Legislature in Action
Governors and legislators are beginning to settle on and advance tax bills that could drastically shape the future of their states and several trends and themes are beginning to emerge.
The Nebraska Chamber has established goals and important guard rails to help shape the discussion of tax reform for Nebraska.
Most senators who spoke in support of slowing down the process said they eventually would vote in favor of the bill that would result in an estimated $73 million loss of annual state revenue by 2027.
Tax season begins next week. Two major challenges await taxpayers: a second year of navigating pandemic-related tax relief on their returns and IRS backlogs that may delay processing and refunds.
Forty-four states levy a corporate income tax, with rates ranging from 2.5 percent in North Carolina to 11.5 percent in New Jersey. Nebraska’s top marginal rate lowered from 7.81 to 7.5 percent as a result of Legislative Bill 432, with a further reduction to 7.25 percent scheduled for 2023.
The state of Nebraska is strong, Governor Pete Ricketts announced in his annual address to legislators. In his 2022 budget adjustments and ARPA proposal, he is prioritizing: • 1% cut in income taxes for individual earners of $31,160 and above • $548 million floor on property tax relief annually • Accelerate Social Security exemption and corporate tax cuts from 2021 • An up to $270 million prison • Pay and rate increases for 24-hour facilities • $700 million to boost Colorado River water supply and recreation His proposals also include $75 million for workforce housing and $15 million to each community college for workforce training.
The Governor identified four priorities this legislative session: provide tax relief, protect public safety, secure our water resources, and invest ARPA funds in one-time projects that will benefit our state.
The Legislature simply won't have enough time to address everything senators want to this session. That was the message given this morning by Speaker Hilgers.
Governor Ricketts will hold his annual State of the State Address on Thursday, January 13, 2022, at 10 a.m. to lay out his top priorities for the legislative session ahead. You can tune in by visiting Nebraska Public Media's website at https://nebraskapublicmedia.org/en/schedules/#live-programming.
On Jan. 6, 2022, Governor Pete Ricketts held a press conference in the State Capitol Rotunda with members of the Legislature’s Revenue Committee. The Governor and Revenue Committee Chairwoman Lou Ann Linehan both called on the Unicameral to prioritize tax relief during its 60-day short session in 2022.
The second session of the 107th Nebraska Legislature kicks off Wednesday, Jan. 5, 2022. It's a "short" 60-day session, which means floor debate on carryover legislation from 2021 can start almost immediately. (In an odd year, the Legislature has a "long" session lasting 90 days.) Once the session is under way, senators will have 10 days to introduce new legislation. Hundreds of bills will be introduced between Jan. 5 and Jan. 20. Jan. 13 will be Gov. Pete Ricketts State of the State Address, where he will outline his priorities for the session. Since we're in an even year, the Governor will be releasing proposed adjustments to the state's two-year budget adopted last year. In addition, the Governor will outline his recommendations for spending the nearly $1 billion in American Rescue Plan Act (ARPA) funds that are available to Nebraska and will be allocated this session. Speaker of the Legislature Mike Hilgers has announced that committee hearings will occur at 1:30 p.m. on weekdays until every bill has had its legally required public hearing. The all-day hearings implemented last year due to COVID are now a thing of the past. This session is the last one for nearly 25% of the legislative body due to term limits. In Nebraska, senators are limited to two consecutive four-year terms (eight years), after which they must wait four years before running again. 2022 will be the last session for the following 12 senators: Sen. Curt Friesen, Henderson, District 34 Sen. Mike Groene, North Platte, District 42 Sen. Matt Hansen, Lincoln, District 26 Sen. Robert Hilkemann, Omaha, District 4 Sen. Dan Hughes, Venango, District 44 Sen. Mark Kolterman, Seward, District 24 Sen. Brett Lindstrom, Omaha, District 18 Sen. John McCollister, Omaha, District 20 Sen. Adam Morfeld, Lincoln, District 46 Sen. Patty Pansing Brooks, Lincoln, District 28 Sen. John Stinner, Gering, District 48 Sen. Matt Williams, Gothenburg, District 36
The Nebraska Legislature is scheduled to convene on Wednesday, Jan. 5, 2022. The most effective way for legislators to understand issues facing the accounting profession is to receive input from the CPAs they represent. As experts in your field and key advisors to businesses of all sizes, your input is critical to both our state and our nation.
One of the best ways to connect with state legislators is to attend the Society’s annual State Senators’ Reception and Dinner, which will be held beginning at 6:00 p.m. on Jan. 4, 2022, in the Renaissance Room at The Cornhusker Marriott in downtown Lincoln. Although it was cancelled last year due to the COVID pandemic, this event carries a long-standing tradition of being the first official event prior to the start of the Legislative Session.
