With taxes being the hot topic in this year's Legislative Session and with no tax relief bill being sent to the floor yet, some positive news was released by the Nebraska Department of Revenue this week. That being the February 2018 General Fund Receipts.
Nebraska Department of Revenue
Press Release
FOR INFORMATION, CONTACT:
Tony Fulton, Tax Commissioner -
402-471-5604
March 15, 2018 (LINCOLN, NEB.) - February Gross Receipts: Tax Commissioner Tony Fulton reports that gross General Fund receipts for February were $497 million, which is 2.0% above the certified forecast of $487 million.
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* Gross Sales and Use:
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0.9% below forecast
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* Gross Individual Income:
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2.8% above forecast
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* Gross Corporate Income:
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26.1% above forecast
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* Gross Miscellaneous:
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6.9% above forecast
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February Tax Refunds
: Tax refunds for February were $200 million, which is 2.4% above the certified forecast of $196 million.
February Net Receipts: Net receipts for February were $296 million, which is 1.8% above the certified forecast of $291 million.
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* Net Sales and Use:
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1.4% below forecast
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* Net Individual Income:
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1.1% above forecast
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* Net Corporate Income:
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98.6% above forecast
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* Net Miscellaneous:
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7.1% above forecast
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Fiscal Year Net Receipts
: Net General Fund receipts for fiscal year 2017-18 were $2.881 billion, which is 2.9% above the certified forecast of $2.800 billion.
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* Net Sales and Use:
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0.5% above forecast
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* Net Individual Income:
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5.0% above forecast
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* Net Corporate Income:
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4.7% above forecast
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* Net Miscellaneous:
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1.8% below forecast
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The comparisons in this report are based on the forecast made by the Nebraska Economic Forecasting Advisory Board on October 27, 2017. At this meeting, the NEFAB reduced the FY 2017-18 forecast by $100 million. This forecast was divided into monthly estimates and certified to the Clerk of the Legislature by the Tax Commissioner and Legislative Fiscal Analyst on November 13, 2017. At the February 28, 2018 meeting, the Board revised the forecast for the current fiscal year upward by $25 million to $4.530 billion. By law, only downward revisions to the forecast are recertified, so the comparisons made in this release are still based on the forecast certified on November 13, 2017.
As the Legislative Clock continues to countdown, lawmakers will continue to work on advancing priority bills. This week senators worked till 11:35pm on Tuesday of this week in an effort to advance the three budget bills, LB946, LB945, and LB944 to Select File.
It is anticipated that Speaker Scheer will schedule Select File debate of the budget bills this coming week sometime, to ensure that the budget bills are passed on the next two rounds of floor debate by the Legislature and sent to the Governor by the 50th Legislative Day, March 27, 2018.
With only 16 scheduled legislative days remaining Speaker Scheer has scheduled the next eleven consecutive legislative days as potential "late nights", meaning each legislative day's session could go as late as 11:59pm.
While the last scheduled legislative session day is April 18, it is possible the Legislature could adjourn Sine Die earlier, if Governor Ricketts agrees, like he has in past years, to send back any vetoes allowing the senators the opportunity to override them if they so choose by April 11.
As mentioned earlier in this report, the Legislature moved the budget bills from General File, and with the positive news from the Forecasting Board at their February 28, 2018, the Appropriations Committee was able to reduce the cuts that the Governor proposed.
One of the biggest adjustments the Committee was able to make was reducing the cuts to the University of Nebraska for the second year of the budget from a 4% cut to 2% reduction.
Around the Rotunda this week
LB1084
- a large coalition of those opposed to LB1084 have been working to ensure the bill is not advanced from the Revenue Committee. These efforts have been solid, as the vote count is not in the committee to advance the bill from committee.
In continuing efforts by the bill's introducer, Senator Tom Briese, and supporters, to possibly pull the bill from committee, there are ongoing efforts to reduce the number of exemptions that would be repealed in order to garner the needed 33 votes to pull the bill from committee.
They include:
- removing the repeal on trade ins of motor vehicles,
- the taxation of s-corps,
- YMCA and cornhusker state games,
- and most likely create an exemption on the taxation of bottled water for a state of emergency.
- Reduce the tax on real estate services to a $1.25 increase in the document stamp tax,
- and increase the cigarette tax by an additional $0.50 per pack for a total increase of $1.50 making the new tax rate $2.14 per pack,
- phase in the ½% increase in the sales tax rate over a two-year period as opposed to all at once as stated in the introduced copy of LB1084,
- add $15 million to the Earned Income Tax Credit to offset some of the impact of regressivity opposition.
As introduced, LB1084 would make multiple changes to Nebraska taxing authority in order to provide immediate and substantial property tax relief while shielding local school district funding.
