Legislative Update – Bill Summaries
Legislation Introduced to Provide Real Estate Tax Credits
The Nebraska Legislature introduced two bills to provide tax credits for primary residences and agricultural land. The first bill, Legislative Bill 913, would allow a tax credit against state income tax for property taxes paid toward a primary residence. Under LB 913, individuals could claim a credit of up to $250 and married persons filing a joint return could claim a credit of up to $500. The proposed bill contains income limitations to qualify for the credit of federal adjusted gross income of $100,000 for an individual and $250,000 for married persons filing jointly. Senator Rick Kowlowski introduced LB 913.
The second bill, Legislative Bill 1038, proposes an agricultural tax credit. This bill would allow individuals who own agricultural or horticultural land to claim a credit against state income tax. The applicable credit would equal the amount by which the property taxes paid on the land exceeds five percent of such individuals’ federal adjusted gross income. Senator Annette Dubas introduced LB 1038.
LB 913 and LB 1038 are pending before the Revenue Committee and both are set for hearing on February 7, 2014. A copy of LB 913 and information regarding its status can be found here. The same can be found for LB 1038 here. We will continue to monitor the progress of these bills and provide updates as they occur.
Proposed Amendments to Nebraska Economic Development Law
The Urban Affairs Committee is currently considering three bills that would expand upon Nebraska’s economic development laws. The relevant bills are LB 1012, LB 1095, and LB 1096. These bills seek to alter criteria for designating a blighted area, amend several aspects of Nebraska’s Community Development law, and establish a process for altering a business development district. This article summarizes the relevant aspects of those bills.
Blighted Area Designations
LB 1012, introduced by Senator Ken Schliz, proposes an alteration to the calculation for determining the percentage of a city that a blighted area encompasses under the Community Development Law. Nebraska Revised Statute section 18-2103 contains a limitation that cities cannot designate an area of more than fifty percent of the city as blighted. LB 1012 would allow cities to exclude formerly used defense sites from that calculation.
Additional Community Development Law Proposals
LB 1095, introduced by Senator Al Davis, proposes several additions to Nebraska’s Community Development Law. The first addition would define requirements for members of community development authorities. Current law allows a mayor or presiding officer, with the approval of the city’s governing body, to appoint five to seven people as members of the community development authority. LB 1095 would require those members to have clear accountability, leadership, and authority relative to tax increment financing. LB 1095 would also allow for such members to be staff or members of the governing body, representatives of other taxing bodies, experts in the area of economic development, and members of the public.
The next area LB 1095 seeks to add are reporting requirements when a community development authority utilizes tax increment financing. These reporting requirements include the obligation to create measurable metrics for each redevelopment project, which metrics would need to reflect the priorities of the city’s general plan for development. The bill would further require cities to publish performance thresholds to determine the success of a redevelopment project. A community development authority would need to report these matters on the city website.
The final addition contained in LB 1095 would make the Tax-increment Financing Division of the Department of Economic Development (the “Tax-increment Financing Division”) responsible for overseeing community development agencies’ use of tax increment financing. In particular, LB 1095 would further require the Division to establish procedures for community development authorities to follow to utilize tax increment financing as part of a redevelopment project. LB 1095 would also obligate community development agencies to adhere to requirements for reporting to the Tax increment Financing Division.
Business Improvement District Boundaries
LB 1096, introduced by Senator Brad Ashford, proposes a provision on altering the boundaries of a business improvement district under Nebraska’s Business Improvement District Act. The current statutory scheme, Nebraska Revised Statute section 19-4015, et seq., does not contain a procedure for altering the boundaries of a business improvement district. LB 1096 would establish such a procedure, and would require approval of both the business improvement board and the majority of the owners within the business improvement district.
Legislative Status
The Urban Affairs Committee held hearings on LB 1012 and LB 1096 on February 4, 2014. The hearing for LB 1095 is set for February 11, 2014. A copy of LB 1012 and information regarding its status can be found here. The same can be found for LB 1096 here and LB 1095 here. We will continue to monitor the progress of these bills and provide updates as they occur.
