Longtime Nebraska homeowners would get targeted relief under new legislative bills
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State Sen. Mike McDonnell of Omaha. Feb. 27, 2024. (Zach Wendling/Nebraska Examiner)
LINCOLN — Three legislative bills introduced Monday would extend significant property tax relief to Nebraska homeowners based on how long they have owned a home in the state.
Legislative Bill 75, from State Sen. Mike McDonnell of Omaha, would exempt qualified Nebraska homeowners from paying any property taxes after 40 years of ownership in the state.
“I think you should be able to sit on your porch one day of your life and say, ‘I truly own my home, and I’m no longer a partner in paying rent to the government in the form of property tax,’” McDonnell told the Nebraska Examiner on Monday.
Another McDonnell bill, LB 77, would offer property tax relief for the portion of property taxes paid to the local school district, which is about 60% of annual property tax bills. Homeowners who have lived in the same house at least 10 years would be eligible.
McDonnell said that in 1965, voters decided to stop funding the government with state-level property taxes. Now, he said, Gov. Jim Pillen has tasked lawmakers to look at getting rid of most or all local K-12 school district taxes.
“Is that an overnight deal? No,” McDonnell said. “Is it a two-year, four-year, six-year [plan] — I don’t know — but that’s why we’re here now in this special session to try and figure it out.”
The state would replace the loss in local political subdivisions’ revenue, similar to the current system for homestead exemptions. Qualified owners would need to refile for the relief in years divisible by five.
Legislative Bill 79, from State Sen. Jane Raybould of Lincoln, would similarly extend homestead exemptions. Based on household income, Nebraska residents could get a greater percentage of relief if they have lived in their home for two decades or more.
After 20 years, they could claim an additional 2.5% in relief from their qualifying bracket. After 25 years, it would be an additional 5% in relief. Relief couldn’t exceed 100%.
‘Taxpayer Bill of Rights’
State Sen. Julie Slama of Dunbar dropped a package of 16 constitutional amendments Monday, which voters could consider this November together or individually.
Eight amendments would limit the taxing and spending authority of local governments as well as the state. The other eight allow private lawsuits to be filed to enforce the respective provisions.
“You need to have teeth because, otherwise, what’s the remediation for taxpayers?” Slama said.
Slama said the package of legislation is based on the Taxpayer’s Bill of Rights in Colorado, passed decades ago to lock in controls for tax growth.
She said she preferred “one bill, one hearing and one message to give to taxpayers” but decided to “play it safe” given the Nebraska Constitution’s single-subject requirement for ballot measures.
The Nebraska Supreme Court has taken a stricter view of what constitutes a “single subject” for proposed laws or amendments on the ballot compared to laws passed by the Legislature.
Slama has pushed for hard spending controls. She said the hard caps proposed by the governor on limiting annual property tax collection growth “can be easily worked around” and could get in the way of union negotiations for local law enforcement, firefighters and corrections officers.
“I think the only way to really put it in stone to get long-term relief is to put it in our state constitution, very clearly defined principles that need to be adhered to,” Slama said.
She said Colorado has sustained “pretty explosive growth” during the decades since it passed its bill of rights.
Under Slama’s proposals, the following limits would require voter approval during a statewide general election to:
Levy any new tax (Legislative Resolution 12CA and LR 7CA).
Implement a change to tax policy that results in net tax revenue (LR 15CA and LR 10CA).
Create a multiple fiscal-year direct or indirect debt, or other financial obligation, if the political subdivision didn’t have adequate cash reserves to cover those future payments in all future fiscal years (LR 16CA and LR 11CA).
Maintain a reserve of at least 3% of fiscal year spending, excluding bonded debt service, to use for declared emergencies only (LR 17CA and LR18CA).
Set a maximum annual percentage increase in state spending each fiscal year to the rate of inflation plus the percentage change in the state’s population from the prior fiscal year (LR 20 CA and LR 19CA).
Set a maximum annual percentage increase in local political subdivision’s spending each fiscal year to the rate of inflation plus the percentage change from the political subdivision’s population in the prior fiscal year (LR 22CA and LR 21CA).
Cannabis regulation and taxation
Two other major proposals, from State Sens. Justin Wayne and Terrell McKinney, both of Omaha, would legalize, regulate and tax cannabis for adults ages 21 and older.
LB 52, by Wayne, would set a regulatory framework for how cannabis could be grown, refined, manufactured, distributed, tested and sold, overseen by a commission the tax commissioner appoints.
The bill would earmark 20% of licenses for people in areas “disproportionately harmed by cannabis prohibition.” It would tax growers 25% when they sell it to a distributor or retailer and impose a 25% tax on retail sales. It would establish procedures to let people have previous cannabis-related convictions expunged or cleared from their records.
McKinney introduced similar provisions in 2023, through LB 634.
LB 71, by McKinney, would create a regulatory regime for cannabis in Nebraska.
It would impose a 16% tax on grown cannabis to a manufacturer or store and a 16% sales tax on cannabis sales to customers. It shares essentially the same fee structure as Wayne’s LB 52.
It also offers similar incentives for applicants from areas disproportionately impacted by cannabis enforcement.
Political subdivision measure reintroduced
As promised, Wayne also reintroduced a version of legislation that Pillen vetoed this spring that would allow lawsuits against political subdivisions for alleged negligence in certain cases of child sexual assault and child abuse.
Wayne’s LB 57 includes broader reforms. That includes punitive damages and allowing other lawsuits if alleged governmental negligence was the proximate cause of someone’s death, such as state prisoners.
Another Wayne bill, LB 67, would eliminate local tax rate authority for natural resources districts and have the state take over funding for the NRDs. It is modeled after the way the state took over responsibility to fund community colleges in 2023 and what the governor has said his three-year plan is for K-12 school districts.
In total, 81 bills and 24 constitutional amendments were introduced for the special session, the most proposed during any special session since the Unicameral formed in 1937.
Wayne led the way with 24 bills, followed by Slama with 16 pieces of legislation; State Sens. Carol Blood of Bellevue and McDonnell, at eight each; and State Sens. Eliot Bostar of Lincoln and Kathleen Kauth of Omaha, at five each.
Among other bills introduced
Among other bills introduced Monday, the third and final day of bill introductions for the Legislature’s special session on property tax relief:
LB 36, from State Sen. Carol Blood of Bellevue, proposes a minimum 1.25% tax on the sale or transfer of mansions valued at more than $800,000, with a higher tax on mansions worth more than $2.5 million. If the transferee or purchaser resides in Nebraska for three subsequent tax years, the tax would be returned to them through an income tax credit.
LB 40, from State Sen. Jana Hughes of Seward, would require multinational corporations to declare all global profits on Nebraska tax returns. However, they would continue to pay the Nebraska portion of taxes.
LB 49, from Wayne, would reestablish aid to municipalities, and his LB 53 would reimburse local costs for county jails.
LB 56, also from Wayne, would limit legislative salaries for local legislative bodies, like boards, commissions or councils. Part-time officials could receive no more than twice a lawmaker’s salary (up to $24,000). Full-time officials could receive up to three times that amount (up to $36,000).
Nebraska Examiner political reporter Aaron Sanderford contributed to this report.
