Tax incentives for defense contractors advances in Legislature

Nebraska defense contractors could receive tax credits under a bill advanced to the final round of debate in the Legislature Wednesday.

LB649, known as the Defense Efforts Workforce Act, would offer a 5% wage credit to defense contractors capped at $4 million each year across all employers.

To qualify for the credit, companies must have at least 10 full-time employees dedicated to the mission of Offutt Air Force Base. That would include employees working on intercontinental ballistic missile projects in the Nebraska panhandle and other businesses that report to the United States Strategic Command.

The companies also must maintain a workforce greater than or equal to 102% of the prior year, ensuring that businesses are expanding.

Eligible companies could then receive a non-refundable wage credit on payroll to employees making at least 150% of the average hourly wage in Nebraska. That amounts to an annual salary of around $90,000.

Bellevue Sen. Rita Sanders, who designated the bill as her priority legislation for the session, said it would address Nebraska’s "brain drain" and boost the state’s economy.

“The Defense Efforts Act is a critical opportunity to enhance our nation's defense capabilities while driving economic growth in the Bellevue metro area and across the state of Nebraska,” she said.

But Sen. Tom Brandt questioned whether the tax credits would be enough to change the calculus for businesses determining whether to relocate or expand in Nebraska.

“If these jobs are here in Nebraska, I still don't understand why these people aren’t coming here anyway, that they would need this, I don't want to call it a pittance, but $4 million a year is going to make the difference on whether an outstanding company that rebuilds engines or works on airframe stresses or puts missiles in the ground, that that would be the deciding factor?” he said.

Brandt and Sen. Merv Riepe also brought up the budget shortfall that has loomed over the legislative session, questioning whether this is the right time for tax credit legislation.

“At the same time that we're talking about creating a business incentive, we're also in a budget process of cutting back on incentives, or simply eliminating some incentives, I assume, as we go through the budget,” Riepe said. “I for one, do not like specialized, and no pun intended, but siloed types of economic development.”

But Sen. Bob Andersen said the tax credits are a guaranteed positive return on investment for the state, since they would only apply to growing businesses.

“If they don't bring jobs here, if they don't perform, if they don't do what we think they're going to do, there's no damage, no money has left the general fund, so there's no expense,” he said. “But it is a big incentive for defense contractors to be able to relocate more and more people here.”

The bill advanced to the final round of debate on a 40-4 vote Wednesday evening. Brandt was joined by Sens. Danielle Conrad, Megan Hunt and Terrell McKinney in opposition.