Legislation Introduced to Exempt Certain Deeds from Documentary Stamp Tax
On January 22, 2014, Senator John Nelson introduced Legislative Bill 1043. This legislation would amend the statute relating to the documentary stamp tax and to exempt certain deeds from taxation.
LB 1043 would exempt the following deeds from the tax that Nebraska Revised Statute section 76-901 imposes: “Deeds transferring property, without actual consideration therefor, to a nonprofit organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code and is not a private foundation as defined in section 509(a) of the internal revenue code.” Deeds of this nature will still require a Real Estate Transfer Statement, but will be exempt from documentary stamp taxes.
LB 1043 is with the Revenue Committee. A copy of LB 1043 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislation Introduced to Change Certain Provisions Relating to Actions for the Recovery of Title, Possession of Property or Foreclosure
On January 22, 2014, Senator John Wightman introduced Legislative Bill 1049. LB 1049 will amend Nebraska Revised Statute section 25-202 and change provisions relating to actions for the recovery of title or possession of real estate or foreclosure of mortgages or deeds of trust as mortgages.
Currently, an action for the recovery of title or possession of real estate or foreclosure of mortgages or deeds of trust as mortgages can only be brought within ten years after the cause of action accrues. LB 1049 would add another option by adding that an action can also be brought “within twenty years after the cause of action accrues in the case of a platted and subdivided lot.”
LB 1049 is currently with the Judiciary Committee. A copy of LB 1049 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Revisions Proposed to Requirements for Transfer on Death Deeds
On January 10, 2014, Senator John Wightman introduced Legislative Bill 780. This legislation will amend Nebraska Revised Statute sections 76-214 and 76-2,126 to change provisions relating to transfer on death deeds.
Currently, section 76-214 states that every grantee recording a deed shall complete a Real Estate Transfer Statement at the time of filing a grantor’s death certificate if required under section 76-2,126. LB 780 would add language to clarify that the statement shall be filed if required under section 76-2,126 and also if “the conveyance of real estate was pursuant to a transfer on death deed.” As further clarification, LB 780 would add that a cover sheet indicating the transfer on death shall be attached only “if the conveyance of real estate was pursuant to a transfer on death deed.”
The Judiciary Committee held the first hearing on LB 780 on January 24, 2014. A copy of LB 780 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Revisions Proposed on Tax Sale Certificates for Tax Delinquent Properties
Legislative Bill 979, introduced by Senator Burke Harr, would amend Nebraska law regarding tax-sale certificates on real property sold for delinquent taxes. LB 979 provides that all deeds issued to any purchaser of real property sold for taxes shall pass subject to all the rights and interests of a holder of a tax-sale certificate from a tax sale occurring after the tax sale for which the deed was issued. A second sale of real property for taxes after the issuance of a prior tax-sale certificate, however, has no effect on the rights of the holder of the prior tax-sale certificate to apply for a treasurer’s tax deed or proceed with judicial foreclosure. Nevertheless, the most recent tax-sale certificate constitutes a lien superior to the lien of a prior tax-sale certificate.
LB 979 also provides that any holder of a tax-sale certificate purchased by a bid down for a portion of less than a 100% interest in the real property who is issued a treasurer’s tax deed shall take title under the tax deed to the entirety of the real property described in the deed. The deed shall have conveyance language conveying an entire absolute 100% undivided interest in the real property to the holder of the tax-sale certificate. Any holder of a tax-sale certificate purchased by a bid down for a portion of less than a 100% interest in the real property who files a foreclosure action in district court shall have a lien that attaches to the entirety of the real property described in the certificate, and the court in its decree of foreclosure must order the sale of the entire 100% interest in the property to satisfy the lien.
If LB 979 passes, tax-sale certificates issued between January 1, 2010, and December 31, 2014, shall be governed by the laws in effect on December 31, 2009, regarding all matters related to tax-deed proceedings, including notices and applications, and foreclosure proceedings.
