LB 719A (1992)
April 3, 1992
SPEAKER BAACK: You've heard the motion to advance LB 1241A. All those in favor say aye. Opposed no. It is advanced. We'll now proceed to Item 6 on the agenda and LB 719A.
CLERK: Mr. President, 719A is on Select File. I have no E & R amendments. The first amendments I do have are by Senators Hefner, Lamb and Schellpeper. However, Mr. President, I also have a motion to suspend Rule 3, Rule 7, Section 3 so as to permit consideration of that amendment AM3777.
SPEAKER BAACK: Senator Hefner.
SENATOR HEFNER: Mr. Speaker and members of the body, I move to suspend the germaneness rule and this is Rule 7, 3(d). The amendment that I want to add to LB 719A is printed in the Journal on page 1740. I'm suspending the germaneness rule to allow consideration of this amendment. The amendment strikes all the sections to the bill and inserts three sections. Section 1 amends LB 1063 by striking the $4.00 per ton tax on soil conditioners, just on soil conditioners, not on the other fertilizer. It leaves a $4.00 tax on fertilizer and I'm told by the Revenue Department that this would be a minimal amount because there isn't that much soil conditioner sold. Section 2 is a repealer and Section 3 is the emergency clause. Since we enacted LB 1063, it has become clear that we were too hasty and this is what happens sometimes when you don't have a public hearing on a proposal. We put a tax on a product which will destroy the market for that product and I'm very interested in one in my legislative district and this is the Waldbaum Egg Company. They have a plant in my district. They have one in Wakefield or near Wakefield and one near Bloomfield and they are getting ready to build another one between Plainview and Osmond. The Waldbaum Company has a lot of chickens and they sell chicken manure from its operation in the form of a soil conditioner at $7.00, 1 think 6.00 or $7.00 a ton and, of course, if we put a $4.00 per ton tax on that, why it's really going to be tough to sell that. It would just become too expensive to continue their
present operation. Even at $7.00 a ton they are not making any profit. They just want to get rid of this chicken manure. They are merely trying to recover their cost of finding an acceptable method of disposing of this waste in an environmental responsive way. And I don't think that we want to discourage that kind of stewardship. The $4.00 a ton tax makes it financially impossible to continue this practice. So I would urge you and ask you to suspend the rules, adopt the amendment, deal with the amendments that follow and then advance the bill. The tax went into effect April 1, I believe, and so we need to get moving in a hurry. If a company manipulates their compost and provides a guarantee it will fall under the definition of fertilizer and continue to be taxed. So I would move that we suspend the rules to adopt this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Hefner. On the motion to suspend the rules, Senator Warner. Senator Coordsen.
SENATOR COORDSEN: I had a question of Senator Warner and he is in conference. It was the... I'll pass for now, Mr. Speaker.
SPEAKER BAACK: Senator Schellpeper. Senator Warner, would you respond to a question, please.
SENATOR COORDSEN: Yes, Senator Warner, isn't this issue covered in your amendment?
SENATOR WARNER: Yes, it is. Actually, the amendment that I filed later also covers the issue that dealt with mixing .with... fertilizer with water. As you recall, Senator Schrock read into the record the intent, but the amendment I have filed puts that statement that Senator Schrock read into the statutes so it's even clearer. I just asked Senator Hefner, I guess, his comment was he'd like to see this done in the event that the other one didn't go and I have no objection I guess, that the adoption of this amendment will not be in conflict with the next one. It's not broad enough because it doesn't cover the water, but, being added to fertilizer, but if we get to the rule suspension to consider the other, then it's okay.
SENATOR COORDSEN: Okay. Thank you, Senator Warner.
SENATOR WARNER: I have no objection to doing this because I assume that we will address the other issue, will have the necessary votes to address the other issue.
SENATOR COORDSEN: Thank you, Senator Warner. That addresses my concern because while I support this effort, certainly, Senator Hefner, and if it comes up to Senator Warner's, in this particular thing because we created, by using the definitional section of statutes in the creation of the amendments to LB 1063, an unintentional situation. Soil conditioners by definition are composted materials, sewage sludge, composted manures, anything that has a guaranteed type of analysis amounted to approximately 5,000 tons last year out of about one and three-quarter million tons and in impact it is thirty two-hundredths of one percent of the fertilizer sold last year were classified as soil conditioners and this was a question that took a little bit of digging to find the answer to- So the net impact fiscally of this amendment is almost nothing. it's something that we really can't calculate on the total impact of the bill and it then does not, if we take soil conditioners out , it doesn't provide the roadblock that currently exists in law for using composted materials of any type and encouraging recycling of lawn waste, the mixing of manure perhaps in with those and providing an organic material to be used to apply to soil for the purposes of growing flowers or crops or whatever, so I would support the Hefner amendment at this time. I think the additional language that is contained in Senator Warner's amendment would also be appropriate when that time comes. So this has almost no fiscal impact and it will not discourage then recycling of plant materials and animal materials for use as soil adjuvants.
SPEAKER BAACK: One minute.
SENATOR COORDSEN: I support the amendment.
SPEAKER BAACK: Thank you, Senator Coordsen. Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members, I also rise to support this amendment. I just wanted to make the point that when we were trying to work out a compromise of the fertilizer tax over the energy tax, we did not even consider this compost issue. That was never part of the discussion and it was our understanding at that time that it was not going to be part of the issue. But in looking at the definition of fertilizer, we found out afterwards that this was in the actual definition and so it's a good amendment that we take it out it
doesn't make sense to penalize this type industry because it's really needed in our state and so hopefully that this amendment and also the amendment that Senator Warner had talked about will be approved so that the compost issue is not part of the total solution. Thank you.
SPEAKER BAACK: Senator Elmer.
SENATOR ELMER: Thank you, Mr. Speaker. Would Senator Hefner yield to a couple of questions?
SENATOR HEFNER: Certainly.
SENATOR ELMER: Senator Hefner, I certainly understand the purpose of the amendment that we want to suspend the rules and consider. When we're talking about soil conditioners, there are many types and those that are from naturally occurring situations such as paunch manure, the chicken manure, the sludge from treatment plants from municipalities are certainly those types of things that you're trying to address, but there are others that are totally artificial in nature such as our materials that are sold to attract earthworms, materials that are supposed to be wetter than water for detergent purposes that will soak up such as, you know, soak water in faster, are those things separate or lumped together with what you are proposing?
SENATOR HEFNER: Senator Elmer, this amendment, if you'll look on page 1740, strikes the word "soil conditioner."
SENATOR HEFNER: I see that, but in the definition of soil conditioner does it include those totally manufactured items that do not contain those natural ingredients?
SENATOR HEFNER: What our intent of this bill is to take care of the problem that may occur like when these big chicken companies sell their chicken manure...
SENATOR ELMER: I understand that and I support that.
SENATOR HEFNER: Or the hog producers sell the manure out of their pills. The definition now in soil conditioners and compost says that if it's manipulated, well, then it could come under the $4.00 a ton tax.
SENATOR ELMER: I see.
SENATOR HEFNER: What we want to do is get away from that.
SENATOR ELMER: I'll see if I can't clarify that a little bit and then maybe visit a little more later.
SENATOR HEFNER: Okay, thank you.
SPEAKER BAACK: Thank you, Senator Elmer. Senator Lamb.
SENATOR LAMB: I'll pass.
SPEAKER BAACK: Senator Conway.
SENATOR CONWAY: Thank you, Mr. Speaker, members, I rise in support of Senator Hefner's request to suspend the rules and add this amendment. I also agree with what I heard the exchange between Senator Warner and Senator Coordsen with respect to Senator Warner's later amendments that are going to take this a little bit deeper. One of the problems we have, and I worked on the Waldbaum issue to some extent as well when I was called by that company which headquarters in still my district, but soon to be Senator Hefner's district. They handle about 450 tons, of chicken waste, manure if you will, every day. And when you look at 450 tons, their option, if it isn't put out to the local farmers to spread out into their fields as a conditioner and as an additive in that sense, you could imagine what kind of another environmental problem one would have to have that kind or of a waste material piling up with no opportunity, and with this kind of a tax, people certainly aren't going to, it's only $7.00 a ton now I believe to spread, and with that much more of a tax on it, it's riot going to be considered an appropriate alternative and then we wind ourselves into a much more significant problem with respect to how you dispose of such a waste. So it's in everyone's best interest that this material is distributed and used as a soil conditioner. I was informed and my staff was informed by the Revenue Department that since it was not manipulated or probably was not manipulated that, therefore, it probably would not be taxed, but Senator Hefner has gotten a different direction and so therein lies the confusion. And so this will clarify that this particular type of material can be distributed and put back into the environment in a much safer way for the environment than to have these kinds of piles and/or to have some kind of landfill with this kind of waste in it. So for clarification purposes, I think this is
needed and hopefully Senator Warner's amendment later will clarify other problems that I alluded to back when we switched to the fertilizer tax to begin with, but I do support Senator Hefner's amendment at this time because this does need to be cleared for people who do have this particular problem.
SPEAKER BAACK: Thank you, Senator Conway. Senator Schmit, you're next. I don't see Senator Schmit. Senator Nelson.
SENATOR NELSON: Mr. Speaker, I asked this question also yesterday for the record, but since there seems to be some confusion and I do support Senator Hefner's amendment and I'll just take one minute. We also have the same problem with packing plants and that is the distribution of paunch manure, and we would have the very same problem as the Waldbaum Egg Company with the chickens, and that is distributed, it is put back on the agricultural land and I'm not even sure that if they charge for it or not and, again, I think it would be under the same classification and there would be, of course, a lot of tonnage there but I don't think that we ever intended to tax paunch manure or the packing house, the same problem with their byproducts. I just wanted that in the record.
SPEAKER BAACK: Thank you, Senator Nelson. Anyone else wishing to address this motion to suspend the rules? Senator Schmit.
SENATOR SCHMIT: Thank you, Mr. President. I'd just like to suggest, and I know this issue was raised when the fertilizer amendment was discussed, and I was assured personally off the flour and on the floor that there wasn't a problem. And then I recall again, and I know that Senator Warner has attempted to address another problem that is relative to the water added to fertilizers as to what portion of it will be taxed. And I would hope that we would take a very close look at this type of amendment. Now we've been assured it started out to be an amendment that would solve for Senator Hefner and also for me, because I think we are probably one and two in the poultry production in Nebraska, the problem of disposal of the manure from the fertilizer from the poultry plants. There is, of course, also a considerable problem with the disposal of the waste, much of it liquid, some of it solid, from swine confinement systems, beef confinement systems and other types of activity that produces large amounts of solid waste. I was told that this, that as long as it was animal waste, that there was not going to be a problem as long as it was not processed in any
manner. I would like to have someone, Senator Warner or Senator, whoever is the expert in this area, assure me that they have checked with the department and with the Department of Revenue so that in the event some of the large confinement systems in the State of Nebraska do try to merchandise the animal waste from their facilities that they will not be assessed a fertilizer tax because much of this waste will actually carry a considerable amount of nitrogen per 100 pounds, in fact, will probably carry more nitrogen per 100 pounds than some of the packaged fertilizer that we use. And I know that in many instances water is added to the confinement unit pits in order to facilitate the pumping of that refuse and we do not need to have someone file a complaint against one of our swine or beef operators because it is not being properly handled or properly taxed. I think it's important to know as of now just what the criteria are and, very frankly, I want to see it in paper, I want to see it in the statutes. I want to know. I don't want somebody's off the cuff opinion which is what we received when LB 1063 was being debated. I certainly do not want the assurance, the type of assurance that I received when Senator Schrock stood and said on the final, just before the final vote that the water content in fertilizer wasn't, going to be taxed. All fertilizers carry inert material and I want someone to be Prepared to explain exactly what they mean when they say they will not charge for the water in certain types of liquid fertilizers because, in many instances the water is not added by the retailer, and as I read the amendment, it refers to water added by the retailer. In some instances, retailers do formulate liquid fertilizers arid in those instances I want to know if, in fact, the fertilizer tax applies only to the chemical compound for 100 pounds or per ton and not to any of the water. If that is true, then I would like to know how we can equitably tax...
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... the entire chemical compound and inert material in other forms of fertilizers. So those are the questions I raised. I hope they will be addressed as we discuss it and I hope that we will not compound the problem, but resolve the problem with these type of amendments.
SPEAKER BAACK: Thank you, Senator Schmit. Any other discussion on this motion to suspend the germaneness rule? Seeing none, Senator Hefner, do you wish to close?
SENATOR HEFNER: Mr. Speaker and members of the body, Senator Owen Elmer, I do have a definition for the soil conditioner. You'll find that in Chapter 81-2162.02 and I'll just read it for the record. Soil conditioner shall mean any formula or product distributed except unmanipulated animal and vegetable manures which when added to the soil is intended to (a) change the physical conditioner, physical condition of the soil or (b) produce a favorable growth, yield or quality of crops or other soil characteristics but shall not mean a commercial fertilizer or agricultural liming material. I just wanted to read that into the record, but what this would do is clarify that. There was some of us senators that met with the Governor and also with the Department of Revenue and the Department of Revenue's legal counsel and we believe that this amendment says what we want it to say, that those organizations or those businesses that sell this liquid manure or chicken manure or this compost would not have to collect the $4.00 tax and I think this is what we want to do. But at the present time the motion is to suspend the rules and so at this time I move to suspend the rules to adopt this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Hefner. You've heard the closing on the motion to suspend the rules. We will now vote oil that motion. All those in favor vote aye, opposed vote no. We are voting on the motion to suspend the germaneness rule. Have you all voted? Record, Mr. Clerk.
CLERK: 30 ayes, 0 nays, Mr. President, on the suspension of the rules.
SPEAKER BAACK: The germaneness rule has teen suspended. We are now on the amendment. Senator Hefner, on the amendment.
SENATOR HEFNER: Mr. Speaker and colleagues, you'll find this amendment on page 1740 of the Journal. It's number AM3777. I explained the amendment fully to you. If you have any questions, why I'd try to answer them for you. Thank you.
SPEAKER BAACK: Thank you, Senator Hefner. Senator Elmer.
SENATOR ELMER: Thank you, Mr. Speaker. You know this debate that we've had about the fertilizer and the tonnage tax, when it was a flat $4.00 a ton and we have materials that can be classed as fertilizers that run from as little as 6.00 or $7.00
a ton up to $250 a ton. So the differences in the actual amount that is being taxed that you put on makes a great disparity in the tax per acre. The difference between two types of nitrogen materials when you apply 150 pounds of nitrogen for example, one would pay around $1.00 an acre on the tax to put on 150 pounds an acre. The other would pay 35 cents an acre to put on 150 pounds of nitrogen. It seems to me that we should look at this if we're going to continue a fertilizer tax and avoid the type of problem that the $4.00 a ton flat fee brings forth I and consider a percentage of the sale price so that no matter which type of material you used, if it was low in analysis or high in analysis, you would be paying basically the same amount of taxes per acre when you put it on, and I think that would be sensible. As it is, it varies very greatly and it taxes unfairly certain types of materials. Thank you, Mr. Speaker.
SPEAKER BAACK: Thank you, Senator Elmer. Senator Schmit.
SENATOR SCHMIT: Mr. President, I would like to continue briefly on the same line of reasoning as was opened up by Senator Owen Elmer.. Senator Elmer, because of his fertilizer experience background as a dealer and a distributor of that kind of product understands better than most of us the disparity in the taxing system that is embodied in a flat $4.00 per ton tax and I guess that I have touched upon it earlier when I referred to the amount of active ingredients versus the inert materials and my question is, in this instance, Senator Hefner, you have experience also with fertilizer, chemicals. Do you accept the premise that a flat $4.00 per ton tax is a fair tax whether it is assessed upon anhydrous ammonia which is 82 percent nitrogen as opposed to liquid nitrogen which is perhaps only 28 percent nitrogen? In effect, we would be taxing one at three and a half times the active ingredient rate of the other, and is there a possibility that that might encourage the use of anhydrous fertilizer as opposed to liquid fertilizer and, speaking personally, there are many times when I prefer the liquid fertilizers over the anhydrous because of soil types and because of the possibility of excessive leaching of the higher analysis fertilizer. Do you think that this is a fair, is now a fair tax, a flat $4.00 per ton tax regardless of the compound of the materials?
SPEAKER BAACK: Senator Hefner.
SENATOR HEFNER: Senator Schmit, I'll try to respond to that. I
don't believe it is a fair tax, no, but in the minds of who? It's true that there will be a $4.00 tax on anhydrous ammonia which I believe is 82 percent nitrogen versus a lower analysis fertilizer. But this came up in kind of a hurry. It didn't have a public hearing and so a lot of these issues were not debated so, no, you'd be paying $4.00 tax on the high analysis fertilizer and you'd also be paying a $4.00 tax on the lower analysis so ... but it doesn't look like we're going to have time to answer that problem this year. Maybe we need to come back next year and do it then.
SENATOR SCHMIT: Well, Senator, thank you. We took a lot of time yesterday, Senator, to discuss, for example, the extended state aid to schools and that was only involving about $7 million and this is approximately, I suppose, a seven or $8 million amendment and it is going to be with us ad infinitum and I am positive, I am confident that it will not remain at $4.00 a ton. It is just too inviting an area to open up for additional taxation and as we do so we increase the disparity and the unfairness and the inequity. Would it be possible, and perhaps Senator Warner can address this when he speaks to his amendment. Would it be possible, and I'm sure it would be, to assess the tax based upon the active ingredients of a fertilizer rather than upon the gross weight of the product because certainly, for a variety of reasons, we have a wide range of fertilizer combinations.
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... and all taxes are innately unfair, but we ought not to start out with them being unfair when we know they are unfair. We ought to try to correct that problem, and if no one else will do it prior to the time that Senator Warner's amendment comes to the floor, I shall try to do it.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Schmit, your light is on again. Did you wish to speak further? Senator Schmit, your light is on again. Did you wish to speak? Anyone else wishing to address the Hefner amendment? Seeing no one, Senator Hefner, do you wish to close?
SENATOR HEFNER: fir. Speaker, I move for the adoption of this amendment.
SPEAKER BAACK: You've heard the closing on the amendment
April 1 3, 1992
offered by Senator Hefner. We will now vote on that amendment. All those in favor vote aye, opposed vote no. We are voting on the Hefner amendment. Have you all voted? Have you all voted? Record, Mr. Clerk.
CLERK: 26 ayes, 0 nays, Mr. President, on adoption of Senator Hefner's amendment.
SPEAKER BAACK: The amendment is adopted. Before we proceed to the next item I would like to introduce several guests of the Legislature. First we have two guests of Senator Haberman who are under the north balcony. They are Jo Leyland and Tom Spunaugle from Imperial. Would you folks please stand and be welcomed by the Legislature. And under the south balcony a guest of Senator Schrock is Bill Tringe. Would you please stand and be welcomed by the Legislature. And in the south balcony are some guests of Senator Hillman. We have 11 ninth through twelfth graders from Gering High School and their teacher. Would you folks please stand and be welcomed by the Legislature. Thank you all for being with us. Next item, Mr. Clerk.
CLERK: Mr. President, Senator Warner would move to amend with AM3798. You'll find AM3798 in your bill books. Senator Warner would move to suspend Rule 7, Section 3(d) to permit consideration of AM3798, Mr. President.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Mr. President, members of the Legislature, there was handed out I think to you on your desk a couple of days ago a summary of the AM3798 and what is contained in it. Briefly I will describe the contents. First, if you looked in the back of LB 1063, you would find some sections which were directions to the Revisor of Statute to make changes in a number of sections of law and each of those sections was 4 identifed. This process is used from time to time and normally the following year there would be a Revisor of Statute bill that would do those changes. They are all considered technical changes and the bulk of the amendment is those revisor changes as instructed in LB 1063. The issue came up that it might be well to do that yet this year rather than wait till next year and that seemed a reasonable thing to do. In addition to that there are six sections I the bill, in the amendment, one of which deals with, and any of these can be taken up separately if anyone wishes to have the question divided. One of these
sections will clarify that the accelerated property taxes that have been paid this year are, in fact, eligible for a refund in an amount that exceeds what would be necessary to have been paid under personal property tax depending on whether or not the constitutional amendment is approved or not approved and a result of that which level of valuation that is to be used, that is depreciable value or actual value. But it puts it in clear that that is there. The next section which there, I believe, there is some amendments to as well deals with motor vehicles. It's a repeat of language that we have put in the past which avoids the double taxation in a same year on motor vehicles. AS you know if the new or used vehicles are taxed as an inventory, that subsequently to that, after January 1, that vehicle is sold and the individual who bought it goes to the county to register, they then, as a part of the process of registration has to pay the personal property tax that would be due on that vehicle for the balance of the year. And what the amendment does is permits the automobile dealer then to have a refund for the balance of those months which the tax had already been paid on and it's to avoid the issue of double taxation. The next section deals with the fertilizer tax as was indicated earlier with Senator Hefner's. It would be my intent and the amendment as drafted will not strike the Hefner amendment, it is not intended to strike the Hefner amendment, and if this bill ... amendment is adopted, then the Hefner amendment which is identical in part to the one that is included in this bill would be, as an E & R amendment, would be put together and there is no change. The wording in the amendment is identical to Senator Hefner's to the extent that Senator Hefner's amendment-was covered but it does in addition to that cover the issue of water being added which again reflected the comment that Senator Schrock made on the floor. And then there is a clarification also that deals with the amendment that we attached on LB 1063 that was offered by Senator Wickersham and I believe that he concurs in this part of the amendment that strikes the words "which is purchased" and which was intended to not have the transfer of personal property in estates adversely affected, and with this what would occur is that the ... in the transfer of estates the same basis that existed for that estate prior to the death of the individual or the dissolution of the entity that that basis for personal property tax depreciation would carry over at the same level that it previously had. And then finally there is a section that repeals Section 77 in LB 1063 which is also a cleanup amendment because there was a conflict in the amendment... in 1063 in this section and it adds no substantive change
whatsoever. I'd move that the request the rule be suspended that these items could be considered.
SPEAKER BAACK: Thank you, Senator Warner. Senator Haberman.
SENATOR HABERMAN: Mr. President, members of the body, Senator Warner, do you have any more of your sheets that you say you handed out because I can't find one, thank you. And this was handed out on the what, on the first or second, do you know? Okay, thank... if someone wants this, we can make copies for them. Thank you, Mr. President.
SPEAKER BAACK: Thank you, Senator Haberman. Senator Hall.
SENATOR HALL: Thank you, Mr. President, members, I rise to support the motion to suspend the rules which is the one that is before us for purposes of addressing the amendment. Much of the amendment, as Senator Warner points out, clearly close to 200 of the 272-page amendment is technical in nature, but there are other issues in there and once the, and I do believe that there are amendments to the amendment that are either pending currently or will be shortly that will be debated, but I think that it makes sense, and I don't mean to speak, I haven't mentioned this to Senator Warner, but I think it makes sense to deal with the suspension and then get to the issue or the subject of the bills and the amendments to the amendments. So I would urge the body to suspend the rules and then get to the issue at hand.
SPEAKER BAACK: Thank you, Senator Hall. Senator Schmit.
SENATOR SCHMIT: I also rise in support of the suspension motion and I note that page 232, Section 171, refund the tax for those who had to pay the tax because of auctions or closeout sales. I have checked the language. It is almost identical, at the least the result is identical to the amendment AM3328 which I offered during the course of the debate upon LB 1063. At that time it was not deemed to be an acceptable amendment. I'm glad to see it in here and I also have another amendment which I would like to incorporate which Would address the problem of penalties that will be assessed for those who file improperly. I was in the office until late last night and I received numerous calls from people who were still wondering just exactly when they file and what they file and how do they know what to file and the issue of penalties was raised repeatedly; and so I do have an
amendment that will repeal all penalties for improper filing for one year and I hope that it will gather some support as of this time. I'll have a little more to say about the amendment as we proceed, but I think that it's important that we address those issues now and I would hope that there will be additional members who will comment upon the various aspects of the bill. Thank you.
SPEAKER BAACK: Thank you, Senator Schmit. Anyone else wishing to address this motion to suspend the rules? Seeing no one, Senator Warner, do you wish to close? Waives closing. We will now vote on the motion to suspend the germaneness rule. All those in favor vote aye, opposed vote no. We are voting on the motion to suspend the germaneness rule. Have you all voted? Record, Mr. Clerk.
CLERK: 30 ayes, 0 nays, Mr. President, on the motion to suspend the rules.
SPEAKER BAACK: The motion is successful. We are now on the amendment. Senator Warner, would you like to open on the amendment?
SENATOR WARNER: Mr. President, members of the Legislature, as I indicated in the comments on the suspension of the rule, the bulk of the amendment does deal with technical amendments that are instructions from in LB 1063 for the Revisor of Statute, and to complete that I do want to indicate if you do not have a summary, if there's any of those sections that we have identified to be included other than those revisor's, why I would be very willing to separate those out as a divided question issue. I should point out there are some other amendments that are filed that are not included in this group. There's one filed that deals with the issue of the corporate filing fee which is not in this amendment which was part of the discussion on LB 1063. There is a separate amendment that deals with the issue of the taxation of property that the federal supremacy law directs how the state can tax which is otherwise known as the railroad amendment, but technically as it is drafted, it would be as I had previously described it. And then there are other people who have amendments that may be appropriate to an individual section, but I will move the adoption and am willing to accept any amendment that someone would like... any section that someone would like to have pulled out and then I will move to adopt those amendments that have not
been requested to be taken out and move for those adoptions, adoption of those first. With that, Mr. President, could I inquire, has there been a request for a division of the question? If there has not been, then I'll move adoption of the amendment in its entirety. I have explained it and we will deal then with amendments to various sections as they come up.
SPEAKER BAACK: Thank you, Senator Warner. Mr. Clerk, amendments to the amendment.
CLERK: Mr. President, I have a series of amendments to the amendment. First of all Senator Lindsay would move to amend.
SPEAKER BAACK: Senator Lindsay. We'll just go on to the next one. We'll just pass over this one for now and ... Senator Hall, do you wish to take this one?
SENATOR HALL: Yeah, is this one that he has printed in the Journal, Mr. Clerk?
CLERK: Yes, sir, page 1800. (See AM3839.)
SENATOR HALL: Thank you.
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, if this is the amendment that I believe it is, it deals with the fertilizer tax and it is on page 1800 as the Clerk said. It says, it deals with fertilizers that would be subject to the tonnage tax, but under this provision with the Lindsay amendment, it would say that any commercial fertilizer subject to the sales and use tax pursuant to the Nebraska Revenue Act of 1967 shall be exempt from the fee imposed by this section. What it says, in essence, is that you can't have the tonnage tax or fee, if you will, and a sales tax as well, that it is riot to be an additional tax on top of a sales tax. In other words, those of us who would be subject to the fee and who also might buy the fertilizer not on * sales tax exempt basis would not be taxed twice, in essence. That's all the amendment does. It says that the sales tax does not apply to any fertilizer that would be subject to this new tonnage fee. Under the amendments as I read them, and I apologize for not being open to the proper page, but I think the way it is currently drafted the amendment would have, and it is, it's on page 260 of AM3798. It says for purposes of this
section gross tonnage shall not include water and other carriers added by the retail seller of the fertilizer and shall not include sales of packages of fertilizers containing 10 pounds or less. Ten pounds or less is a very small package of fertilizers. It's not uncommon at all to walk into your K-Mart, the local lawn store, the hardware store, wherever they may happen to sell. fertilizer and see it available on a retail basis upwards of 20 pounds, 40pound sacks that under the provisions of the bill, of the amendment to LB 1063, there would be the fee imposed although it would be on a percentage basis. I It would be broken down. That fee would be built into the cost of that fertilizer and then on top of that there would be a sales tax. Under the Lindsay amendment, sales tax would not be any longer applied to those fertilizers and I think that that, in essence, would prevent a double taxation, if you will, whether it was unintended or not. It exists in the practical application of the fee to fertilizers that would be subject to sales tax. With that, Mr. Speaker, since Senator Lindsay is here 1' 11 relinquish the balance of his opening to the amendment.
SPEAKER BAACK: Thank you, Senator Hall. Senator Lindsay.
SENATOR LINDSAY: Thank you, Mr. Speaker, thank you, Senator Hall, I apologize for not being here when the amendment came up. I think Senator Hall has adequately explained what the amendment does. I would add one thing to it. When the ... it's my understanding when the fiscal office ran the figures on the fertilizer tax to see if the funds or if it would produce enough revenue to accomplish the purpose that we are talking about, they did not include these items in their calculations so it's not going to have a negative fiscal impact if the amendment is adopted. As Senator Hall mentions, what the amendment does is simply does not apply that fertilizer tax to those fertilizers that are already paying a sales and use tax, a tax I might add that is higher than the fertilizer tax percentagewise. With that, I would urge the adoption of the amendment.