CPA Firm Ownership Bill. State Sen. John Stinner of Gering, a retired CPA, has agreed to introduce the Society’s bill that would make changes to CPA firm ownership. In a nutshell, the legislation would remove the physical “head count” ownership requirement for CPA firms while maintaining that CPAs must hold at least 51% equity ownership of a CPA firm. We are hopeful for passage of this bill during the upcoming session.
Universal Licensing. On Oct. 27, State Board Executive Director Dan Sweetwood, Society Lobbyist Walt Radcliffe, and I, along with representatives from the Nebraska Board of Engineers and Architects, met with State Sen. John McCollister of Omaha to request exclusion of our professions from LB263, the proposed universal licensing bill introduced by Sen. Tom Briese in the 2021 Legislative Session. After examining the “Amendments to LB263,” which Sen. McCollister shared with us that day, we were pleased to learn that the document did exclude “a credential issued for a certified public accountant pursuant to the Public Accountancy Act.”
Sen. McCollister was the sponsor of an interim study resolution, LR191, to explore the effect of universal licensing on groups that have traditionally faced barriers to occupational licensing; the hearing on LR191 was held Oct. 29 by the Nebraska Legislature’s Government, Military, and Veterans Affairs Committee, where Sen. McCollister presented the “Amendments to LB263.”
Exclusion of the CPA profession is the result of conversations among former State Sen. Laura Ebke, Society Past Chairman Jim Greisch, Sweetwood, and I this past spring. Ebke is presently a senior fellow with the Platte Institute and is focused on the state’s job licensing laws. Greisch is a retired partner with RSM and formerly served on the Platte Institute Board of Directors.
Under universal recognition, workers with job licenses, career experience, and military specialties would be able to come to Nebraska and receive licenses for jobs they were trained for in other states. While this bill may have its place for certain occupations, we believe there is a critical difference between occupations and highly complex, technical professions whose work impacts the health, safety, and welfare of the public. High-impact professions such as the CPA profession require rigorous licensing, including high standards for education, examination, and experience.
While exclusion of the CPA profession from this legislation is positive news, the Society will continue to monitor this bill as it is anticipated to move through the Legislature in 2022.
Taxation of Accounting Services. If you attended the Society’s Fall CPE Conference, you heard a presentation on Blueprint Nebraska’s “Framework for Tax Modernization” by Nebraska Chamber President Bryan Slone, Platte Institute Chief Strategy Officer and former State Sen. Jim Smith, and retired CPA Jim Griesch. The Blueprint Nebraska plan includes policy changes to individual income tax, corporate income tax, sales tax (including the addition of a sales tax on accounting services), incentive programs, elimination of the inheritance tax, and funds for property tax relief. Although we have not taken a formal position on this framework, the Society has historically been opposed to sales tax on accounting services. We will continue monitoring the progress of this framework (and other proposals) should legislative proposals come to fruition in the coming session.
On the Federal Level. Society Chairman Erica Parks, Past Chairman Pat Meyer, and I attended the virtual AICPA Council Meetings held with the Nebraska congressional delegation the week of Oct. 25. Both Parks and Meyer are members of the AICPA Governing Council representing the state of Nebraska. Meetings were held with Rep. Adrian Smith, Sen. Deb Fischer, and Alan Feyerherm, who is chief of staff for Rep. Jeff Fortenberry.
Among the topics covered were:
- Providing taxpayers with targeted COVID-19 tax penalty relief from the underpayment of estimated tax penalty and late payment penalty for the 2020 tax year;
- Granting the IRS authority to issue disaster relief in a timely manner in response to state-declared disasters;
- Recognizing accounting as a Science, Technology, Engineering and Math (STEM) profession; and
- Passing a Fiscal State of the Nation resolution that would ensure Congress is made aware of information in the federal financial statements so that they can gain a better perspective on the nation’s fiscal health. Since these meetings were held, the House has passed the resolution; it has yet to pass the Senate.
In addition, a small group of members participated in an in-person “CPA Roundtable” on Nov. 12 with Congressman Don Bacon in Omaha. Discussion included the bipartisan infrastructure deal as well as the Build Back Better framework. Rep. Bacon was one of the 13 House Republicans who has come under fire for voting for the $1.2 trillion infrastructure bill. He pointed out that the bill includes $2.5 billion for Nebraska roads, will provide more access to rural broadband, and will help fix the country’s highways, seaports, and locks. Most of the bill is paid for by unspent COVID money, said Bacon. He hopes the Democrats’ other bill, for $1.75 trillion to fund President Joe Biden’s Build Back Better agenda, does not succeed. Bacon said there has been a lot of misinformation on the infrastructure bill and that people were trying to attach these two bills together.