LB 979 is with the Revenue Committee. A copy of LB 979 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislation Introduced to Declare Policy on Tax Reform
Legislative Bill 836 declares Nebraska policy regarding tax reform. Specifically, LB 836 amends current law to declare it is the policy of Nebraska to revise the tax structure to: (1) encourage businesses to locate and invest in rural areas of Nebraska to decrease unemployment; (2) increase research and development in Nebraska; and (3) encourage entrepreneurship and increase investment in high technology industries in underserved areas of Nebraska. LB 836 also declares it is Nebraska policy to modernize livestock facilities and to promote the creation and retention of quality jobs specifically related to research and development, manufacturing, and large data centers.
LB 836 is with the Revenue Committee. A copy of LB 836 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislation Proposed to Require County Treasurers to Publish a List of Tax-Delinquent Properties Online
Introduced by Senator Tyson Larson, Legislative Bill 697 requires county treasurers to send a list of tax-delinquent real properties subject to sale to the Property Tax Administrator, who must compile a complete list for all counties and publish the list on the Department of Revenue’s website. Nebraska Revised Statute section 77-1804 currently requires the county treasurer to publish this list in legal and daily publications and to post a copy in a conspicuous place in the county treasurer’s office.
The Revenue Committee held the first hearing for LB 607 on January 23, 2014. A copy of LB 697 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislation Introduced Relating to Tax Sales on Real Property
Legislative Bill 681 would amend current procedures for tax sales on real property beginning January 1, 2015. LB 681 provides that within nine months after the expiration of three years from the date of the sale of real property for tax delinquency, a land bank with the tax-sale certificate for the real property may: (1) apply for a tax deed on the real property; or (2) foreclose the lien represented by the tax-sale certificate.
If a land bank gives an automatically accepted bid, the land bank shall be the purchaser and no public or private auction shall be held. If no land bank has given an automatically accepted bid, the person who offers to pay the amount of taxes, delinquent interest, and costs on the real property is the purchaser.
The county treasurer shall announce bidding rules at the beginning of the public auction, and these rules apply to all bidders throughout the auction. If the county treasurer conducts the sale in a round-robin format, LB 681 specifies the manner of the sale. LB 681 also requires bidders to register with the county treasurer prior to participating in the sale, pay a small non-refundable registration fee, and, if the bidder is a foreign corporation, provide proof it maintains a registered agent in Nebraska for service of process.
Senator Heath Mello introduced LB 681, which advanced from the Revenue Committee to the General File on January 28, 2014. A copy of LB 681 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislative Bill 912: Property Tax Relief for Nebraska Homesteads
Senator Rick Kolowski introduced Legislative Bill 912, the Property Tax Relief Act, on January 15, 2014. The purpose of the legislation is to provide property tax relief for property taxes assessed against homesteads. For tax year 2015, and each following tax year, all Nebraska homesteads shall be taxed the same as other property, except there shall be an $8,000 exemption for homesteads. That equals approximately $150 in annual tax savings on a home valued at $115,000. To receive the exemption, a homeowner must file an application with their county assessor, but need not refile in succeeding years.
LB 912 creates a Property Tax Relief Fund. Counties will be reimbursed the homestead exemption from this fund. County Treasurers must certify to the Tax Commissioner the total tax revenue lost because of the homestead exemption. Reimbursements will be based on the certified amount and distributed in six roughly equal monthly payments.
The Revenue Committee held the first hearing on LB 912 on February 6, 2014. A copy of LB 912 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Nebraska may adopt the Nebraska Benefit Corporation Act
Approximately twenty states have adopted benefit-corporation legislation, and approximately fifteen other states, including Nebraska, have introduced such legislation. On January 9, 2014, Senator Danielle Conrad introduced Legislative Bill 751, which would create the Nebraska Benefit Corporation Act. The Act allows a corporation to elect to become a benefit corporation in its articles of incorporation and thereby become subject to the Act.