SPEAKER BAACK: Thank you, Senator Lindsay. Senator Schmit. Senator Hall, did you with to speak further right now on this amendment?
SENATOR HALL: No.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Mr. President, members of the Legislature, I have no objection I believe to the amendment. I want to point out the purpose of the clarifying amendment as I introduced it and the reason for the 10-pound container was to make sure that... there's a lot of the little sticks that you can purchase, ,for example, to put in the flower pots that are fertilizer, those kinds of things on which sales tax is currently collected. They are sold, as you well know, in many places and obviously those little sticks, I don't suppose there's a ton of them sold in the City of Lincoln in a year or at least in a large city as a practical matter and it would be a nightmare from an administrative viewpoint. Actually from an administrative viewpoint, probably the use of sales, tax is an easier approach than the size of the package purpose is to be accomplished is essentially the same and I do not see any problem with using that as a definition. I should also point out that I am told at least that the amount of fertilizer that would be affected statewide in terms of tonnage if; probably something under 1 percent of the total. So it's not an appreciable amount of difference in terms of dollar.- collections, but for administrative purposes it would make maybe greater sense to use the sales tax exemption.
SPEAKER BAACK: Thank you, Senator Warner. Senator Hefner.
SENATOR HEFNER: Mr. Speaker and members of the body, I rise to support this amendment. I think this is a good amendment. it's certainly a clarifying amendment. My interpretation of the amendment is that if you pay sales tax on some type of fertilizer why then it wouldn't be subject to the $4.00 tax. So I think this will help the retail merchants in identifying these packages and so I support the amendment.
SPEAKER BAACK: Thank you, Senator Hefner. Senator Lindsay, yours is the only light on. Do you wish to use this for your closing on your amendment?
SENATOR LINDSAY: I would simply move the adoption of the amendment.
SPEAKER BAACK: Thank you, Senator 'or Lindsay. You've heard the closing on the Lindsay amendment to the Warner amendment. All those, we will now vote on that amendment. All those in favor vote aye, opposed vote no. Have you all voted? Record, Mr. Clerk.
CLERK: 26 ayes, 0 nays, Mr. President, on adoption of Senator Lindsay's amendment to the Warner amendment.
SPEAKER BAACK: The amendment is- adopted.
CLERK: Mr. President, Senator Crosby would move to amend Senator Warner's amendment, page 1830 of the Journal. (See AM3908.)
SPEAKER BAACK: Senator Crosby.
SENATOR CROSBY: Thank you, Mr. Speaker and members. This amendment is actually LB 997, and as the Clerk said, it's on page 1830 of your Journal. I did not distribute it. And if you'll look at page 1830, or at LB 997, you will see what the point of this amendment is. It was moved out of Revenue Committee with no negative votes. I brought the bill because when LB 829 was passed there was...we made a basic change in that having to do with the way partnerships are treated on their income tax returns tinder the depreciation surcharge, under LB 829. Specifically this change clarifies the depreciation surcharge applies only to the depreciation that was deducted by a person subject to Nebraska taxation. This change prevents the payment of the surcharge by a Nebraska resident partner of a partnership which has no business activities in the State of Nebraska. Actually, that's all there is to this amendment. And I think that the Revenue Committee heard the bill and moved it out. And so I would ask that you would vote for this amendment in order to make this correction, so that people who are partners in a business outside of Nebraska are not liable for the depreciation surcharge, which LB 829 was not meant to do that originally. There was no idea at all to ... to levy that depreciation surcharge on businesses that do not do business in Nebraska and for people who are partners in those businesses that do not do business in Nebraska. So I would ask that you vote for the amendment. And if Senator Tim Hall, or anyone has anything to add to that, I would appreciate it. Thank you, if you have any questions, I can try and answer.
SPEAKER BAACK: Thank you, Senator Crosby. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker. I rise to support Senator Crosby's amendment. It, as she stated, the bill did advance out of committee without any dissenting votes. Would
have .. had the body had time for another consent ,calendar, it would have been clearly a candidate for that, although that would have been clearly the Speaker's decision. But it would have been something that would have been... fit that type of definition. Although I do have to admit I don't...Senator Haberman was not present at the time that the vote was taken, so I, can't speak for him. But it was a proposal that it's a little more than a technical change. It clarifies the provision with regard to the surcharge as it does relate to the partnerships. And I would urge that it be amended into the bill.
SPEAKER BAACK: Thank you, Senator Hall. Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. also rise to support this amendment. I think when we passed LB 829, we never had any intention of doing what is accomplished here, or what did happen. And so I think this just clears up some of the language that... as we find as we get into some of these bills that are major tax problems that we have in this state, and we don't realize, until it's actually too late. And some of the companies that operate outside of Nebraska, and the CPAs have been having a lot of problems with this. So I think it's a very good amendment, and it helps clear up a problem that we have at the present time. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. Senator Hefner.
SENATOR HEFNER: Mr. Speaker and members of the body, I would like to ask a question of Senator Crosby.
SPEAKER BAACK: Senator Crosby, would you respond, please.
SENATOR HEFNER: Senator Crosby, as I understand it, some of these people have already filed their income tax. Now, if we pass this, will they be getting a credit back?
SENATOR CROSBY:, Well, that's a difficult question for me to answer. That has to do with partnerships and people who have...I'm not sure that anybody's going to go back and get credit. I think it was just that this year...
SENATOR HEFNER: Okay. Maybe Senator Hall who ...
SENATOR CROSBY: They can file...they can file an amended return
and take care of a few things.
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Senator Hefner, that would be the process that they would have to go through. They, would have to file an amended return, And would be eligible for either a refund or most of these folks that would be in this category I probably haven't I filed yet. They don't file until the last minute if they're looking at this kind of a setup, because more than likely they may owe. And many times they file extensions, so I don't think it's going to be a problem. If the change I is in place, they'll...and it becomes law, and I don't know if this has the E clause on it, I would guess that it would. But I guess it does. So, if it's adopted into this it would become law upon the Governor's signature, and I don't think there would be a problem.
SENATOR HEFNER: Okay, thank you, Senator Hall and Senator Crosby. I heard this in the Revenue Committee, but I wanted to get it on the record here while we were adding this amendment to this bill. So...and I support the amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Hefner. Senator Warner
SENATOR WARNER: Mr. President, members of the Legislature, it's been indicated this was included in LB 997, which was advanced from the committee. At least from the committee statement, I don't recall anyone appearing in opposition or a neutral position on the issue. There is a concern that...that I would have with the approach that I would like to be comfortable. I won't object to the adoption today, but we may have to revisit the issue later today. But the concern I would have is ... deals with whether or not personal property that is Subject to the surcharge, that we do not give any impression or intent that that is a property tax. It is not. It is a surcharge on depreciation that is allowable income tax expense ... deduction and is not in any way, shape or form considered a property tax in which there is one of the pending lawsuits on LB 829. And if there is no...I believe this only covers partnerships and subchapter S corporations I believe , if I understand it correctly, primarily at least. At this point I'm not...I don't think I want to vote yes, because I'm not clear if that legal issue, which is another issue aside from the equity issue there perhaps that Senator Crosby is calling our attention to. But I
do have some concern that we may be getting into the issue inadvertently of whether this is property tax when I you ...if is a property the result of this is to identify personal property, which site is not in Nebraska, is somehow or other not subject to the depreciation surcharge. And with those comments, I probably will not vote until I'm clear as to the impact. If there is not a problem with the impact that I'm mentioning, then certainly it can remain in the bill.. But if it does add a problem eventually for the defense of LB, 829, then I would probably come back with an amendment to strike it.
SPEAKER BAACK: Thank you, Senator Warner. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. I rise again to support Senator Crosby's -amendment. I don't believe the concerns that Senator Warner raises are there. That is...clearly is not the intent, nor do I feel that it would be an effect with the adoption of the Crosby amendment. Clearly, it was not, the intent., as Senator Warner pointed out, not even the Department of Revenue, who I guess were the catalysts for this issue because of their determination of the surcharge as it related to partnerships. And yes, Senator Warner, it is subchapter S corps. They showed, at the hearing, to either oppose or testify in a neutral category. So there is not a problem, I do not believe, with the issue that Senator Warner raises with regard to potential ramifications of the property tax issue. It clearly is an income tax issue, the surcharge is without question income tax based. And I do not believe that anyone could make that kind of connection that Senator Warner raises a concern about, although I do appreciate the concern. I don't ... it clearly was not the intent of my support for it., for that purpose, and I don't think it was Senator Crosby's intent by offering the amendment. I think all she's trying to do is get her bill passed this year, and I think that's all we're doing here. I don't believe that there is any adverse impact on the legislation at all, so I would urge the adoption of the Crosby amendment.
SPEAKER BAACK: Thank you, Senator Hall. Senator Nelson.
SENATOR NELSON: Mr. Speaker, I had my light on a minute ago, and when Senator Hall spoke and said there was no problem with this, I turned it off. But I'm not so sure about that. Naturally, I'm not...I didn't sit in Revenue Committee and I just want the body to know I do attend income tax or tax classes
put on by the University of Nebraska, every year. This very thing came up: at the session in Grand Island, and I'm sure every other session, with a lot of discussion. And the gentleman from the Nebraska De Department of Revenue pointed out many ambiguities about this very thing and the problem to out-of-state corporations, limited partnerships, S corporations, they seem to ,come up with a lot of unanswered questions on this very issue. And so when it finally got done, without being identified, I asked the 're venue agent if he would just ask for a showing of hands, how many people wanted to do away with the depreciation surcharge and preference a half cent on sales tax. Well, when .the intern... and most of, those people are attorneys, tax people from accounting firms and so on that do attend those classes. I will guarantee you that at least 60 percent of the hands went up because of this one very complex issue, that I would prefer to see an additional half cent sales tax. Then I said, well, I should have. asked the next question. When you go back to your clients which way would you like to ask, whether they want a half cent sales tax increase, or a quarter percent, or they want this depreciation surcharge? So as I say, at first I turned my light back off because I thought that this had been discussed. But it is a problem. And I don't know, I don't see anyone that owes Nebraska income tax, and if they're out of the State of Nebraska why they should not be paying that tax, or a limited partnership. But it becomes very, very complicated on those tax returns. So I just want to call it to your attention. I'm not expert on it, but it is a problem. And I ... at this point I can't support this amendment right at this time.
SPEAKER BAACK: Thank you, Senator Nelson. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. I had my light off, but when Senator Nelson spoke, I turned my light back on. (Laugh.) The amendment, I think, is pretty straightforward. All you have to do is read it. it's on page 1831 of the ... the Journal. And what it says is it clarifies who is subject to the surcharge. And the line that's the only line that is relevant in this issue. It says, for tax year 1991, so this is not, prospective, it doesn't put a surcharge in place. It goes back to I the surcharge under LB 829 that was for, one year and is no longer in existence, but those taxes Are being put, together right now, they are being paid, and that's what Senator Hefner's question related to, is hereby imposed on all taxpayers, in addition to the tax imposed by Section ? the general income tax section, a surcharge of 2 percent of all depreciation deducted
by a person subject to the Nebraska Revenue Act of 1967. That's all, it just clarifies who's going to pay it. And for purposes of, I think, not only helping out those individuals that Senator Nelson spoke of, those tax practitioners, in terms of clarifying it for them,, clarifying it for the Department of Revenue, clarifying the intent of the Legislature, that's what the Crosby amendment does. That why the bill that she had before the Revenue Committee was advanced out of the committee without any objection because we understood that's what it was meant to do, and that's all that it's meant to do. It is not meant to be prospective in nature. It's tied into... with regard to the section of statute that it amends to a date specific in, terms of tax year 1991. And I don't believe that there is Any room for confusion with regard to how it would be applied. I don't think there's any problem adopting the amendment. I think the problem will continue to persist I in terms of ambiguity if we do not adopt it some time this year would again urge the body to support Senator Crosby by adopting this amendment to the amendment.
SPEAKER BAACK: Thank you, Senator Hall.
SENATOR HALL: I give the balance of my time to Senator Nelson.
SPEAKER BAACK: Senator Nelson.
SENATOR NELSON: Senator Hall, I appreciate that explanation.. And as I say, I guess I just accept your expertise and I did simply want to call it to the body's attention. It's no intention to say that it's not right or wrong, but I did want to call it to your attention. Thanks.
SPEAKER, BAACK: Thank you, Senator Nelson. Seeing no other lights on, Senator Crosby, do you wish, to close on your amendment?
SENATOR CROSBY: Thank you, Mr. Speaker, yes. I appreciate the questions that were asked, and I thank Senator Hall for his helpful explanations, and point out again that it's for LB 829 isn't any big change on the tax code, necessarily, and It does have to do with the depreciation surcharge having to do with partners who...and businesses that do not do business in the State of Nebraska, that's the point, 1 think, that you need to remember. Senator Warner and I have talked this morning and we have people coming from Revenue. I think they may be coming
April 1 .3, 1992
a little later to be sure that we have ironed out Bill his questions,.. and be sure that he is satisfied, and by the end of the day, why we'll have that settled, I'm sure., I don't think there is any problems in the way that he is concerned. But just I sure, we J. L right to be, we'll follow up on that during the day. So, right now I ask you to support this amendment. Thank you very much.
SPEAKER BAACK: You've heard the closing on the amendment by ,.Senator Crosby. We'll now vote on the amendment. All. those in vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 25 ayes, 0 nays, Mr. President, adoption of Senator Crosby's amendment.
SPEAKER BAACK: The amendment is adopted..
CLERK: Mr. President, Senator Landis would move to amend the Warner amendment , AM3922, Senator. (See pages 1907-12 of the Legislative Journal.)
SPEAKER BAACK: Senator Landis.
SENATOR LANDIS: Thank you, Mr. Speaker, members of the Legislature, we made it clear at the last stage of consideration of 1063 that there was a cash flow problem with the measure in that we needed a two-year time line of obtaining money to make the processing of funds flow. At that time we asked the .corporate community whether or not the corporate filing idea was one that we could utilize to plug the hole., if you will, and they basically said yes. The amendment that I offer to you has several provisions. It is drawn by the Revenue Department in consultation with Allen Beermann. Allen has handled a lot of the phone calls the last year from people who have not been excited about the corporate filing provisions and he makes the recommendation that this amendment is a justifiable amount and he thinks that this is a measure that not only work s for the money purposes, but can work with the public. The amendments do this. They create three different, or rather four different levels of payment in addition to the existing $13.00 fee. I In the event you have paid-up capita I -stock of 10,000 to 125,000, it adds $30.00. If your paid-up stock is 125,000 to 350,000, it adds $60.00. If you have paid-tip capital between 350,000 and 10 million, then you add $90.00, and if you are over $10 million it, adds $120.00 to your corporate filing fee. This does not tax nonprofits and because of a provision in our bill, in our
existing law, foreign corporations are doubled in their amounts. Corporations located in other states doing business in Nebraska pay double this amount. This is a relatively simple method. The corporate community has agreed to- this me I measure. I would Urge the adoption of the amendment and with this we have the money necessary to do and carry out LB 1063.
SPEAKER BAACK: Thank you, Senator Landis. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, if Senator Landis would respond to a question or two.
SPEAKER BAACK: Senator Landis, would you respond, please.
SENATOR LANDIS: Yes.
SENATOR HALL: Senator Landis, does this, and I appreciate, the comments from Mr. Beermann. He was kind enough to pass along all those phone calls and letters to my office as well and I don't have any problem with that $150.00 fee that we put in place under LB 829, but I do have a question with regard to the changes that you make here. How does this relate, if at all, to the not-for-profit corporations?
SENATOR LANDIS: Not-for-profit corporations will be exempt.
SENATOR HALL: And why is that?
SENATOR LANDIS: Because...
SENATOR HALL: They were not under LB 829.
SENATOR LANDIS: That's right. They were not under. LB 829, they are here. It's been one of the sources of squeaky wheels. When the corporate community speaks in the sense of talking to people who represent corporations out in the lobby as to whether or not they're willing to support this as the mechanism for balancing the sheet, if you will, the not for profits are not represented in those groups, they are not part of those organizations. The monies that they raise and spend are spent for supposedly public purposes, eleemosynary purposes and, therefore, would be unrepresented by talking to the lobby. Among those reasons, not for profits are taken out.
SENATOR HALL: It wasn't politically expedient that the ...
SENATOR LANDIS: This is in the eye of the beholder, Tim, and my guess is if you'd like to...
SENATOR HALL: Okay, all right.
SENATOR LANDIS: ...take it that way, you may.
SENATOR -HALL: Second question. Why is this only in place for two years? What revenue source is going to pick up the balance of the cost when this sunsets in 1995?
SENATOR LANDIS: The purpose, of this is to replenish the capital, I'm sorry, the Cash Reserve fund which we will be drawing out of to make 1063 cash flow low. We'll have to take a certain amount of money from the Cash Reserve Fund and this will pay that back without burdening any other resource or state revenue stream. Once we get the cash reserve, paid back, we have no more need for this mechanism.
SENATOR HALL: Now wait a minute. Walk me through this because I'm riot quite tracking. We're going to take the money that we're short in 1063 and pay for it out of the Cash Reserve Fund.
SENATOR LANDIS: Yes.
SENATOR HALL: Okay, and then effective January 1 of 1993 and for the years '93 and '94 we're going to have this fee in place.
SENATOR LANDIS: Yes.
SENATOR HALL: And in those years, how are we going to fund this approximately $2 million that we're short? Is that going to be drawn out of the Cash Reserve Fund or is that going to be paid for by these corporation filing fees?
SENATOR LANDIS: The Cash Reserve Fund will be ...
SENATOR HALL: It will be drawn on?
SENATOR LANDIS: ... will be drawn on and then this money will be used to replace the Cash Reserve Fund.
SENATOR HALL: It will be used to replenish it.
SENATOR LANDIS: That's right.
SENATOR HALL: If that stays in place and that system continues to work like that, why wouldn't it need to be on into the future? Why would January of 1995 there no longer be a need to replenish the Cash Reserve Fund?
SENATOR LANDIS: The reason being this is not a permanent downturn. This is a cash flow problem, not a permanent deficit, therefore once you get over the cash flow problem, you are in a revenue neutral situation. You borrow in the short term, you 'have to pay back that short term so you can get the start-up of the operation, but once the operation is tip and running it is revenue neutral and does not need to continue to draw on the Cash Fund or on this source of revenue.
SENATOR HALL: And....
SENATOR CONWAY PRESIDING
SENATOR CONWAY: One minute.
SENATOR HALL: ...what numbers do you have, Senator Landis, to base that time frame of that, the short term turnaround with regard to January I of 1995? Wouldn't it be better, in essence, to put it in place permanently and then have... if we don't need it when that upswing takes place, go ahead and repeal it? Or is this all the corporate community would agree to?
SENATOR LANDIS: Well, let me say that as somebody who approached the community, this is the only, all that was asked and I'll tell you why. To the best of our ability to predict, what we can identify as the cash flow problem, this amendment raises that amount of money which we predict we'll need to meet the cash flow obligations and to replenish the Cash Fund. We do not know of an additional need and for that reason did not ask for a permanent corporate filing increase because we meant to solve a particular and somewhat narrow problem.
SENATOR CONWAY: Time. Senator Schmit, you're next, please.
SENATOR SCHMIT: Mr. President, and members, as I recall and I voted against it, but as I recall the tax that was in LB 829 was supposed to be a temporary tax and, of course,' when It came out, it turned out to be substantially greater than what
the public, well, the public did not know about it, of course, the telephones of all of us I am sure began to ring. Now we are told this is a two-year tax and the small corporation which I operate will pay a $43 fee I suppose or maybe a little more and the major corporations will pay 120 on top of the 13. Now it seems to me, and Senator Carson Rogers and I were just this, Senator Landis said that the corporate community has signed off on this and I guess that, Senator Landis, Senator Rogers and I are not a part of that co corporate community, but nonetheless, we do pay the tax and the amount' of money raised of course from those ma and pa corporations is a substantial amount of money. 'And I understand the Cash flow problem. I said during the debate on LB 1063 that cash flow will be much greater than what we anticipate and it will show up much sooner. And I thoroughly expect that we will be back here ,trying to cut the budget in the latter part, probably right after election, because we will be out of money. We'll not have enough money to make the thing work. I guess that I just prefer to collect the money up front. If you have to have more money, you raise the sales taxes, you raise the income tax and I do not like to see these type of taxes. It may be that from the standpoint of cost that some of that can be justified. If it is a cost of the operation that we're trying to recover, that's one thing, but if it is a revenue raising measure, then I think it is wrong and I just think that from time to time we ought to accept the fact that either we are going to hold down the cost of government and have a lesser total expenditure or else we just raise the sales tax and raise the income tax and let the people, belly-up and pay it and we take the heat. No one that I know of knew about the corporate occupation tax increase until it hit them when their assessments came out. Then, of course, the telephones rang and Mr. Beermann's phone was very busy, as were all of our phones. And I would expect, I suppose, that this will be sold as a tax reduction measure when, in effect, it's not in there anymore. And so I don't like it. I don't like it. I think it is not a forthright method of raising revenue. We should not do it. Of course, we're not going to find any problem with the 10 million to $100 million corporation. They're going to be able to raise 120 bucks, but if you have three or four small corporations, as do many individual small businesses in this state, then the tax is a substantial addition. I don't think we should be doing it that way. I think that it is one more example of how we nickel and dime the procedure and we get the people's money without their knowing it ...
SENATOR CONWAY: One minute.
SENATOR SCHMIT: ...until it's after the fact. And I don't... I think it is totally wrong. I think that we have ... that 1063 is replete with such examples as it stands and we should not try to add to that at this time. I don't know where you're I going to get the money. I just think that you're going to be out of money. anyway and you're going to be forced into a very serious budget cutting procedure and I think this is wrong.. I think we ought to forget the thing, go back to the old $13 fee and be done with it. Thank you very much.
SENATOR CONWAY: Thank you, Senator Schmit. Before we move on, I would like to announce that we have guests of Senator Dierks in the south balcony. We have 50 fourth graders from the Nel-4ghOakdale school system. Will they please stand and be recognized by your Legislature. Thank you for coming today. Next we'll move to Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I have a couple of questions for Senator Landis, if he will yield.
SENATOR CONWAY: Senator Landis.
SENATOR LANDIS: Yes.
SENATOR HEFNER: Senator Landis, did you pass out a chart telling us how you changed these?
SENATOR LANDIS: Yes.
SENATOR HEFNER: Oh, when did you.
SENATOR LANDIS: Been on your desk for since either late last night or this morning.
SENATOR HEFNER: Okay, I can't find mine, but...
SENATOR LANDIS: Well, you know, that's not my fault.
SENATOR HEFNER: No, I know.
SENATOR LANDIS: If you don't have a clean desk, that's your own problem.
SENATOR HEFNER: Okay, I'll try to clean it up a little bit. But, okay, why don't you go over it again?
SENATOR LANDIS: Okay.
SENATOR HEFNER: Where do we go with the $13 fee?
SENATOR LANDIS: And if I had a chalk board, I would write it right here,...
SENATOR HEFNER: Okay.
SENATOR LANDIS: ... so we could all see it. Paid up capital, 10,000, up to 125,000, 30 bucks, added on top of the 13; 125,000 to 350,000, 60 bucks; 350,000 to 10 million, 90 bucks; over 10 million, 120.
SENATOR HEFNER: Okay, thank you. And who...who represents the corporate community?
SENATOR LANDIS: Among others, the Nebraska Assoc...well, now ,the State Chamber, most. specifically, although there were ,representatives of also the area in Omaha that has the concern about jobs for Nebraska and that kind.
SENATOR HEFNER: And you're leaving the nonprofit corporations out of this?
SENATOR LANDIS: Yes.
SENATOR HEFNER: I think. that's a good idea because, like Senator Schmit said, we really got a lot of calls and we did that at the 11th hour last year, and I certainly don't think this is fair. So... so, with that information, I believe I could support this. Thank you.
SENATOR CONWAY: Thank you, Senator Hefner, Senator Warner, you're next.
SENATOR WARNER: Mr. President and members of the Legislature, just to revisit the reason this amendment was put in. You will recall that LB 1063, at one time, had a different level of refund on the sales tax, it was at 4 percent, and it also had a tax on energy, 1 percent, which there was objection. The
April 31 1992
amendment was then developed which established the refund at the full 5 percent and also the tax that dealt with fertilizer. The effect of those two amendments created the cash flow because there was an estimated 14.6 million reduction in state receipts by virtue of the refund on new and used farm equipment. Part of the discussion then that was held on the floor as the amendment dealing with the fertilizer and changing the refund to a full 5 percent was how will that shortage to the General Fund be made, up. And what was proposed to the body that was the amendment that would be coming is what Senator Landis has introduced. And then you will recall that in LB 1268 we transferred $4.5 million to...from the Cash Reserve Fund to the General Fund for the purpose of taking care of the initial cash flow issue. The concept that was discussed then on 1063 was that this tax for two years which goes to the General Fund would provide the .revenue that permitted the reimbursement of the Cash Reserve Fund to occur over that two-year period. As I understand the estimate, this is about 2.2 million and then over the two years that, in effect, will permit the reimbursement of the General Fund ... of the... from the General Fund to the Cash Reserve. Fund with no adverse impact on the General Fund. And the choice that those who sponsored the amendment to change LB 1063 as far as the energy tax and the level of refund on sales tax had stated that this would be the option that would then be used. So I would support the concept and the Landis amendment as it fulfills what the body had explained to it when LB 1063 was before us.
SENATOR CONWAY: Thank you, Senator Warner. Senator Crosby, you're next, please.
SENATOR CROSBY: Thank you, Mr. Chairman, and Speaker, and members. Senator Landis, may I ask you two quick questions? Was this a bill? I'm sorry, I didn't hear your opening, I didn't hear all of your opening.
SENATOR LANDIS: No.
SENATOR CROSBY: It was not originally a bill? You just ... well, okay, so...
SENATOR LANDIS: I would...
SENATOR CROSBY: What I want is...go ahead.
SENATOR LANDIS: I would say that it's part of the problem solving of the larger issue of LB 1063.
SENATOR CROSBY: I understand.
SENATOR LANDIS: You've got to make things cash flow low and ultimately you've got to solve the problems in here in that kind of a situation.
SENATOR CROSBY: I understand., Thank you. But my big problem with it is the $30 one, the 10,000 to 125,000, for this reason. Last year, in LB 829 when we levied the $150 corporation surcharge that hit a lot of small businesses, include art galleries, and not all art galleries are nonprofit. I have several friends who are in art galleries who are there to make money and they set their corporations up, as I understand it, because they...that's the ones that I got a lot of calls from, when they had to pay $163 instead of $13 this past year. For them, that's a lot of money and the art galleries aren't the on I only ones. There are small corporations that I suppose $30 to us doesn't sound like a lot of money but for some people it is a lot of money. So, from that point of view, that's why I wanted to know and I'm pleased to see that you're saying not ... that there isn't any tax on nonprofits because a year ago when LB 829 went into effect we were having a little problem with the Revenue Department and nonprofits. They were bound and determined that they were going to pay that $150. Well, that hits the Symphony, the Playhouse Guild, all those ... all those wonderful groups that do so much for us but don't make any money. For that reason, I still ... I have grave doubts about this amendment, Senator Landis, because of those small businesses. And I know it will raise like $43. For them, it would be $43, right, most of them, up to 125,000?
SENATOR LANDIS: If you let me answer here.
SENATOR CROSBY: You add 30.
SENATOR LANDIS: The amendment will raise $30.
SENATOR CROSBY: So...
SENATOR LANDIS: Existing law will have a $13 fee. The answer is that, as a result of this, they will pay $30.
SENATOR CROSBY: They won't pay 43?
SENATOR LANDIS: They will pay $30 as a result of this amendment. They have a...
SENATOR CROSBY: But they still have to pay...
SENATOR LANDIS: ... continuing obligation to pay $13 ...
SENATOR CROSBY: Okay, so...
SENATOR LANDIS: ...which is now in the statute, that's right.
SENATOR CROSBY: ... so it's another $30.
SENATOR LANDIS: They will write a check for 43, 13' of which they'll write if this amendment does not pass.
SENATOR CROSBY: Okay, thank you. Well, I still think I may not vote for it and I understand what you're trying to do and I understand what Senator Warner said, but a year ago after LB 825 and some of the results of that I just thought I was never going to do that Again to certain businesses. So, before we come to a vote, I will try to make a good decision but I don't think I will vote for it. Thank you.
SENATOR CONWAY: Thank you, Senator Crosby. Senator Hall, you're next.