As stated in the Fiscal Note to LB1084:
"LB 1084 is an omnibus bill that amends a number of Nebraska Revised Statutes, creates a new Act, repeals certain sales tax exemptions, imposes new sales and use taxes, and provides sunset dates for several Acts.
Section 77-382 is amended to change certain reporting requirements for the tax expenditure report.
Sections 77-202, 77-693, 77-801, 77-1238, and 77-1248, are amended to provide that the calculations for and exemption granted by the Personal Property Tax Relief Act applies to tax years prior to tax year 2019, which in effect terminates the Act following tax year 2018.
Section 77-1116 is amended to provide a sunset date of December 31, 2018 for the New Markets Job Growth Investment Act.
Section 77-2602 is amended to increase the cigarette tax by $1.00. The new tax rate would be $1.64 per package (not containing more than 20 cigarettes). In addition, the equivalent of $1.00 of the cigarette tax is to be placed in the Property Tax Credit Cash Fund. If necessary, the distribution of the cigarette tax to the General Fund is to be reduced to meet this requirement.
Section 77-2701 is amended to provide that for tax years after January 1, 2019 there is imposed a surtax on any individual who is subject to Nebraska income tax and has a federal adjusted gross income (AGI) of $500,000 or more. The surtax will be in addition to any other income taxes owed and shall be equal to the income tax liability multiplied by a rate of:
- Two and a half percent if the AGI is at least $500,000 but less than $1,000,000;
- Five percent if the AGI is at least $1,000,000.
The Tax Commissioner is to adjust the income tax forms to include the calculation of the surtax.
Section 77-2701.02 is amended to increase the state sales tax rate to 6%, effective October 1, 2018.
Section 77-2701.16 is amended to impose sales and use taxes on the following:
- Animal specialty and pet services which would now include veterinary services, specialty services performed on livestock as defined by Section 54-183, animal grooming performed by a licensed veterinarian or licensed veterinary technician in conjunction with medical treatment;
- Cleaning of tangible personal property;
- Storage and moving services;
- Investment advice;
- Personal care services, including hair care, massage, nail services, spa services, and tattoo services;
- Maintenance, painting, repair, and interior decorating services for single-family housing;
- Limousine, taxi, and other transportation services;
- Travel agents and tour operator services;
- Lawn care, gardening, and landscaping services;
- Parking lot services;
- Swimming pool cleaning and maintenance services;
- Dating and escort services;
- Instruction in music, dance, golf, and other recreational activities;
- Custom meat slaughtering services;
- Real estate services relating to the sale of single-family housing;
- Tanning services;
- Telefloral delivery services;
- Contractor labor for any major addition, remodeling, restoration, repair, or renovation of owner-occupied residential housing.
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Section 77-2701.32 is amended to insert new language to impose a duty to collect sales and use tax for internet sales (same language as LB44) if:
- The seller made retail sales to purchasers in this state totaling $100,000 or more; or
- The seller made retail sales to purchasers in this state in 200 or more transactions.
The amended subsection becomes operative on the later of July 1, 2018 or the first day of the calendar quarter following a court decision or federal legislation abrogating the physical nexus requirement of Quill Corp. v. North Dakota.
Section 77-2701.35 is amended to repeal the sales tax exemption for motor vehicles, motorboats, all-terrain vehicles, and utility-type vehicles trade-ins.
Section 77-2704.10 is amended to remove the sales tax exemption for the following:
- Prepared food and food and food ingredients served by public or private schools, school districts, student organizations, or parent-teacher associations, in an elementary or secondary school or at any institution of higher education during the regular school day or at an approved school function;
- Fees and admissions charged for political events;
- Fees and admissions charged by a public or private elementary or secondary school, etc.;
- Fees and admissions charged for participants in any activity provided by a nonprofit organization exempt from income tax which conducts statewide sports events with multiple sports for both adults and youth;
- Fees and admissions charged for participants in any activity provided by a nonprofit organization exempt from income tax which is affiliated with a national organization primarily dedicated to youth development and healthy living, and offers sports instruction, leagues, and events in multiple sports.
Section 77-2704.24 is amended to impose a sales tax on the following:
- Soft drinks;
- Candy;
- Bottled water.
Sections 77-2715 and 77-2717 regarding the income tax are amended to impose a Nebraska alternative minimum tax.
Section 77-2734.01 is amended to provide for tax years beginning on or after January 1, 2019, that residents of Nebraska who are shareholders of a small business S corporation or who are members of an LLC shall include in their Nebraska taxable income, to the extent includable in federal gross income, their proportionate share of such corporation or LLC federal income without any adjustments pursuant to this section.
Section 77-27,132 is amended, regarding credit to the Highway Allocation Fund, to change the percentage from the "excess of five percent" to "the excess of five and one-half percent," and provides that the proceeds derived from the sales tax on motor vehicle trade in value shall be credited to the Property Tax Credit Cash Fund.
