LINCOLN — Nebraska lawmakers advanced their first tax relief bill of the session Friday — a sales tax exemption on repairs and replacement parts for agricultural machinery.
The exemption has been a long-sought goal of farmers, ranchers and implement dealers.
Bills proposing the exemption have been introduced for more than a decade in the Nebraska Legislature.
“Everyone agreed it was probably good legislation, and it needed to be done,” said Mark Othmer, Nebraska field director for the Iowa-Nebraska Equipment Dealers Association.
But previous efforts were stymied because of the price tag, which is estimated to be nearly $10 million for the first full year of implementation.
This time, Legislative Bill 96 cleared first-round approval with no dissenting votes.
State Sen. Annette Dubas of Fullerton, who introduced the bill, said it fits within the state's general policy of exempting business inputs.
She said Nebraska is one of only eight states that still charge sales tax on agricultural equipment repairs and replacement parts.
A 2011 study by Creighton University economist Ernie Goss concluded that the lack of an exemption has hurt the state's economy.
Goss said the pace of job losses in Nebraska's farm equipment supply industry from 1998 through 2009 was more than twice the national rate and about three times that of border states.
Job losses were especially steep in Nebraska's border counties, according to the study.
Goss also noted that Nebraska had lost a net of 42 farm equipment dealerships over the 11-year period.
Sen. Galen Hadley of Kearney, chairman of the Revenue Committee, said those findings call into question the accuracy of the revenue loss estimates.
He said the state is not collecting sales taxes now when farmers and ranchers go to other states for parts and repair work. He also said the state would gain by keeping jobs at implement dealerships.
Providing the repair and parts exemption was among the top recommendations of the Legislature's Tax Modernization Committee, which undertook a major tax review last year.
Othmer said he feels good about the chances of getting the exemption passed and signed into law this year.
Gov. Dave Heineman has not addressed the issue although he made tax relief his priority for the session.
His office did not respond to a message seeking comment Friday afternoon.
While supporting the bill, Sen. Heath Mello of Omaha, the Appropriations Committee chairman, warned colleagues that the pool of money available for tax cuts is limited.
He said lawmakers will have to make some hard choices as the session goes on. Under legislative rules, the final vote on LB 96 will have to wait until the budget update is passed.