SENATOR HALL: Thank you, Senator Conway, members, I rise to oppose the amendment but I think, Senator Crosby, the issue that you raise about... and it's not for purposes of the fact that it raises I additional monies because it doesn't It isn't honest in its approach in terms of raising it on into the future. It has a sunset that is laid out as a cash flow problem and I don't believe that that issue has been explained well enough. I don't believe that it is justified. I think what we have here is a short-term fix that gets. us through the next budget cycle And we'll worry about it next year, is how it could very easily have been portrayed as well. Senator Crosby, I think the concern that you raise is really riot that valid of a one. I mean, some I of these businesses that you speak of have been paying personal property tax prior to this. That, sinless they're depreciating that property, goes away, and the $30, in the example that you gave, I don't think is too much to ask of any business, no
matter how large or small in terms of the occupation tax for that corporation. I would prefer that this applied to nonprofits as well. I think that it's important that we collect some remuneration from those folks for purposes of the ability to. claim that corporate status, especially a not-for-profit status in the state, and I don't think that the figures in here are that onerous. So it's not an issue for me of the tax is too high, I would even argue that it's probably not high enough and my concern is that it does not go on into the future. This should be a permanent change that we make. It is one that does address those hose people who were paying the personal property tax prior to the change in LB 1063, but it does it for a two-year period. It is, I believe, less than honest in its approach. as far as the revenue hole that we're trying to close. If we have a revenue hole there, it is one that's going to stay there on into the future. The cash flow situation and the money out of the reserve is not, I don't believe, a one-time problem, if you will, or a two-year problem as laid out in the amendment before us by Senator Landis. I don't believe though that the structure of the amendment itself is all that bad. I don't think there is any problem with upping from $13 our occupation tax to a graduated scale as is laid out here. The real problem is that it purports' to correct., a problem that we argue is only going to be here for two years. I don't believe that. I think ink the problem is not going to go away in two years. I think the problem is going to gradually become worse in terms of the revenue that won't be raised under LB 1063 and I guarantee. you that we will be back here not doing $2.2 million changes but probably doing $20.2 million changes in, terms of revenue because the receipts won't be there. They weren't there when we debated 1063. They weren't justified by numbers. They were a guess, at best. Never did get an answer from the. Department of Revenue .how much, what percentage of personal property is represented in a depreciated manner. And that question was asked sometime last year during the discussion of the 3-R Committee. And I was going to ask, I think it was Senator Hefner who said...
SENATOR CONWAY: One minute.
SENATOR HALL: ...that they had had discussions on an earlier amendment with the legal counsel for the Department of Revenue. I was going to ask him, just out of curiosity, what that individual's name was. .1 had never met him. But that might have belabored the issue a little. In this case, the problem I see with Senator Landis's amendment is that it doesn't go on
into the future and raise the money in a responsible fashion as it should. It is not an issue of the structure of it. I believe the structure of it is fair.
SENATOR CONWAY: Thank you, Senator Hall. Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Chairman, and members, I would like to ask Senator Landis some questions, if I might, please.
SENATOR CONWAY: Senator Landis.
SENATOR SCHELLPEPER: Senator Landis, in some of our meetings when we were discussing the sales tax exemption for farm machinery we talked about having a tax such as this and you stated then, you and Senator Lindsay, that you could not accept this, that the corporations would not accept this tax. Why are they willing to accept it now?
SENATOR LANDIS: Oh, in fact, that's not a fair characterization, at all. First, I never said that. Second, we never said that the corporations wouldn't accept it. Both of those things are not true. Third, with respect to why this is used, with respect to why this is used, it's used on a temporary basis. The argument that was before us at that time was what was the nature of the obligation and who should bear it on a continuing basis. And, at that time, an argument not made by me but by others was that there should be a relatively equal distribution among the farm community and the nonfarm community. And this was suggested as a measure to use in place of farm community obligation which was objected to. And, by the way, not by me.
SENATOR SCHELLPEPER: Well, as I re...thank you, Senator Landis. As I recall it, we tried several things like this to find the $15 million and I think there were some people that wanted to raise the corporation tax and the comments were made that the corporations would not accept it or that some of the senators could not accept it be cause they thought it was very unfair, and it's just, I guess, kind of amazing now how we can comeback now and when the funds are not there and try to raise the funds now. I realize that the funds are not going to be there and that we need to raise the funds someplace. I thought at the time that this was a way that we could raise some extra ... extra dollars. In talking to the Nebraska Chamber, some of those people were willing to accept this increase back then. But I think some of
the other corporations were not and the senators were not ''Willing to accept it because they thought agriculture didn't pick up enough. But there are corporations in agriculture also, a lot of them, and they would be paying a lot of this extra tax to like I said, I don't have as much problem with how we're going to go about it as much as I do where it's going to be applied and when it's going to be applied and why it's okay one day but not okay 30 days ago. So I don't know what I'm going to do about this amendment because I realize the money needs to be raised. But it just points out another problem with LB 1063, as It has-been mentioned here before, that we're going to be coming back time after time after time trying to help raise funds, trying to work out LB 1063. And I guess it's really no wonder why the voters of Nebraska are very confused and why they don't know how they're going to vote because the Legislature doesn't know how we're going to raise the funds, how are things going to happen. So it's really no, I guess, surprise that the voters also are very upset and disturbed about what's happening down here. So, I guess, I'm going to have to decide what I do with this amendment, but I can just ... kind of upsetting why it's okay one place and not the other. Thank you.
SENATOR CONWAY: Thank you, Senator Schellpeper, Senator Bernard-Stevens, please.
SENATOR BERNARD-STEVENS: Thank you, Mr. President, I yield my time to Senator Warner.
SENATOR CONWAY: Senator Warner.
SENATOR WARNER: (Microphone not activated) Stevens. I want to repeat again because there are things being said that are totally irrelevant to this amendment. The purpose of this amendment was one purpose and for two years was to replenish the Cash Reserve Fund which LB 1068 transferred four and a half million. The cause of the cash flow and why it is only temporary was because the refund on new and used farm equipment goes back to January 1 of 1992 and you were covering an initial 18-month period as far as the General Fund and the fiscal year of the state, with receipts that are in place in LB 1063 on an ongoing basis as a balance of the General Fund was held relatively harmless. But the receipts from the ongoing tax would not replace the 18-month period of the refund but it does approximately replace on an ongoing basis the 14.6 million at 12 months. So there simply is no problem and that's why it is
temporary so that that Cash Reserve Fund can be replenished as: it is provided for in 1268, money to be transferred, as I recall, June 30, 1993 and June 30, 1994, 1 believe, so that: it balances out for next year's fiscal year when we are dealing with next year's budget. Now the comments that were made as to whether or not the whole concept of LB 1063 were raised statewide the amount of revenue that is estimated for local governments has nothing to do with the amendment that's before us. There's no relationship, nor would there be ... there, may be an issue we can argue about on 1063 but it is not an issue that relates to the Landis amendment: as such because all we're talking about, the only reason for it, was the refund that a number of legislators want to increase from four to five and the fact that we would have an 18-morith refund period as opposed to an annual 12-month after this first year and the revenue that was... the additional revenue that; was raised in LB 1063 on a 12-month basis approximately for state government now was ,approximately a draw or a neutral impact and that was the intent of those who wanted to make....make the change. Obviously, you have a choice if you did not adopt this or some other short-term revenue to replace the Cash Reserve Fund, two years from now you will have that temporary gap that will be there dealing with 'the General Fund. I'm supporting this amendment because it was my understanding, as I listened to the discussion on LB, 1063, that this was the concept that had been proposed to be adopted to and had been proposed to be presented to the Legislature if they adopted it to make the General Fund balance over the period of time and it was to be a temporary measure because ...
SENATOR CONWAY: One minute.
SENATOR WARNER: ... that's all it took to replace what we move from the Cash Reserve Fund for cash flow reasons and to hold the General Fund harmless from the refund. So I would urge that there may be other concerns about the legislation but this amendment deals with that one issue' of replenishing the Cash Reserve Fund for the 4.5 million that was moved out this year in order to...to meet that cash flow issue.
SENATOR CONWAY: Thank you, Senator Warner. Before we move to the next speaker, Senator Wehrbein has two guests under the south balcony, Florence Corbin from Plattsmouth and Nancy Stander from Louisville. Will they please stand and be recognized. Thank you. We'll now move to Senator Schmit.
SENATOR SCHMIT: Mt. President and members, as I recall, the $150 fee raised approximately $8 million. This will generate apparently 2.2 but we're not certain because it says there was some shrinkage. I assume the shrinkage came about when the small business man said, nuts, I will not pay the 150 bucks, I will let that corporation expire. And I guess my question is, do we know. . maybe Senator Landis can answer this, do we know, Senator Landis, how many of those corporate structures have thus far not been renewed?
SENATOR CONWAY: Senator Landis.
SENATOR LANDIS: I do not have a number for you. I can tell you that our estimation came from the Secretary of State analyzing previous filings and lapses in the last year.
SENATOR SCHMIT: Uh-huh.
SENATOR LANDIS: But I can't hand you a number, it hasn't been provided to me. It's Possible that it might be able to be developed. Loran, I just didn't think to ask for it.
SENATOR SCHMIT: Could ... has the Secretary of State given us information as to how many corporate structures there are in each of the categories, the 10,000 to 125, etcetera, etcetera? And how many there are, for example, in the 10 million to 100 million. Does he have that information available?
SENATOR LANDIS: I don't have that information available it's possible, perhaps, to do that. I can tell you that, there is some sense of the relative proportion. For example, if you were to change that top bracket, from $120 to $1,000, you could lower the bottom bracket from $30 to $27. It gives you the number... or the relative size difference of those two pots. There's not many in the biggest pot, not enough to make a significant difference on the short end which is the, you know, the $30 fee for the 10,000 to 125,000. There's a lot of those kinds, of corporate filings.
SENATOR SCHMIT: Thank you, Senator Landis. I believe that is very excellent information arid I appreciate your frankness in having it available for us. I think that...I would hope that the members will re ... will listen based upon Senator Landis's analysis. It is, of course, the ... again, the small corporate structure which is going to pay the bulk of the 2.2 million. it
is not, going, to be the one... the $10 million plus corporate structure.. I do not know whether that is fair or not and I do not know what the body chooses to consider fair but I do think. it is important for the record to know and I would hope that before the, session is over we will know exactly how, many corporate structures there are in the $10 million plus category. But it would not make any difference, the $120 when paid for the additional fee wouldn't add up to the cost of lunch for two of those executives of a $10 million corporation.. The million... the $30, of course, may be a substantial portion of their profit. They don't... many of them do. not even exist except for purposes of convenience and so, to me, it is a very regressive assessment and it may be the only way you can do it but I think that the cash flow problem is there. I do not dispute that. But I would suggest that the cash flow deficiency will be substantially greater than the 2.2 million and that we will still need to do something. And I would like to see fee arrangements cover the cost of issuing the paperwork and nothing more. Of course, now tinder this arrangement, I suppose it's a as like it was under LB 829, the Secretary of State collects the money and the Revenue Department actually has it in their coffers and so there's a little bit of ... of discrepancy or disillusion there as to how it's actually handled. It would appear that we're paying it to the Secretary of State ...
SENATOR CONWAY: Thirty seconds.
SENATOR SCHMIT: ...as I recall under LB 829, the money actually went to the Department of Revenue. I will oppose the amendment and I, don't have any solution, Senator Landis, for the shortfall except that I think we're going to have to raise it substantially greater in the fall anyway.
SENATOR CONWAY: Thank you, Senator Schmit. Senator Moore, you're next.
SENATOR MOORE: Mr. President and members, I actually rise to support Senator Landis's amendment, given the cash flow situation, it is responsible to adopt at least for now. But I continue to be troubled. One, as I stated before, many times before in LB 1063, the night that the cloture rule was invoked, this amendment could have and should have, certainly in my opinion, one, if it's a Christmas ornament, it don't make much difference what tree it goes onto and it should have went on that tree and kept it together that way and it certainly could
have happened with certainly a little more time, and I was critical 'of the introducers of the bill at that time and I will ,renew that criticism now as that was the proper time to, adopt this his amendment. Secondly, the other frustration is that, as Senator Hall had mentioned, basically the business community, primarily the, corporate community who loves LB 1063, loves LR 219, or amendment one, and wants to spend a quarter to half a million dollars to get them...get those things passed, you know, they were certainly willing to solve a little problem by spending $2 million a year in taxes but, as Senator Hall pointed .out to Senator Landis, not for a long-term period of time, not at ail, but at the same time when this state, you know, reversed the clock and reimposed at least partially the tax on personal property to re ... make, set the record straight, so to speak, and to exempt sales tax property, there were many in this body, many in this state that felt, well, we can't...there's no I way on earth we can let agriculture not get out from paying some- more here. if we're going to give them a sales tax exemption, it must come from agriculture, that was very clear that that came from the administration as well as from any member of-this floor that's where it had to come from. And the business community, you know, at least finally in the last hour was willing to come up with a couple million dollars a year even though agriculture, from the beginning, spends eight to ten million dollars a year on conservative estimates, that's going to go nowhere but up, in my opinion, and in years to come it will continue to go up whereas this one goes away in two years. And so that's the frustration, the ongoing frustration I have with LB 1063, LR 219 and the basic problems I have from a fairness standpoint, but having said that in venting my frustrations with that process, Senator Landis's amendment. is certainly proper. The Cash Fund reserve transfer has already occurred. This does pay that back. I think it's a relatively minuscule contribution to the business community to solve this whole problem and, as I have said time and time again, if they really wanted to pass LB 1063, they certainly should have and could have anted up to the table and solved our personal property tax problems much cleaner, much more efficiently and, in my opinion, much more permanently by doing something else. Bit But, nevertheless, here's where we are. Senator Landis's amendment is in order and I rise to support it.
SENATOR CONWAY: Thank you, Senator. Next is Senator Crosby.
SENATOR CROSBY: Thank you, Mr. Chairman. I yield my time to
SENATOR CONWAY Senator Lamb, please.
SENATOR LAMB: Thank you, Mr. President, and thank you, Senator Crosby. I rise to support this amendment and I just would like to explain once again how this really came about, at the risk of being a bit redundant. Some of us were not happy, of course, that the original proposal was that only part of the sales tax, on farm machinery would be removed. So we were looking around for a method of getting it all removed. We reached an agreement with some of the other senators that the fertilizer tax would be attached but that tax would not start until July 1st. However, the removal of the sales tax on farm machinery would be As of, January 1, 1992. And so that's the way we left it. However, then later it was discovered by the fiscal people over here that take care of those things that there was a problem in,... there was a hole in revenues there. And so a couple things were done or agreed to or at least I agreed to them. One was that the fertilizer tax would start April 1st. Well, I said that's really not a big problem because we had about three weeks there before April 1st at that time and any farmer in his right mind is going to have his fertilizer purchased before the 1st of April anyway. So bringing that date back to April 1st from July 1st was really not a problem and was really not going to raise that much revenue. And then the proposal was brought. up that this corporate filing fee be increased. We had previously, as Senator Schellpeper indicated, gotten an agreement with some of the people that represent the corporate community that they would agree to a couple million dollars contribution to this cause. And so when this hole in the revenue was discovered then this seemed to be a logical source 'of it. I think, Senator Landis has presented the case well. I support the amendment.
SENATOR CONWAY: Thank you, Senator Lamb. Senator Warner, your light's on. Senator Warner.
SENATOR WARNER: Mr. President, just a couple of comments. I appreciate what Senator Lamb had to say. Probably it ought to be realized that when we're talking about the corporate filing fee, the corporate filing fee is based on the capital stock that a corporation has indicated on its corporate filing forms, I may or may not have any relationship to the value of a corporation. A probable exception is publicly traded corporations, but others that is not the case. And so the effort to use this is merely
one of using the current graduated filing... occupation filing. fee that we have for a two-year period to raise the amount of money to replace the funds transferred from the Cash Reserve. Fund. And, again, it's my impression that, this was the concept that was presented to us as a part of the language that was put in LB 1063 in with the ag refund on new and used equipment of sales tax and the elimination of the use of the energy tax and replace that with the fertilizer tax. Again, I would be supportive of the concept as it was proposed to the body at the time that that was done, which I believe is reflected in the. Landis amendment.
SENATOR CONWAY: Thank you, Senator Warner. Senator Lamb.
SENATOR LAMB: Question.
SENATOR CONWAY: The question has been called. All in favor vote aye, opposed vote nay. We're voting on ceasing debate. We're voting on ceasing debate. Have you all voted? Mr. Clerk.
CLERK: 25 ayes, 0 nays to cease debate, Mr. President.
SENATOR CONWAY: Debate is ceased Senator Landis, would you like to close?
SENATOR LANDIS: I would first like to ask for a call of the house.
SENATOR CONWAY: There's been a request for a call of the house. Record.
CLERK: 19 ayes, 0 nays, Mr. President, to go under call.
SENATOR CONWAY: The house is under call. Will, all members please return, to the Chamber and record your presence. The house is under call. The house is under call. Will all members please return to the Chambers ad record your presence. Senator Moore, Senator Chambers, Senator Wesely, the house is under call. We're looking for Senator Moore, Senator Wesely, Senator Chambers. Please return to the Chambers. Senator Landis.
SENATOR LANDIS: Senator Conway, if you would like to recognize me for the purpose of beginning my closing and if the house remains under call, those people could come back while 1 was summarizing the amendment for the body.
SENATOR CONWAY: You are so recognized.
SENATOR LANDIS: Thank you.. I took the unusual course for me of asking for a call of the house because this will wind up being a controversial measure and you're going to want to have a chance to think about it and reflect on it to know what it is before we vote. I put out yesterday a copy of this amendment and *I also sent out a summary of its provisions. Let me tell you what it does.. It keeps the corporate filing assessment idea in place for' two more years and reshapes what that filing will be. It, adds ... what it does is it will keep, for those corporations that have from ten to $125,000 of paid up capital stock, they will have a $30 assessment; $60 for 125,000 to 350,000; $90 for 350,000 to 10 million; and $120 for 10 million and above. This is a progressive system as opposed to what we did in 825 which was a nonprogressive system. Secondly, it cuts out nonprofits. They do not pay taxes. Third, foreign corporations pay double this amount. That's by existing law. It raises $2.2 million at the best guess of our Secretary of State. Why do we need the money? We need the money because we will ... we have already in a law that we passed this year taken out of the Cash Fund an amount of about 4 million bucks. We will need to replenish that amount of money in the next two years. Otherwise, our permanent cash reserve... our... there's a name for this fund, thank you, the, Cash Reserve Fund will be down this amount of money. This gets us back to even keel. Senator Moore, who is not a proponent of these general... this general trend of law does find this appropriate fiscal policy to do. For those of you who harbor ill will about LB 1063) 1 hope you will consider that this is simply a matter of balancing the books for the state with taxpayers who generally, at least, in their representatives out in the rotunda have agreed to this notion, they have supported the idea of using the corporate filing fee. The State Chamber supports this concept. With respect to the question of why we do this, we do this to fund the farm machinery sales tax exemption. Let me say that again for those of you who may have. some problems in this. The reason we need to do this is because we need to balance the books because of the farm machinery sales tax exemption. If that provision was not in LB 1063, we wouldn't have to do this at all. But in an attempt to accommodate various parts of this body, we made that change, it created a cash flow problem. This solves the cash flow problem. I hope everyone will share in that obligation of making the books balance. Whether or not you agree with the original
policy or not, we need to balance the books. This amendment does that with representatives of these various organizations and corporate taxpayers agreeing to this amendment. I urge its adoption. Thank you, Mr. Speaker.
SENATOR CONWAY: Thank you, Senator Landis. We're now voting on the Landis amendment to the Warner amendment. All members in favor vote aye, opposed vote nay. Have you all voted? Mr. Clerk, record.
CLERK: 28 ayes, 8 nays, Mr. President, on the adoption of Senator Landis's amendment.
SENATOR CONWAY: The Landis amendment is adopted. Mr. Clerk, items for the record.
CLERK: Mr. President, Reference Report referring gubernatorial appointees, Report of Registered Lobbyists, as per statute. Amendments by Senator Moore to LB 1026, Senator Chizek to LB 189, Senator Morrissey to LB 1257. Enrollment and* Review reports LB 245 as correctly engrossed, Mr. President. That's all that I have. (See pages 1913-23 of the Legislative Journal.)
SENATOR CONWAY: The call is raised.
CLERK: Mr. President, Senator Lowell Johnson would move to amend Senator Warner's amendment. (AM3924 appears on page 1923 of the Legislative Journal.)
SENATOR CONWAY: Senator Johnson, please.
SENATOR L. JOHNSON: Mr. President and members of the Legislature, this amendment number 3924 has been circulated and should appear oft your desk. It is a fairly straightforward and self-explanatory amendment to Section 197 of the Warner-Withem amendment. This is the section of the amendment which provides for a refund or credit of taxes paid on inventory vehicles when a vehicle is sold. Section 197 would be relevant, of course, only if the voters reject the constitutional amendment and dealer inventories would again be taxed. The Warner-Withem amendment allows dealers to claim a refund or credit in the same proportion as the time remaining in the year from the date the vehicle is sold. If a dealer sold a vehicle on June 1, for example, the dealer could claim a credit for half the taxes owed
or owing on the vehicle by virtue of it being included in the dealer's inventory which would be taxed if the constitutional amendment fails. In the event an inventory tax is imposed this amendment would apply to vehicles in the dealer's inventory as of 12:01 a.m. on January 1. It's conceivable that a dealer could acquire a vehicle on January 2nd, for example, and turn around. and sell the vehicle on January 3 and then request a property tax refund on that vehicle for the remainder of the year. In effect, the dealer could claim the refund or credit on a tax the dealer never paid or didn't owe. My aide spoke with people in the property tax division of the Department of Revenue who suggested that retailers would not necessarily list each I individual item of inventory and its respective value when reporting their personal property. Therefore, if a dealer claims a refund for a vehicle sold off the lot, the county assessor does not have the means to verify that the vehicle included ... was included in the dealer's taxable inventory. My amendment, therefore, does one simple, common sense thing. it simply requires that dealers document that the vehicle they are claiming a credit for was included in the dealer's inventory which was reported for purposes of the tax. Thank you, Mr. Speaker.
SENATOR CONWAY: Thank you, Senator Johnson. The first speaker is Senator Warner, please.
SENATOR WARNER: Me. President and members of the Legislature, I would rise to support Senator Johnson's amendment. As I understand the amendment, it is simple ... simply requires the documentation by a dealer that, in fact, anything that they were requesting in tile refund that would be permitted has, in fact, had the property tax paid on it and to prohibit, as Senator Johnson indicated, anyone attempting to claim a refund on property tax that they had not, in fact, paid. And I think it's a good amendment and would prevent anyone from inadvertently or purposely attempting to file for a refund that they would not be eligible for under the law. So I would support Senator Johnson's amendment.
SENATOR CONWAY: Thank you, Senator Warner- Senator Hall, you're next, please.
SENATOR HALL: Thank you, Mr. Speaker. I would alto rise in support of Senator Johnson's amendment. It puts a check and balance in place, if you will, with regard to the issue of
requiring those dealers to be able to justify what they're basically writing back off, if you will, in terms of the inventory that they have. I think it's appropriate to, at a minimum, ask them, to do that and the documentation will not be any kind of hardship to them. So I would also rise to support Senator Johnson in his amendment.
SENATOR CONWAY: Thank you, Senator Hall. I see no other lights, The question before the body is the adoption of the Johnson amendment. Excuse me,, Senator Johnson, would you like to close? Okay, closing is waived. We're voting on the Johnson amendment to the amendment. Have you all voted? Mr. Clerk.
CLERK: 25 ayes,. 0 nays, Mr. President, on adoption of Senator Lowell Johnson's amendment.
SENATOR CONWAY: Senator Johnson's amendment is adopted.
CLERK: Mr. President, Senator Schmit would move to amend with AM3936. I believe copies have been distributed. (The amendment appears on pages 1923-27 of the Legislative Journal.)
SENATOR SCHMIT: Mr. President and members, would you give me that? Yes, 3936. Thank you. Mr. President And members, this amendment is offered because of the fact that I have felt very strongly that we seem to expect the public to keep up to speed on what this Legislature does regardless of the various proposals that have been advanced by this Legislature and offered to the people and we place the burden of the responsibility for reporting personal property upon the individual. And I just want to say that I think that I have had hundreds of phone calls wanting to know when we should be filing personal property tax returns since way last fall. I think that it is important that we repeal the penalty. provisions of a statute for those persons who file a late personal property tax return for the year 1992. There are those who say the statute is clear, that if and when 219 is approved by the voters, that the tine for filing is very clear, I believe it's up until June 1st, and there is sufficient time. My question is, what 'happens if 219CA does not secure the approval of the voters? Governor Nelson has indicated that he will not call the Legislature into special session if that should occur. I'm handing out for your information an article which you have seen already which states that 51 percent or the people who have ... were polled did not support the proposed amendment and
only 38 did. Now I do not say that's going to be the fact when the issue has been determined at the ballot box. But if, with all of the information that has been proposed to the people this past several years and the past several months about the desirability and the inevitability of LR 219CA as that being the only solution, etcetera, etcetera, etcetera, if with that information only 38 percent of the people support the' amendment, then I believe this Legislature must be prepared to take other measures. If Governor Nelson, in his wisdom and his desire to do that which he believes is right, does not think it's proper to call this Legislature into session, it may well be that the Legislature may have to act on its own. If that does not occur, then, of course, there is still the initial procedure and I think that is available to the people in this particular instance. And so I believe that in order that there not be confusion at the county level, local subdivision level, we ought to not apply the penalty provisions. There are I many taxpayers out there who are not sophisticated. There are many tax payers who are not going to know if they, in fact, should be filing a return. And given the small period of time that would be available for them to do so, it would seem to me that we are placing an unnecessary burden upon them. I understand that such taxes can be waived but that provides for individual decisions by the counties and I do not believe that is a very equitable way of doing it. For one county to waive the penalty and another not to do so places a burden upon those who would not waive it. I know that there are many people who will say, well, it's the taxpayer's responsibility, they should be there. They should make that return available to the tax ... to the Treasurer and have it done by the time outlined by law., Ladies and gentlemen, members of this floor, members on this floor do not know exactly what is covered and when it needs to be reported. I suggest that the individual taxpayer should not be burdened with that decision. I would hope that you would adopt this amendment and give the taxpayer a little bit of flexibility. I do not believe the average taxpayer is going to try to escape but I do believe they ought to be allowed flexibility, just as we allow ourselves flexibility. I ask for your support for the amendment.
SENATOR CONWAY: Thank you, Senator Schmit. Senator Warner, would you like to speak to the Schmit amendment, please.
SENATOR WARNER: Mr. President and members of the Legislature, this is an issue we also dealt with earlier on LB 1063. As
Senator Schmit indicated, this mandates the fact that there cannot be a penalty assessed for this year. The argument that we used before., that I used before in opposing it, which I do -again, is that under existing law the county board, in fact, does have the authority to weigh those penalties in which they can make judgments whether or not it is...was intended, that the filing was one of intent to defraud the state or local government, in fact, of necessary required taxes or if it, was out of a lack of understanding. I'm concerned if you put this in as mandatory, it simply becomes an incentive to those who intend to defraud., I appreciate there are ... it may be a help to those who unintentionally find themselves in violation. As I stated earlier on LB 1063, I'm willing to trust the local county boards to make those decisions. And, of course, obviously, if they decide wrong in an individual case, and I appreciate the fact that going to court is expensive but if you found county boards that were unreasonable, and I don't believe they would be, but if you did, obviously, you could attempt to show that ... that their failure to weigh the penalty had not been appropriate. But I do not think it would be wise since the vehicle is there now for someone who accidentally did not file properly. I do not believe it would be wise to put in virtually an incentive to avoid paying and filing those necessary papers, and I would be opposed to the amendment as it is outlined, just .as I was opposed to it on LB 1063.
SENATOR CONWAY: Thank you, Senator Warner. Senator Schmit, please.
SENATOR SCHMIT: Mr. President and members, I hope now that you .will read the other half of the article which I have sent out. It says, "Union Pacific likes the fine-tuning of the tax plan." This is the major reason for my offering this amendment., If the Union Pacific or any major corporate structure or any large individual taxpayer fails to meet the deadlines, there isn't any doubt about the fact what's going to happen. The county boards will not assess the penalty. They have marched into the Governor's office, along with members of this body, and had negotiated their own tax structure. And I want to see how those of us who have opposed this plan can go back and explain the equity of that. They have said, in effect, we're going to let the Union Pacific attorneys, and several have worked for me, were trained in my office, and many others who have even more experience are going to sit down and negotiate with Mr. Balka how much tax will the railroads pay. The same thing is going to
happen. No one wants to take a major company to court. But if it is a small taxpayer who owes a thousand dollars, you can't even go to court for ... can't even: hire an attorney for that, we're going to once again penalize that individual. I don't think it's fair. The structure ought to work equally for all citizens and all taxpayers. Senator Warner said that he opposed this on LB 1063, and lie did, and. I appreciate that. He also opposed the refund, as I recall, of the difference paid between the taxes collected on forced sales or early sales as opposed to the tax that would be due if 1063 becomes law. Now there is an amendment in this large 270-page amendment that provides for that reimbursement. When I argued that as an amendment to LB 1063, in plain language, I was ridiculed. As of, now, it becomes desirable. An amendment, ladies and gentlemen, is an amendment. The amendment is very clear. The desirability of an amendment ought not to lie in the source of the amendment it ought to lie in the content of the amendment. This is a desirable amendment. It is a fair amendment. It says, very frankly, that if an attempt or if a tax is not... the form is not filed promptly that there's no penalty. You can be certain that the major entities will take their time and there will. be no penalties, there will be no penalties. I have watched public officials cower before major entities time after time on this floor and off the floor. That will happen again. But if the small business person or the small operator or the small farmer fails to meet their deadlines, they will be penalized. I accept Senator Warner's concern that this might be an invitation not to file and I accept the problems that ensue from that. But, ladies and gentlemen, it is not the taxpayers' fault that we're in this dilemma and I still believe that this is a fair proposal.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: One minute.
