Nebraskans who have claimed a state income tax credit for property taxes paid in support of their area community college should continue to do so in the coming year.
Unlike a new program created by the Legislature this summer to “front-load” a tax credit to property owners for taxes paid to K-12 schools, taxpayers will still need to complete and submit a form to receive credit for taxes paid to community colleges.
The difference between the two programs — one is a set of credits that will automatically show up on a tax statement while the other must be claimed — is a discrepancy that wasn’t discovered until after the special session ended.
“It was such a chaotic special session, it wasn’t really clear if our credits were front-loaded with the others or not,” said Courtney Wittstruck, executive director of the Nebraska Community College Association. “None of us realized they weren’t until the dust had settled.”
In 2022, the Legislature created a state income tax credit that refunded 30% of the property taxes paid to community colleges.
Last year, a property tax reform package (LB243) increased the tax credit to 55% of the property taxes paid to schools like Southeast Community College, which has campuses in Lincoln, Beatrice and Milford.
The amount will increase again for taxes paid in the 2024 tax year, with the credit increasing to 100%, fully refunding the property taxes paid to the state’s six community colleges.
But when lawmakers convened for a special session called by Gov. Jim Pillen to reduce property taxes in the state by up to 50%, the mechanism for paying out the community college tax credit went untouched.
Instead, lawmakers created the School District Property Tax Relief Credit Fund (LB34), which automatically provides the credit based on the taxes paid to local school districts and funneled $750 million into it.
LB34 also caps spending for municipal and county governments to the rate of inflation, with exceptions for voter-approved bonds, public safety spending or a vote of the people to override the tax levy.
Because the community college tax credit was left out of the front-loading, property owners will need to continue filling out the Form PTC — property tax credit — which has previously been used for both K-12 and community college tax credits.
“If you want the community college PTC, you will need to file that document,” said Patrick Roy, a legislative media coordinator for the Nebraska Department of Revenue.
All community college property taxes paid after Dec. 31, 2021, qualify for the credit, according to the revenue department. Community colleges generally make up about 5-6% of a property owner’s tax bill.
Many property taxpayers across the state are already familiar with the tax credits created for K-12 schools and community colleges.
For the 2022 tax year, approximately $562 million of a possible $763 million was claimed, or approximately 74% of the available credits.
In the 2023 tax year, about $477 million of a possible $809 million have been claimed through July of this year — about 59% of the credits available. Roy said that number will increase as more tax credits are claimed.
With the larger share of the tax credits being applied automatically, Wittstruck said community colleges will continue to spread awareness about the need to claim the tax credit.
The community colleges may also push lawmakers to apply the tax credits directly, even though the state will take over the portion of their budgets that until this year was funded through property taxes.
Should the state not fully fund the Community College Future Fund, LB243 allows college boards to reimpose a levy to meet their fiscal needs.
“If the state underfunds us and we’re forced to levy, there would theoretically be a property tax levy, which would make homeowners eligible for the tax credit,” she said.
“It definitely needs to be a conversation, and I anticipate it being something for the next session if it comes up.”
Article by Chris Dunker, Lincoln Journal Star.
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