LINCOLN — Gov. Dave Heineman may get one of his top legislative goals after all.
His plan to eliminate state income taxes went down in flames earlier this year. But Tuesday night, lawmakers gave first-round approval to two smaller tax reforms that could achieve one of the governor's priorities: improving the state's business climate.
Lawmakers voted 40-0 to advance Legislative Bill 308, which would eliminate the state's alternative minimum tax and allow businesses to spread out their losses on their state tax returns over 20 years instead of the current five.
The changes were backed by business groups, including the Omaha and state chambers of commerce, as a way to improve Nebraska's business tax ranking, often described as “mediocre” by Heineman.
One ranking, done by the nonpartisan Tax Foundation, put the state's tax rank at No. 31. Heineman described that as unacceptable when he proposed his tax shift to eliminate state income taxes.
Barry Kennedy of the Nebraska Chamber of Commerce and Industry said that while his organization didn't back the big tax shift, it supported the less-ambitious changes in LB 308.
“It's going to simplify our tax code, and it's doing away with a tax, which is always a good thing to do when it comes to tax rankings,” Kennedy said.
A year ago, Maine improved its rankings from 37 to 30 by passing a similar change.
The alternative minimum tax, or AMT, was created on the federal level decades ago to ensure that some high-income taxpayers who invested in tax shelters paid at least a minimum amount of income tax as an alternative to regular income taxes.
But the prime sponsor of LB 308, State Sen. Paul Schumacher of Columbus, said that the AMT had become a tax “dinosaur” because tax shelters have mostly gone away and that the AMT was affecting more taxpayers with middle-income wages.
Only about 2 percent of Nebraska taxpayers — about 17,000 — now pay the state alternative minimum tax.
Kennedy, of the state chamber, said the other aspect of LB 308 — allowing companies to deduct net operating losses from their state taxes over 20 years — would primarily help high-tech startup businesses.
Such businesses, he said, typically lose money over the first eight to 10 years. Allowing them to spread out those losses for a longer period, Kennedy said, will put Nebraska on par with most other states and the federal government.
LB 308 was among 19 bills and appropriation measures either advanced or given final approval during a two-hour flurry of activity Tuesday night.
Among the bills given final-round approval was LB 6, which would create the Nebraska Commission on Problem Gambling. Its sponsor, Sen. Bob Krist of Omaha, has said the bill would give added emphasis to efforts to deal with compulsive gamblers.
Advanced from second-round debate was LB 216, designed to improve the transition out of foster care for children after they turn 19.
The bill provides for up to two years of additional services for such children, who officials say often “age out” of foster care without a job, money or place to live.
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