SENATOR SCHMIT: I would suspect that at some later, and I want to remind you, there is a very real chance that LR 219CA does not pass and then there is another real chance that we will meet again and I do not know all of the ramifications of the various statutes relative to the filing deadline. But I would hope that in that kind of pandemonium once again the taxpayer is not put head first through the ringer. I would ask that you support this amendment because if you do not do it, the consequences are going to be adverse to the average small taxpayer. I think we
have abused that portion of the taxpayer enough. There is no problem with the corporate. structures who have, six-figure attorneys to keep their people on target and to argue their defense. There is no comparison between that entity and the, average taxpayer.
SPEAKER BAACK: Time.
SENATOR SCHMIT: At this, time, we ought to vote for the average taxpayer.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Warner.
SENATOR WARNER: Mr. President and members of the Legislature, just a couple of comments in response to some of the comments of Senator I Schmit that were unrelated specifically to this amendment.. It. has been brought to my attention that the amendment which is filed deals with how railroads, are taxed, that some people thought it was filed as an amendment to the amendment, which would preclude under the rules of the Legislature amending it. That is not how it was filed. It is filed to the bill and it can then be amended in any fashion that tile body wants. I would not have attempted to offer an amendment of that nature that blocked out, by virtue of the process, attempts to amend it. So I want ... if anyone believes that that amendment is coming later as an amendment to the amendment in order to preclude amendments to that railroad, what we refer to as the railroad amendment, I want to assure you that is not how I propose to have it handled. But, again, also 'comment was made that that refund provision that's in here, when we did argue that on LB 1063, 1 had stated, which was clearly my understanding, that that authorization in the statute was not nee-led and that those refunds, could occur and it had been suggested to me that there were ... even placing it into statute might create a potential problem with the computation of tax issue. Since then that's been cleared tip. That is not a concern and the refund then is put in there as a clarification of the accelerated property tax that was collected on various individuals or businesses that either went out of business or otherwise had sales that substantially eliminated any personal property that they might have on which tax would ... was due to be assessed as of January 1 of this year, with tile tax to be paid under the existing Supreme Court decision December of this year. But, aside from that, again, to address the issue specifically, I am of the opinion that if we make a mandate of eliminating any
penalty that it is also a very open invitation to that very small, small percent of people required to file, people or corporations, to not be concerned about filing accurately because there is no penalty anyway. This becomes even more significant on down the road because sometimes if there was an intent to defraud and it's caught two or three years later, which can happen, and if that would happen tinder existing law, you could go back to the year which they had initially failed to properly report. This would preclude doing that. You would have to start another year and I just believe that this is an issue which the confidence should be placed in the county boards, that they will deal with it fairly and equitably where there are, individuals who inadvertently or unintentionally fail to accurately file some report that is required. Incidentally, .all those reports, irregardless of which....
SPEAKER BAACK: One minute.
SENATOR WARNER: what occurs on the CA1, the filing date is June 1st under the existing law as of January to report at market value all personal property that was required to be put back on by the Supreme Court decision or June 1st, at the depreciable basis, in fact, the amendment requires both to be filed so that no matter what happens that people have adequate ,time to be making the preparation of those returns in the event, that the CA passes, that they will not be in a position of not knowing which to file until after the constitutional amendment. As it now stands, they would be required to file both.
SPEAKER BAACK: Thank you, Senator Warner. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, I rise to support Senator Schmit's amendment. The provision with regard to the penalty not applying for filing a late personal property tax return is, as I read it here, Class IV misdemeanor for any such offense committed for any tax year prior to the year 1993. And then it becomes a Class II misdemeanor for any such offense committed for tax year 1993 or thereafter. Senator Warner, would you respond to a question?
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Yes.
SENATOR HALL: Senator Warner, what would the penalty be under a
Class IV misdemeanor, the maximum?
SENATOR WARNER: I don't know off the top of my head, Senator.
SENATOR HALL: Do you know what it would be for a Class II misdemeanor?
SENATOR WARNER: Not off the top of my head.
SENATOR HALL: Do you know if...
SENATOR WARNER: I know this that there is, as you well know, and I assume you know the answer to the question you're asking me, that the...
SENATOR HALL: You assume too much...
SENATOR WARNER: ... oh, well,...
SENATOR HALL: ...on my time, by the way....
SENATOR WARNER: Then you should ask Senator Schmit, it's his is amendment, but, as we all know, there are...
SENATOR HALL: No I think he's amending sections of the bill that were originally in...
SENATOR WARNER: Yes, yes.
SENATOR HALL: ... in LB 1063.
SENATOR WARNER: There are different (interruption) ...
SENATOR HALL: There was (inaudible) bill originally.,
SENATOR WARNER: ...that apply to different classes of ... of felonies or civil or misdemeanor and I just don't ... do not... happen to know those...
SENATOR HALL: Okay.
SENATOR WARNER: ... numbers off the top of my head.
SENATOR HALL: Could you tell me on the tax, if the tax isn't paid and it's delinquent, would there be a penalty on that, an
SENATOR WARNER: Yes, there is.
SENATOR HALL: What rate is that at? Isn't it...
SENATOR WARNER: Fourteen percent.
SENATOR. HALL: Fourteen percent. That's what I thought. Thank you. Mr. Speaker and members, what Senator Schmit does is .nothing more than say for tax year 1992 the only penalty you're going to have, if you fail to file, is the 14 percent. He doesn't take. away all penalty provisions. He just says you're not going to be guilty of a Class IV misdemeanor. For that one year that we're going through right now, we're in the process of .Changing and adding back on the tax rolls personal property that hadn't been on for years, where we're in the middle of a .constitutional amendment going to the ballot with the people in .May and a reporting date that, I think, Senator Warner said was June 1, he is saying that for purposes of a late filing that misdemeanor for this tax year doesn't apply. And what that says though is that it doesn't make any change with regard to the penalty provision of interest that's already in statute as it relates to nonpayment of taxes. I've heard a number of times about how 14 percent interest is a heck of a penalty in terms of having to... or incentive for people to pay their taxes. I mean, in this case, it's an issue of filing the report. I happen to believe that the folks out there are going to be extremely honest with regard to that. But the few people that might actually forget to do this might be confused on this issue in terms of,, you know, what's taken place in the Legislature, the changes that have been made, a constitutional amendment on the ballot in front of the people and a reporting date that follows approximately within two months after that. To say that we're going to exempt them from a Class IV misdemeanor for one year and the penalty becomes a Class 11 misdemeanor, Senator Schmit does not change that provision. So what you have here is one year where the maximum penalty they're going to face is 14 percent interest on that nonpayment of taxes that would be due and owed, if any. And in the second year, the Class II misdemeanor would be in effect. It would be there.
SPEAKER BAACK: One minute.
SENATOR HALL: They would be subject to that. But for
approximately six months if the reporting... seven months if the reporting date is June 1, if I didn't misunderstand Senator Warner, they're given a reprieve and said the maximum penalty YOU re going to be facing is whatever 14 percent of that tax would be if you haven't filed your plan, if you haven't filed your personal property tax return, your listing, if you will. That would... that's exactly what it says. It doesn't say that you're going to have problems down the road if I'm looking at a Class II felony, you're going to learn about that, more than likely, before the next time you have to file. They may very we11 know about it in time to file le this year and I think many of them will. But we have literally year after year, every year, a bill come in because somebody didn't file...
SPEAKER BAACK: Time.
SENATOR HALL: ...on time. All Senator Schmit does is protect people from a misdemeanor infraction which I think is onerous in this case.
SPEAKER BAACK: Thank you, Senator Hall. Senator Pirsch.
SENATOR PIRSCH: Thank you, Mr. Speaker. Senator Hail, you said everything I wanted to say. You didn't leave me much left to say ay. I agree with what you, said and I support Senator Schmit's amendment. It concerns me very much that we are not making allowances for that small taxpayer, that small corporation taxpayer. It concerns me very much that because of the confusion that has surrounded this issue and property tax in general, and particularly the, personal property tax, that we should at least give one break to the small corporation property taxpayer. The interest is still going to be paid. It is specifically for the. year 1992 and I think that we should all support Senator Schmit's amendment.
SPEAKER BAACK: Thank you, Senator Pirsch. Senator Schmit.
SENATOR SCHMIT: Mr. President and members, I want to just say again, very briefly, that I believe the vast majority of the taxpayers are honest and I also believe that sometimes in our desire to try to carve out an equitable tax program for the State of Nebraska and the various subdivisions that we assume that it is easy to pay these taxes and that everyone is as wrapped tip in this program as we are visited with a gentleman who is in his upper eighties, who is very well
educated and very well read and has tried very diligently to keep track of what we are doing, but he is totally confused as to what his responsibilities are. I visited with a dairyman last Week who has a large dairy herd and they are very confused and they are not even certain how they are going to operate. They have been meeting with their accountant regularly and, very frankly, the avoidance of taxes is not a... is not a crime, evasion is. But the manner in which we have drafted the bills make. it very, very imperative that the individual sit down with his or her accountant and decide how they are going to handle these various items of personal property so as to pay the least amount of taxes. That's what we found with the occupation tax on corporations. I think it ought to be accepted by us that it is not easy to pay taxes in Nebraska, be they income tax, sales tax, personal property tax, any other kind of tax. Sometimes we give the impression, we give the impression with the 14 percent interest we charge on past due taxes that the taxpayer does not pay the tax because he or she is trying to let the county or the subdivision subsidize the taxpayer. That's not true. That is, in itself, a substantial penalty. We raised that rate when interest rates and banks were standard in the 14 to 16 percent category. In all honesty, we ought to be lowering that rate at the present time, but that interest rate is a penalty in and of itself. What I'm trying to do is to avoid that more onerous penalty which we know does exist under the present statute. I hope that you will support the amendment and that I hope also that it's not going to be very necessary, but in the event it is necessary, I hope that the county boards can say, well, for this period of time the Legislature, in its concern for the citizen because of the confusion that has existed, has said we will not invoke that more serious penalty. I would hope that you would adopt the amendment.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Warner.
SENATOR WARNER: Mr. President and members of the Legislature, again, just to provide more information on the ... on the total issue, as I understand it. It's been indicated and it's accurate that for late filing of...payment of taxes, correction, there is under statute the requirement of 14 percent interest. No matter what happens, that would be there. In the case of the penalty that is being discussed here, there are two different ways that it happens. If an assessor goes out and finds that you failed to make the required reports, then the penalty is 50 percent, which can be waived by the county board. If you
come in voluntarily and find that you have made an error, then the penalty is 10 percent, which also can be waived by the county board. And the only argument really here, from my -viewpoint at least, is not that. someone is, going to be- unfairly penalized for unintended violation because I would believe that in the vast majority of the cases the county boards would understand that, and most certainly if an individual dame in voluntarily realizing that, they had made an error, that would even, it would seem to me, increase the likelihood of an individual not having to pay the penalty. They would still have the interest, regardless, because that cannot be waived under existing statute. So I would still not support the am amendment. I appreciate what Senator Schmit is trying to address but I also see it as an invitation for or' some to intend to defraud on the basis that they know that they will not have any penalty., They will still have the interest to pay which is substantial, ,there's no question about that, but the only enforcement mechanism you have other than that is the significant penalty ,that is assessed if you fail to voluntarily go in and make a correction, which obviously means the assessor has gone out and discovered that you, for whatever reason, did not, properly file the amount ... valuation of equipment that you had or you did not properly file the depreciable equipment as required by law and it was, obviously, an intent to defraud the tax otherwise required.
SPEAKER BAACK: Thank you, Senator Warner. Senator Schellpeper, You're next.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker, and members, I rise to support this amendment. I think it's a very fair amendment. There is no way that the people are going to be able to get everything on the schedule if by the time that it passes or if it passes in the middle. of May by the 1st of June so I think it's a very fair amendment. It doesn't cost any money, it just kind of helps the people that are in business in this state that if you're not able to get it in by that time, because of the confusion that we have in the Legislature in our tax system, that at least it's a way for the property owners to not be unduly penalized. So I think Senator Schmit has brought us a very good amendment that's a very fair amendment. He's not asking for anything unreasonable here. I think it's just good business sense to do this for just, this one year. He's not asking that we do it every year. I think if we didn't have all of the confusion that we currently have, it wouldn't be ... we
wouldn't have to do this, but if we can't decide in the Legislature, how do we expect the normal taxpayer to know what's going on. So I think Senator Schmit has a very good amendment and it's very reasonable. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. Senator Warner. Senator Warner, you've already spoken three times on this issue so, Senator Kristensen.
SENATOR KRISTENSEN: I would yield my time to Senator Warner, please.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Thank you, Senator Kristensen. I just wanted to Comment, under LB 1063, they don't have to wait till...Senator Schellpeper indicated to see what happens with the constitutional amendment, under LB 1063 you can file both forms now, anytime beginning now and that was intended so to provide adequate time, more adequate time to do it. And so the argument that you have to wait is...simply is not a valid argument. They both are required to be filed and could be done any time prior to June 1.
SPEAKER BAACK: Thank you, Senator Warner. Seeing no other lights on, Senator Schmit, would you like to close? Oh, Senator Wickersham.
SENATOR. WICKERSHAM: Thank You, Mr. Speaker. Just very briefly. I'm afraid I have... I was off the floor and I did not catch all ,of the debate, but as I came back in and quickly read Senator Schmit's amendment,, I ... my concerns immediately arose that if we adopt his amendment, there would be absolutely no incentive to file a personal property tax schedule at any time during the year 1992 and I'm wondering if that is really his intent. Senator Schmit.
SPEAKER BAACK: Senator Schmit, would you respond?
SENATOR SCHMIT: Well, Senator Wickersham, I never give up easily and. I still hope that the Lord will smile down on Nebraska and events will take place that will provide for total repeal of the personal property tax, but it is not my intent and I would vigorously deny any implication that I am encouraging people not to comply with the law.
SENATOR WICKERSHAM: Senator Schmit I believe you misunderstood me. I was not indicating that I believed you wanted to cause them to fail to comply with the law, but usually we ask them to comply with the law and then if they do not, we impose sanctions or penalties.. As I read your amendment, you would remove all those sanctions and penalties for the year 1992. Is that correct?
SPEAKER BAACK: Senator Schmit.
SENATOR SCHMIT: Senator Wickersham, my amendment says that if you do not file the return, you're not... you're not subject to the misdemeanor penalties. It does not say that you do not need to file, and you still must file, but if you didn't file it timely, by June 1st, the penalties that we have talked about do not apply.
SENATOR WICKERSHAM:: So even though it would be unlawful to fail to file, there would be no penalty for doing so?
SENATOR SCHMIT: There, would be no penalty for... there would not be the 50 percent penalty, As Senator Warner has outlined, nor would there be the 10 percent penalty for the inadvertent failure to file.
SENATOR WICKERSHAM: All right, I guess I ... I guess I fail to believe that we should rely on good will exclusively for the enforcement of our laws, and even though it would-be unlawful to fail to file a personal property tax schedule by June the 1st, I cannot support Senator Schmit's amendment for the reason that we simply cannot rely on people's good will and sense of civic duty in order to have compliance with the laws.
SPEAKER BAACK: Thank you, Senator Wickersham. Senator Hefner.
SENATOR HEFNER: Mr. Speaker and members of the body, I have a question for Senator Warner.
SPEAKER BAACK: Senator Warner, would you respond, please.
SENATOR HEFNER: Senator Warner, just the other day I had some constituents say that these forms were not available from the county assessor, these assessment forms were not available from the county assessor in the county that they lived in. So how...
SENATOR WARNER: For the depreciable property?
SENATOR HEFNER: On personal property tax forms.
SENATOR WARNER:. For depreciable property.
SENATOR HEFNER: Well, which form do they which form do they use then?
SENATOR WARNER: Under LB 1063, you are required to file both by 1063 I, frankly, do not know the answer immediately as to the form if they are yet available for depreciable property They are available, as many of us have received it in the mail, for filing at market value or have picked them up at the local county. That form has been available to people. Whether or not, .the form on depreciable is not now available, I don't... I simply do not know but I would think it would be shortly if they are not.
SENATOR HEFNER: Okay, so, in other words, what a personal property owner should be doing now is filing on those previous forms?
SENATOR WARNER: The... the requirement of LB 1063 is to file both the personal property due under existing law, which is at market value, which was initially, as you know, March 1, passed a resolution to delay that to March 31st, and LB 1063 further delayed that to June 1st as the deadline. Many people have already filed those. The form on depreciable property is... is... I am given a note that the mailing today the forms to the assessors by the Department of Revenue that the local assessors are to be using. So the forms will be available beginning next week.
SENATOR HEFNER: Okay, but they're not due until ...
SENATOR WARNER: June 1.
SENATOR HEFNER: ...June, the 1st of June. Okay. Well, you can see how confusing this is. It's very confusing to us right here who make the laws and then ... and then we expect those county assessors out there to know what to do and we also expect those property owners to know what to do., So...so I think Senator Schmit's deal is reasonable. And, if I read this amendment
right, it's only for one year. Isn't that right, Senator Schmit, just for one year, just for the rest of this year? Okay, thank you.
SPEAKER BAACK: Thank you, Senator Hefner.. Senator Pirsch.
SENATOR PIRSCH: Again, I echo, it's confusing for us. Senator Warner, forgive me but you have so much knowledge and... and understanding that many of, us here don't have within the legislative body and I can tell you, for sure, that those people who will be paying personal property do not really have any idea. And I think this, again, is only fair that one year, 1992, you can't have a criminal sanction against you or the increased penalty. You will still pay the interest, so you better make sure you get your report in if, indeed, you know about it and if, indeed, you can find the right form, and if, indeed, you know which property needs to be filed.
SPEAKER BAACK: Thank you, Senator Pirsch. Senator Kristensen.
SENATOR KRISTENSEN: I would yield my time to Senator Warner.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Thank You, Senator Kristensen. You know, ..there's another side to this equity issue that no one is talking about, and it's one that I have a very deep concern about. Property that is not reported becomes a part of the valuation that the county cannot take into account when, setting levies that will be set this fall, if it's not reported. The person who carries the burden for people who intentionally do not file, and if there's no penalty, as Senator Wickersham has so, capably pointed out a concern as to those who intentionally do not, the person who carries that burden is all the taxpayers who did comply because that amount of valuation was not then taken into account when levies were set and levies, therefore, would be somewhat higher, depending on how much was not reported, obviously. But it would Le somewhat higher than they should have been. And I'm willing to trust the county boards to review those who do late file, certainly those who voluntarily come in, because the burden...the penalty that taxpayers are paying will be all the rest who did report, because their levy is going to be higher, somewhat higher than otherwise would have been required if everyone had complied. And I think we need to be concerned about not increasing the taxes on everyone who did
comply by virtue of a higher levy because the valuation of a governmental subdivision was less than was required. That's the other side. And I would hope that you would take that into .account as well as you look at this amendment.
SPEAKER BAACK: Thank you, Senator Warner. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, and members, again, I rise in support of Senator Schmit's amendment. The issue is, did you. file on time or not? And whether or not at the local level there is the ability to waive the penalty, the issue is that there is a Class II misdemeanor levied at the state level. The state is saying, as a body, as a policymaking body that we believe that this ought to be a first year Class IV misdemeanor; second year, A Class II misdemeanor. And then the 50 percent penalty and 10 percent that are clearly waivable at the local level. All it takes is one local body that says, no, there's too many of these coming -1 1 through, we're going to treat them all alike and I we're going to go ahead and process the criminal charge on it. And then we're going to be back here making .changes to the statute saying that, no, we really didn't want that to happen. Or we're going to be writing letters to the county officials saying we passed this law to make sure that... to keep the honest people honest, if you will, and then at the same time make sure that the penalty is never used. Don't put the penalty out there. It's... it is something that if you're going to argue that the locals have the ability to do it but yet they can waive it, then why have it in the first place? In light of the confusion around this issue, the change in the timetables that we put in place in order to have ... bring some kind of order to this system, this change that we're making in our personal property tax system, to say that for this year and this year alone, and that's all Senator Schmit does, he leaves the, Class II misdemeanor in place for subsequent years, that the only penalty that will be there is the 14 percent nonpayment interest on those taxes, which seems to be enough in other areas in terms of an incentive to get people to pay their taxes. And, clearly, what's going to happen is folks just aren't going to file. You could have the death penalty for first offense and there's going to be people who aren't going to file. They're just not going to file. You're never going to get those folks who are going to try to circumvent the system. Make it the most... the stiffest penalty you can think of. You're never going to get those. But what we're doing here, I think, is adding more burden to the individual who is trying to figure out
just what the system is all about. They. may not know whether their property is depreciable. There may be an honest mistake. .It may be depreciable for another three or four years. They may go three or four years without paying it. The assessor may not find out about it. At that time.. was it an honest mistake? Are they going to come back an d say, sorry, this is a Class II misdemeanor the first year, or a Class IV misdemeanor the first year, excuse me, and a, Class II the second? That's real, possible that it could go for a number of years down the, road and those individuals are going to have to say, well, you know , sorry, it's too late, we're not going to waive, it at this point. Those are the folks I'm really worried about and I think that if you allow everybody to be treated the same way the first year, they're going to learn about the issue of filing, how that has to be dealt with, and they're going to know at the same time they, learned about that that if you don't get this done for the subsequent year, that Class II misdemeanor is going to be in place. Now even under the Schmit proposal, I will guarantee you there going to be people that slip through the cracks. But, at a minimum, you're going to catch the majority of them. You will never catch those individuals with a penalty, I mean, you'll never turn them around and get them to comply ...
SPEAKER BAACK: One minute.
SENATOR HALL: ... because you have a penalty in place if their intent is to circumvent the system, if their intent is not to pay the tax. There is no way to do that. What I'm worried about. is lumping the honest people in with the few that are going to attempt to do that. And I would argue that Senator Schmit, just brings a little reasonableness to this issue and says, hey.. let's pull back a minute here and for 1992, with all the changes that we have made, with the constitutional amendment on the ballot, with court cases that could affect this pending, let's wait and make sure that for 1992 we don't worry about penalizing people, we worry about getting them on the tax rolls. And that's what the assessors are about. That's what the proposal was about, I thought, LB 1063. The penalty provision that Senator Schmit strikes is a good amendment and I would urge adoption to that.
SPEAKER BAACK: Thank you, Senator Hall. Senator Wickersham.
SENATOR WICKERSHAM: Thank you, Mr. Speaker Just very briefly, I thought I heard a hint of something that I do not believe is
correct and that was the statement that if you did not file that criminal penalties would, in all events, be assessed. And maybe Senator Hall didn't mean to leave that impression with you but I want to rise and. dispel that impression if you have it, because, first of all, as I see the system, you have at least two levels of discretion. One is the county assessor who may or may not report a potential offense to the county attorney's office. You have one level of discretion there. You have a second level of discretion once the. matter comes to the county attorney's office. Rememher, that the standard in the statute is willful or fraudulent.. It has nothing to do with impossibility or other circumstances that might have made it impracticable for you to file. And I don't know a county at attorney across the State of Nebraska that would file tinder circumstances where you could come in as a defense and, for example, show that you were in your hospital bed. That will not happen. Nor do I think the county assessors would be so cold-hearted as to even report that kind of an incident to the county attorneys. I simply want to make the point that you have at least two levels of discretion. It is not a hard and bright line as you may have had the impression that it is. The system that we currently. have in place in addition gives the county boards discretion as to what you might consider to be the civil penalties and I have every confidence that those county boards will be able to exercise that discretion carefully. Senator Warner made an absolutely valid point about the burden that will be on the honest persons if we allow a loophole in the system and do not maintain any penalties for failure to file. I cannot see how we should be in a position to, in effect, penalize the honest people and reward those who are able and willing to take advantage of every loophole or opportunity to evade.
SPEAKER BAACK: Thank you, Senator Wickersham. Senator Fall.
SENATOR HALL: Thank you, Mr. Speaker, and members, and I appreciate Senator Wickersham's remarks but I have to disagree with him in terms of the issue of whether or not the penalty exists. And the penalty exists, whether there is discretion or not is not the issue. The issue is, is the penalty there and can it be invoked? Arid the answer to that is yes. And that's what Senator Schmit's amendment does. It strikes it, otherwise there wouldn't be a need for the amendment if it didn't exist. We build in safeguards but let me tell you, Senator Wickersham, about two or three years ago one would think that... and I would tend to trust the county board, but we had folks who were ... had
their homestead exemption, elderly I 83-year-old lady had her homestead, exemption taken away because she failed to file. She failed to file and the county board said, tough rocks, sorry, pay the property taxes, They go from having the first $35,000 as the value of the house, a virtual 100 percent exemption in that case to paying what was about... amounted to about $850 after she had been on the program since its inception. Cold-hearted county board or one that's following the statutes, depends on which way you're looking at it. We had legislation that. came in to peel that back so that, that individual was not going to be subject to the rational, reasonable arguments of the county board in terms of how they thought the law ought to be applied, because the penalty was there. Even though the discretion existed, the penalty was there. It's going to-happen .the same Way here. There are going to be county boards that say, no, absolutely not, this is the law, we're going to adhere to it. And I think that what Senator Schmit does with his amendment is prevent to the best extent possible, because you're I talking about a seven-month window here, when the filing date is June 1, the Class II misdemeanor goes into effect for next year for the '93 year, all you're doing is preventing what I would consider to be a number of problems that will exist out there because of this penalty provision. And if the argument is that, well, don't worry, they'll allow for it on a discretionary basis, then why have it in the first place? Why have it in the first place? Because there's a small number of people that are going to try to willfully circumvent that process. And I would argue that if you're going to lump those people right in with the issue of those who just inadvertently forgot, did not know, were unaware, and that there is going to be, just like you say, no bright line to make the distinction between those two people. So. the county boards, if they follow that line of thought, will just exempt everybody and then the penalty becomes a moot issue because it's not applied, it's not going to be used. Should be stricken for the seven months that would be where it would be applicable in this case for the Class IV misdemeanor and .everybody should be on the same playing field come the next tax filing deadline and have a Class II misdemeanor that they face. Were Senator Schmit striking the penalty altogether, it would be a whole other story. But, in this case, all it does is allow for people to get tip to speed and what no one argues is a very confusing issue. I don't think this penalty is appropriate I . I think Senator Schmit's amendment needs to be adopted.
SPEAKER BAACK: Thank you, Senator Hall. Seeing no other lights
on, Senator Schmit, would you like to close on your amendment?
SENATOR SCHMIT: Mr. President and members, Senator Warner and Senator Wickersham have very capably turned the argument around on me and said in the event that someone doesn't file, the old honest taxpayer, good old Ironsides Joe is going to have to pick up the difference. Ladies and gentlemen, I believe it's time that we do not treat the average citizen of the State of Nebraska like an habitual criminal. The average citizen wants to obey the law. The average citizen wants to comply with the statute. The individual who wants to circumvent the law is even now busily contemplating how he is going ... he or she is going to do that. And if past history is any criteria, they will find a way to do it. They will find a way to do it. They will hire the accountants, they will hire the attorneys, they will hire those individuals- who will tell them, if you change this schedule, if you 90 Off the accrual system, if you do these things, then the county board will have to go after you. What I'm saying, and I don't like...one of my major concerns, Senator Wickersham, is just what you referred to, discretionary authority. I abhor the discretionary authority that is necessary for county attorneys, for example. Let some individual without any resource break the law and the full force of the law comes down upon that individual. Let some individual, well known, we have it in our own situation, senators are not treated as are average citizens and the discretionary authority of the county board is going to be used differently in those instances. We enacted a law here, LB 130, that said, in effect, cigarette vending machines can be used only in very limited circumstances, totally changes the value of the cigarette vending machine. If I were in that business, I would say they were junk.. It's an arguable point but it's one which will be argued, 10,000 of them in the state, and what are they worth. The point that I make is the same as has been made by others here today. Confusion reigns in the State of Nebraska relative to personal property taxes. The tax, of and in itself, is unfair, arbitrary and capricious. I've made that point many times. I am not trying to encourage people not, to pay. What I an saying is that in the event, in the event that someone does not file properly, file completely, or file at all, certain penalty provisions are waived for this balance of the year 1,992. While we were debating this, I went back and read the arguments that were ... that were made on both pro and con when I suggested that we provide in the statute specific repeal language because the Department of Revenue had told me that there is no blanket
way that the county board can refund taxes overcollected, that we should provide for specific language. I have read Senator Warner's comments in which he disagreed with me. In that at brief period of time since we debated, Senator Warner has decided that. it is necessary to provide for specific repeal language relative to the collection of taxes that are not due. I suggest it's time to give the average taxpayer a break in this instance and to assume that every taxpayer is hanging on the edge of his chair waiting to find out what we are going to do and then they're going to rush down to the courthouse and do it, I think is an, assumption that is not valid. The average citizen needs, to earn a living. They can't sit with their eyes glued to the TV when in most...
