Senator Kate Bolz Nebraska State Legislature
AGO 19-3
No. 19-003
Nebraska Attorney General Opinion
State of Nebraska office of the Attorney General
February 22, 2019
SUBJECT:
LB 420 - Constitutionality of "Circuit Breaker"
Providing Refundable Income Tax Credit
REQUESTED
BY: Senator Kate Bolz Nebraska State Legislature
WRITTEN
BY: Douglas J. Peterson, Attorney General, Lynn A. Melson,
Assistant Attorney General
INTRODUCTION
You
have requested an opinion from this office on the
constitutionality of LB 420, known as the Property Tax
Circuit Breaker Act. In general terms, this bill would
provide a refundable income tax credit for certain qualified
taxpayers if the taxpayer's property taxes or rent exceed
a certain percentage of the taxpayer's income.
LB 420,
§ 3(3) defines a "qualifying agricultural
taxpayer" as "an individual who owns agricultural
land and horticultural land that is located in this state and
that has been used as part of a farming operation which has
federal adjusted gross income of less than three hundred
fifty thousand dollars in the most recently completed taxable
year."
[1] Section 4(2) then provides that an
agricultural taxpayer, who qualifies for an income tax credit
under the Act, will receive "a tax credit in an amount
equal to the amount of property taxes paid on the
agricultural land and horticultural land during the most
recently completed taxable year minus seven percent of that
taxpayer's federal adjusted gross income." Section
4(5) provides that only one tax credit may be claimed under
this section per parcel of agricultural or horticultural
land.
[2]
LB 420,
§ 3(4) defines a "qualifying residential
taxpayer" as "an individual who owns or rents his
or her principal residence in the State of Nebraska and who
has federal adjusted gross income of less than one hundred
thousand dollars for a married filing jointly taxpayer or
fifty thousand dollars for any other taxpayer." Section
5 provides that a residential taxpayer, who paid property
taxes on his or her principal residence and who qualifies for
an income tax credit under the act, will be eligible for an
income tax credit equal to the "amount by which the
total amount of property taxes paid on the principal
residence exceeds the sum of the amounts calculated in
subdivision (3)(b)"of § 5. These amounts are based
on specified percentages of the taxpayer's federal
adjusted gross income. A residential taxpayer, who paid rent
for his or her principal residence and who qualifies for an
income tax credit under the act, will be eligible for an
income tax credit equal to the "amount by which twenty
percent of the total amount of rent paid exceeds the sum of
the amounts calculated in subdivision (4)(b)" of §
5. These amounts are again based on specified percentages of
the taxpayer's federal adjusted gross income. Subdivision
(5) of § 5 also includes maximum income credits or
credit caps allowed to qualifying residential taxpayers.
Finally, § 5(11) provides that only one tax credit may
be claimed under this section per residence.
Your
letter states "[B]ecause a circuit breaker affords tax
relief to individuals according to income level, we are
asking for an Attorney General's opinion as to whether
such a policy is in conflict with the Nebraska
Constitution." Your request does not articulate a
specific constitutional provision which LB 420 may
contravene. We have previously stated that a general question
on the constitutionality of proposed legislation will
necessarily result in a general response from this office.
Op. Att'y Gen. No. 09008 (April 16, 2008). Therefore, our
analysis will discuss generally provisions of our state
constitution regarding commutation of taxes, equal
protection, special legislation, the uniformity clause and
the commerce clause.
ANALYSIS
A.
Commutation of Taxes.
As a
preliminary matter, we note that "[S]tatutes are
afforded a presumption of constitutionality, and the
unconstitutionality of a statute must be clearly established
before it will be declared void." Gourley v.
Nebraska Methodist Health System, Inc., 265 Neb. 918,
942, 663 N.W.2d 43, 68 (2003). If LB 420 is enacted, anyone
seeking to have its provisions declared unconstitutional will
bear the burden of overcoming the presumption of
constitutionality.
Nebraska's
"commutation clause" is found at Neb. Const, art.
VIII, § 4, which provides, in part:
Except as to tax and assessment charges against real property
remaining delinquent and unpaid for a period of fifteen years
or longer, the Legislature shall have no power to release or
discharge any county, city, township, town, or district
whatever, or the inhabitants thereof, or any corporation, or
the property therein, from their or its proportionate share
of taxes to be levied for state purposes, or due any
municipal corporation, nor shall commutation for such taxes
be authorized in any form whatever....
This
office has previously addressed the commutation clause with
regard to the constitutionality of refundable income tax
credits. In Op. Att'y Gen. No. 18001 (March 21, 2018), we
analyzed the constitutionality of two bills which would
provide a refundable income tax credit based on a percentage
of property taxes paid during the taxable year. As the
commutation clause was discussed at length in that recent
opinion, we will summarize that discussion here.
The
Nebraska Supreme Court has held that the commutation clause
"prevents the Legislature from releasing either persons
or property from contributing a proportionate share of the
tax." Sarpy County Farm Bureau v. Learning Community
of Douglas and Sarpy Ctys., 283 Neb. 212, 244, 808
N.W.2d 598, 621 (2012). The Court has also held that an act
which allowed delinquent property taxes to be paid in
installments violated the commutation clause, stating that
"the legislature not only shall have no power to release
or discharge any one from the payment of his share of taxes,
but a commutation for taxes in any form whatever is
prohibited ... it is quite apparent that the...