A Nebraska lawmaker has proposed that the state decouple from some federal tax changes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Proposed July 20 by Sen. Tom Briese as an amendment to L.B. 1074 (a technical corrections bill), AM 3093 would decouple Nebraska from several sections of the CARES Act, including section 2304, which temporarily suspended the excess business loss limitation under IRC section 461(l) for tax years 2018 through 2020. It would also decouple the state from section 2306, which temporarily increased the amount of interest expense that can be deducted at the federal level from 30 percent to 50 percent of a taxpayer's adjusted taxable income.
“Because Nebraska conforms to federal tax law on a rolling basis, it automatically incorporated into its tax code the Coronavirus Aid, Relief and Economic Security Act changes passed by Congress in March,” according to a July 28 legislative release.
In testimony in support of AM 3093 during a July 27 Revenue Committee hearing, Tiffany Friesen Milone of the OpenSky Policy Institute said section 2304 of the CARES Act “won’t benefit taxpayers with incomes below those thresholds, and the tax breaks increase as incomes increase.”
According to Milone, the provision “primarily benefits a small subset of wealthy Nebraskans” and will result in “reduced investments in services that are essential to helping our state recover and thrive as we move forward.”
The amendment would also decouple from section 2204, which allows individuals who do not itemize to deduct up to $300 of qualified charitable contributions, and from section 2205, which temporarily eases the limitation on charitable contributions during 2020.
Briese said the CARES Act provisions would reduce Nebraska tax revenue by about $242 million over the next three years, according to the legislative release.
Sarah Curry, policy director at the Platte Institute, told Tax Notes July 28 that decoupling from the CARES Act provisions will not save money to allocate to property tax reform if the economic recovery is slow. She said the act provides much-needed relief for businesses that are hurting because of the pandemic.
No action has been taken on the amendment.