By Yanqi Xu
Gov. Jim Pillen is one of the few Nebraskans who paid his 2023 property taxes in 2023, a move that allowed those who did to claim a state property tax refund. Anyone who paid their 2023 property taxes in 2024, as most do, can’t claim that refund.
Justin Harris could use the money.
The McCook farmer and businessman is already behind on his family’s property taxes levied last year. He still owes $3,200 that’s growing with interest.
Adding to the pain, Harris is missing out on a tax rebate thanks to a much-misunderstood change that Nebraska lawmakers made earlier this year. It’s costing him $1,300 – money he still could have received had he paid his property taxes in full by Dec. 31, 2023.
“There was no chance for us to be able to take advantage of that discount because we’re living paycheck to paycheck,” he said.
The vast majority of Nebraska property owners may not realize it, but they’re in the same boat as the Harris family. And, in total, Nebraskans who didn’t pay their 2023 property taxes in 2023 will lose as much as $570 million.
At the tail end of this year’s special session, the Nebraska Legislature – after failing to agree on greater property tax cuts – changed how the state offers relief on property taxes paid toward public schools. Previously, the state delivered a 30% “back-end” refund to those who applied. Lawmakers switched to a “front-loaded” system meant to guarantee that every Nebraska homeowner and landowner gets relief.
But in doing so, they retroactively eliminated the back-end credit for the 2023 tax year if you paid your property taxes after Jan. 1, 2024 – something the vast majority of property owners did.
In fact, owners of only 15% of taxable properties paid off their 2023 property taxes in 2023, a Flatwater Free Press analysis of Nebraska Department of Revenue data shows.
Gov. Jim Pillen, who called the special session, was among the few who took advantage of the old credit before the Legislature took it away.
Some leading lawmakers, including Sen. Lou Ann Linehan, a Republican, and chair of the Legislature’s Revenue Committee, said the law was intended to offer relief to property taxpayers each calendar year and effectively does so.
But Sen. Steve Erdman, a Republican from the Nebraska Panhandle, urged his colleagues to set aside more money for a fix in the upcoming legislative session. The Nebraska Farm Bureau has also called on the Legislature to give Nebraskans back their refunds for the 2023 taxes they paid this year.
“We must find a fix that prevents the changes made in the special session from effectively raising taxes on most property owners by more than half a billion dollars. …The state’s property tax burden should not have gone up. Yet, it did, and it did so in a big way,” Farm Bureau President Mark McHargue said in a statement.
It’s important to note: The new law passed by the Legislature and signed by Pillen will lower the taxes of many Nebraska property owners.
That’s because many Nebraskans never realized they needed to claim a tax refund under the old law. So they never did, and never got the money owed to them.
The new, $750 million relief package that the Legislature settled on will directly deliver money to all Nebraska property owners automatically.
But it won’t save those who applied for, and received, the old “back-loaded” refund a single dime. All the new law does for them is change when and how the tax relief is delivered.
And the switch will actually be a net negative for many of these Nebraskans, some accountants say, since they won’t receive any refund for 2023 property taxes they paid in 2024.
Want to know where you stand?
Look up your taxes paid – and credits you can still claim – by using this state tool. Select the year you paid and the year the property taxes were levied.
When you file your 2024 income tax return, you won’t see a spot to claim a refund on your public school taxes, because the Nebraska Legislature changed the law to give you that property tax relief automatically moving forward. But, in 2024, you will still be able to claim a 100% credit for the portion of property taxes that go to community colleges. This credit will likely be phased out after tax year 2024.
People like Jane and Jerry Mann, who live in a three-bedroom home in Papillion with their cat and a goldendoodle. The Manns started claiming the old property tax credit in 2022, and got back $1,747 from the state.
The retired couple, like most Nebraskans, always paid their property taxes in the following calendar year. They assumed they would continue to receive the credit each year, but didn’t expect the Legislature to “yank it away” without any forewarning.
