LB670 would create a nonrefundable income tax credit for donations to private school scholarship programs. This bill will be debated by the full Legislature during General File at 1:30 p.m. on Monday, May 13.
LB670 will be very costly to taxpayers and will shortchange public schools. The cost of this tax break is capped at $10 million in the first year. However, if 90 percent of that amount is used, the cap will grow by 25 percent the following year. It is very likely the full cap will be used, as donors can get a full reimbursement on the amount contributed, up to half their income tax liability, due to the generosity of the credit. Assuming the credit grows by 25 percent each year, the credit would total more than $93 million in lost state tax revenues by 2030.
Under LB670, an individual, couple, or business can receive a credit equal to 100 percent of their total contribution or 50 percent of their income tax liability, whichever amount is smaller. There are no limits on contribution amounts. This means that as long as there are enough credits available, a corporation with an income tax liability of $1 million could make a donation to a private scholarship granting organization of $500,000 and receive a $500,000 tax credit. Or, if a couple has income tax liability of at least $20,000 and they make a donation to a private scholarship granting organization of $10,000, they receive a state tax benefit of $10,000.
While LB670 is advertised as an effort to help low-income families, the eligibility criteria in LB670 would allow students to qualify if their families have income that is less than twice the reduced-price lunch threshold, approximately $93,000 for a family of four.