LINCOLN — Residential electricity could be a rare example of a service to become tax-exempt, as more than 70 goods and services appear ready to lose their tax-exempt status to make way for Nebraska property tax relief.

The Legislature’s Revenue Committee considered an amendment Wednesday to Legislative Bill 9 that would exempt the purchase and sale of residential electricity from sales or use taxes. Committee members said the intention is to exempt the 5.5-cent per dollar state tax, but not the local rate — up to 2 cents in select cities or villages.

State Sen. Lou Ann Linehan of Elkhorn, the committee chair, said recent storms across the state have shown the necessity of electricity.

In eastern Nebraska, 221,314 Omaha Public Power District customers lost power after the July 31 wind storm, the utility reported. More than 2,600 were still without power as of midday Wednesday.

“Electricity is definitely, in our world today, a necessity,” Linehan said. “This would also provide a source of tax relief for homeowners and renters alike.”

According to estimates from the Nebraska Department of Revenue, taxpayers could save at least $62 million annually if electricity was exempted. The local sales taxes amount to an additional $18 million, plus $3 million allocated to two highway-related funds.

In the spring, lawmakers came close to exempting natural gas and propane, in addition to electricity. Those measures were part of LB 388, a property tax relief bill that was defeated.

Testifiers on Wednesday largely skewed toward those asking to add a broader exemption on propane and natural gas, though they took different approaches in how they formally declared their support or opposition.

Chris Dibbern, the Nebraska Public Service Commission’s public advocate for natural gas ratepayers, testified in support based on the concept, encouraging lawmakers to add three words: “and natural gas.”

“On behalf of ratepayers, I thank you for looking into saving every household in this state in this package,” Dibbern said.

Jill Becker, a lobbyist for Black Hills Energy, opposed the legislation. She said it would “pick winners and losers” and ignore customers’ right to choose their power source.

“There’s no policy reason to differentiate between electric and natural gas customers,” Becker testified. “I respectfully ask that you either include natural gas residential customers … or not advance the amendment at all.”

Lynne McNally, executive director of the Nebraska Propane Gas Association, testified in a neutral capacity but asked lawmakers to consider that more homeowners in western Nebraska use propane for heating.

Rick Kubat, a registered lobbyist for the Metropolitan Utilities District, agreed on the necessity and affordability for customers to heat their homes “during bitter cold snaps.”

State Sen. Eliot Bostar of Lincoln, a committee member, chastised Becker for her “odd position” that would still help residents. He thanked McNally for being more careful in expressing her reservations. In multiple exchanges with testifiers, Bostar noted that natural gas is used in producing electricity and, similar to Linehan, noted that nearly all homeowners need some form of electricity.

“This is about helping people,” Bostar said at one point to Becker. “That’s the goal.”

Bostar said he believes the committee will soon exempt all utilities, even if that comes in stages.

Lynn Rex, executive director of the League of Nebraska Municipalities, opposed the measure if it included local sales taxes. While the League typically doesn’t weigh in on the “how” to fund property tax relief, Rex testified, other legislation this special session could impact the ability for municipalities to continue providing necessary and desired services.

That includes the plan from the Revenue Committee and Gov. Jim Pillen to capture local sales taxes on newly taxed items under LB 9.

Rex said that would leave municipalities on the hook to refund businesses for expected local sales tax revenue as part of incentive programs previously approved by the Legislature — the Nebraska Advantage Act and ImagiNE Nebraska Act.

Bostar asked Rex to consider whether taxes on any utilities are the right decision for the future. He noted that the state would also be losing revenue if utilities aren’t taxed.

The Revenue Committee is expected to consider whether to advance LB 9 as its main relief package Thursday morning. Debate could begin Friday, rather than Thursday afternoon, because of delays in drafting the revised legislation.

Nebraska Examiner is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nebraska Examiner maintains editorial independence. Contact Editor Cate Folsom for questions: [email protected]. Follow Nebraska Examiner on Facebook and Twitter.