Benefit corporations
A benefit corporation is a new class of corporation that voluntarily meets rigorous standards regarding corporate purpose, transparency, and accountability. The focus is on providing community benefits in addition to creating wealth for stockholders. A university, for example, may elect to transition from being a traditional for-profit corporation to a public-benefit corporation, to improve relations with its constituencies, including accreditors.
Under LB 751, a benefit corporation must have a purpose of creating general public benefit and may state in its articles that it has a purpose of creating a specific public benefit, such as: (1) providing low-income or underserved individuals or communities with beneficial products or services; (2) promoting economic opportunity for individuals or communities beyond job creation in the normal course of business; (3) protecting or restoring the environment; (4) improving human health; (5) promoting the arts, sciences, or the advancement of knowledge; (6) increasing the flow of capital to entities with a purpose to benefit society or the environment; and (7) conferring any other particular benefit on society or the environment.
Third-party standard
The performance of a benefit corporation would be measured by a third-party standard, which is a recognized standard for defining, reporting, and assessing corporate social and environmental performance. The standard must be comprehensive, credible, independent, and transparent. Comprehensive means the standard assesses the effect of the business and its operations on the corporation’s shareholders, employees, subsidiaries, suppliers, and customers, each community in which the corporation has offices or facilities, and the local and global environment. Independent means an entity that is not controlled by the benefit corporation developed the standard. Credible means the standard was developed by an entity that has the necessary expertise to assess corporate social and environmental performance and that uses a balanced multistakeholder approach to develop the standard, including a reasonable public comment period. Finally, transparency means the development and revision of the standard must be made publicly available, including an accounting of the revenue and sources of financial support for the entity with sufficient detail to disclose relationships that could be reasonably considered to present a conflict of interest.
Transparency
A benefit corporation’s benefit director, an elected independent director, must prepare an annual benefit report, which must include, among other things: (1) the ways the corporation pursued general and specific public benefits and the extent to which those benefits were created; (2) any circumstances that hindered the creation of general or specific public benefits; (3) an overall assessment of the corporation’s social and environmental performance against the third-party standard; (4) the name of the benefit director and the address where persons may direct correspondence; (5) the compensation paid to each director; and (6) if the benefit director resigned, refused to be reelected, or was removed, any correspondence from the director concerning the circumstances of the resignation, refusal, or removal.
The corporation must send the annual report to each shareholder, file the report with the Secretary of State, and make the report publicly available, either by posting it on the corporation’s website or by providing a copy, without charge, to any person that requests a copy. Information made available to the public need not include compensation paid to directors or other financial or proprietary information.
Accountability
A benefit enforcement proceeding is any claim, action, or proceeding for failure of a benefit corporation to pursue or create general public benefit or a specific public benefit set forth in the corporation’s articles, or violation of any obligation, duty, or standard of conduct under the Act.
Only certain parties may bring a benefit enforcement proceeding. Those parties are the corporation itself, a person or group that owns at least two percent of the shares of the corporation at the time of the alleged act or omission, a director, a person or group that owns at least five percent of the equity interests in an entity of which the benefit corporation is a subsidiary, or other persons as specified in the corporation’s articles or bylaws.
Except in a benefit enforcement proceeding, no person may bring an action against a benefit corporation or its directors or officers regarding the failure to pursue or create general public benefit or a specific public benefit or violation of an obligation, duty, or standard of conduct under the Act. A benefit corporation is not liable for monetary damages for any failure to pursue or create general public benefit or a specific public benefit.
Conclusion
Public-benefit corporations are a new class of corporation that voluntarily commit to providing public benefits, in addition to increasing wealth for stockholders. The legislation pending in Nebraska provides strict requirements for transparency and accountability.
The Banking, Commerce and Insurance Committee held the first hearing on LB 751 on February 3, 2014. A copy of LB 751 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Constitutional Amendment Introduced to Allow Separate Valuation of Residential Real Property
Senator Jeremy Nordquist introduced LR423CA, an amendment to Nebraska’s Constitution to allow the Legislature to classify residential real property as a separate class of property. This amendment would allow the Legislature to tax residential real property differently than other real property, but requires the uniform taxation of all residential real property.