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... areas of the state we do not have that capacity. And. so what I'm saying is that because of the confusion that has existed, let's treat everyone alike. Let's not leave it up to the discretionary authority of an elected official because they are under the same pressures to raise funds that we are. This morning we're trying to raise some more money because of a shortfall. The county boards are going to look at it and say, perhaps we just ought to go ahead and collect the penalties and treat- everyone alike. Let's treat everyone alike, ladies and gentlemen, but for once in our lifetime let's give the taxpayer a little bit of a break and say, taxpayer, we trust you. We know you are burdened. We know you don't like what we're doing to you but at least we trust you to be honest and, based upon that premise, we are not going to penalize you further than is absolutely necessary. I ask you to support the amendment.
SPEAKER BAACK: You've heard Senator Schmit's closing on his amendment. We will now vote on the amendment. All those in favor vote aye, opposed vote no. We have a request for a call of the house. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 13 ayes, 0 nays, Mr. President, to go under call.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence. The house is under call. Senators Beutler, Chambers, Lindsay, Nelson, Hartnett, Hefner, Horgan and Rod Johnson. If there are any of
my colleagues who are in their offices but not checked into the Chamber would you please come back to work. We have only got 32 people checked in. We are waiting for Senator Chambers. Senator Schmit, did you wish a roll call vote then? We are voting on the Schmit amendment and a roll call vote has been requested. Mr. Clerk, call the roll.
CLERK: (Roll call. vote. taken. ..See pages 1927-28 of the Legislative Journal.) 19 ayes, 11 nays, Mr. President.
SPEAKER BAACK: The amendment fails. A record vote has been requested. The call is raised. I would encourage any of my colleagues, if they are in their offices, to please come up to the floor of the Chamber.
CLERK: Mr. President, the next amendment I have to the Warner amendment is by Senator Lamb. Senator, AM3935. (See page 1882 of the Legislative Journal.)
SPEAKER BAACK: Senator Lamb.
SENATOR LAMB: Thank you, Mr. Speaker, and members, very difficult to do much business with only, what, 35 people here, but I suppose we may as well go ahead. This amendment has to do with the double taxation of motor vehicles if the constitutional. amendment fails and inventories are, therefore, on the tax roll. Senator Warner's amendment deals with this problem and, as you are aware, currently the situation is that the dealer will pay the tax if he has his car in inventory on January 1st. And then when you buy this car and register it, say, on February 1st, you will then be required to pay the property tax again, which is double taxation, which both Senator Warner and I believe is not fair I and is not fair. But we have two different methods of dealing with this problem and on your desk I have outlined my version of what should be done. Let's just go through that sheet and let's use ... I think the best way to explain it is use an example, and let's assume, for instance, that this automobile is in the dealer's inventory as of January 1st and also assume that the dealer sells this automobile. on February 1st. So, under Senator Warner's amendment, of course, the dealer would pay the property tax on the automobile because it's in his inventory as of January I and then, number two, the purchaser pays the property tax on the automobile when it is registered February 1st, that double taxation which we don't want. But, number three, then the dealer would receive a. refund of
eleven-twelfths of', the property tax he paid since this vehicle was in his possession only one month of the 12 months of the year. So we would have. to have this refund provision back to the dealer to alleviate the double taxation problem. I don't like that too well and one of the reasons I don't like it is because other dealers don't get that sort of refund. You have a farm equipment dealer that has a tractor on the lot January 1, he pays the tax. And then I come in on February 1st and buy, .this tractor, the dealer does not get any refund, he pays what is the, essentially the property tax for the full 12 months but he, doesn't get any refund because, of course, I don't have to pay the tax because the farm tractor will not be taxed until it's in my, possession I on January 1st the following year.. So there's no problem of double taxation. However, that dealer still has that problem because he has paid that tax for the full year. and so he is in a different position than the automobile dealer. So under my proposal, I am suggesting that, number one, the dealer pays the property tax on the auto because it's in his possession on January 1st, just as Senator Warner has in his, but, number two, this is where it differs, the purchaser, the person that comes in and buys that car on February 1st would pay no property tax on this car because it has ... the, tax has already been paid by the dealer for that calendar year. so, instead, of having a refund, the buyer of the car I just doesn't pay the tax, so the dealer does not get a refund, just as the farm equipment dealer does not get a refund on the tractor he sells. It puts those dealers in the same sort of situation. Now, the advantages of the method I am suggesting are, number one, well, there's no necessity for a refund since you don't have double taxation in the first place, and, number two, the au automobile dealer is treated exactly like the farm equipment dealer or business equipment dealer or any other dealer, so they're all the... all ... or it all works out the same for all of those dealers. Now what do I see as the main disadvantage of Senator Warner's method? And that is automobile dealers are less negatively affected than other dealers if inventories are placed back on the tax roll. You see, that automobile dealer isn't going to have the problem that the other dealers are going to have because he-- going to get the rebate tinder Senator Warner's plan. He's going to get the rebate when the customer pays the tax later in the year when the automobile is sold so that's why I'm suggesting that this amendment be adopted. We do away with the refund and ... and treat the automobile dealers just as all other dealers are treated. Sounds fair and equitable to me. I would like to hear... I have tried...tried this out on a.
number of people, both on and off the floor of the Legislature is and nobody has really come up with a valid reason why this is not a fair and equitable way of handling this problem. If there is a problem, I would like to hear about it. But I would I would appreciate your vote on this amendment.
SPEAKER BAACK: Thank you, Senator Lamb. Senator Conway.
SENATOR CONWAY:. Thank you, Mr. Speaker, and members, I rise in opposition to the Lamb amendment. And will be holding off for Senator Warner's amendment which is virtually identical to an amendment that I carried last spring when we were faced with the potential of the same problem. Automobiles are unique in the way that they are taxed. We pay that property tax 'at the beginning of, the period instead of the end of the period, unlike a tractor or any other piece of equipment where we have a period of time when it isn't even on the schedule and does not have a taxing period until we meet some magical date, the 1st of January, if so chosen, and then comes on the tax rolls and is paid after the fact and after the ownership period. With automobiles, we also have a bit of' a uniqueness by virtue of paying that tax at the beginning of the period when we register that vehicle in that we might buy that automobile in another county and quite often do and that tax, if, in fact, they come on the tax rolls under the personal property tax as inventory, there is going to be added to the price of the automobile, literally, the cost of that tax as an additional amount of purchase price when you buy that automobile.. That's going to -vary all over the state and as we then move over to...and in my case if I bought an automobile in Douglas County and went to Wayne County, I'm in a situation where I re I paid Douglas County's Is property tax, so to speak, at that rate, I will have a different rate in Wayne and let's say I purchase that vehicle and have it for six months, I'm then entitled... and sell it, I'm entitled for a refund on a tax that, according to the Lamb amendment, was never paid by me but was paid by the dealer. And so I'm still entitled to that refund because there's nothing in the amendment that addresses the refund provisions associated with selling an automobile short of the entire year's term that you paid the property tax on. So, as you put this whole twist together, you're going to see that the Warner amendment, because of the uniqueness of the automobile paying that tax up front, is really the only way that one can do it to make any particular sense. In essence, what you're doing is prorating out the amount of money paid up front by the dealer and then as the owner takes
that over that refund is just transferred down. So it makes much more sense to follow through on the Warner amendment and trying to equate automobiles with other dealers as being tractors or other types of equipment can't be equated because we tax them differently. We don't register that tractor in the county and pay the tax up front, it comes on schedule later., So they're not like situations and they need to be treated in a different manner.
SPEAKER BAACK: Thank you, Senator Conway. Before I go to the next speaker, I would like to introduce some guests of the Legislature. We have some fourth grade students from Oxford, Nebraska. They're guests of Senator Elmer and they're in the south balcony. Would you folks please stand and be welcomed by .the Legislature. Thank you for being with us. Senator Warner, you're next.
SENATOR WARNER: Mr. President and members of the Legislature I would rise also to support the...Senator Conway and his opposition to the amendment and essentially for the same reasons. But I would certainly agree that, as we all know, motor vehicles are handled differently and the purpose is to avoid double taxation the same year as the amendment that is proposed on the same piece of equipment. That's, not true of .other types of equipment, there would not be a case of double taxation because the purchaser of other equipment than motor vehicles, obviously, would not have it in their possession until the following January 1st after the date of purchase and, in fact, wouldn't be paying the tax then until whatever the registration month for the particular vehicle came lip. So to attempt to draw an analogy between the two situations just simply does not exist. I gather, from Senator Lamb's comments, that... and as well as his handout, that somehow or other the incentive on the part of automobile dealers is somehow less interested in taxing of inventory as it is proposed or as will be the case- , rather, should the constitutional amendment not be adopted, I suspect that their interest is just as keen with now as they would be with this possible amendment. It also affects others though, you know, it's not only automobile dealers that get a refund, individuals do too. If you sell your vehicle during the course of the year, you then are eligible for a refund and the new purchaser, even though it is between individuals, picks up the difference. I really don't know quite how you would handle the situation. Obviously, the price of a car that came into the dealer's inventory after January I would
have a different price than the one that came in before January a 1 because, obviously, the tax that was to be paid the following 12 months would have to be, applied to one and not to the other. It seems to me that it just significantly adds to the problem.. Certainly, the amendment that Senator Johnson offered earlier, and we have adopted, very clearly makes sure that no refund can be made unless, in fact, the individual had paid the property tax as inventory and that it was so recorded and that it was an excellent protection. This amendment, as I understand the way it's drafted, goes just the reverse of what Senator Johnson's amendment was, and I believe the way it's .drafted would prevent an individual who bought a car from a dealer who had paid the tax and then sold it later, as I understand, the draft, could then go get a refund of a tax that they didn't pay for the balance of the year because it, only applies to dealers. And that, too, it would seem to me, obviously, is not a thing that we would want to do as a matter of public policy. So I would urge the body to reject this approach and adopt the approach that, as Senator Conway indicated, was utilized in LB 829 last year. I think that's a very workable one and it's a very clear one and one that certainly the public is accustomed to and not another change they would have to learn to work with.
SPEAKER BAACK: Thank you, Senator Warner. Senator Coordsen.
SENATOR COORDSEN: Thank you, Mr. Speaker, and members of the body, I don support Senator Lamb's amendment but I think I rise to support what he is trying to tell us. And what he is trying to tell us with this amendment is what many of us tried to tell the body earlier in the property tax debate in that when you try to tax personal property by whatever mechanism or means you use you're going to come up with an inequitable system by definitional content of law. The method, as Senator Warner indicated and Senator Conway, and I'm sure others, is one that has been an accepted process relative to the method of levying property taxes and collecting property taxes on motor vehicles. Senator Lamb alluded to some purchase made from a farm equipment dealer early, in the year and the farm equipment dealer had already paid the full year's tax and had no way to get it back and the farmer wouldn't ... wouldn't have to report that till the following year and pay the full year's tax, whatever was due on it. The practical aspect of what... show that system works, that if an equipment dealer had an inventory on July 1, a large piece of... or on January 1, a large piece of equipment, he would be
liable for the tax under the scenario that's been presented to us relative to the constitutional amendment. But the margins are small enough in that business that the practical impact is that the purchaser of that piece of farm equipment will, in fact, pay all of the tax in addition to the cost of the equipment because no one can absorb, in their operating margins costs of the size that are going to accrue on farm equipment through this particular tax. So, above all else, what Senator Lamb points out to this ... with this particular amendment is that our system that's presented to us by LB 1063, with or without the implementing the constitutional amendment, is not going to be a fair system . There isn't any way that it can be fair. This illustrates one of the patent unfairnesses in it, so I ,would, while I'm not going to support the amendment, I certainly congratulate Senator Lamb in bringing it before us for consideration.
SPEAKER BAACK: Thank you, Senator Coordsen. Senator Lamb.
SENATOR LAMB: Thank you, Mr. President. I have had a number of .bills where I was congratulated on bringing those bills and it seems. that in every case that did not translate into votes for the proposal. But so I appreciate what Senator Coordsen says, you know, there's an unfairness here that I'm trying to get at, trying to bring to your attention, that some people under the system, that we will have if everything goes back on, if all inventories go back on the tax roll, we're going to have an unfair system. We're going to have an unfair system in many sectors and I am pointing out one sector where merchants who sit across the street from each other are treated differently. They are treated differently. The automobile dealer on this side of. the street is treated differently than the farm equipment dealer that's sitting on the other side of the street. It's a long way from being a fair and equitable system. One...one dealer gets a rebate, at least a partial rebate on. the property, on the property tax he pays on his inventory. The other dealer does not get a rebate on the property tax he pays on his inventory. There's an unfairness there. But, you know, the system is somewhat ingrained as to how we have been doing it and I recognize it as far beyond my power to, at this late date, change that system which, I think, I believe that does need to be changed. So. at this point, Mr. Speaker, I would withdraw the amendment.
SPEAKER BAACK; It is withdrawn.
CLERK: Mr. President, the next amendment I have to the Warner amendment is by Senator Schmit. This is AM3937, Mr. President. (The Schmit amendment appears on pages 1928-29 of. the Legislative Journal.)
SPEAKER BAACK: Senator Schmit.
CLERK: Senator Schmit, AM3937.
SPEAKER BAACK: Senator Schmit.
SENATOR SCHMIT: Mr. President and members, this amendment is a an amendment which, I believe, is properly following right on the heels of the Lamb amendment.. And the reason for this amendment. is to provide for equity in the taxation of personal property., I call again your. attention to the article relative to the railroads and their ability' to negotiate with the. tax commissioner to lower their tax burden if, in fact, the percentage of their tax that they pay upon their property is greater than is the percentage of tax paid by other entities who have to pay personal property tax. I know there is a deep concern about trying to make the system work. But it would seem strange... seems strange to me that one entity can become involved to the extent that we have allowed the railroads to become involved so that they can, in fact, dictate the kind of taxes that they are going to pay. I am not antirailroad and, were it in my power to do so, I would exempt all personal property from taxation. I agree. with, the concept that if only 30 percent of the person al property is going to be taxed that the railroads should not have to pay tax on more than 30 percent of their property. I do. not know how the tax commissioner is going to arrive at the proper numbers. At least one assessor told me he does not find it possible to even get into the buildings where. the railroad property is located. I do not know what percentage of the pipelines are going to be taxed but I haven't seen a pipeline laid in Nebraska for many years and I would assume that there will be very few pipelines that will have been laid. I Therefore, because they will have all been depreciated out, I doubt that there will be many pipelines that will be taxed. I do not know the situation relative to telephones. 1 know there have been some Substantial investments in equipment for the telephone companies and we will have to ... time. will tell as to what percentage of their taxes will be paid relative to other personal property. What I am saying in
this amendment is that the ... if the ratio of the taxable value of property of persons engaged primarily in the business of farming and ranching exceeds the ratio of the comparable taxable property other than property of persons engaged primarily in the business of farming and ranching by more than 5 percent, the tax commissioner may order the county assessor to adjust the value of property of persons engaged primarily in the business of farming and ranching to the percentage of such other comparable ,taxable property. Now if that is not what is happening with the railroads, if: I am incorrect, then I apologize. If it is what is happening with the railroads, then it ought to be acceptable as a. method for taxation of rural property. Mr. President and members, it's very simple, it's very straightforward, it is fair, it is equitable and I offer the amendment at this time. Thank, you.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Warner.
SENATOR WARNER:, Mr. President and members of the Legislature, first, under the provisions of CAI, which restricts ... which requires that All depreciable property will be taxed under one method, the uniformity that is so frequently talked about does not permit what is proposed here in this amendment. The only exception that's contained in CAI and sets up a separate class is where federal supremacy law is primarily the railroad, restricts the state in what they can do in the form of taxation that we have to comply with., whether we want to or not. 'The attempt to begin a route which many of you argued that you wanted uniform. treatment, this is being a ... and which, incidentally, CA requires, but this would be an attempt to Violate what many of you argued that you wanted, which was uniform treatment. And I would urge, that you reject this concept. Number one, it can't be done. If you start applying the concept also to railroads, you will be running a chase which you can never win because this tends to change the valuation, total statewide actual or valuation and taxable property ratios but that's another issue. But the facts are that the constitutional amendment does not permit that, what is proposed here. And the only exception is where the federal supremacy factor exists and that, of course, we have no choice but to recognize that. So I would urge the amendment be rejected.
SPEAKER BAACK: Thank you, Senator Warner. Senator Schmit.
SENATOR, SCHMIT: Mr. President and members, I believe that
Senator Warner has said it all. I said. it repeatedly on ..this floor during the debate on LR 219CA, you're not going to tax ax the railroads. Now you may get a little token tax money under this convoluted system which is being proposed here today. If and when you do, ladies and gentlemen, it's going to be dictated by the railroads. And then they'll say it's cheaper to, do.. this than go to court and we can.. we'll put on our good citizen white hat and we will march with the best of them. But the. facts are that we are progressing rapidly down the direction which I said we would progress when LR. 219CA was adopted. Tile railroads are going. to opt out for all except the token amount.,. Pipelines will follow suit and I would assume telephone companies, based upon their ability and agility in the Past'.. will also follow suit. And so you're going to have the ma and pa businessman and the farmer and rancher. And then, of course, when additional revenue is needed, it cant come- from nowhere except those who are not in a position to sit down and negotiate with Mr. Balka or whoever happens to be in the Tax Commissioner's office. As I recall, it was argued on this floor repeatedly that we're going to have uniformity in the taxation of personal property because it's only going to be on depreciable property. I have tried to determine, through the various methods available to me, what percentage of the total personal property tax will be under the tax coffers under LR 219CA. The nearest I call come is it is about 29 or 30 percent. So, ladies and gentlemen, I visited. this morning with Attorney General Spire for a little bit and I couldn't help but reminisce a bit that when lie conceded that only 25 percent of personal property was being taxed that the court said that's not fair, that's not fair, we're not going to allow it. So now we raise that to 30 percent, the difference principally being this, instead of taxing the railroads and, the pipelines and the telephones, we are now taxing the small business person and the farmer and rancher. I don't think the court is going to look any more kindly oil that than they did on the other. And no matter what kind of stretch of the imagination we use, to assume that a depreciated cow is taxable property and a nondepreciated cow is not taxable property, I believe the court will say a cow is a cow is a cow flow we talk about looking at... yeah, thank, you, Senator Hefner. The credit goes to Senator Hefner. Now we talk about assessment of personal property and try proposed amendment relative to mistakes was not successful. And, as I look at some of those persons who voted against the amendment or who did not vote or were not present, I'm wondering how they're going to explain that even today...in the old days when the
county assessor went out to the farm they could identify taxable property.
SPEAKER BAACK: One minute.
SENATOR SCHMIT: Today they're going to look at old bossy in the eye and say, are you depreciated, bossy? Or are you a nondepreciated bossy? Now, if you're depreciated, you've got to put your foot... your hoof print. on: the taxable. on the form here and pay -taxes. But if you're not depreciated, then you. don't have to. Ladies and gentlemen, given the wisdom of most farmers and ranchers I know of, you're going to see an awful lot of nondepreciable animals out there. This, is an attempt. Senator Warner, says we can't do it. I Senator Warner, I this Legislature has done, a lot of things that can't be done. We, have not done anything right in the last five years. The court has not accepted it. I suggest we try At least to approach it on the basis of some kind of equity. Thank, you very much. I ask You to support the amendment.
SPEAKER BAACK: Before I proceed to the next speaker, I would like to introduce some guests of Senator Conway. We have 18 seventh graders from the Newcastle Public School and the i r teacher. And they're in the south balcony. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. Senator Warner.
SENATOR WARNER: Mr. President and members of the Legislature I did not say now nor have I ever said on this floor that under the provisions, of the constitutional amendment, C, now known as CAI, that railroads would not be taxed. What I did say, ,repeatedly, that of all the methods that wore considered, that I an-. aware of, this was the only one which they might be taxed. There is nothing in the provisions of CAl that would automatically pull out pipelines and telephones companies. They rode out of the 4-R Act along with the railroads on the basis of the tie between real and personal property and the requirement by the 4-R Act as dictated by the courts that the level of valuation was too high by the formula that's in the 4-R Act. So it simply is not accurate to suggest that CA1 means railroads will. pay no taxes. The issue that is at stake is whether or not it complies with the 4-R Act. And when we get to that issue, which is an amendment to the bill as a whole, so that it can be amended and discussed in any fashion that the body wishes to do so and not be locked in as an amendment to the amendment, when
April, 3, 1992
we get to that issue we will again point out that that is being proposed to be put in at this time in order to give to the tax commissioner the authorization to comply... for the state to comply with the provisions of the 4-R Act affecting railroads only and possibly airlines. Their federal supremacy laws are somewhat different than the 4-R Act. But it is to give the possibility to the railroads in the state to comply and if the ..tax. commissioner chooses not to, of course, a lawsuit can still, be filed. I may as well talk a little about the railroad Because that keeps coming up here. There is a slight difference. in the estimates, slight reduction to what the railroads Across the state would be paying from the way the bill was... LB 1063 was enacted. The comparison on personal property is about 5.5 million, reduced to 2.25, about a million and a quarter less. The issue, with me is, as we have dealt with this, however, was that. if you force to. go to court to resolve an issue, if you force to go to court, then there is, true., once the case is filed, the opportunity to negotiate but there is none before. that under existing law. Maybe a lawsuit then would not necessarily be followed through but assuming that it was followed through, which I suspect is more likely, then the courts are not going to tell you how to do it. They're going to .tell you whether what you did was correct or not, which means that you, from my viewpoint, there are, either approximately 4.25 million paid or zero, if you go to the courts; or it could be 5.50 or zero. I don't want to run that chance. It makes a .significant difference when the case ...
SPEAKER BAACK: One minute.
SENATOR WARNER: ... if there would be a case be filed, railroads chose to file the case under the 4-R Act after the State Board of Equalization had made valuations, and, by the way, the county has no responsibility in the implementation of the personal property as far as railroads are concerned, it's all down at the state level and each county is sent as well as each subdivision what proportionate amount of valuation they have to the valuation statewide of a railroad ... of a particular line, and the end result is that we are not going to be faced with refunds.
SPEAKER BAACK: Time.
SENATOR WARNER: We're going to avoid a lot of those kinds of problems which 7 think is important to do, but we'll discuss
that issue on the proper-amendment.
SPEAKER BAACK: Thank you, Senator Warner. Senator Schmit.
SENATOR SCHMIT: Mr. President and members, comes right down to the bottom line, all of us know that rural people in Nebraska and small business persons were suckered into the support ox certain legislation because they said this is the only way we're going to get the railroads. Ladies and gentlemen, I was never a proponent of taxing the railroads for the reasons given by Senator, Warner. The 4-R Act says you're going to treat them equitably. And, under this proposal, the Governor had not even signed the bill and the railroad says, huh-uh, we're not going to buy off on it. I quote from the World-Herald article*. Mr. Fisher, who I know very well, says, "If it's adopted, it won't litigate." Fair enough. Senator Warner gives some good reasons why that's the way to go. Unfortunately, the average farmer, rancher, business person is not in that position, for whatever reason, they can't afford that situation. I visited with some of the railroad people and we're talking about 4 million bucks. I've got a reputation as a gambler. I'm I willing to gamble ... we're talking maybe two, maybe two. I don't think it's going to be $4 million. Why would they pay $4 million? Because if they go to court, as Senator Warner has said, they're going to... they're going to win and they will pay nothing. Now it's okay to pay a certain amount of money to get rid of a nuisance. All of us have been in those positions. All of us have been ... not all of us, some of us have been in court and it's easier to pay a few thousand bucks and not litigate. Lawyer's have plenty of work to do anyway, although we do have too many lawyers and they tend to produce extra work. But the point blank truth is this, ladies and gentlemen, the railroads are going to pay what they damn well please. And if I was in their position, I would do the same thing, I because the 4-R Act passed by the Congress says there have been all sorts of things out there that have not been fair to railroads. There are two types of taxpayers, ladies and gentlemen, that can be .discriminated against, the very small and the very large. The very large have said, we've had enough, we're not going to be treated that way anymore. You're going to treat us equitably or else, and, in our estimation, we've paid and paid and paid for too long. So now the burden is going to shift to the other taxpayer, the small taxpayer, and I do not know how much longer the small taxpayer will accept their share of the burden. I know the homeowner... I wish Senator Lynch was here today, the
homeowner has had enough. l know that the small business person has had enough. I still contend, as I have said earlier, the, continual escalation of expenditures on both the state and local level makes it virtually impossible to draft a tax collection plan that is equitable because we are simply collecting too much revenue. But we're not going to collect it anymore for the railroads and the unwillingness of someone to say what is, fair for the railroads, this is the Nebraska version of the 4-R plan it says we're going to try to I within the realm of possibility that's available to us to, treat., agricultural property...
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... in the same manner and percentages, treat railroad property as big as that ... big exception, of course, some people in the agriculture area are going to escape scot-free and some are going to pay a lot more than 30 percent. But any indication that the railroads are going to belly-up to the bar and lay down four, point some million is, I think, looking at it through rose-colored glasses. And if I were them, I wouldn't do it either. I would go to court for a lot less than that. And I think they would win. I think that we ought to take a look at this. Senator Lamb withdrew his amendment because he said it didn't have a chance. I still think it's best to vote on these bills... these amendments so that we know how people feel about them and a year from now, or two years from now we can have a record as to what really happened when equity was discussed in taxation. I ask you to support the amendment.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Warner.
SENATOR. WARNER: Mr. President and members of the Legislature, I have a feeling I'm prolonging the debate for no particular good purpose because every time something is said that, in my opinion, is not accurate I feel compelled to respond. The tax issue that's before us that the state's spending too much money, is not the issue here. That issue is on appropriation bills and one just votes no, I guess, or reduces them. Incidentally, LB 1063 did have a very tight lid on local governments on the property tax side which was an effort on the revenue side to restrict their budgets. And the state, very frankly, if we had as a matter of public policy some...a couple of approaches to taxation and budgeting, which is pending legislation which we will not deal with this year, wouldn't have some of the problems
we've had in the past year because I we would carry adequate. reserves ,which would get through the high and low economic times. But my opinion, when we get to the railroad amendment, and that's really what we're discussing, we will be collecting the 4.25 million or thereabouts, best estimates. I do not believe, if that amendment is adopted and implemented by the tax commissioner, which is, authorized, that there would be no. lawsuit. The taxes would be paid. But if we fail to do anything, then. the potential is there. The potential is the governmental subdivisions would have around 5.50 million, under, LB 1063, or if the state would lose the court case, zero. And when. we get to the other amendment I think we're assured, as best one can be assured, at least there will not be the 4.25 million. We will not be putting local governments in the position of setting levies before a lawsuit is filed, having shortfall in the receipts. We will not be looking at refund. And I think that is an issue that should be discussed on that amendment, not here, but neither can I let remarks just go by the way which are not accurate and not to immediately comment on them. I would urge that the amendment that is proposed would be rejected for reasons I initially stated and that is that CA1, if adopted, does not permit this kind of classification of taxation, requires that all depreciable property have one method of depreciable depreciation utilized with the exception where federal supremacy laws affects our ability to do that. And that also is provided for in the constitutional amendment and, as structured, will not, I believe, will not carry over to other sectors of the economy where there is no federal supremacy legislation affecting how Nebraska can structure their own tax system.
SPEAKER BAACK: Thank you, Senator Warner. Seeing no other lights on, Senator Schmit, would you like to close?
