EDITOR’S NOTE: A description of each CARES Act tax change, as well as the estimate of total revenue reduction, can be found in this Department of Revenue report. The CARES Act tax changes also will be the focus of a Tuesday, July 7 webinar with Adam Thimmesch, associate professor at the University of Nebraska College of Law. The webinar starts at 10 a.m. and you can register for it here. Thimmesch has recently written about the CARES Act tax changes and how states can adjust to them in the tax blogs Tax Notes and The Surly Subgroup.

Unless Nebraska decouples from tax changes contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the state will effectively enact a large business tax cut in the midst of a pandemic, a new analysis from OpenSky Policy Institute shows.

The tax changes would result in a $250 million state revenue loss over the next three years with $230 million of that coming from reduced business taxes, the analysis shows.

This revenue loss would be on top of other revenue losses caused by the pandemic, which are estimated to be between 10% to 25% of state revenues, and would likely force cuts to vital state services, the analysis finds.

“Given the pressing needs of the state regarding the pandemic, the fact that property tax relief is the main desire of Nebraska taxpayers and that some are calling for the state to pass a large business incentive package, the idea of providing businesses with a $230 million tax cut at this moment is questionable at best,” said Renee Fry, executive director of OpenSky Policy Institute.

Nebraska lawmakers could put the brakes on the tax cut by decoupling from the CARES Act Tax changes, as states such as North Carolina, Georgia and Colorado are looking to do, Fry said.

Just decoupling from tax changes related to net-operating losses, which in some cases could provide tax cuts for wealthy Nebraskans for businesses losses not tied to the pandemic, would help the state avoid about $214 million in revenue losses over the next three years, the analysis found.

“The pandemic is placing tremendous economic pressure on Nebraskans as well as on our policymakers,” Fry said. “Decoupling from the CARES Act changes would provide state leaders with needed flexibility in their efforts to help our state recover from this unprecedented challenge.”

Read the full analysis here and download a printable PDF of the analysis here.