Review program for Nebraska's tax incentives wins first-round approval from lawmakers

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LINCOLN, Nebraska — Nebraska's tax incentives for businesses would face greater scrutiny from lawmakers under a review program that won first-round approval on Tuesday.

The program is designed to show whether the incentives are benefiting Nebraska's economy and meeting the goals set by lawmakers. Legislative auditors would review each tax incentive at least once every three years.

Nebraska's current review process only looks at whether companies have created a specific number of jobs and invested the amounts required to qualify for a tax credit.

"While that information is valuable, it is also important to conduct a broader review" to ensure they're attracting the kind of businesses and jobs that Nebraska needs, said Sen. Dan Watermeier of Syracuse, chairman of the Performance Audit Committee.

The bill would direct the Legislative Audit Office to review how an incentive affects the economy, its impact on local governments and whether alternatives are available, among other factors.

Sen. Mike Gloor of Grand Island, chairman of the Revenue Committee, said the evaluations could help identify state revenue that lawmakers could divert into broader tax cuts. Many businesses that bemoan the state's tax rates actually pay less because of incentives, he said.

"We wave goodbye to a lot of state revenue as a result of these programs because we think they're appropriate for business development," he said.

Lawmakers have heard anecdotal complaints that rural Nebraska isn't always seeing the benefits of tax incentive programs, and the review will help determine if that's the case, said Sen. Heath Mello of Omaha. Mello said the tax incentives aren't necessarily bad, but regular reviews could uncover ways to improve them.

Even with the reviews, Nebraska still may need to cut special deals for businesses to compete with neighboring states, said Sen. Paul Schumacher of Columbus.

"This is an effort to give us some foggy idea of whether these things are working, and whether they're fair or not fair," Schumacher said.

A legislative committee concluded in a report last year that Nebraska has no way to judge whether its tax incentives have succeeded in attracting and retaining businesses.

The report said the state was spending $43,000 to $235,000 for each job created by the Nebraska Advantage Act, the state's largest tax-incentive program. In many cases it wasn't clear whether the businesses would have come to Nebraska without an incentive.

The bill advanced on a 37-0 vote. Two more are required before it goes to Gov. Pete Ricketts.

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The bill is LB538

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