In addition, the Property Tax Credit Cash Fund is to be credited with an amount equal to the net increase in sales and use tax revenue and state income tax revenue received as a result of the changes made by LB 1084, minus the increase in funds paid to school districts pursuant to the Tax Equity and Educational Opportunities Support Act (TEEOSA) as a result of the changes made by LB 1084, and
minus $200,000 for the education study required by the bill.
Section 77-2912 is amended to sunset the Nebraska Job Creation and Mainstreet Revitalization Act as of December 31, 2018.
The bill inserts new language that would require the Department of Education to oversee an in-depth review of the financing of the public schools. There are a number of criteria the Department is to consider in the study.
The bill states that it is the intent of the Legislature to appropriate at least $200,000 to the Department of Education to carry out the study.
The following sections of statute are outright repealed:
- 77-2704.07: the sales tax exemption for newspapers;
- 77-2704.14: the sales tax exemption for coin-operated laundering and cleaning machines;
- 77-2704.52: the sales tax exemption for prepaid calling service or prepaid wireless calling service;
- 77-2704.55: the sales tax exemption for certain contractor labor;
- 77-2704.56: the sales tax exemption for the purchase of certain property or fine art by a museum;
- 77-2704.65: the sales tax exemption of purchases by a historic automobile museum;
- 77-2704.67: the sales tax exemption for membership or admission to or purchase by a zoo or aquarium;
- 77-2715.09: Capital stock; sale or exchange; extraordinary dividend and capital gains treatment;
- 77-2715.08: Capital gains; terms, defined.
LB44 (internet sales tax)
fails to advance on Final Reading this week, coming up two votes of the needed 33 to end a filibuster.
An amendment, AM2433, that was filed by Senator Watermeier, but was not taken up on Final Reading do to a priority motion by the opposition, would have removed the reporting requirement of out of state retailers.
If AM2433 were adopted, the bill would still have required out of state retailers selling to Nebraska customers to collect and remit Nebraska sales tax whose sales were more than $100,000 in aggregate annually or whose sales totaled 200 or more separate transactions annually. These provisions would be triggered if the U.S. Supreme Court case of Quill Corp. v. North Dakota from 1992 is overturned declaring South Dakota's internet sales tax constitutional. The court ruled in 1992 that states can only collect state sales tax from businesses that have a physical presence or a "substantial nexus" within their boundaries. The court has agreed to revisit the 26-year-old ruling and is expected to rule by the end of June 2018.
LB44 not be able to garner the needed 33 votes to end the filibuster on Final Reading, coupled with this being a short session with little time left to get to all the remaining priority bills, the fate of LB44 is unknown.
LB1090
advanced from Select File on Thursday of this week on a voice vote.
Introduced to offset those federal changes by implementing credits, deductions and exemptions that would reduce state revenue by $326 million in FY2018-19, as estimated by the state Department of Revenue.
LB1090 works to restore the $134 personal exemption credit that was effectively repealed by the federal Tax Cuts and Jobs Act. It also establishes the Nebraska standard deduction as $6,750 for single taxpayers and $9,900 for head of household filers. Collectively approximately $326 million for Nebraska taxpayers.
The bill would also adjust the individual income tax brackets, the personal exemption credit, and the standard deduction based upon the Consumer Price Index - All Urban Consumers for tax years beginning or deemed to begin on or after January 1, 2018.
As reported two weeks ago, one issue that also needs to be included in the offset to the federal tax changes is the elimination of 1031 exchanges for personal property.
Personal property that is affected by changes in the federal tax code are assets like tractors, combines, pivots,
collectibles, aircraft, franchise rights, rental cars, trucks, heavy equipment and machinery, etc. will no longer be permitted beginning in 2018.
Just like the deferral gain on the sale of other assets, the most commonly known use was with real estate and "like kind exchanges", but this change in federal tax law will influence a broad range of businesses.
While this needed change is not included in LB1090 it still hopeful that this change can be amended into the Revenue Committee's second priority bill, LB1089. LB1089 was advanced to General File on February 23 but has yet to see any floor debate.
On Wednesday of this week LB994 was advanced by the Transportation and Telecommunications Committee to General File on an 8-0 vote.
AM2358
, which replaces the bill makes the following changes:
Creates the Rural Broadband Task Force, whose legislative members would become non-voting, ex-officio members and the Chairperson of the Task Force would be the Chairperson of the Nebraska Information Technology Commission (NITC).
