on Thursday morning while the Legislature engaged in a heated debate over both the procedures and substance of the 2024 Special Session. In a surprise to many, Senator Linehan moved to adjourn the Legislature until Monday due to the lack of consensus around the tax package. The Revenue Committee will continue to work with other members of the Legislature to reach a compromise on the plan.
 
In its most recent form, the committee amendment to LB 9 has the main components of LB 1 and LB 9, which include caps on city, village, and county spending, elimination of sales tax exemptions, enactment of new sales taxes on services, and state funding to school districts with a corresponding reduction in the levy from $1.05 to $0.25. A detailed summary of the most recent draft of the LB 9 committee amendment can be found here.

The Nebraska Legislature met today for Day 7 of the 2024 Special Session. Overall, there have been 81 bills and 24 constitutional amendments introduced following Governor Jim Pillen’s proclamation calling for a special session to address property tax relief. Legislative rules require all bills to be heard in committee hearings within five days of being referenced to a committee. As such, the Revenue Committee will continue hearings tomorrow to wrap up a marathon six days in a row of committee hearings. This includes a 10-hour hearing on LB 1.

LB 1 was introduced by Senator Lou Ann Linehan (Elkhorn) on behalf of Gov. Pillen and represents the major portion of his plan to cut property taxes. The NBA Board of Directors and Government Relations Committee met in a joint meeting on Monday, July 29, to discuss LB 1. The Board voted unanimously to oppose the bill as drafted and to seek amendments to eliminate sales taxes on certain business inputs. The NBA’s letter submitted to the Revenue Committee can be found here.

The Revenue Committee heard testimony from individuals, business owners, government officials, and lobbyists from all over the state, with a majority of the testimony being opposed. As introduced, LB 1 would accomplish the following:

1) Adopts the Property Tax Growth Limitation Act to cap local government (counties, cities and villages) property tax requests by the greater of CPI or 0%; provides exceptions for real growth, personnel costs for public safety or public health, or by a vote of the people at a regularly scheduled election. 
 
2) Adopts the School District Property Tax Relief Act to create a property tax credit payable directly to schools in the amount of $2.33 billion in 2025 and increasing each year thereafter.
 
3) Implements the Advertising Services Tax Act, implementing a 7.5% tax on the gross advertising revenues for those entities with a combined gross advertising revenue in excess of $1 billion.
 
4) Implements new taxes on services and eliminates exemptions for more than 100 products and services including legal services, accounting services, lobbying services, real estate agents and appraisers, investment advice, travel agency services, real property maintenance, loan broker services, tax return preparation, marketing and telemarketing services, information, data processing, mainframe computer access and processing, and other cloud-based and data storage, processing and co-location services, including core banking and related software services at banks. 
 
5) Increases “sin taxes” on spirits, cigarettes, games of skill and consumable hemp products. 
 
6) Retroactively to January 1, 2024, eliminates proration of income for shareholders of S-corporations. 
 
7) States an intent to reformulate school funding to lower property taxes in the future.
 
In addition to the 51 bills and constitutional amendments referenced to the Revenue Committee, an additional 54 bills and amendments were referenced to other committees that have met throughout the week. The Revenue Committee will meet on Monday and Tuesday of next week to discuss LB 1 and other bills heard this week. Speaker John Arch (La Vista) announced this morning that the Legislature will reconvene next Wednesday, August 7. Debate is expected to commence on LB 1 on Thursday, August 8. Beyond that, the schedule for the remainder of the session remains unclear. Speaker Arch indicated it is likely that debate will continue on Friday and Saturday of next week. He does not plan to schedule any other bills until LB 1 has been fully considered.