Senator Kate Bolz Nebraska State Legislature, 022219 NEAGO, AGO 19-3

Case DateFebruary 22, 2019
CourtNebraska
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...

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