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Nebraska tax reform measure headed to final vote

Grant Schulte, Associated Press

LINCOLN, Neb. (AP) -- A Nebraska tax measure that could benefit high-tech start-up companies and uninsured medical patients is headed to a final vote in the Legislature after winning second-round approval on Thursday.

The bill would repeal Nebraska's alternative minimum tax and allow businesses to spread financial losses over a 20-year period to reduce their state tax burden. It also could help Gov. Dave Heineman's push to improve the state's national tax ranking.

Nebraska is one of nine states that still impose the alternative minimum tax, which was created to ensure that residents who use tax shelters pay at least something. But tax experts say the need was largely eliminated with a 1986 federal law that took away many of those shelters.

The bill's lead sponsor, Sen. Paul Schumacher of Columbus, said the alternative minimum tax hurts residents with high medical bills, mortgages and other tax-deductible expenses.

Schumacher introduced a bill this year that led to the creation of a statewide tax study, which has put a hold on a number of other tax-related proposals. But he argued that the alternative minimum tax would likely get eliminated after the tax study, which seeks to make Nebraska's tax system simpler and more equitable.

"If you apply the standards of the tax study, this one jumps out as one that shouldn't be there," Schumacher said. "It's not competitive. It's not simple. It's a small amount of money involved, relative to the state budget."

The bill also would expand an existing tax law that lets businesses claim losses in their tax filings over a five-year period. The original bill was introduced by Sen. Bob Krist, of Omaha, to give start-up companies additional breathing room.

Allowing companies to spread their losses over 20 years, as with federal law, would help start-up firms that often endure financial losses for years before taking off, said John Cederberg, a certified public accountant in Lincoln.

The measure may not be enough by itself to attract new businesses, but it will make it easier for those that have high research and programming costs, said Cederberg, who helped research the bill.

Cederberg said the proposal would also likely cause a jump in how the state is ranked by the Washington, D.C.-based Tax Foundation.


The bill is LB308.