Center supports Microenterprise Tax Credit improvements, opposes attempt to eliminate program

LINCOLN, NEBRASKA – With Nebraska’s smallest businesses continuing to face uncertainty as a result of the COVID-19 pandemic, now is not the time to eliminate a tax credit program geared toward helping them recover and succeed, but rather improve it, Center for Rural Affairs staff members said in testimony before the Legislature’s Revenue Committee Thursday.

“The coronavirus pandemic has caused many small businesses to shutter and is forcing others to pause plans for future growth,” Johnathan Hladik, policy director for the Center, said in testifying in favor of Legislative Bill (LB) 366. The bill proposes changes to the Nebraska Advantage Microenterprise Tax Credit Act and extends the program’s authorization.

LB 366 was one of two bills addressing the tax credit introduced this year in which the Center offered testimony Thursday. The revenue committee also considered LB 74, introduced by Sen. Suzanne Geist, District 25, which seeks to eliminate the program. 

The Nebraska Advantage Microenterprise Tax Credit Act, created in 2005, incentivizes microentrepreneurship by encouraging business investment and job creation. Currently, the program offers a 20% refundable tax credit over an applicant’s lifetime for eligible investments to business owners with five or fewer employees.

LB 366 would increase the maximum tax credit from $10,000 to $20,000; allow family members to apply the credit to unrelated businesses; ask the Nebraska Department of Revenue to show more transparency when approving new applications; and ensure it remains available beyond 2022.

Hladik said every Nebraska community has felt the consequences of the pandemic and the Microenterprise Tax Credit can help businesses recover by encouraging and facilitating strategic new investment.

“From Omaha to Chadron, we have seen that microentrepreneurship is a successful strategy for growing and sustaining the local economy,” Hladik said. “That was true in 2005 when the Microenterprise Tax Credit was developed and it remains true today.”

However, Hladik and other supporters agree the improvements in LB 366, to bring the program in line with the current business climate, are needed.

In introducing LB 366, Sen. Tom Briese, District 32, said he’s seen the program’s benefits in his district and others across the state, especially in rural Nebraska.

“Knowing how important small businesses are in my area and the impact the program has made toward their success, I believe this credit could be used by many others across the state,” he said. “This bill will make the opportunity accessible and it is a solution to those who need it.”

Regina Krebs, a certified public accountant in Neligh, welcomed the change allowing other family members to use the tax credit. She said the program has huge potential.

“It can be used for small and urban communities, neighborhoods and in rural Nebraska,” she said. “There are even provisions for beginning farmers.”

Andrea McClintic, executive director of Dawson Area Development in Lexington, said because microbusinesses, such as gas stations, hardware stores, salons, and restaurants, are vital to communities, the tax credit is important.

“There are very few programs that microenterprises qualify for even though they are the lifeblood of our communities, large and small,” she said.

Testifying in opposition to LB 74, Policy Associate Trenton Buhr said the Center for Rural Affairs understands Nebraska’s economy relies on businesses of many sizes and industries, including essential businesses supported by the Microenterprise Tax Credit.

“As a small business lender, we know microbusinesses provide a substantial portion of income in Nebraska and should be treated as a worthy and important part of our economy, as they are,” he said.

Pointing out that the vast majority of Nebraska businesses—more than 80%—fit into the microbusiness category, Buhr said elimination of the tax credit would be inappropriate. 

“It is crucial now, perhaps more than any other time, that we support Nebraska microbusinesses,” he said. 

Click here information on the Nebraska Advantage Microenterprise Tax Credit. 

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