SENATOR SCHMIT: Thank you, Mr. President it's always interesting how we use various types of numbers in arguments. I am not unaccustomed to being lectured by my good friend, Senator Warner, because he has excellent historical knowledge of the tax structure in the State of Nebraska, both on the revenue side and the appropriations side. One, of the comments in this article says that. in 1988 railroads were paying $10 million taxes. And under the present proposal if and when Mr. Balka is successful, they will pay 4.25, which I don't believe will happen. In any case, no one talks about the fact that the amount of personal property owned by the railroads has undoubtedly increased
substantially since 1988. The state budget has increased substantially. I would assume the railroads and other classes of personal property have increased also. So for those who would imply that this is going to have the railroads panning about 40 percent of what they were paying in 1988 is true but it is not 40 percent of the burden that would be imposed if the centrally ally assessed property were all laid out in front of us today. And Senator Warner continues to, refer to 'constitutional amendment 1. And, of course, I opposed that vigorously. I Would hope that those of you who supported the constitutional, amendment can see now why I did... The inequities that were before that time perceived are now built into the constitutional amendment so as to protect certain entities. Ladies and gentlemen, what we have done now is to set the stage for an event that will only become worse. And I would suggest that if 'we continue to hammer away on this that we're not going to get much better. I agree with Senator Warner, there are some ,technical corrections here, but some of these are not technical corrections. And it's interesting that, as I said before, it, wasn't until the bill was passed by the Legislature that the railroads said to- the Governor, we won't buy it, and the .Governor said, let's sit down arid talk, and key senators sat down with the Governor and the railroads and negotiated. And, ladies and gentlemen, under those kind of conditions, I don't have any doubt how the railroads came out nor how they will come out.. If we're going to allow the tax structure of the State of Nebraska to be established by negotiation between principal taxpayers arid the tax commissioner, that may be acceptable. I do riot know if we can do that or riot legally. But if, we set that precedent, then we are going to see an expansion of that kind of activity as other taxpayers take up that same kind of a forum. rum. They're going to say, oh, no, you can't do that because we're. riot protected by the 4-R. Well., ladies arid gentlemen, that's why businesses hire lawyers arid we have talked before about going back and falling back upon the equal protect ion clause of the Constitution, arid someone else is going to try it, arid someone else is going to try it. And, eventually, as I said before, the individual taxpayer, without a forum, without a spokesperson, without the ability or the resources to hire attorneys, you're going to pay a greater and greater proportion
SPEAKER BAACK: One minute.
SENATOR SCHMIT: of the tax burden. I ask you to support the
amendment in the interest of equity and fairness and let someone else say that we can't do it.
SPEAKER BAACK: Thank you, Senator Schmit. That was the closing on the Schmit amendment. We will now vote on the Schmit amendment. All those in favor vote aye, opposed vote no. We are voting on the Schmit amendment. Have you all voted? Have you all voted? Record, Mr. Clerk.
CLERK: 7 ayes, 6 nays, Mr. President, on adoption of the amendment.
SPEAKER BAACK: The amendment fails. Items for the record. CLERK: Mr. President, thank you. Senator Wesely has amendments to LB 1019 to be printed; Senator Schellpeper to LB 503; Senator, Hall to LB 934. (See pages 19.29-30 of the Legislative Journal.)
A new resolution by Senator Pirsch. (Read brief description of LR 425. See pages 1930-31 of the Legislative Journal.) New A bill, LB 934A. (Read by title for the first time See page 1931 of the Legislative Journal.) That will be laid over.
Mr. President, the next amendment I have to the Warner amendment is by Senator Robinson. (The Robinson amendment appears on pages 1931-33 of the Legislative Journal.)
SPEAKER BAACK: Senator Robinson.
SENATOR ROBINSON: Mr. President and members of the body, this is a...originally a bill, LB 996, a bill that Senator Cudaback, Senator Elmer arid myself brought for the Educational Service Units. There is presently a small number of school districts who choose not to belong to an Educational Service Unit arid whose property is not taxed for that purpose. How some of these school districts have expressed an interest in rejoining a unit. The proposed change would require the school district property to be assessed with the levy currently requested by the ESU unit. And, basically, that's what the bill is that...it came out of committee six to nothing. Also, there's another small part to it, is when a school district dissolves, with that property moving to one or more new ESU units then that property would be taxed by the ESU units and I would urge your adoption of the amendment. Thank you.
SE14ATOR LAMB PRESIDING
SENATOR LAMB: The Chair recognizes Senator Cudaback.
SENATOR CUDABACK: Senator Lamb, members of the body, this amendment actually won't change one thing unless the people want it to be changed.. The. school board has the option. If they opt to come back into the program, then somebody must pay under this provision. If nobody requests to come back in, there will not be a change and consequently nothing changes, So I just urge your support. Some districts would like to come back in and it's a great service the ESUs provide and they should have the opportunity to do such. I urge your support for this amendment. Thank you.
SENATOR LAMB: The Chair recognizes Senator Hall.
SENATOR HALL: Thank you, Senator Lamb, members, I rise in support of Senator Robinson's amendment to the bill 11 he's Is amending into the amendment, came to the Revenue Committee, was would have been, another candidate for consent calendar had it been out a little earlier. It was a late issue that we dealt with. It was, as lie stated, one that would allow for those ESUs that acquired new value to be able to tax against that for purposes of their budgets. I would urge adoption of the amendment to the amendment.
SENATOR LAMB: Senator Robinson, to close.
SENATOR ROBINSON: Waive closing and I would ask for a call of the house, please, because I'm sure we don't have the number present. Thank you.
SENATOR LAMB: Call of the house has been requested. All those in support vote aye. Those opposed vote no. Record, Mr. Clerk.
CLERK: 15 ayes, 0 nays. to go tinder call, Mr. President.
SENATOR LAMB: The house is tinder call. All senators record your presence. All unauthorized personnel leave the floor. The house is under call. At this time, I would like to introduce, some guests of Senator Conway, in the south balcony. They are 30 fourth graders from the Homer School at Homer, Nebraska, with their teacher. Would you folks rise and be recognized and welcome to the Legislature. Senator Beutler, would you record your presence. Looking for Senator Lindsay, Senator Pirsch,
Senator Rasmussen, Senator Schellpeper, Senator Schrock, Senator Labedz. Would you please record your presence. We're looking for Senator Pirsch and Senator Schellpeper at: this point. Senator Robinson, we cannot locate at this point. We will begin the roll call all, Mr. Clerk. Oh, machine vote. Machine vote.
CLERK: Have you all voted? Record, Mr. Clerk.
CLERK: 32 ayes, 0 nays, Mr. President, on adoption of Senator Robinson's amendment.
SENATOR LAMB: The amendment is adopted. Mr. Clerk.
CLERK: Mr. President, Senator Hall would move to amend. AM4001, Senator.
SENATOR LAMB: Senator Hall.
SENATOR HALL: Thank you, Mr. President, and members, the amendment here is...
SENATOR LAMB: Raise the call.
SENATOR HALL: ....a group of bills, three, to be exact, that were heard in the Revenue Committee, all three of which were advanced out, the first being LB 897 that was introduced by Senator Warner. It was a bill that provides for a report with regard to the Department of Revenue relating to tax policy changes. If you would like to open your bill book to LB 897, there was Senator Warner who testified, introduced the bill and then John Anderson from the University of Nebraska Lincoln and Don Yelick from the Legislative Council with regard to the other testifiers on the bill. It just would ask the Department of Revenue to compare analysis on economic sectors defined by the SIC codes for future policy changes. The bill would ask that the Department of Revenue...and I'm just reading from the summary of it, compile indicators of each sector and show the role and legal tax incidents by tax type, develop an appropriate share of each sector's taxes; two, compile the amount of tax fees and other governmental costs imposed on each economic sector and those individuals employed in those industries by sector; establish the tax fees and the governmental costs exported or offset by their tax laws. It would allow for cooperation between the Department of Labor and the Department of Revenue and the University of Nebraska for compilation and
computation of this information. Currently, right now they do not have the capability or necessarily the authority to exchange information. It also allows the Department 'of Revenue to contract with an independent entity for any assistance that they may need and it requires that a report be made by December 1, 1992 with the appropriate information. It also then goes on to say that the report is updated on an annual basis each ,.December 1st. Has the report filed with the Clerk and the Revenue Committee and has the models that are developed by this, trilogy Of entities to be shared. with the Legislative Fiscal Office and the E clause is attached. The second bill is a bill that. was introduced by the Revenue Committee, LB 1269. It's the ,cabin trailer bill, if You Will. It just redefines, cabin trailer for purposes of taxation. It was such an innocuous bill that Tim Erickson introduced it on the part of the Revenue. Committee and the re was no objection to it. It was, again, another consent calendar type of proposal that would, had it seen the light of day, have been passed into law earlier, this year. The third bill, and I misspoke earlier when I said that all three of these bills had been advanced out of committee, this provision is one that did not advance out of committee because I introduced it and I did not push the issue. But I do believe it's important. At the time that we were dealing with this issue, then we were also dealing with another tax issue on personal property. What it deals with is the assessment practices and procedures at the local level and it is a provision under LB 1244 that goes back to the assessment group, the assessment commission that was put together by then Governor Orr and we spent time studying just what needed to be done with regard to the assessment practices in the state to bring some sort of uniformity and at least reliance on those practices across the state. What LB 1244 did was, it was similar to another bill that I introduced in an earlier session, looked at the recommendations and the changes that the commission suggested for purposes of legislation and incorporates those. And I would offer that as the amendment. What it would do is this, It requires any person employed or elected after January 1, as an assessor, to be a licensed, certified or registered appraiser. That is part of the professionalization of the offices across the state. The issue also allows for someone who happens to work in those offices to fill that .requirement. It eliminates the school that the Department of Revenue is required to put on each year with regard to appraisal requirements., They have cancelled that school in the past or put it off, if you will, because. of the personal property tax
issue and. it has really not. served the kind of purpose that it was intended to serve from time to time and the department feels that they have a different version or scope, if you will, of what it ought to be. What we do in this bill is just eliminate it. Gives, intent language which requires the department to. update the assessor's test and requires that each, county, assessor take and pass the test before filing for election or reelection. The assessor's test is not a difficult test. It is one that is of minimum requirement, if you will, with regard to the understanding the broad issues of property and its taxation and assessment and valuation, so it is not something that. would prevent anyone from filing for office. Fourthly, it creates a statewide sales data file for better comparable sales to determine actual value. What it does is it has the Department of Revenue set up a statewide sales data file and it has that data file available to the assessors to help them work out, determine value for specific pieces of property that may be for some reason unique to them as far as assessment or valuation goes. And what this would do is allow for those type s of properties to be compiled in a file so that they would have a bank, data batik, if you will, for purposes of making comparisons although there clearly will be differences but at least they will have some rational basis on which to begin from when they have a unique piece of property, although the data filed does apply to all sales that would take place. This is mainly and specifically looking at the issue of unique types. of properties that can vary from county to county, depending on assessment practices. It also requires mandatory reappraisal in counties should they not meet the standards set forth by the Department of Revenue. And that is an issue that many people were concerned about in terms of mandatory reappraisal. It is one that I think needs to be addressed. If a county is not able to meet the standards that the Department of Revenue sets, if they haven't been able to bring their assessment practices up to speed, if they have comparable sales that don't relate to the value or the assessment placed on properties, then they need to be looked at. And there is provisions in the bill that allow for time for that to take place for them to fix any problems that they have before a reappraisal would be required. And then, lastly, it raises the documentary stamp tax from $1.50 to $2.50 to pay for the mandatory reappraisal through the current mix of funds. So, in other words, that mandatory reappraisal would be one that oftentimes is brushed under the rug because of the cost. What we do is, through the increase in the documentary tax stamp, raise revenues to allow for.
SENATOR LAMB: One minute, Senator.
SENATOR HALL: ... that to be paid for out of that fund that would be established. With that, Senator Lamb, I would urge adoption of the amendment. Clearly, the first two parts, I think, are extremely noncontroversial. The third part, dealing with the LB .1244 any or all of the proposals could be divided for purposes of debating them. But I think all three of the issues needed to be addressed this year. As I mentioned, the first two, LB 1269 and the cabin trailer bill ... excuse me, 1269 was the cabin trailer bill, LB 897 introduced by Senator Warner relating to the interrelationship between revenue, the. university and the Labor Department for purposes of putting together a model using the sector indicators is, again, I believe, a noncontroversial issue. I have no ... could care less how they're dealt with. If someone wants to divide them, fine.
SENATOR LAMB: Time.
SENATOR HALL: If they choose to accept them as a package, that's fine as well.
SENATOR LAMB: We're discussing three innocuous bills that Senator Hall is introducing on Select File. Senator Warner is the next speaker.
SENATOR WARNER: Mr. President and members of the Legislature, as Senator Hall has explained, this is amendments that were in the form of other bills, one of which is one that I introduce d. And the amendments, themselves, I've got a couple of questions About them, Senator Hall. I believe you indicated that there was the Tax Commissioner's property assessment improvement fund, I believe...
SENATOR HALL: Uh-huh.
SENATOR WARNER: ... and the increase in the documentary tax. This ... I have a practical problem. Where ... where do you intend to have the appropriation occur? The tax is collected, but we need an Appropriation, and 1 have the same problem with- the bill, with the amendment that, with your amendment where it includes the bill I introduced. In fact, I think you and I co-introduced it if I remember right, maybe,...
SENATOR HALL: Hmm.
SENATOR WARNER: ... but that needs funding, too, and I don't know how you can do an A bill on 1719A (sic), and. I know it could not be appropriated in the bill itself. Have you got an A bill that can be utilized...
SENATOR HALL: I have got a...
SENATOR WARNER: ... somewhere?
SENATOR HALL: I have got a...
SENATOR WARNER: Any A bill can do it.
SENATOR HALL: Any A bill it, could be tacked onto, and I would be willing to do that. The fund, to answer your first question, the fund would be through the Department of Revenue and, again, it is just ... it is not a complete payment of that reappraisal. It is only 50 percent, up to 50 percent, so yet that is where it would flow through, the Department of Revenue, but it would have to have an A bill that would follow, and I would move to amend, if this amendment is successful, an A bill that is out there, probably one of the ones that we've advanced over off of General in the last few days, as we've been bringing them up just to make sure, but, I don't have that filed pending the success or failure of this amendment.
SENATOR WARNER: Okay, I want to be sure to raise that issue.
SENATOR HALL: Right, and I appreciate that.
SENATOR WARNER: One other concern that had been talked about and may have been talked about on the hearing, I do not recall, on the economic impacts, or sector impact. I believe the way the bill was introduced and the way you have it amended, it was timed, it was to December of 1992, and as I recall, there was, somewhere along the line, there was a question raised as to whether, in fact, this could be completed by that date. And I would share some concern as to that, unless there is a clear understanding. I suppose that that might only be an interim report or progress report rather than a final report, and I don't think it physically conceivably could be completed and be as accurate as we would like by December 1st of this year, plus we need come funding for it.
April 3, 1992.
SENATOR HALL: Correct.
SENATOR WARNER: Could you comment, would you...
SENATOR HALL: Sure.
SENATOR. WARNER: ...maybe later we could make an interim report instead of the final report for that date, so, at least, then we can monitor its progress and see how it is coming, at a minimum.
SENATOR HALL: That added, Senator Warner, I mould have no objection to that. I believe that it, for my purposes, I know: we had talked about this, you and I directly, that it was....there was a, question whether or not the December I date would be able to be achieved, and that one of the things that...I have no problem stating that for the record, that the...
SENATOR CONWAY PRESIDING
SENATOR CONWAY: One minute.
SENATOR HALL: ... December 1, 1992, time frame would not necessarily have to be a completed final report, and if the language needs to be changed to adjust for that, if it is mandatory right now, and I will take a look at it, I would have no problem doing that.
SENATOR WARNER: Okay, then I will just assume that you will make that ... have such an amendment, I won't pursue it...
SENATOR HALL: Okay.
SENATOR WARNER: ... if it looks desirable. Thank you.
SENATOR CONWAY: Thank you, Senator Warner. Next is Senator Landis.
SENATOR LANDIS: Mr. Speaker, members of the Legislature, I rise in general support of the amendment. I am not convinced on every aspect of it, but as far as the general goal, if the bugs can be worked out, I think the goals that Senator Hall is trying to achieve are reasonable ones. The study and the work in trying to reappraise and to (jet intercounty equalization is a
good goal, and for that reason, I generally rise to support... my Chairman.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Thank you, Senator Landis. Senator Wickersham..
SENATOR WICKERSHAM: Mr. Speaker, I would ask that the, question be divided, and if Senator Hall will assist me, I believe that we should divide out from Section 161 to 122 (sic). My intention is to divide out LB 1244.
SENATOR HALL: Mr. Speaker.
SPEAKER BAACK: Yes.
SENATOR HALL: The division is not a problem at all and I believe Senator Wickersham has ... well, could you... Jim, what was that...excuse me, Bob, what was the... 169?
SENATOR WICKERSHAM: 161 to 16...
SENATOR HALL: I believe the correct...
SENATOR WICKERSHAM: 161 up to 222, it would be to page 37, line 4.
SENATOR HALL: Correct, that would be the...
SENATOR WICKERSHAM: That would be all the contents of LB 1244.
SENATOR HALL: That is correct.
SENATOR WICK SHAM: Okay.
SPEAKER BAACK: That is clearly divisible along that line.
SENATOR HALL: If I have the option, I would choose to take the first two sections, that being the cabin trailer bill and the sector analysis proposal first.
SPEAKER BAACK: We will do that first.
SENATOR HALL: And then come back to the assessor provision.
.SPEAKER BAACK: We will definitely do that first.
SENATOR HALL: Okay
SPEAKER BAACK: Okay, on the first section of the amendment, Senator Hefner, did you wish to speak to that first section? Mr. Clerk.
CLERK: I just want to be sure, Mr. Speaker. Senator Hall, Section 161 through 222? Okay. Okay.
SENATOR HALL: (Mike off) yes, Mr. Clerk.
CLERK: 161 through 221.
HALL: Correct, well, it is not listed as 221.
SENATOR HALL: No, the problem is that it goes from 161 to 169 on page 35, and then goes over to 77-425 on page 36. It would include all of that, and then the balance of that section, on, lines 1 through 3 on page 37.
CLERK: But it includes all the material in between those?
SENATOR HALL: That is correct.
SENATOR HALL: That is correct.
CLERK: Thank you, Senator.
SPEAKER BAACK: Okay, now that we have the correct division, we will speak ... we will deal with the first part of the amendment flow, Senator Hefner, you did not wish to speak to that? Senator Hefner.
SENATOR HEFNER: Mr. Speaker and members of the body, Senator Hall, maybe you could help me out a little bit, but...
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Yes.
SENATOR HEFNER: Okay, in regards to LB 897 and LB 1269, we did advance those two bills, didn't we?
SENATOR HALL: That is correct. They were advanced without objection, Senator Hefner.
SENATOR HEFNER: Okay, and then since we are going to divide these, the first two will be in the first one, and LB 1244 will be in the second one.
SENATOR HALL: That is correct.
SENATOR HEFNER: So I guess I'd ... did we have anybody testify against LB 1244, do you recall? That increases the documentary tax.
SENATOR HALL: Right, that would be the second half of the amendment. We are now on.
SENATOR HEFNER: Okay.
SENATOR HALL: we are on the first half.
SENATOR HEFNER. Okay, I will talk a little later then.
SENATOR HALL: Right, okay.
SPEAKER BAACK: Senator Beutler.
SENATOR BEUTLER: Is it possible, Mr. Speaker, to divide out the second part further so that the increase in the documentary stamp tax is separated from the remainder?
SPEAKER BAACK: We are dealing with the first part right now. Let's go ahead and deal with the first part of the amendment right now. Is there any discussion on the first part of the amendment? Seeing none, Senator Hall, did you wish to close on that portion?
SENATOR HALL: Just that these are... thank you, Mr. Speaker, members. Just that these are two bills that, like I said, they were advanced out without objection, and they are technical changes, at least in the cabin trailer provision. The proposal that Senator Warner and I discussed with regard, that we did
cosponsor dealing with the impact on taxes as they relate to sector by sector analysis or breakdown allowing for the University of Nebraska in Lincoln, the Department of Revenue, and the Department of Labor to work jointly together, those being the two departments of government that deal with the numbers in terms of, employment and tax, and that have the figures available to them allow for them to work together to just break down on a sector by sector basis what the impact of tax changes, shifts, and the current system is, and to develop a model that we could use into the future that could be updated, and to allow for the systems to coordinate that information I think is an extremely important provision as we move forward in terms of taking a look at various tax changes that we are going to have to address in the future. So I would urge the adoption. I do not believe that any of the provisions in these two sections would meet with any objection. I will take care of the, amendment in terms of an A bill that Senator Warner mentioned would be necessary if this is adopted.
SPEAKER BAACK: Thank You, Senator Hall. Senator Lamb, on this first portion of the amendment.
SENATOR LAMB: Thank you, Mr. Speaker.
SPEAKER BAACK: Oh, excuse me, excuse me, Senator Lamb. Senator Hall was closing so we will now vote on the first section of the amendment. All those in favor vote aye, opposed vote no. Have you all voted? Record, Mr. Clerk.
CLERK: 25 ayes, 0 nays, Mr. President, on the first portion of Senator Hall's amendment.
SPEAKER BAACK: The first portion is adopted. Senator Hall, on the...would you like to open on the second part of the amendment?
SENATOR HALL: Thank you, Mr. Speaker, I would. The second part of the amendment deals with the assessment practice in the state and upgrading, professionalizing, and, frankly, standardizing them, also looking toward uniformity, as it relates to assessment value, comparison, and all the components of a tax system that would have the base that you start with, the value that is placed on it in terms of an ad valorem tax system, be as accurate as possible, so that the rates can be as low as possible if you keep the value as close to true in terms of
what it would bring, if that is a fair market system, if that is what the definition of a fair market value is, you can then-have' a tax system with rates that are as low as possible, so that the base from which you start has to be as true as possible. We currently in Nebraska don't have that, and it is my belief that we need to improve our system.. I am going to continue to work on this. I think that it is something that is vitally necessary at this stage. Unfortunately, because I use of time, it won't be given its necessary due, :but: I in tend to bring it back I intend to bring it back until it is passed, because it is, critical. The assessors, themselves, will tell you that they want this for themselves as a tool in which to begin not only to professionalize themselves but to be able to do a better job for their constituents, that being the taxpayers of the state. Many of the assessors out there do a tremendous job, but they need better tools in which to do that. What the intent of this a I amendment was, and the original bill introduction of LB, 1244, was to do just that. I am going to continue along those lines, but not today. With that, Mr. Speaker, I would respectfully ask to withdraw the second half of the Amendment.
SENATOR HALL: It is withdrawn.
CLERK: Mr. President, the next amendment I have is by Senator Cudaback. (See AM3987 on page 1934 of the Legislative Journal.)
SPEAKER BAACK: Senator Cudaback.
SENATOR CUDABACK: Mr. Speaker and members, what this amendment would do, it would go by the nutrient basis rather than by, the to I tonnage on fertilizer. This would raise the fertilizer from $40 on the tonnage to $6 on the nutrient basis. There has been a lot of discussion about this. We All understand it. We know what is going on It was put into place in a matter of several hours. There were several mistakes made. I think we understand what they were at the time. You do things in haste once in awhile, and then you reconsider the fact, and you come to the conclusion that there probably was a mistake made. When do you adjust this mistake? I guess the wheels are now rolling, as of April 1st dealers and so on started going ahead and taxing according to the tonnage, and this has been three or four days down the road. Do you change canoes in, the middle of the stream? I don't know Perhaps you cause more confusion than if you would stick with the process, and study it out, and come to a conclusion later on. Senator Schrock has proposed a study
this summer on the situation. Maybe if we would do it now, we might find something that would be incorrect at that time. So perhaps it, would be best, maybe, to overlook this now and, go down the road and study it this summer, come up with the proper solution. We jump into things and we come to a. conclusion I and. I don't like to do this. So, with that I guess, although we know it is probably the best step to change it. to the nutrient basis, but I am afraid it might cause more confusion, so, with that, I'd just ask permission for this amendment to be withdrawn. Thank you.
PRESIDENT MOUL PRESIDING
PRESIDENT MOUL: Thank you, Senator Cudaback. The amendment is. withdrawn. Next amendment, Mr. Clerk.
CLERK: We are now back -to Senator Warner's amendment as amended. Senator, Hefner, do you wish to address this? Or, Senator Warner, have you opened on this amendment?. Senator Warner.
SENATOR WARNER: Yeah, Madam. President, members of the Legislature, just briefly, if I am understanding this correctly, I'd move adoption of the amendment. There are other amendments, which are all drafted to the bill as opposed to the amendment, and with the discussion we have had, I would just move the adoption of this portion, so we can move to those other amendments that are to the bill.
PRESIDENT MOUL: Thank you, Senator Warner. Does anyone else wish to speak to the bill ... or to the amendment, itself, the Warner amendment? Senator Wickersham. Senator Schmit. Okay,
Senator Warner, was that your closing? Okay, we will now proceed to vote on the Warner amendment. All those in favor please vote aye, opposed nay. Have you all voted on the Warner amendment? Senator Warner.
SENATOR WARNER: Madam President, I guess I'd request a call of the house and a roll call vote to expedite things.
PRESIDENT MOUL: Thank you, Senator Warner. We have a request for a call of the house. All those in favor please vote aye, opposed nay. Please record, Mr. Clerk.
CLERK: 14 ayes, 0 nays to go tinder call.
PRESIDENT MOUL: The house is under call. Would all unexcused senators please return to the Chamber and record your presence. All unauthorized personnel must leave the floor, the house is under call. Would the senators please check in Senator Schellpeper, Schimek, Schmit, Cudaback, please check in. Senator Wesely, Senator Hillman, Senator Horgan, Senator Rod, Johnson, please check in. Senator Lindsay, Lynch, Moore, Bernard-Stevens, please check in. Senator Warner, would you Accept call-ins? Okay, we will accept call-in votes on the Warner amendment.
CLERK: Senator Conway voting yes. Senator Rod Johnson voting yes. Senator Lindsay voting yes. Senator Morrissey voting yes. Senator Hillman voting yes. Senator Bernard-Stevens voting yes. Senator Cudaback voting yes.
PRESIDENT MOUL: Please record, Mr. Clerk.
CLERK: Senator Lowell Johnson voting yes. 26 ayes, 2 nays on adoption of Senator Warner's amendment, Mr. President, Madam President, excuse me.
PRESIDENT MOUL: The Warner amendment is adopted. Mr. Speaker.
SPEAKER BAACK: Yes, Madam President and colleagues. We do need to deal with a motion that we have up there in front of us We are going to continue with 719A in a minute, but Senator Coordsen has a motion that we need to deal with today that calls for a rules suspension. We need to do that right now while we have enough people here.
PRESIDENT M0UL: Senator Coordsen.
SENATOR COORDSEN: Thank you, Madam Chairman, members of the, body, early this morning, I was notified by the Governor's Office of three appointments to the Boiler Safety Code Advisory Board. We need to suspend the rules to allow me to hold a public hearing this next Monday morning at one-thirty in order that we could get the hearing accomplished ... Monday morning. (Laughter) Oh, well, it seems like we are here that many hours, doesn't it? Monday afternoon at one-thirty in order to get the confirmation report back to the body of the Legislature before' we adjourn. So I'd encourage your adoption of the suspension motion. Thank you.
PRESIDENT MOUL: Thank you, Senator Coordsen. Does anyone wish to speak to this motion? Seeing none, we will now vote... seeing. none, we will now vote on the motion to suspend the rules. All those in favor please vote aye, opposed nay. Please record. Mr. Clerk.
CLERK: 36 ayes, 0 nays, Madam President, on adoption of Senator Coordsen's motion to suspend end the rules in order and permit scheduling of the hearing. A hearing notice, Madam President, by Business and Labor Committee, sighed by Senator Coordsen, who is chair of the committee.
PRESIDENT MOUL: Thank you, Mr. Clerk. I will raise the call. Further amendments on LB 719A.
CLERK: Madam President, the next amendment I have to the bill is by Senators Warner and Withem found on page 1759 of the Journal.
PRESIDENT MOUL: Senator Warner.
CLERK: Senator, AM3834.