Nebraska’s Constitution currently allows the Legislature to classify certain real property, such as agricultural and horticultural land, as a separate class of property. This allows the Legislature to assign a lower valuation to agricultural and horticultural land for purposes of property taxation.
LR423CA is currently with the Revenue Committee. A copy of LB 751 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Religious Organizations in Danger of Losing Property Tax Exemption
Legislative Bill 675, introduced in by Senator Ernie Chambers, would revise Nebraska law to eliminate property tax exemptions for certain property owned by religious organizations. Currently, Nebraska law provides an exemption from property taxes for properties owned by educational, religious, charitable, or cemetery organizations and used exclusively for educational, religious, charitable or cemetery purposes, but not used for financial gain or profit.
The Revenue Committee held the first hearing for LB 675 on January 24, 2014. If enacted, the provisions of LB 675 will take effect January 1, 2015. A copy of LB 675 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Changes Proposed to Eligibility Requirements for Public Board of Directors of Power District
Legislative Bill 817, introduced by Senator Ken Haar, would change who may serve on the board of directors for a public power district. LB 817 would amend Nebraska Revised Statute section 70-619 to allow individuals to qualify as a member of more than one district board. LB 817 would also revise section 70-619 such that a member of a governing body of any one of the municipalities within the areas of a district may not serve on the original board of directors of a district.
The Government, Military and Veterans Affairs Committee held the first hearing for LB 817 on February 7, 2014. A copy of LB 817 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Legislation Introduced to Create Public Power Task Force
Senator Ken Haar introduced LB 1100 to create a task force to study the possible restructuring and modernization of Nebraska’s public power entities. The proposed responsibilities of the task force include numerous tasks such as studying the current structure of the public power entities, possible reorganization and consolidation of the entities, and the role of the Nebraska Power Review Board. Unlike all other states that rely on a combination of public and private providers, public power utilities provide all power to Nebraska consumers.
Make-up of the task force will consist of individuals appointed by the Governor including a representative member from each of the following: the Power Review Board, State Energy Office, Department of Economic Development, a statewide health organization, a statewide environmental organization, a wind energy advocacy organization, a solar energy advocacy organization, a labor union, an electric energy service business, the University of Nebraska, and each public power entity. The task force will also include residential, commercial, and industrial electricity customers.
The report of the task force would be due to the Legislature by December 1, 2014 and must include a strategic plan for reorganization prioritizing benefits for the State of Nebraska and maximizing economic development and use of resources in the State while minimizing costs to residents. The task force would then terminate on December 31, 2014.
LB 1100 is with the Natural Resources Committee. The first hearing of LB 1100 is on February 13, 2014. A copy of LB 1100 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.
Appropriation Bill Introduced for Study of Electric Transmission Infrastructure
Legislative Bill 1115, introduced by Senator Al Davis, provides for the appropriation of $200,000 to the Nebraska Power Review Board for a study of state, regional, and national transmission infrastructure and the future needs for transmission infrastructure to serve Nebraska electric consumers, utilities, and generation facilities seeking to export electricity from Nebraska. LB 1115 would also create the state policy to encourage and allow opportunities for development and operation of renewable energy export facilities in Nebraska.
The purpose of the study is to identify electric transmission and generation constraints and opportunities as well as identification of regulatory requirements and practices, transmission plans, possible markets for export, barriers to export, and economic benefits to expanded state, regional, and national transmission.
LB 1115 requires that the study consider input from a working group consisting of members of the legislature, public power districts and other electric providers, renewable energy development companies, municipalities, the Southwest Power Pool, the Western Area Power Administration, and other transmission owners, operators, developers, and environmental interests. If enacted, the Power Review Board must submit the results of the study to the Legislature by December 15, 2014.
LB 1115 is currently with the Natural Resources Committee. The first hearing of LB 1115 is February 12, 2014. A copy of LB 1115 and information regarding its status can be found here. We will continue to monitor the progress of this bill and provide updates as they occur.