LB 2 – Key Ag Land Tax Bill Advances
State lawmakers advanced LB 2 to Final Reading this week. The bill would lower the value of agricultural land from 75 percent of value to 50 percent of value for purposes of calculating taxes to pay principal and interest on school bond debt. If passed, the provisions of LB 2 would go into effect for school bonds issued on or after January 1, 2022. Agricultural landowners often reflect a minority of voters in K-12 school bond elections yet are held responsible for paying a large portion of school bond taxes. Sen. Tom Briese of Albion introduced LB 2 to more closely link agricultural landowners’ financial responsibility for school bond taxes to their voice in local bond elections.
LB 388 – Broadband Expansion Bill Advances
Senators gave first round approval this week to LB 388. Introduced by Sen. Curt Friesen of Henderson, the bill would have the Public Service Commission (PCS) administer grants to providers, cooperatives, and political subdivisions to fund qualifying broadband development projects. The bill would appropriate $20 million annually beginning in fiscal year 2021-22 to the commission to fund the grants. Priority would be given for grants to unserved areas that previously have not been targeted for such a project, unserved areas that are receiving federal support for construction that would not be completed within 24 months, and underserved areas that have developed a broadband and digital inclusion plan. Eligibility would be restricted to projects providing broadband internet service scalable to 100 Mbps for downloading and 100 Mbps for uploading, or greater. Each project would have a completion deadline of 18 months from the date the grant is awarded and be eligible for one extension of six months, to be approved by the PSC. Passage of LB 388 is a Nebraska Farm Bureau priority for the session.
LB 595 – Sales Tax Exemption for Ethanol Inputs
A Nebraska Farm Bureau supported bill to provide a sales tax exemption for ethanol inputs advanced to second round consideration this week in the Legislature. LB 595 was introduced by Sen. Joni Albrecht of Thurston. The bill would prevent the state from implementing state sales and use tax on enzymes, yeast, and related products used to manufacture ethanol. Nebraska Farm Bureau supports the measure as taxing the inputs positions Nebraska ethanol producers at a competitive disadvantage with ethanol producers in other states.
Biden Tax Proposal
President Joe Biden’s American Families Plan includes likely tax increases for farmers and ranchers. American Farm Bureau Federation (AFBF) Senior Congressional Relations Director Pat Wolff says there are three changes in the bill that could mean higher taxes for farmers and ranchers.
One is an increase in the capital gains tax rate, that would apply to any sale of land or buildings. The second is a curb on the ability of farmers to sell one asset and buy another without paying capital gains taxes, that’s called like kind exchanges. The third is a new capital gains tax at death, and the repeal of stepped up basis.
Wolff says the new capital gains tax at death comes with a promise that family farmers who meet certain qualifications would be exempt. AFBF President Zippy Duvall did have a conversation with USDA Secretary Vilsack about the proposed changes to tax law and Vilsack did say that he would work to make sure that family farms across America were protected from damaging tax code changes.
Under current law, heirs inheriting farmland are allowed to increase the tax basis of the property to fair market value without paying capital gains tax.
According to Wolff, preserving the step up in basis, as it is, is the best outcome for farmers and ranchers. The proposal on the table comes with the promise that farms that continue in families won’t have to pay, but there’s no details on how that would work. And so, it’s important to move with caution.
Be on the lookout for information and an announcement from Nebraska Farm Bureau next week.