SENATOR WARNER: Madam President, members of the Legislature, this is the amendment which would authorize tile tax commissioner in the taxation of personal property by railroads to apply the methodology required under the 4-R Act, and if as a result of that, the total taxes due to the ... by railroads and car lines were greater than five. or different by 5 percent from what is required, that they then could adjust.. tile taxes due so that we were in compliance. The purpose, of course, is to provide an opportunity to comply with the 4-R Act without the necessity of going to court in the event that the calculations of LB 1063 did not comply. As I indicated earlier, the issue before the Legislature, if you want to do this or to not do it, is the likelihood of what would occur in the event that a lawsuit would be filed contesting LB 1063 as, it currently stands. The estimated revenue that would be raised for subdivisions across the state, LB 1063, estimated to be at 5 1/2 million. If the provisions of the 4-R Act are complied with, it would appear to be about four and a quarter million. Under the 4-R Act, and I have got some handouts here I should have gotten out before we started speaking, but under the 4-R Act as I understand it, what is required is that all personal property that is taxed in the
state, that is the net book value under the system in LB 1063, is to, be determined and then the actual value, market value, not .the tax value, but the actual value of all commercial and industrial personal, property, which includes inventory, that ratio would be determined. The handouts you will shortly receive, perhaps some have seen, would indicate that to be 29 percent. Then. a separate calculation is made in which all of .the railroad personal property that would be taxed under personal property, excuse me, under net book value, would be compared to the actual value of all railroad personal property at what ratio that would be, and in the handout that you will receive it is 41 percent. In other words, the amount of all personal property taxed at net book value compared, to actual value commercial and industrial property, including inventory, is 29 percent. Under the provisions of LB 1063, and this particular railroad, all railroads' personal property tax net book value's ratio to the total value, actual- value, which comes out at 41 percent, under that calculation as required by the 4-R Act, railroads would have to be taxed, to be taxed at a comparable ratio at 70 percent of their amount required under LB 1063. And that then would become the taxable value of railroad property, personal property in the state. In my opinion, there is basically one issue that we are talking and that issue is whether or not the body feels that LB 1063, as it stands, would be in sufficient compliance with the 4-R Act that you would not have a rail suit, a railroad suit filed by one of the car lines, or one of the railroads objecting to the level of valuation that is required from them hem as far as LB 1063 is concerned, Under that situation, if the lawsuit is filed and the state would lose, as if the court would determine that the percentage of property that railroads were paying on their personal property was 5 percent greater than the percentage of all market value of other commercial industrial property, en the court would come down and say zero because as you read Judge Urbom's decision and one that you would anticipate to be the case in any event, the courts are not going to tell you what are the tax, they will only make a judgment as to whether or not the system you have complies, in this case, with the 4-R Act, and if it does not, they will not adjust it down to where it will, but they would put it at zero and you'd have to come back and readjust the law in order to comply, but for that year, you would be out of compliance and probably have no source to recover it. My concern is that 1 it seems to me a much more prudent route to go ahead and place into the statute a .methodology that appears to me, at least, to be in compliance
with the, 4-R Act and assure that at least that four and a quartet million is paid and distributed to local governmental subdivisions, rather than run the chance that a lawsuit might be lost. it makes a significant difference, obviously, when that lawsuit is filed. If that lawsuit is filed after levies have been set, late in the year, then you are in the position, local government is in the position where they I are going to have a shortfall of revenue in anticipation of what otherwise would have been collected. The other option that probably, which would be less of a problem for local governments, would be if the railroads would file. suit to enjoin the State Board of Equalization distributing the valuations by governmental subdivisions, if it occurred at that point, it would be less of a problem, probably, for local government because the levy perhaps then could be set without assuming that valuation. But it seems to me that this is a more desirable route to go. I assume there will be conversation about this issue and LB. 1063 in the time in which it all occurred, and I can only speak of the knowledge that I have. it was my understanding early on. that there were some requests that were being considered that came, I believe, through the Governor's Office, but, in any event, of railroads, and there may have been others, who had some suggested requirements, one of which was the constitutional amendment that if one was passed would carry provisions related to the federal statute designation of the 4-R Act, which seemed an inappropriate thing to do. I recall some discussion that it'd be an absolute mandate on the part of railroads which seemed... or on the part of the state to comply which seemed inappropriate to do, but as it developed, it seemed to me that, and I was not aware of the extent of the issue as I am now, until after LB 1063 had been, advanced to, well, not only advanced to Final Reading, but was ready to be read in a couple of days. I think Senator Moore made some comments earlier that ...
PRESIDENT MOUL: One minute.
SENATOR WARNER: ... some of these things should have been considered in LB, 1063. 1 don't disagree with that except the concept, you will recall, that the Legislature had, at least several members of the Legislature seemed to desire, was that LB 1063 be enacted prior to the constitutional amendment being approved, and it just simply would not have been possible to have pulled the bill back at that time and still comply with the necessity of having the constitutional amendment approved prior
to the 13th of March. That is, what happened. The judgment you need to make is whether this approach, which I believe will result in no lawsuits, whether this approach gives greater stability for funding of local ...
PRESIDENT MOUL: Time.
SENATOR WARNER: ... government, or if you choose, and there are a number of amendments or some amendments proposed, not to follow this and make some adjustments which, in all probability, will end up being litigated, and then the option of local governments having shortfalls in their....
PRESIDENT MOUL: Time.
SENATOR WARNER: ... local receipts would exist.
PRESIDENT MOUL: Thank you, Senator Warner. Before we proceed. I would like to call your attention to the south balcony. Special guests today of Senator Bohlke are 10 grades three through sixth students at Ayr Public Schools in Ayr, Nebraska, and their teacher. Would you please rise and be recognized? Welcome to the Chamber. Mr. Clerk, amendment on the desk.
ASSISTANT CLERK: Yes, Madam President. Senator Moore would move to amend the Warner amendment. That is found on page 1841. (See AM3918.)
PRESIDENT MOUL: Senator Moore.
SENATOR MOORE: Madam President and members, this amendment, as the Clerk mentioned, found on page 17, is that what, 1730?
ASSISTANT CLERK: 1841.
SENATOR MOORE: 18,11, okay, found on 1841, quite simply would bring all public service utilities in under the same amendment as Senator Warner's amendment, and then therein lies treating .all centrally assessed companies that have historically been centrally assessed by the State of Nebraska, treating them the same in some uniform manner. The only reason I bring this amendment forward is that, you know, I did mention something about Senator Warner about doing some things before. This, Senator Warner's amendment is something I don't think we ever heard about until LB 1063 had passed, so that was, previous
criticisms of the bill and the funding. of it, that is fine, this is something new.. I think Senator Warner's amendment and the amendment brought to us by Senator Withem and Warner, and the Nelson administration is An ongoing attempt to make, and: for or Carson Rogers' benefit, to make a silk purse out of a sow's ear in many ways. We continue to try and make this thing palatable,. try and sell it, try and protect it, things like that. It just. amazes me at what lengths this body and many members of. the business community in the State, of Nebraska are willing to go to try and convince us, that LB 1063 and LR 219 are the only choice. we have got. Once again, you remember back in November, soon, the two major driving arguments. behind the plan by supporters, primarily from the Administration, were, one, initially, was minimal cost to agriculture, only $3 1/2 million; two, is it finally made the railroads pay taxes, their fair share of taxes. That is what they continued to say, as time and time again I questioned that, hey, the railroads are going to litigate; time and time again, the supporters said, no, we have an ironclad case. The Legislature passed LB 1063 over my objections, passed LR 2119. Lo and behold on March 18...well, March 17th, there was some talk about UP filing lawsuits. At that time, quote, the Lincoln .Journal, Governor Nelson, "We think it is handled. LB 1063 and the constitutional clearly addresses and solves the 4-R problem." In the Omaha World-Herald, I will give equal time over there, "Nelson and other backers of LB 1063 said that the new depreciation-based tax system could stand up against a 4-R challenge. The state would not be treating railroad personal property differently because all personal property being depreciated would be taxed regardless of who owned it. Senator ,Warner said he doesn't think railroads are being treated any differently from any other taxpayers under LB 1063. Once again, one of the selling points of LR 1063 has been that it would tax. railroad personal property." Now, obviously, under Senator Warner's amendment, they still would pay something, but the question that I have is that if you had such an ironclad case, if you spend the last five months saying people like myself that always argued the railroads would litigate, and the railroads would win, always told me I was living in "lala" land and wasn't dreaming it, how come the moment the railroads threatened to file suit, we go into a room, cut a million dollar deal, they back up with their lawsuit. You answer that question, the body think about that. For months they say this can stand up to a lawsuit case, go ahead and sue, the 4-R Act is taken care of. We passed a bill, the railroads threatened. We cut them a
million dollar deal. Walk away and bring it to the body and say this is what We have got to do. And Senator Warner is right, and I respect him, for this is saying I your choice is either you do nothing. They may end up paying nothing because they may litigate and win. Lo and behold, they finally recognized that they may win, and this arguably is from some sort of, I understand, an agreement, makes it better, but at least they are. going to pay. $4 million. And finally, they are going to pay $4 million. And one of the criticisms, you know, I Senator Hall and the depreciation add-back scheme had the railroads, paying much, much, much more. They would have paid much more under those schemes. They would have litigated that, too, obviously, .but, you know, what is going on here? You simply, as I have said time and. time again, we are going to change the constitution under the name of fairness and uniformity, and, Senator Warner will continue to say the uniformity clause is still intact, but as we know, we are not going to treat all taxpayers the same.. We are going to treat all depreciable property the same henceforth with two exceptions, mainframe computers and corporate jets, since there is no ag processing equipment, and now we are going to give different treatment to the railroads. Where is it going to end? Where is it going to stop? At least, historically, since 1970, at least, this Legislature, in my opinion, has tried to have some rational form of classification, even though it certainly has failed to meet that Supreme Court test we tried to do. We tried to have, classify like properties alike. This amendment would continue that policy, which I think is a very fair, very defendable policy, saying we are going to treat all these types of property alike. And I think if you don't adopt my amendment, one thing you are going to have a lawsuit. Not on the state...you are going to total, in my opinion, my opinion only and it is probably worth nothing, in my opinion, you have totally bastardized the State Constitution. You don't have to worry about a lawsuit there anymore, but I am sure these public service utilities will eventually file suit in federal court under the equal protection clause. Our State Supreme Court has already argued already we may ... they've hinted we have a problem there. Why don't we solve the problem Lip front and treat them the same as well, and say we are going to ... what is good for the railroad is good for all people, at least in their own class, let's treat them all alike. I think that makes sense. I think it is the fair thing to do. Does it cost money? Well, obviously, if you believe, if you believe the Revenue Department's number in LB 1063, this amendment may cost up to
April 3, 1-992
$14 million in lost revenue, so it is a money loser. I will tell you that. I don't believe the numbers. because I don't think it is going to cost that much. I don't think that much centrally assessed property is going to come back on the tax rolls.. Now if you go ask many of those companies what they think, they will argue that LB 1063 is not all bad, because we will never pay that much tax. But if you believe all that new .property is coming on the tax rolls, including the centrally -assessed, this amendment may cost a good chunk of change. Once again, if your desire is uniformity and your desire is uniformity within a class, I think you have to adopt this., because if you don't, you are going to have litigation on the equal protection side of things. Now some may argue, now wait a second, in LR 219 which is now Amendment 1, we have this bizarre creature that says, in there, that says we are going. to have three different I ... we are going to have these classes and, obviously, anything tinder federal legislation can create a separate class to stop the bleeding. I opposed that at the time. Senator Warner's amendment obviously comes in tinder that. My amendment may not, but I think it is something simply if you 'want to continue trying to get uniformity within class, once again, if you want to go out and tell the people you are not going. to do just... you know, just kind of hop scotch all over the place making tax policy in the personal property tax area, I think you need to try to begin with again to have some uniformity. I think it makes some sense to pull the public service companies, treat them just like the railroads, I think that is the fairer thing to do, -if you are going to do it. I don't know whether I am going to vote for Senator Warner's amendment or nut, but it just is simply amazing to me we are going to try and sell this to the public, and then you turn right around and do something like this, admit it's full of holes. You are so scared of a lawsuit, you are willing, to... just to roll over a million dollars and hand it to them, when for months and months, I have been criticized for saying the railroads are going to win, the railroads are going to win, and time and time again I have been told, no, it's ironclad. Don't worry about it, the railroads will pay. We passed the bill, you passed the bill, we all passed the bill, passed the constitutional amendment. Railroads say, we are going to sue, and what happens, to try and buy them off, we give them more favorable treatment. We give them, what, an estimated million dollar benefit to keep them from filing lawsuits, 'it is that simple. It is that simple. That is what the amendment is all about. it is to try and protect from that lawsuit being filed.
Bad things happening to LB 1063, lot of squeamish people out. there on the constitutional amendment, and I understand why, but. it just simply defies me that's what you want to do. But if you are going to do it, I think you ought to send a message we are going to try and adhere to what the Supreme Court, and everybody said what the Supreme Court has hinted at in...
PRESIDENT MOUL: One minute.
SENATOR MOORE: ... MAPCO and Enron, one very clear hint all the way along has been federal equal protection. I would say that hint has been much clearer than any hint, well you can't exempt all personal property. And unless you start doing something like this, you are buying into that case right away, I think, to make sure you are going to continue the uniformity within, class, treat them all the same, I'd ask the body to adopt my amendment knowing it costs money, but I think it certainly strikes the point. If you are going to go down this route, if you are going to go down this track with the railroads, I think you need to go down this telephone line, down this pipeline with everybody else. I urge the body to adopt the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. Senator Haberman, followed by Senators Warner, Schmit, Lamb, Dierks, Wickersham, Schellpeper, Hall, and Coordsen. Senator Haberman.
SENATOR HABERMAN: Mr. President, (sic) and members of the body, maybe I can throw some light on why we have the amendments and why the railroad is willing to settle. The word has been passed that they might save a million, a million and a half dollars by the amendment. Now as Senator Moore explained, the amendment came through the members of the 3-R Committee, some of them, and the Governor, and Senator Warner and Senator Schrock sitting down in the room,, shutting the door, and cutting a deal. Well, here is why it may be so sweet, Senator Moore. The sheet that was passed out talked about personal property, railroad personal property, railroad personal property, railroad personal property. In the present time and in the past, the railroad tracks, the railroad tracks that the railroad runs on has, been declared as real property. That's real property. Now under the cloth of the amendment of Senator Warner's it can be argued that this is no longer real property, it is personal property, and believe me, folks, if it is argued that it is personal property, they are going to save millions and millions and millions of dollars. I will give them credit. If they go to
court, and when they go to court, they are going to win,, because they. have people working for them, that are a lot smarter than we have people working for us. So it is. going to be argued, the railroad track is not real property. It is personal property and will be valued. ..taxed differently than real property, and they are going to save millions and millions and millions. So would like to have you think of that when it comes time to vote on Senator Moore's amendment. Why the deal was cut, why the railroads are perfectly willing not to sue, we are not going. to sue now folks. Then -the Governor says but we are not going to mandate that the railroads are going to do this or do that. I it leaves it up to the Revenue Department Well, don't kid me, folks. You know as well. as I do that the man in charge of the Revenue Department is going to give in to the railroads, that is part of the deal. Let's don't close our eyes altogether and hold our breath until we get blue in the face. Anybody can understand, even Senator Hefner can understand that. Yeah, even Senator Elroy Hefner can understand that. So I would strongly suggest, and I am going to keep on harping on this as much as. I can, the difference between real property and personal property for the railroads is millions and millions of dollars, and I'll bet that's what they have got up their sleeve. Thank you, Madam President.
PRESIDENT MOUL: Thank you, Senator Haberman. Senator Warner.
SENATOR WARNER: Madam President, members of the Legislature, let me just simply state law now states that track is real property. There is nothing in this amendment that changes that. So that just simply isn't there. I am not sure how I want to, say what I feel I need to say. I don't mind, understanding the political system, there are those who want to utilize these discussions to cast out on CA1. There is a lot of adjectives that are thrown around, that offends me a great deal. There was no deal, I know that is a headline grabber, and a few other adjectives that I have heard. My interest in this issue is to try and resolve. a tax issue that has faced this state for four or five years. I know there are those of you who believe that what you would like to see done can be done without a constitutional amendment, and that I disagree with, but you are entitled to take that position. What you are not entitled to, though, is to mislead the public with adjectives and allegations which simply are riot true. The citizens of this state desire accuracy in what they are told, not allegations, and I am very willing to sit and discuss this issue on the basis that it ought
to be discussed as a policy issue, but it is a shame if. you attempt to use it to create confusion, misleading statements, and accusations that are not true.. I have never said, and if you can find it on the floor, I'll....on the record in the typing, but I don't think I have ever said that this was an ironclad case, 1063, that the railroads would pay. What I did say, and repeatedly said, of all the proposals that was before the Legislature that I saw, short of putting everything on the tax rolls, which is now where it is that this was the only one in which railroads would be paying something tinder personal property tax. To allege, as the amendment does, that you could transfer this to other centrally assessed, what this federal supremacy factor requires, the laws, court.. decisions,. to be carried onto other property by virtue of the constitutional amendment, CA1, simply Isn't true.. CA1 does permit to hold some state responsibility, some state option-of taxation without our whole structure being governed by what the federal government has done. It annoys me when the word "uniformity" is thrown around. About every other speech, some of those people ...
PRESIDENT MOUL: One minute.
SENATOR WARNER: ... Who make it, one time may argue they are against something because it is not uniform. The next second they offer an amendment which is not uniform, the very thing they say that you ought to have. The constitutional amendment does permit, requires that all depreciable property will be taxed at one method, and it is the exception for any federal legislation which prevents the state from using a system where the federal law supersedes us. And that happens no matter what you do, no matter what you do, that will happen. Now the real issue here, those of you who want to throw the adjectives around, you will continue to do that, and that's fine, but the real issue is ...
PRESIDENT MOUL: Time.
SENATOR WARNER: ... your desire is to defeat CA1. That is the issue. And if you are successful, you will have the personal property on the tax rolls at market value. I know you, think somehow or other something else will happen.
PRESIDENT MOUL: Time.
SENATOR WARNER: But we have been down that road the last four or five years. and I'd tell you, in my opinion, if you are successful in defeating CA 1 with a lot of allegations that are simply not accurate, that then the price that this economy will pay in this state is going to be immense.
PRESIDENT MOUL: Time. Thank you, Senator Warner. Senator Schmit.
SENATOR SCHMIT: Weil, Madam Chair and members, I kept most of the clippings that were printed relative to the LR 219 and. to, LB 1063, and all of the promises that were made, and the speculation that took place, and I do not have them here at this time. I do not intend to begin to quote from them, but I can, tell you very bluntly that I went to, dozens of meetings where I was told that this is the way you get the railroads. And I said you are not going to get the railroads, and I don't know now whether a deal has been made or not, but I have been told that the railroads are going to pay 4.25 million under this proposal. I do not know if this Legislature can delegate to the tax commissioner of this state the ability to negotiate the tax rates for the railroads. I don't know if you can do that. I would suggest that if they do, that Senator Scott Moore is on the right track, that there will be other entities, namely, the telephones and pipelines, that will be in asking for the same perk. I don't make any bones about where I stand on LR 219. 1 hope it is defeated because it is not equitable . And, Senator Warner, you may be right, the votes may be' here and the Governor may be correct that lie will not call us back, and there will not .be another opportunity to add it all on or all off. If that is it, then so be it. At least you won't have to wear a band around the cow's neck to know if it is taxed or not. You going to know it was taxed, and I would suggest, you know I have watched this Legislature run for cover so many times in the last five years, I-would suggest that if that happens that there will be those in the Omaha area who will come down here and say, wait a minute, we are not going to start paying taxes on our inventory. That means those farmers are going to escape, well, we will find some other way, and that is why I opposed, and Senator Warner opposed., I think, the proposal to tax farmland differently than ag land, because I have a hunch they are going to nail us there, and I have said it before an this floor, I would accept full reimposition of the tax on personal property, if I had the power and the ability to repeal the inequitable, the inequitable taxes that are going to be assessed Linder that farmland amendment
provision, and they are going to be wailing and gnashing of teeth, among I the farm organizations, and all of the, fine-feathered leaders, who were out there bragging about it, are going to come back begging, and begging, and begging, And you know how much good that'. does on this floor,, when you have got this many rural votes? You are going to get your fanny kicked up to your- Adam's apple. That is, where it belongs, because when you start dealing from those kind of positions, that is what you are asking for. There is no place, on this floor for charity, ladies and gentlemen. Senator Chambers has pleaded for that for years. Senator Pirsch and others have tried, they say this is the right thing to do, and the only thing that is right on this floor is 25 votes, ladies and gentlemen, sometimes 30, sometimes 33, depending upon the rules. But I want to emphasize again, and again, and' again that the threat, and I have no other way to categorize it, but the threat that you are either going to take it this way, or this way, nothing else, is what has put. us in the position we are in today. You said you are either going to tax personal property based upon a depreciated value, or we will put it all on, we, meaning...
PRESIDENT MOUL: One minute.
SENATOR SCHMIT: ... the majority. I-low that may be what will happen. If it is, then we will all be hollering.
PRESIDENT MOUL: Thank you, Senator Schmit. Senator Lamb. Senator Lamb. Senator Dierks.
SENATOR DIERKS: Madam President, and members of the body, I would like to ask Senator Wickersham a. question, please.
PRESIDENT MOUL: Senator Wickersham.
SENATOR WICKERSHAM: Yes.
SENATOR DIERKS: Senator Wickersham, railroads are saying that they will not challenge LB 1063 if this modification is passed, but what is the standard for someone to have what you call standing, to challenge the law. In other words, could an individual, could I, as an individual, or could a business go to court and say I am negatively impacted by a Nebraska law which violates federal law. Though I am not a railroad, I am challenging this Nebraska law on the fact that it is in
violation of the 4-R Act?
SENATOR WICKERSHAM: You wouldn't have any standing under the 4-R Act, because that applies only to transportation companies and the rail business. You could attempt to bring some sort of a state law action, but at that point I think you would run into the barrier that will be erected by CA1, saying that the railroad property is in a separate class and we can treat it differently and separately from other personal property. You. could not bring an action in the federal district courts. You could bring an action in the state courts, but if CA1 passes, you would not be likely to prevail.
SENATOR DIERKS: Thank you. I just have some problems with that. I wonder if we are creating a condition where this reduced tax liability for the railroads might be an event that, you know, could be challenged. I Just have problems with this. whole concept. I am not sure what I am going to do with Senator Moore's amendment. I am not even sure about the Warner amendment.. I guess I just want to hear some more about what people have to say about it. I am disappointed, of course,. that we got to this position. I wasn't all that pleased with the position we got to with LB 1063, as most of you know. I hope that... this kind of looks to me like somewhat of a Band-Aid or like we are closing the door after the horse got out of the, barn, but I guess I just need to know a little bit more about what the discussion will be here today. Thank - you. Madam President.
PRESIDENT MOUL: Thank you, Senator Dierks. Senator Wickersham.
SENATOR WICKERSHAM: Thank you, Madam Chairman. I am in something of an awkward position here as we begin to discuss this amendment, and the amendment to the amendment. I was one of those who accepted LB 1063 as an alternative, and I believe that CA1 is absolutely necessary to bring any kind of stability to our tax system, or at least the kind of stability that we can live with. I guess if we don't pass CA1, we will have stability in that we will have virtually all personal property on the tax tolls, in my view, and that is some kind of stability. I think in my view the kind of stability we could achieve with the passage of CA1, and, in effect,. the ratification of LB 1063 represents a more desirable form of stability where we would tax some personal property under a special scheme for valuation. I personally prefer that to the
alternative, but if we begin to nibble away at the principles that are embodied in that proposition,. then it becomes more and more difficult for me, And I am concerned about this nibbling away at, that proposal, that we would tax virtually all personal property by a special valuation method as applicable to all. Now as I understand it, the difficulty that the railroads are raising is that they are somehow discriminated against, or. they are not being treated properly under the provisions of the 4-R Act, and, therefore, we would have some litigation risk with them, some millions of dollars. While normally I am not one who will advocate taking litigation risks, when you have an alternative that makes sense, and you can see what your chances are, and you can weigh that carefully, I think in this instance I am willing to take the litigation risk. I am not personally satisfied that the railroads have a hands-down winner. I think the. arguments that have been advanced before have validity in that we would tax all depreciable property in the State of Nebraska, whether it is owned by railroads, whether it is owned by people, in agriculture, whether it, is owned by someone who operates a small business in a town or a city. I fail to see how that is discrimination. As I understand the argument of the railroads, the discrimination is that we are not going. to tax inventories, and, I guess they must feet that they are one of those businesses that do not have significant levels of inventory, but they. want to take advantage of the fact that other people do. Well, I am unwilling to allow one business group to drive tax policy in the State of Nebraska to that extent. I am willing to have that issue litigated in the federal district courts, through the federal circuit courts, and have a final resolution of that issue. When it comes back, maybe I will have to eat my words. Maybe I will have to think differently, but at, this point, for the amount of money involved, I am willing to take that risk. I understand the amendment that Senator Moore has brought, and if I thought we should adopt the amendment for the railroads, I'd support his amendment. But at the present time, I am not going to support either one of them because I believe that to support either one of them is an erosion. in the principle that we set out in LB 1063, and that is a principle that I have come to accept as offering the State of Nebraska a fair and workable tax, system. And I will say, again, at the present time, I do not intend to have any one business interest drive us away from that decision or that principle.
PRESIDENT MOUL: Thank you, Senator Wickersham. Senator
SENATOR SCHELLPEPER: Thank you, Madam President and members. I would like to ask Senator Moore a question if I might. Senator Moore, we had to raise approximately $100 million with LB 1063 in order to make up the personal property tax lost. Now if the railroads and :he pipelines and, the telephone companies are not going to pick their who is going to pick up this. difference?
SENATOR MOORE: Well, I guess I wouldn't necessarily agree with your 100 million. dollar, that is if you'd exempt it all, you would I-Lave to raise that, but, nevertheless, if the railroads, let's just say! for instance, from the Revenue Department, essentially three numbers, let's say the railroads save a million I lion, two, and let's say. you adopt my amendment, worse case scenario would be 12, 14 million dollars. If you adopt both of those amendments without doing anything else, obviously the remaining real estate and personal property taxpayer in the state would pick up the difference.
SENATOR SCHELLPEPER: Thank you. Well, I hope that the press in this state will also print what will happen if they do not pay these extra taxes. Is this going to fall back onto the homeowners, the people that own real estate, and mainly agriculture? And I think they have not been really printing what is really going to happen. They keep saying that it is going to be kind of spread across the whole state. But if this does not happen, and I think they will-win these lawsuits because everybody has been kind of telling us that they will-win it except the Governor. Everybody else, I think, has been kind of convinced that the railroads will win. And if they do, probably the pipelines and probably the telephone companies, but I hope that people in Nebraska realize who is going to pick up what these companies are not going to be paying. It is going to be very important to this state, and to who really pays the final taxes eventually. Thank you.
PRESIDENT MOUL: Thank you, Senator Schellpeper. Senator Hall.
SENATOR HALL: Thank, you, Madam President and members. I rise to support Senator Moore's amendment. The issue that Senator Moore tries to resolve is a valid issue. I believe that,, although there is a question with regard to whether or not it may come up, the fact that we do give, in the Warner amendment,
preferential treatment to railroads, clearly would -allow. for. that to flow. over to another entity. All you -have to do I is go back to the Northern Natural Gas case, and let me quote from it. The court said this, it said,. "As We have previously stated, it makes no difference that the undervaluation of the. property of the railroad and car companies comes about because of deliberate action by the board, legislative enactment, or the. final and binding judgment of the federal courts, the conclusion remains ,the same. The equal protection clause of the Fourteenth Amendment mandates that the same result be reached with respect to the personal property of Enron, as that in the case of the railroad and car companies." It can't get any clearer than. that. That is all it says, and at least I think what the Moore amendment does, if you are going to adopt Senator Warner's amendment, and I don't. intend to, and I am blatantly and. patently opposed to CA 1, and I don't want anybody to leave here not understanding that, that I oppose that and I will continue to oppose it, and I am on record as opposing it, and I want it to fail. And I want it to fail on public policy tax issues and on public policy basis because I believe that it is bad policy. I also think that the railroad amendment in front of us is bad policy. I think the provisions that were talked about with regard to or raised by Senator Haberman, in terms of what constitutes real property and personal property, is a legitimate issue. I do not know whether, probably do not believe that they are the basis behind the amendment. I don't believe that at all, but I do believe that they can be raised at some point in the future in terms of the question with regard to whether rail constitutes real or personal property. And the figures that we heard about and that have been used, they are included in real property, and I believe they should be. But if they are, by some transformation, become personal property, then the issue that Senator Haberman raises about the shift in terms of the, amount of money that we are talking about with this amendment is dramatic. It is dramatic. It will more than double the effect because of the way the numerator, denominator formula works and what would be calculated into that. It is extremely difficult to explain, let alone understand, and it ... but rail makes up a big portion of the railroads' real property valuation. That property valuation is over $650 million in terms of real property. Their personal property is over $111 million. The rolling stock is over $375 million. You start making shifts that affect big percentages of that by changing definitions of what fits into one as opposed to the other, and then making percentage adjustments accordingly under the personal property
tax side of things the n you are looking at dramatic shifts. Now I don't believe that that was the intent of the amendment, but I do clearly want to point out that that potential effect is there,, and that is not misleading anyone. That is, in my opinion, what I believe could be a potential.. problem. I hope it isn't. If I really wanted to deep-six the constitution I al amendment, I think I would vote for the Warner amendment because I believe that, no matter what any one individual says, what folks perceive to be the case...
PRESIDENT MOUL: Time.
