Legislature Considers Funding for Inheritance Tax Cut

By Gordon HopkinsA bill intended to address one of Governor Jim Pillen's priorities, to reduce or eliminate inheritance tax, is scheduled to be taken up on the last day of the 2024 legislative session, Thursday, April 18.The problem for many rural counties is that they depend on that money to operate. Many local officials have expressed concerns that, by reducing or eliminating this source of revenue, they would then be forced to raise tax levies.LB (Legislative Bill) 1363 is intended to address that concern. The bill changes provisions relating to the rate and disbursement of the documentary stamp tax, which is the tax imposed on the grantor executing a deed for the privilege of transferring beneficial interest in or legal title to real estate.Right now, counties collect $2.25 for every $1,000 in value on the transfer of real estate. Counties then remit all but 50 cents of each $2.25 collected to the state treasurer. Those funds are then used for such things as homeless assistance and behavioral health services.LB 1363, originally introduced by Senator Mike McDonnell, District 5, of Omaha, was debated earlier this week. After debate and amendments, the bill would raise the rate to $3.25 for each $1,000 in value and would allow counties to retain $1.15 of every $3.25 collected as documentary stamp tax.As for the portion sent to the state treasurer, those would be used for use such things as federally qualified health centers, the creation of an office to obtain grant funding on behalf of the state and military-related programs, such as a program that helps military members transition to the civilian workforce after retirement.One amendment contains provisions of another bill, LB 1067, introduced by Senator Robert Clements, District 2, of Elmwood, which would also use those funds to cut the inheritance tax rate that applies to remote relatives from 11 percent to eight percent and the rate that applies to all other beneficiaries from 15 percent also to eight percent. One of the supporters of the bill is Senator Tom Brandt, District 32, who spoke in support of the bill, addressing senators at the legislature on Tuesday, April 9, “Thank you Senator Clements and staff. They've continued to work on the inheritance tax issue. They've worked with NACO (Nebraska Association of County Officials). They started off at odds and now I can see some real progress here. This is a very good amendment. The commissioners that have contacted me, I've had three or four emails this morning, all have switched from opposed to they fully support this.”“Quite often when you're buying a farm or a house for $300,000 or $3 million, the cost of those doc stamps are financed by the bank and that's just part of the annual payment or monthly payment on that house,” said Brandt. “As Senator Clements explained, it decreases the effect of inheritance tax quite significantly. So, both sides gave a little bit on a really good compromise here.”The matter was also discussed at length by the Jefferson County Commissioners at their meeting on Tuesday. Commissioner Mark Schoenrock serves as the Southeast Director of the NACO Board and has worked closely with senators and the governor's office on this matter. He gave an update to his fellow commissioners.Schoenrock said, “We as the NACO Board have spent many long hours working constructively with Governor Pillen and his staff and the legislature to lower the tax burden on Nebraska taxpayers.”“Senator McDonnell approached us at NACO late last week,” said Shoenrock. “To see about combining his doc stamp increase with a reduction inheritance tax rates.”The bill was being debated at the same time as the commissioner's meeting.While supportive of the bill in its current form, Schoenrock did express some concern that potential changes to the bill during debate could defeat the purpose. He reported Senator McDonnell gave NACO his assurance that, “He would pull the bill if anything started to go sideways.”Schoenrock explained why cutting inheritance tax without replacing the funding is such a problem, “And the reason this is critical. Here in Jefferson County, the inheritance tax is about 12 percent of our budget. And we don't have the ability to do anything else other than cuts services or raise property tax. That's the options that we've got. Period. And guess what? Neither one of those options is popular with our citizens.”Senators voted 27 to 10 to advance the bill.

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