Senators advance LB901 tax package with fixes to protect property tax credits and new excise proposals

Lincoln — After extended floor debate, Nebraska senators on the select-file calendar advanced a multi-part tax package bundled as LB901, adopting committee and floor amendments that its sponsors say correct technical calculations and preserve funding for property tax relief.

The Revenue Committee chair, Senator Von Gillard, told colleagues the bill — which folds together several measures including a revised games-of-skill tax, elimination of certain sales-tax exemptions, and a domestic-violence service provider tax credit proposal — produced a fiscal note received that morning showing "about $25,000,000 to the good" for the current year. He described AM2599 as a committee "fix" that corrects fund-transfer language and the math on the property-tax refund calculation so the property tax credit fund remains whole under the package.

The nut of the debate centered on timing and trade-offs: Senator Hughes offered AM2650, an amendment she described as a "stutter step" that would slow the scheduled drop in the individual income tax to 3.99% and hold tiered property tax credit funding flat for two years to improve near-term budget stability. Hughes framed the proposal as fiscal prudence given wildfire losses and economic volatility; she also included phased cigarette and vape tax increases in that amendment. After floor discussion she withdrew AM2650, saying it did not have the votes.

Senators adopted AM2599 on a recorded voice vote (the clerk recorded 36 ayes, no nays) and later adopted AM2717, a Conrad floor amendment removing CPI-based fee escalators, which the clerk recorded with 43 ayes. Supporters of the committee amendment said it maintains funding flows to the property tax credit fund and channels new revenue to behavioral-health programs, compulsive-gambling prevention, and tourism allocations tied to the games-of-skill revenue stream. Opponents warned about the long-term fiscal effects of accelerating income-tax reductions and expressed concern about relying on ephemeral revenues.

A key component of LB901 is the change to how revenue from games-of-skill (also described in the debate as "cash devices") is allocated. Sponsor Senator Spivey said the revised approach raises the effective tax/fee on machine net revenue to about 11.5% and directs new dollars toward enforcement, behavioral-health services, and a compulsive-gambling fund; the bill also includes operational safeguards such as an on-site attendant requirement (sponsors and the committee rejected video-only monitoring as an adequate substitute for age verification and safety).

Senator Hallstrom offered and explained a floor amendment that would add a 10% excise tax on retail kratom sales effective Jan. 1, 2027; she said the change would help fund implementation costs and estimated ongoing revenue of about $1.5 million annually after start-up, with an initial uplift to cover implementation.

Senators repeatedly raised two interlocking themes: whether Nebraska's immediate budget gap is best addressed by creating new near-term revenue streams or by reining in spending; and how to preserve property-tax relief measures while meeting general-fund needs. Several senators also noted the concurrent humanitarian response to wildfires as context for their remarks.

What happened on the floor

- The chamber adopted E & R technical amendments early in the session, then took up LB901 on select file.
- AM2599 (committee "fix" to correct transfer math and fund allocations) was adopted (clerk: 36 ayes, no nays). The amendment clarified where behavioral-health dollars from games-of-skill revenue "follow the locations of the machines" rather than being sent to specific legislative districts.
- AM2717 (Conrad) removed CPI escalators on certain fees and was adopted (clerk recorded 43 ayes).
- AM2650 (Hughes), which proposed slowing the income-tax reduction schedule and pausing increases to property tax credits while adding cigarette/vape tax changes, was offered but later withdrawn by the sponsor.
- Senator Hallstrom spoke for AM2674 to add a 10% excise on kratom sales effective 01/01/2027; she said the earliest fiscal estimate would cover implementation costs and produce roughly $1.5 million annually thereafter.

Votes, tally and formal actions recorded

- E & R amendments to LB901: adopted (voice vote; announced by presiding officer).
- AM2599: adopted (clerk recorded 36 ayes, no nays).
- AM2717: adopted (clerk recorded 43 ayes).
- AM2650: offered then withdrawn by sponsor.

Why it matters

Senators said LB901 combines revenue-raising steps and clean-up language intended to help the state meet its budget obligations without drawing further from reserves. Proponents argued the package protects property tax credit funding and adds targeted support for behavioral health and domestic-violence service providers; critics warned the accelerated income-tax schedule and other long-term changes could exacerbate budget pressure in future years if economic conditions worsen.

Next steps

Debate continued on additional floor amendments to LB901 at recess. The body recessed to welcome former legislators and planned to resume consideration after the break. The package remains subject to further amendment before final reading.

Quotes

"It's generally very good news — about $25,000,000 to the good," Senator Von Gillard said of the fiscal note that morning.

"This amendment is a reasonable amendment. It gives us a little time, maybe a little pause," Senator Hughes said of AM2650 before withdrawing it.

"We shouldn't be abdicating our legislative responsibility to unelected bureaucrats on autopilot to continually raise more revenue," Senator Conrad said in support of removing CPI escalators.

Ending

The chamber carried the tax-package debate into late morning, adopted technical and policy amendments intended to shore up property-tax relief funding and clarify transfers, and paused for recess with additional amendments to the measure pending when the Legislature returns.