As stated in the Committee's Statement of Intent:
"Membership on the Task Force would be increased by one member to include a representative of the wireless telecommunications industry, in addition to a member of the regulated wireline telecommunications industry. An advisory group could be appointed by the Task Force from representatives of interest groups and stakeholders. A consultant could be hired by the Task Force. Changes were made to language relating to issues to be studied by the Task Force, including a study of alternatives for deployment to underserved or unserved areas such as reverse auction programs, public-private partnerships, and funding for competitive deployment. Also, broadband services are defined as high-speed telecommunications capability at a minimum speed of 25 megabits per second down and 3 megabits per second up that enables users to originate and receive high-quality voice, data, and video telecommunications using any technology.
Other changes include creating a Rural Broadband Task Force Fund, which would be located in the NITC and which would be initially funded with a transfer of $50,000 from the Nebraska Internet Enhancement Fund. Section 3 of the original bill, which would have provided the Public Service Commission (PSC) with authority to require telecommunications companies to contribute to the Nebraska Universal Service Fund (NUSF) through a connections methodology, is stricken.
Section 4 of the bill (and amendment) relates to the establishment of a reverse auction mechanism within the PSC, and procedural due process requirements relating to provision of notice and the right to a hearing are added to standards required to be adopted by the PSC prior to the issuance of an order withholding funds from any NUSF recipient. Also, if funds are withdrawn from a recipient in an exchange area, funds that are withdrawn must be used in the exchange area from which the funds were withdrawn.
Finally, the committee adopted a limited version of LB 573, as introduced. The committee amendment would eliminate requirements for local exchange companies to notify their customers and the PSC at least ninety days prior to a change in rates for local exchange service. It would eliminate the opportunity for impacted customers to petition the PSC to determine the rates if the customers don't agree with the proposed rates. The amendment would eliminate the required public meeting in each PSC district that allows customers to meet with company representatives in non-competitive areas. All companies would have the same regulation as those companies in areas that have been deemed competitive. The companies would file a tariff with the PSC that includes the new rate at least ten days before implementation. Nothing in the amendment would impact quality of service or customer complaint provisions. This portion of the amendment outright repeals Sections 86-145, 86-146, 86-147, and 86-148.
The amendment would provide an operative date of July 1, 2018 and contains an emergency clause."
When lawmakers convene from their four-day weekend on Tuesday they will continue with priority bill floor debate. Of contention Monday's Agenda will be:
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Document
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Introducer
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Description
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Change county and school retirement provisions - set out parameters of a school district that
wishes to withdraw from the County or School Retirement Plan by ensuring that the entity
bears:
(1) the financial liability to provide retirement benefits for affected plan members;
(2) the cost of any actuarial study necessary to calculate such financial liability; and
(3) the administrative costs connected to the entity's withdrawal incurred by the Board and
the Nebraska Public Employees Retirement System. It grants the Board authority, after
receiving recommendations from the actuary, to set the methodology and assumptions used to
calculate the obligation of the retirement system to provide benefits for plan members affected
by the entity's business transaction. Affected employees are considered fully vested if
terminated from the plan due to the entity's decision to withdraw. Within ninety days of the entity's withdrawal, the affected members are considered inactive
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Create a licensing exception under the State Electrical Act for certain farm building construction
LB 921 would lessen this licensing requirement by not requiring employees who are
constructing a farm building but are only handling the electrical wiring and wiring components to
be licensed. Employees who are doing the actual installation would also not need to be licensed
if under direct supervision of someone with the appropriate license. Direct supervision means
that the licensed supervisor is at the same project location as the unlicensed employee but not
necessarily within line of sight at all times.
LB 921 defines the term farm building as (a) Not open to the general public or used for
purposes of education and research; and (b) Used primarily for a bona fide farm purpose,
including, but not limited to, the production or storage of agricultural products or commodities,
including crops, fruits, vegetables, ornamental or flowering plants, dairy, timber, livestock,
poultry, and all other forms of agricultural products.
AM1935
, the General Affairs Committee amendment, strikes the term farm building and inserts
the term farm installation, but the definition in LB 921 remains the same. The Committee
Amendment creates an exception to the requirement that an apprentice electrician shall do no
electrical wiring except under the direct personal on-the-job supervision and control in the
immediate presence of a licensee under the State Electrical Act. That exception allows a
licensee to employ or supervise apprentice electricians at the ratio permissible under
subsection (2) of this section [three apprentice electricians to one licensee], except that a
licensee may employ or supervise apprentice electricians at a ratio not to exceed five
apprentice electricians to one licensee when such apprentice electricians are engaged in
installing conduit runs or pulling wire. (page 5, line 29 page 6, line 4).
The Committee Amendment strikes language in LB 921 regarding general laborers and inserts
a new subsection (8) that states that the Nebraska Electrical Act does not require a license for
a person engaged in general labor, including, but not limited to, digging trenches or unloading,
hauling, or moving electrical wiring or wiring components. (page 7, lines 9-11).
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