Union Pacific-focused tax incentives advance in Nebraska Legislature 

LINCOLN — Nebraska lawmakers debated roughly six hours Tuesday before handily advancing a tax incentives package aimed largely at keeping and growing a Union Pacific Railroad workforce after a planned merger with a railroad giant from another state.

Legislative Bill 1165, pushed by Omaha State Sen. Brad von Gillern on behalf of Gov. Jim Pillen, now moves to a second phase in the lawmaking process. The tally was 38-3, with four legislators present but choosing not to vote.

Several state senators said they see the benefits of the bill extending beyond Omaha-based U.P., which is in the process of absorbing another Fortune 500 company, Georgia-based Norfolk Southern.

State Sen. Danielle Conrad of Lincoln led the opposition to what she called a “sweetheart deal for Union Pacific.” She said no one has been able to prove to her that LB 1165 was not “special legislation,” saying its criteria is tailored to the “iconic” and “legacy” U.P.

“When on earth are Nebraska leaders going to come together and say, ‘Hey corporate Nebraska, stop fleecing us?’” she asked.

State Sen. Mike Jacobson of North Platte, among the majority on the other side, dismissed any notion that the state is “writing a fat check” to corporate America. He described the proposed incentives as a well-crafted and “incredibly well thought out plan.”

“To sit back and say incentives don’t matter is sticking your head in the sand,” Jacobson said.

‘Grow the Good Life Act’

Discussion on the so-called “Grow the Good Life Act” stretched beyond most Nebraskans’ dinner time. As proposed, it modifies three existing incentives laws and adds a new grant program.

Critics largely questioned the timing, as the state grapples with fiscal deficits and is poised to cut some human and social services including for disabled, homeless and special education communities.

Supporters, citing Chambers of Commerce backing, argued that the business incentives are integral to ensuring that U.P remains a state anchor and that Nebraska can compete with other states to retain and attract high-paying jobs capable of growing the state’s economy.

State Sen. Jane Raybould of Lincoln referred to a fiscal analysis prepared early on by the legislative staff, which showed a negative revenue impact on the state’s general fund for several years, including $8.76 million in 2026-27.

“It’s disheartening to see how we’re handling our budget and priorities,” she said. 

Von Gillern, who chairs the Legislature’s Revenue Committee, emphasized that the fiscal analysis would be updated by a later round of voting. He touted potential returns on the state’s investment, including expansion of the state’s tax base and anticipated economic development. 

“This is a way to grow our way out of challenges,” he said.

Union Pacific-centric

Key parts of LB 1165 only apply to big companies undergoing a merger during a certain time period, namely U.P. Among highlights: 

• Expands the cap for eligible employers on wage credits available under the “Key Employer and Jobs Retention Act” from $4 million to $5 million per year starting in 2030.
• Increases tax credits available under the ImagiNE act for wages paid to new employees by 1 percentage point if the average wage is at least 150% of the statewide average paid. 
• Increases the investment credit for eligible manufacturing projects by 1 percentage point if investment surpasses a certain amount.
• Increases allowable wage and investment credits by 1 percentage point to applicants that have 3,000-plus Nebraska employees and within seven years of a merger add another 1,000 employees with salaries of at least $90,000.
• Transfers $5 million from documentary stamp tax proceeds for a renovation grant to an employer to help worker retention and recruitment. A previous version would have tapped the state’s general fund. 
• Creates a grant, not to exceed $300,000 a year for an employer undergoing an ownership change, if used to support employee retention and recruitment.

Conrad, who led the opposition, characterized the package as a $50 million give away to U.P. at the expense of Nebraskans seeing cuts in services for veterans and people living with disabilities.

She said she was particularly offended by apparent “white glove concierge services” allowed under the $300,000 annual grant for retention and recruitment.

While that language was not explicit in the bill, Conrad said the white glove service was a description used by a Pillen aide to a legislative committee. 

“It seems really out of touch and murky at best,” she said.

Von Gillern defended the grant, saying the funds are more about helping potential newcomer professionals sink roots in a new state so that they stay. 

Conrad’s attempt to carve that particular grant out of LB 1165 failed on a 9-24 vote. Fifteen other senators were present but did not vote. 

Child care 

State Sen. Bob Anderson of Sarpy County called the legislation smartly developed because he said the state would not award credits until they are earned.

Von Gillern, under questioning by Anderson, said the applicant does not receive credits for as much as six years “after they’ve spent their own dollars” and that the business has 10 years to use the credits. He said the 2005 Nebraska Advantage Act, which was replaced by the 2021 ImagiNE Nebraska Act, was flawed in that the state “never knew when (credits) were going to be used.”

Criticism by State Auditor Mike Foley was a motivator in creating so-called safeguards in LB 1165, von Gillern said. 

Foley, in a Feb. 13 letter to the Department of Revenue, pointed out “serious unintended consequences” of the Advantage and ImagiNE acts.

He called for more scrutiny from Revenue Department officials and lawmakers, saying a result was nearly $1.2 billion in “lost revenue” over the past four fiscal years. Foley highlighted the ability of participating companies to “uninvest” in Nebraska but continue to receive incentive payments.

State Sen. John Fredrickson of Omaha said during Tuesday’s discussion that he appreciates “clawback” provisions in LB 1165 designed to retrieve losses from participants that don’t “deliver.”

Concerning him, though, is a shaky state fiscal situation. He said the timing of the incentives proposal was “questionable.”

Fredrickson asked about related child care incentives, which have been lauded by chamber officials. Von Gillern said the proposed package offers more accessible incentives than previous laws.

Von Gillern said that under the ImagineNE act, the child care credit is available only to employers that offer on-site services. LB 1165, he said, allows a qualifying employer to pass on the benefit to workers that use off-site daycares, likely in the form of a payroll reimbursement. 

Von Gillern said that up to 112 companies in the state appear eligible to apply for the new child care credit. 

‘Tone deaf’ 

Hitting on a common objection, State Sen. Terrell McKinney of North Omaha said he was disturbed at programs lawmakers are prioritizing.

“It’s the other things we are not providing to Nebraskans,” he said, calling certain moves “tone deaf.”

State Sen. Megan Hunt of Omaha said her track record shows she’s open to business incentives, but she was troubled by this scenario.

“My position is that we just can’t keep offering companies handouts at the expense of services in our state,” she said. 

Von Gillern thanked lawmakers for the “great debate” and said a fiscal analysis will be firmed up by the next lawmaking step. 

“The returns will far exceed the investment by the state,” he said.

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