Revisions to Nebraska’s C-BED Statute Incentivize New Renewable Energy Facilities (LB 402)
On April 2, 2014, Governor Heineman signed Legislative Bill 402, which will allow more renewable energy projects to use Nebraska’s Community Based Energy Development or “C-BED” statute to qualify for exemption from state sales tax. Introduced by Senator Heath Mello, LB 402 will enhance the economic development benefits of renewable energy development in Nebraska.
The current C-BED law exempts the component parts of a wind energy generation facility from state sales tax if, during the life of the project, at least thirty three percent (33%) of the gross power purchase agreement payments flow to a Nebraska community or a qualified owner, which may be an individual or may include a limited liability company comprised entirely of Nebraska residents. LB 402 reduces the qualifying percentage to twenty-five percent (25%), reduces the time requirement from the life of the project to twenty (20) years, and expands the definition of a qualified owner to include business entities domiciled in Nebraska. LB 402 also expands the contributors to the threshold percentage to include lease and easement payments to landowners, payments to Nebraska domiciled companies or residents for labor, materials, manufactured content, and professional services. Finally, LB 402 expands the definition of a C-BED project to include solar, biomass, landfill gas, or other low-emission fuel source, in addition to wind.
The goal of LB 402 is to incentivize new renewable energy facilities in Nebraska while also encouraging development of supporting industries by giving those industries an additional reason to focus on Nebraska and pursue renewable energy. As detailed in a report produced by Baird Holm and Bluestem Energy Solutions, wind energy development in Nebraska contributes substantially to property tax revenues by significantly increasing the property tax base, thereby allowing municipalities to maintain or lower current tax rates and alleviate the property tax burdens their residents face. As such, over time, the additional tax revenues and community benefits offset the foregone sales tax. LB 402 compounds these benefits by also encouraging development of the supporting industries, which will, in turn, contribute additional property, sales and income taxes.
Baird Holm’s David C. Levy played an instrumental role in the drafting and passage of LB 402. For information regarding LB 402 and a copy of the final slip law visit, the Nebraska Legislature’s website.