SENATOR HALL: ...is what they Are going to believe, and they are going to believe that this is a tax advantage to the railroads, and I think it will spell the demise of CA1.
PRESIDENT MOUL: Thank you, Senator Hall. The speaking order now is Senators Coordsen, Haberman, Morrissey, Moore, Schmit, and Warner. Senator Coordsen.
SENATOR COORDSEN: Thank you, Madam President and members of the body. Several minutes ago Senator Wickersham I think articulated what my concerns were with regard to the Warner amendment, with or without the Moore amendment, far more well than I could have done. The premise that we have been operating on, as it appeared to me, was to try through the vehicle of LB 1063 to find a fair and uniform method of taxing, or not taxing, but determining the value for taxation of a certain class of property, that property being income-producing property used in trade or. business. Senator Hall, may I ask you a question, please?
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Yes.
SENATOR COORDSEN: Senator Hall, do you have in front of you, or in your memory, the common law definition, the three-part test that the court used in MAPCO to determine whether a piece of property was, in fact, real or personal?
SENATOR FALL: No, I can get it.
SENATOR COORDSEN: Okay. Well, I don't remember it, thank you, Senator Hall.
SENATOR HALL: I will get it.
SENATOR COORDSEN: I don't remember it verbatim. I could get it, too, but it seemed to me that one of their tests was that that piece of property had to enhance the value or increase the value of the real estate in which it was located under or on. And if, in fact, that became, in court tests in the future the method of determination whether a piece of property was real or personal, and what tax system applied to. it, then it is not inconceivable that Senator Haberman's concern relative to the rails and the ties, and then that sort of thing, might well become personal property. The same thing could apply to the fiberoptic phone lines that just houses to extend that theory out to its ultimate. I am not at all comfortable, although I supported the constitutional amendment. have talked several times with Senator Warner,. and he believes that he is right. I hope that Senator Warner isn't right. I have a great concern that if we begin to chip away at what we have decided to be a uniform method for valuation of all classes of taxable personal property that we will have created again the possibility of through court action another chaotic situation. I wish I knew all the answers, and I don't think anyone here does. Bit I believe it would be the wisest course during this session, of the Legislature to ensure that the method that is used in the event that the constitutional amendment does pass is, in fact, for all property within the class that is being taxed. Senator Hall, did you want to read that? I think I have a little time. You can have the rest of my time.
PRESIDENT MOUL: One minute.
SENATOR HALL: Thanks, Senator Coordsen. I will read it to you, that I did have it in front of me, I just didn't keep reading long enough. "Personal property includes all property other than real property and franchises." This is from the Northern Natural Gas Code. Yeah, it is Nebraska Revised Statute, 77-104, reissue 1986. "The issue, therefore, is whether pipelines are fixtures arid, thus, real property, or are personal property. Section 77-103 does not provide a definition for fixtures, however this court in the State ex rel. Meyer v. Peters stated that the common law rules relating to fixtures are largely codified in 77-103. To determine whether an item constitutes a fixture, this court looks at three factors: One, actual annexation to the realty or something appurtenant thereto; two,
appropriation to the use or purpose of that part of the realty with which it is connected; and, three, the intention of the party making the annexation to make the article a permanent accession to the freehold. The third factor, the intention to make the article a permanent accession to the freehold is, generally regarded as the most important factor when determining whether an article is a fixture. The other two factors, annexation...
PRESIDENT MOUL: Time.
SENATOR HALL: ...and appropriation to the use of the realty have value primarily as evidence of such intention.
PRESIDENT MOUL: Thank you, Senator Hall. Senator. Haberman.
SENATOR HABERMAN: Madam President, and members of the body, it was stated here that there was no way, as I understood it, the statement was that there is no way that railroad tracks would ever be personal property. Well, I disagree with that for this reason. The amendment hammered out in an agreement with the railroads would give the state tax commissioner the power to negotiate settlements with the railroads, if they claim they are being taxed unfairly. Now I'd have somebody stand tip on the floor and tell me that the railroads aren't going to say to the tax commissioner, we are being taxed unfairly. Tell me that. Because I am not going to believe it if you tell me, because they are going to save millions of dollars, and I don't dislike the railroads. I respect them for being so smart. That is what it says. That. is what the agreement was. And the Governor goes on to say it doesn't mandate the tax commissioner to do anything. Well, of course, they 'Couldn't mandate the tax commissioner to do that, but you stand tip and tell me that if the railroads make a deal,. they are not going to save some money or they are going to sue. Now you can believe, if you want to, that it will not ... it will stay as real property, but I will tell you, folks, it is going to be personal property and they are going to save millions of dollars. Now this issue was not addressed or contested in the original litigation of the federal district court in Nebraska when the railroads went to court. This issue was never brought up, so, therefore, it is wide open, anything can happen, anything can be done, and the tax commissioner can rule that they are being taxed unfairly. And, believe me, folks, lie will rule that because they are mighty powerful people, and they are going to win in the end, and we
are going to lose, and I don't like that., So I am going. to' support the Moore amendment, and give the rest of my time to Senator Hall if he would like to have it.
PRESIDENT MOUL: Senator Hall, there is about two and a half minutes.
SENATOR HALL: Thank you, Madam President, Senator Haberman. Members, the issue in terms of whether or not it can...rail can become personal property is, although not the...the main, reason. for the amendment is clearly a question that has to be asked, that has to be addressed to a certain extent so that we have an understanding of what could happen if the question was raised. The definition that I gave that I read from the Northern Natural Gas decision gave those three factors that had to be looked at, the most important of. which the court said was the intention of the party. What was, their intent for purposes of that attachment? Was it meant to be a fixture, and thus real, property? Or was it meant to be something that they moved around freely? I don't know. Now, I haven't worked for the railroad I don't know what they do with the tracks. It appears that they stay there and that they drive tip and down on them. They change them out. Maybe they move them around, I don't know. It would appear that the potential is there for a determination like that, and I think that ...
PRESIDENT MOUL: One minute.
SENATOR HALL: ... that needs to be raised, whether it is ... it shouldn't be the basis, I think, whether you vote up or down on the Warner amendment, but it clearly has to be something that we address in terms of possible ramifications down the road, no pun intended. But I mean that is clearly an issue that weighs extremely heavy on the formula that the Warner amendment would put in place in terms of what constitutes real property versus personal property when you get into the reduction as it relates back to the balance of personal property as being taxed under a net book value approach that is out there. So I mean it is extremely difficult to understand, let alone explain, and I apologize for not being more clear on it. It is just something that I want to be on the record...
PRESIDENT MOUL: Time.
SENATOR HALL: ... as saying it concerns me. I hope and don't
think that that type of a decision, would come forward calling rail personal property, but I want to be on record recognizing that it could.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Morrissey.
SENATOR MORRISSEY: Thank you, Madam President and members. This too, concerns me as I made, I think, clear in the debate .on LB 1063 when I asked about the 4-R problems, and when I heard the statements made that the change in the Constitution would protect us from...was attempting to protect us from the, pipelines if the railroads got off, and I, then, again as Senator Moore mentioned, I sat down and wondered if, indeed, we were trying to amend the U.S Constitution at the same time because that still caused me concern, and the pipeline's ability to go to the equal protection clause. As far as the question on: real property, it is a question, and it is a real puzzler. The definition of rail and ties as real property has always been confusing to me. The actual structure of the rail and the ties from, say, Lincoln to Kansas City will exist, and that structure will always be there, but the components that make up that structure are continually changing, the rail and the ties Three men and one minor piece of equipment can move a quarter mile of rail, take it out of the track in Elk Creek today, move it up to Lincoln the next day, and install it the third day. Those three men tan pick up a quarter mile of rail and do that easily. They have a machine called a PA11 that can go out in one day and remove 3,000 ties, and 16,000 feet of rail, and in one day they can have that, removed and loaded and shipped wherever they want., They can sell the ties or they can ship the ties from Falls City, Nebraska to Crawford, and install them on a backtrack in Crawford. They can take the 16,000 feet of rail, take it out one day, load it up on a flatcar the same day, have it shipped out to Colorado, sold to another railroad, or laid on their own road again within a week. So they can take over a mile of rail on both sides, mile and a half, load it up, move it out of state, sell it. They can pick it up and we do it continually. You can take a large switch, which is the turnout portion where you go into a siding, you can pick that tip and move it out, go in, grade the land, pick it up, put it back in, load it on a flatcar, move it to Crawford, move it to Louisiana, move it to Colorado, however you want, so what is the definition of a permanent fixture, and what is the definition, and the definition of whether the rail and ties are real or personal property is very confusing, and should cause everyone at least
to sit back and scratch their heads on, this. The total structure of the track between here and Kansas City will always be there, I hope, and it is pretty permanent, but the components that make up that structure, the rail and the ties, and the ballast, even, is continually changing. We do the same thing. with the rock, the bed. We go in there with machines load it up, clean it, put it back, or load it into a car and. move it somewhere else I dump it. That real property, as we are currently defining it, is continually in the state of flux and change. So this should cause us a lot of concern, I think, and we need to be comfortable with that, that definition, and whether it will ... the definition as real will continue to be real in the future or not. It is something we cannot avoid thinking about at this time. Because if you can guess how the court would ultimately rule on that, you should be working in Las Vegas, not out here. I am concerned about this amendment because of the questions and the confidence that with which my questions were answered, that I had no concerns on the original bill, and now all of a sudden, again, there are concerns, so I question whether- we need this amendment. or whether we -should just run with LB 1063 with the original confidence we had. in it when we were debating it. Thank you.
PRESIDENT MOUL: Thank you, Senator Morrissey. Senator Moore.
SENATOR MOORE: Well, Madam President, members , you know, oftentimes Senator Warner seems to be the, today at least, and oftentimes has been the major person speaking in defense of this measure. Maybe some of the things I personally say aren't directed to him but lie perceives they to be, arid some of the adjectives that used may be strong. That is kind of the! way I am. I am not going to apologize for that, but as far as if the word "deal" offends someone, maybe that's not ... maybe that sounds too sinister, but you describe anyone that says that I threaten to sue you, you say but before people have always said, I don't care if you sue me, it is all right, but now all of a sudden when they threaten to sue, you go somewhere and you decide something, it has a monetary impact, you walk away from it, I don't know what adjective you want to use to describe that. It could be an arrangement. It could be a compromise. I don't know what you want to use, or you could just say it is wise tax policy, that is fine, too. But I don't think it sells. I mean, something has got to give. You know when ... I guess the reason that I turn up an octave is that in November and December and January and February and March, I continued to say
repeatedly on this floor and across the State of Nebraska that: the railroads would litigate, the railroads would win, and I was repeatedly treated like. I was Worf, the Klingon, or something like that, just coming out of nowhere in outer space, that the railroads are... I am speaking out of the top of my head. And that was an absurd allegation and an absurd threat, never going to. happen. So we finally passed this bill under the major promises to pass the bill as it would get the railroads I to continue. to pay tax, and to pay their fair share of tax, I may add. After you pass the bill, oh, no, they do threaten to litigate, as: 1. predicted, and when they immediately say that, all the defenders, I am not including ... you know, Senator Warner is not the. person that continued to ridicule me whenever I said that. I will give him ... he wasn't the person. There are others' behind the I glass and -around the state that I guess I am talking to when I say that. All of a sudden when the railroads did threaten to litigate, they worked out something. Maybe it was a serious threat after all. And as I have tried to... one of things I've tried to do throughout the debate for months I is at least I have never once encouraged anybody to vote against that constitutional amendment. I continue to say I personally am opposed to it. I think you need to make an educated decision. One thing I will not allow to let the other side get the upper band, I think, in telling something other than the total, total truth of what the options are to people. That is what I am mad about. That is what I continue to be frustrated about. As far as drafting amendments, probably the only frivolous amendment I ever drafted was the one that said we ought to appropriate a million dollars to defend this thing because of the railroads. And that really didn't work, but, in some way, I'd rather spend a million dollars litigating it than give them millions of dollars here, year-round and the state will still be litigating it. I would rather spend that million dollars litigating it than what this amendment, the Warner amendment tries to do, I think that probably makes a little more sense. But as far as my amendment, this whole thing, I think Senator Wickersham is absolutely right. I mean, if you are going to go the Warner amendment route, you'd better buy the whole section of land because I don't think you can just buy a forty of it. It you are going to do it, you need to buy the whole section. The whole, section is all public utilities, all centrally assessed. You can certainly make the argument that the constitutional amendment which is pending talks about, you know, federal law superseding things but, nevertheless, you know, there is certainly, as I have stated before, I mean, the State Supreme
Court, time, and time again, has raised the specter of federal. equal protection, and if you want to make sure once again, I don't know, if you really want to do this, you I ought to buy the whole hog, ought to buy the whole section, and do them all. That's what I encourage...
PRESIDENT MOUL: One minute.
SENATOR MOORE: ... you to do. That's...if you want to talk about sound tax policy, that's what you ought to do.. And just, it: is one of those. things that I have said. The problem I have is we are going I to sell this whole new tax scheme to the people of the State of Nebraska. We are going to say it is the new, fair, right thing to do. The only people exempted in the original LB 1063 were corporate jets and the mainframe computers. I have a problem with that, and now we are going to amend it and give preferential treatment to the railroads, and I don't know what adjectives are proper and improper to describe that, but I have certain adjectives I guess I won't use now to describe it in my opinion.
PRESIDENT MOUL: Senator Schmit.
SENATOR SCHMIT: I would guess that there will be many, many times in the next years when we will look back upon this debate and wonder just exactly what we were trying to do. I do not .know, and I guess my concern is that the original amendment as proposed by Senator Warner, how far this Legislature can go in the delegation of our responsibility to a nonelected person. And I would hope that it is not possible for us to do that because I am deeply concerned that once we delegate to the tax commissioner the authority to negotiate with the railroads that it would not be an equitable type of negotiation. And I would have to say also, as Senator Moore has said, that there comes a time when it might be better to go to court because the. agreements reached by this tax commissioner may be far more expensive than to litigate the issue. Another point I would like to make is this, what happens if two years from now we have a different tax commissioner, and that individual says, wait a minute, Mr. Balka gave away the farm, can't afford that, and he decides that something else needs to be done, and where does that leave us? I know that 'the issue is one which is very emotional. I know it is one which many people do not like to discuss, but I know that once we go. part way, as we are doing in this instance, the issue as to whether or not the railroads are
being taxed proportionately and, fairly is going to become an item of interest to pipelines and telephone lines and other individual entities and taxpayers. I would support the Moore amendment. I think, as has been pointed out by others, that this amendment, without the Moore amendment, will probably seal, the doom of constitutional one. I think that it is not so much whether it is fair or not, but whether it is perceived to be fair that is going to,, seal the fate of that constitutional, amendment.. And. there seems to be an attitude that says the take it or leave it is the way to go, and there is no other area of. negotiation. But I think there is another area and one that is open and, certainly, if my telephone calls and my mail are any, indication, the right of the initiative is still there. And,, eventually, that may be used if the Legislature refuses to accept its responsibility and if the Governor refuses to bring us back into session. I have mentioned before that I have been. on the receiving end of that treatment, and it works,' and so, therefore, the Legislature is not the final word. And the Governor may, wish to go fishing and, more power to him, I went fishing once myself, kind of enjoyed it. But the facts are that the Legislature and the Governor are not the final say so in this matter, and the people will have a say themselves if they do not deem this to be fair ...
PRESIDENT MOUL: One minute.
SENATOR SCHMIT: and equitable, and in the final analysis that maybe we will...
(No overlap between tapes. Some debate. has been lost.)
(Senator Warner now speaking) ... no longer exist. flow they are all one class, arid' some of the things that have been read as far as the past court cases were based on our State Constitution and then applying the Fourteenth Amendment to that, and it just simply is different. Again, I would repeat the provisions of the Moore amendment, in my opinion, simply is not possible under, the proposed CA1. It requires all personal property to have a single method of depreciation. An attempt to move other centrally assessed into the... that is, I should more accurately. describe it, to attempt to move nonprotected property under...to put them tinder the 4-R Act flies in the face of the uniformity* that would otherwise be required by CA1 and simply could not be done. And I would trust that you would vote down the amendment. What we are talking about is giving some stability. We can talk,
to our tax structure when we get to Senator Wickersham is amendment. Then we can an discuss the issue that he will raise, which is more of a direct one of how much of a judgment do, ..you want to ... well, obviously, whether ... what judgment you want to make on whether to pursue a case law or pursue trying to avoid that issue and do it by statute in a way that keeps us in conformance with the 4-R Act. So I would urge that the Moore amendment be rejected and move on to the substantive issue that directly affects the 4-R Act, and that would be Senator Wickersham's amendment.
PRESIDENT MOUL: Thank you, Senator Warner. Senator Schrock.
SENATOR SCHROCK: Madam President and members of the Legislature, I don't know what to say here. On one hand we are being told if. we don't accept Senator Warner's amendment, why the railroads will take us to court, but I have been going around the state on my spare time talking to farmers, letting them vent their wrath on. me for what we have done to them down here, and, telling to them, trying to explain to them what has happened. And it is going to be rather difficult to tell them that, well, now the railroads really don't like this plan very well, so we are going to treat them special. I, for one, have been hoping the constitutional amendment is going to pass. And I believe if the Warner amendment gets adopted here, it is really going to be a tough sell. And one thing you will notice when you count the votes, the Third District has a little higher percentage of people voting than the other districts, so I think our vote out there is going to be very important, and if we make this more difficult to sell to the farmers, I think we are in trouble on the constitutional amendment. Maybe we are already. I don't like what's going to happen if the constitutional amendment fails. Some people say there is a remedy., We will come back with a special, I don't know that, and I try not to be much of a gambler, although by the nature of the business, I am... I'm in, I am a gambler. But all I know, Senator Warner, is your amendment is going to make my sell jot a lot tougher, and I thought I was going to be doing a lot of selling here the next three or four weeks before the election. And I guess if the railroads don't want to be a player, or it they want to play on a different level, you know, collectively, I think farmers are probably paying...I think Senator Coordsen said they pay about 30 percent of the real property taxes, and there is only about four... and we are only about 4 percent of the population. And 1 don t see any class out there that is going to get hit as hard
as agriculture on personal property. And if we are not going to treat everybody the same, I don't think farmers are going to vote for this. I really don't. I believe the ones I have talked to understand the situation, and when I explain it to them,. keep in mind it is difficult to understand, let alone have me doing the explaining. So, golly, I just don't know what to do here.. I just can't believe this is going to set well out there in rural Nebraska, especially in the Third District, and farmer I s do vote. A high percentage of them vote there, and I think they. will become informed about this situation here,, but it is really going to agitate them. If they say, well, the railroads don't want to be on the same basis we are, we are going to give them a break, you know, when is agriculture going to get a break? I have been supporting LB 775, but the fact of the matter is for every break. business gets, farmers and homeowners pay more. So, that is, a little frustrating to me want to bring business into Nebraska, but for every break we give people on 775 benefits, farmers and homeowners pay more. It is just a fact of life., So I don't know that I am going to be supporting the Moore amendment, but I don't think I can support the Warner amendment either.
PRESIDENT MOUL: Thank you, Senator Schrock. Senator Haberman.
SENATOR HABERMAN: Madam President and members of the body, Senator Schrock, you are right on track. We are not going to treat railroads the same. We all know that. As the amendment hammered out in an agreement with the railroads would give the tax commissioner the power to negotiate settlements with the railroad, if they claim they are being taxed unfairly It does not say with the farmer or agricultural I people that he can declare them being unfairly taxes. It does not say that the homeowners can go to the tax commissioner and lie can declare them being unfairly taxed. It doesn't say that the big business or small businessman can to the tax commissioner and say I am being fairly untaxed or fairly taxed and have him change my taxes, no, it doesn't say that. It just says the railroads. if they feel they are being taxed unfairly, the tax commissioner has the authority to change it. You know Senator Schmit might have had a good point. He said what if we change tax commissioners. Well,, from history, every four years for the last many, many, many years, we have gotten a new Governor, and in two years if we hold to the past, we are going to get another new Governor, and it is quite possible, folks, that the new Governor will not reappoint the present tax commissioner, and we
don't know what the new. tax commissioner is going to feel about having the power to say to the railroads, you are being taxed unfairly. Who knows, he might me an ex-railroad man, or he .might be an ex-agriculture man, and he says, hey, wait a minute,, folks, I am going to substitute the word agriculture or farmer for railroad. We don , t know that. We don't know that. So I would say this, that we are playing with fire. You know, Senator Schmit said maybe we should go to the courts. Well the' courts haven't been too friendly towards us on these matters. However, I would almost be willing to go to the court s rather than leave it up to one political man to make the decision, are we, taxing railroads I not fairly. That's a lot of weight to carry. That's a lot of track to carry if I you want to make it personal property. So I would support the Moore amendment. I oppose the Warner amendment, I and I would like to, as I have in ,the past, go on the record as opposing the constitutional amendment. Thank you, Madam President.
PRESIDENT MOUL: Thank you, Senator Haberman. Senator Warner.
SENATOR WARNER: Madam President and members of the Legislature, I just want to repeat a couple of things. The amendment that deals with the railroad is not special treatment. What it is compliance with the 4-R Act and the federal supremacy of that act over what we can do. It is not another provision. It is not a case of negotiation by the tax commissioner. There is a spelled-out method which reflects the. method required by the 4-R Act, and Under that provision, if applying those factors, come out with a 5 percent differential with the tax that they would pay compared to what the 4-R Act would permit, then the tax commissioner is authorized to make that adjustment, not, required. That is all it does. If the 4-R Act didn't exist, .the issue wouldn't be here. There isn't any question that we could take the position that some Of YOU, Would like to do, as 1. don't know if they will file a case without this or not.. But if they do, or did, then the issue is do you want to put local governments in jeopardy depending on when the case was filed. That the revenue that was anticipated because of the valuation of railroads in that governmental subdivision, if you want to put that in jeopardy, then a lawsuit can accomplish that. Maybe the state will win, maybe they won't. I don't know. What I do understand is that if we adopt this amendment, the likelihood is virtually zero, at least it is as slim as I can make a judgment on. And we are not putting the local governments in' the position of looking at refunds again. We won't be looking at
the position of how you make up the shortfall if it does. occur.. We only address the shortfall that has already been created by past cases. The bottom line of it all is that if all this discussion, is aimed at defeating CA1, which as Senator Haberman summed up his position at the end, bear in mind that the most likely thing, in my opinion, that is going to occur is all 1 property that was affected by the Supreme Court decision here will remain on the tax rolls at market value. And if agriculture is going to take. a shock, that is a supreme shock, probably $40 million which they cannot absorb. That's really what we. are talking about. The thing in the whole issue that bothers me a lot are those of you who are opposed to CA1, what you would like to see done, in my opinion, can only be done if CA1 passes., You wait till
PRESIDENT MOUL: One minute.
SENATOR WARNER: ...the November election, you are going to be. faced with levies having already been set, you are going to be faced with computation of taxes, you are going to have a whole number of problems, and we may Well have problems anyway for this year for a special session. That depends on what the court does with LB 829, but that is not the issue at all. As a matter, of fact, if that comes out the way it possible will come out, then CA1 is the, only response. You may not know that until after the primary. And I, would urge that Senator Moore's amendment be rejected because it flies in the face of equal treatment. The only nonequal treatment that is in CA1 is where the federal supremacy...
PRESIDENT MOUL: Time.
SENATOR WARNER: ... requires us to follow those requirements over and above our own state laws.
PRESIDENT MOUL: Thank you, Senator Warner. Seeing no other lights, do you have closing, Senator Moore?
SENATOR MOORE: (Mike off) members, Senator Warner, YOU mentioned my amendment-flies in the fact of equal treatment, and the definition you use, when you make that statement would be CA1? The definition, you just finished by saying that, my amendment flies in the face of equal treatment. And the definition you are using when you say that I am assuming must be CA1?
SENATOR WARNER: Yes.
SENATOR MOORE:: Which is not passed. Under our present. ..under the multitude of court cases we have had in. the past, though, this is the definition of. equal treatment, is it not? Our present Constitution as it now stands...
SENATOR WARNER: Well,...
SENATOR MOORE: ...as ruled by the court, my amendment, is the definition of equal treatment.
SENATOR WARNER: I don't believe so, Senator. If I am understanding your question correctly, equal treatment would be exempting all real and personal property under our existing Constitution because I believe the two are tied together.
SENATOR MOORE: Well, no,...
SENATOR WARNER: You and I disagree on that.
SENATOR MOORE: Well, we would disagree on that, but. as far. as Enron and MAPCO cases, equal treatment is what my amendments... is exactly as defined by my amendment, correct, Senator Warner? Well, you can ( interruption)
SENATOR WARNER: Are you talking under an existing... an existing Constitution defines real and personal property taxed, together and there is a single class of centrally assessed property, and those cases, and I am kind of paraphrasing now, but you would argue that it was unequal treatment because the railroads were treated differently under the 4-R Act and under the centrally assessed. And I am talking about if CA1 is approved, that provision which allows the state to treat as a separate class those federally mandated requirements without having discrimination occur with the balance of our tax system tied to that 4-R Act, that is correct.
SENATOR MOORE: Okay, thank you, Senator Warner. And I would contend that actually, under CA 1, your statement about my amendment is probably true, but CA1 is not passed yet. I think historically in this state we have tried to maintain some degree of uniformity within class. We have had a number of court cases with our present Constitution which says all centrally assessed
must be equalized. We may change the State Constitution under CA 1, get out from underneath that, and we may not. And there is still some federal equal protection problems we still have to have. But, nevertheless, if you sit here today and look at. our present I resent State Constitution, the court has said time and time again, you have to treat these people alike. And they have done that under the guise primarily of the State Constitution. We are going to change the State Constitution, there still may be a federal district court challenge, obviously that's not why .you need to adopt my amendment but, nevertheless, if it is fair to treat all the people alike" you can say, and Senator Warner say, the railroads don't get special treatment. They get., you should refine it and say that they get: mandated special treatment as opposed to everybody else that depreciates their property. It is not our fault. It is not his fault. It is the federal government's fault, even though, time and again, the administration and the tax commissioner have said don't worry about bothering our representatives back in Washington about the 4-R Act, it is not part of our problem. Yet what I hear today is exactly what our problem is if we discuss this, and I can't say much more. As I said before, if you are going to vote against Senator Warner's amendment, don't vote for mine just to be hostile. But if you really think you want to go down the path of treating people alike, which I think is something that is imperative that we do, I would ask the body to adopt my amendment so all centrally assessed utilities are treated the same, and treated, in my opinion, at least preferential to anybody else that has just straight depreciated property.
PRESIDENT MOUL: Thank you, Senator Moore. We will now vote on the Moore amendment to the Warner amendment!. All those in favor please vote aye, opposed nay Have you all voted on the Moore amendment? Senator Moore.
SENATOR MOORE: I would ask for a record vote.
PRESIDENT MOUL: A record vote has been requested on the Moore amendment to the Warner amendment. Have you all voted? Have you all voted? Please record, Mr. Clerk.
CLERK: (Read record vote. See page 1935 of, the Legislative Journal.) 12 ayes, 14 nays, Madam President, on the amendment.
PRESIDENT MOUL: The amendment fails. I would like to call the senators' attention to the area under the south balcony.
Special. quest today of Senator Schrock is Bob King, who is the editor of the Holdrege Daily Citizen. Welcome to. the Legislature today. Thank you. Items for the record-- Mr.. Clerk.
CLERK: Madam President, amendments to be printed to LB 719A by Senator Wesely, Senator Nelson, and Wickersham; Senator Schrock amendments to LB 1011; Senator Crosby and Wesely to LB 934. (See pages 1935-43 of the Legislative Journal.)
A new bill, LB 1184A by Senator Rasmussen. '(Read for the first time by title.) And a resolution, LR 426 by Senator Conway. .(Read brief explanation. See pages 1943-45 of the Legislative Journal.) That will be laid over, Madam President. That is all ,that I have.
PRESIDENT MOUL: Thank you, Mr. Clerk. Speaker Baack.
SPEAKER BAACK: Madam President and colleagues, I might make an announcement. You will find on the agendas as they come out, we are going to start at eight o'clock on Monday morning I because we will be reading the budget bill, and we do. need 30 people to show up as quickly as possible, around eight o'clock, because we do have to suspend the rules to read that because it'll only have a one-day layover rather than two. So we will need a rule suspension before we are able to read the budget bill. Next week is you can plan on working late every night next week, and by Tuesday night next week, we need to be off General File, and by Thursday night next week, everything has to be passed that is going to be passed and back to us before we adjourn on Thursday night next week. We are getting right down to the end and we have lots to do yet. So with that, I'd move that we adjourn until Monday morning at 8:00 a.m.
PRESIDENT MOUL: You heard the motion to adjourn. All those in favor please say aye. Opposed nay. We are adjourned until 8:00 a.m., Monday morning.