“It’s just so confusing. And the way I look at it is, we’re losing out on a year and that we are not going to recoup that,” said Jane Mann, who expressed frustration with the lack of communication from lawmakers.
The Legislature has been discussing such a switch for more than a year, Linehan said, and shifting to the new “front-loaded” tax relief was built on a wide consensus.
“If you read a paper in Nebraska in the last 24 months, and you didn’t know this is a possibility, you weren’t paying much attention,” she told the Flatwater Free Press in the interview.
Accountants found filing the tax forms too cumbersome under the old law. Public policy experts say applying the credit automatically when collecting taxes helps regular Nebraskans get their fair share.
The state could only pay for the new credit by rolling over money appropriated for the old credit, and laid out the plan in the fiscal note, Linehan said. She also said that Nebraska Farm Bureau executives like McHargue had advocated for a front-loaded credit and knew about the state’s plan all along.
“The Farm Bureau was in every meeting we had on this for two years,” Linehan said. “So would (McHargue) know that this was a possibility? Yes, he would. Would Steve Erdman know this was a possibility? Yes, he would.”
Whether intended or not, the new law creates inequality, said Sen. Julie Slama, Republican from Dunbar.
Slama voted for the bill, which passed 40 to 3. She says she didn’t realize it had a problem until after the special session ended, a problem she attributes to two words missing from the 44-page bill.
“Several accountants have raised it as an issue, and were given the same runaround that a lot of the senators are being given now, and that it’s a non-issue — ‘On the whole, everybody is treated the same,’” Slama said.
Those who paid their 2023 property taxes in the calendar year 2023 tend to be wealthy landowners savvy enough to know about tax planning or who can afford accountants, said Slama. Some pay their property taxes early at year’s end to offset their taxable income.
Contrast that to most homeowners with mortgage payments, who have no control over when escrow accounts paid their 2023 property taxes, said Brian Klintworth, chair of the Nebraska Society of CPAs.
Those payments typically came in two payments – both in 2024.
So richer Nebraska landowners, Slama said, were far more likely to receive their 2023 tax refund.
“You have multimillionaires who got the free pass and got a double dip, but then you have average tax-paying Nebraskans, working-class Nebraskans stuck with a missing year of relief and half a billion dollars of relief that should be in their pockets gone,” she said.
Pillen, and the company he founded and built, are among the small group of Nebraska taxpayers who paid early and were eligible to receive their 2023 refund.
Pillen’s personal trust and his family members were eligible to claim credits on two years of payments on a handful of properties on their most recent returns, according to a Flatwater Free Press analysis. His family business, Pillen Family Farms, appears to typically pay property taxes early for its hundreds of properties every year.
Sarah Pillen, co-CEO of Pillen Family Farms, did not respond to questions from the Flatwater Free Press about the company’s taxpaying practices.
Erdman himself also paid his 2023 property taxes last year and claimed the refund, he said.
“I think everybody should have the same opportunity that me and Pillen did,” Erdman said.
The Legislature should find the money to fund property tax relief on 2023 taxes, Erdman said, even if it involves budget cuts.
The push from state senators like Erdman for a fix, Linehan says in an interview, is a “very political” move.
“It’s easy to say there needs to be a fix, but until they show me how they’re going to come up with the money, it’s not a very serious conversation,” said Linehan.
Nebraska taxpayers are receiving some form of relief every year, Linehan wrote in an op-ed to the Lincoln Journal Star. Even if you won’t get the old credit for 2023 taxes when you file your 2024 income tax return, you still get tax relief in 2024 – the new “front-loaded” credit that delivers money back automatically on your 2024 property taxes.
“A lot of this is not fair overall,” Linehan told the Flatwater Free Press. “But it is the best thing to do for the vast majority of Nebraskans who were getting nothing.”
Harris, the McCook farmer, encountered the new law for the first time this week, when he opened his first 2024 property tax bill and was happy to see that, on the front end, it’s $1,300 less than he used to pay.
“It feels good … Now we might actually have the money to pay that,” he said.
By Yanqi Xu
A publication of the Nebraska Journalism Trust
