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LB81 - Define a term and change tax credit provisions under the Nebraska Property Tax Incentive Act

• The Stated Intent: The intent of LB81 is to address the gap year for the Property Tax Credit Fund that was created by LB34 in the 108th Legislature, 1st Special Session.

So what is LB81 all about?

LB81 will simple put back the tax credits for eligible taxpayers that were ended with with the passage of LB34 in last year's 108th Legislature, 1st Special Session dealing with property tax relief. Following is the language from the bill.

For taxable years beginning or deemed to begin during calendar year 2024, the department shall set the credit percentage so that the total amount of credits for such taxable years shall be the maximum amount of credits allowed in the prior year increased by the allowable growth percentage.

What's the big picture

Due to Nebraska's skyrocketing property taxes and overall tax burden, in 2020 Nebraska started offering property tax credits for property taxes paid the following year. There were two significant problems with this tax relief approach. First, property taxes have continued to skyrocket. In many cases, increases in property taxes are outpacing credits given by the state. Second, there are a number of eligible taxpayers who were not applying for these credits when completing their tax form.

A simple way to think about this approach is comparing it to an after purchase rebate some companies use as a marketing strategy. Two good examples of companies that do this in Nebraska are Menards and Bomgaars. Menards will frequently advertise an 11% saving on everything. However, to get that saving the customer must mail in the receipt (proof of purchase) along with a rebate form. A couple months later Menards sends a merchandise credit check good for instore purchases. The 11% saving is deferred a couple months and you must apply for it to receive it.

Similarly, Nebraska's property tax credits are deferred by a year and you must apply for the credit to receive it. Pictured below is a simplistic view of how the process worked up until last year's special session.

What changed in the special session?

The special session started with very lofty goals from the Governor - a 50% cut in property tax. It quickly became apparent to all that the Governor's goal was not going to happen. Instead of talking about cuts, the legislature focused on how to shift Nebraska's tax burden from one person or group to another. In the end, very little to no property tax relief happened and certainly nothing to lesson Nebraska's overall tax burden.

However, remember issue number two with the property tax credit application not everyone was applying for? The legislature decided to fix that by doing away with taxpayer application and just giving the credit when the taxpayer actually pays the bill. With that, the legislature ended the old program in 2024. That leaves taxpayers no way to apply for or receive the credit on the property taxes paid last year.

Back to the Menards example. The legislature's approach would be like Menards ending their 11% rebate program and replacing it with an 11% sales off program and then telling customers they can not apply for or receive the merchandise credit check on purchases they made before the program ended. Needless to say, Menards would have a lot of unhappy customers complaining to the company, the better business bureau, and the State Attorney General. Below is the updated process flow.

What's the impact?

The impact is huge! What once was a 30% credit on prior year property taxes paid is now zero. For every $1,000 of assessed taxes you would have gotten $300 back. In very rough numbers, if you owned a $200,000 home in Lincoln, NE, you would have a $4,000 property tax bill. Thirty percent (30%) of that is $1,200. If LB81 doesn't pass into law, you will be loosing out on $1,200! Who wouldn't want $1,200 dollars?

Remember, this was money the state promised you! It was in their statutes when you were issued the tax bill and when you paid the taxes!

Is everyone impacted? No. The reality is, if you had the means and the foreknowledge, you could have paid your property taxes early - in December. This would have allowed you to apply for the credit before the program was terminated. Most Nebraska's didn't have this luxury because they are living paycheck to paycheck or have a mortgage. Plus, the legislature is not telling people this fact and some are even denying the fact you are loosing the credit.

Going forward

After all the talk about about property tax cuts, nothing has been done. The legislature continues to look for ways to spend your money and shift the tax burden while not really solving the issue. The issue was well stated by Creighton University Economist, Dr. Ernie Goss when he stated,

"We need to accept the fact Nebraska is a high tax state".

The longer Nebraska waits to fix it's tax problem the more people will leave this state. Taxes are a driving factor why people choose to leave a state. NFFV has reported on this before, however, you can read the Tax Foundation's January 2025 report "Americans Moved to Low-Tax States in 2024" if you need further convincing. Following is a chart from their report. It doesn't look good for Nebraska.

Let YOUR senator(s) know:

• Nebraskan's had been promised a property tax credit for taxes paid the prior year since 2020. Having the state renege on that now, when taxes are at their highest, seems quite unbelievable. People are struggling and agriculture incomes are down.

• If a company did what the state appears to be doing, taking away a rebate that was promised, people would be seeking legal action.

• Nebraskans are left with no recourse other than hoping LB81 becomes law. How did we get to this point? The longer we wait to fix our tax problem, the more people will have moved out.

Your voice is powerful, make it heard on LB81. The committee hearing is scheduled for Wednesday, February 26, 2025. NFFV recommends you "Support" this bill.

How to be heard? Here are three ways:

• Most Effective: Testify in person. Going to the Committee hearing and sharing YOUR story with committee member Senators is very impactful. For first time in person testifier here are some helpful hints. 
• Effective: Submit written testimony. If you can't be there in person then submit written testimony. Not sure how to do that, click here. Note: The deadline to submit and verify a comment for the hearing record for LB81 is Wednesday, February 26, 2025 at 8:00 AM Central Time.
• Least Effective: Email your position letter to the Committee Senators and CC your own Senator. For a listing of the Revenue Committee Senators click here. Note: emails should be sent by noon, the business day before the committee hearing. It's not likely these emails will be included in official hearing minutes, however, there is a better chance Committee Senators will see your comments. You can request they be added to meeting minutes in your email to Committee Senators.

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