Business group urges LB701 refunds

State lawmakers will get a nudge in the form of a resolution that requests a prompt refund of property taxes that were ultimately declared illegal.

The resolution was crafted at Tuesday's meeting of the South Platte United Chamber of Commerce with Gov. Dave Heineman as the keynote speaker.

It asks for a refund of property taxes collected by the Republican River Basin natural resources districts under LB 701, about $2.5 million. These property taxes were ruled unconstitutional by the Nebraska Supreme Court in February.

Although some taxpayers filed a protest within 30 days of paying the LB 701 property taxes, many did not.

LB 681, introduced by Sen. Mike Flood on behalf of the governor to address the refund, is stalled in committee.

Under LB681, property taxes and occupation taxes found unconstitutional by a final court order would be refunded.The hold-up of the bill is due to some senators who fear the law could affect potential lawsuits in the future, said Sen. Mark Christensen of Imperial, at a McCook Area Chamber of Commerce Legislature conference call.

The resolution that will be delivered to the Legislature specifically asks that the NRDs, now in possession of the funds, "be directed by the State of Nebraska to refund in a timely manner all property taxes collected under a law declared unconstitutional."

LB 701 was passed by the Nebraska Legislature in 2007 and allowed the Upper, Middle and Lower NRDs n the Republican River Basin to collect an additional property tax on top of the current 4.5 cent all NRDs in the state levy. The funds were to be used to meet Nebraska obligations of the Republican River Compact, an interstate agreement that allocates water usage of the river between Nebraska, Kansas and Colorado.

A lawsuit challenged the property tax as unconstitutional and the Nebraska Supreme Court agreed, finding the Republican River Compact a state and not a local obligation.

Angus Garey, one of the plaintiffs of the lawsuit that challenged the LB701 property tax, said in speaking with Gov. Heineman at Tuesday's SPUCC meeting that LB 681 is still viable.

"He indicated that the committee would reach a compromise this week and LB 681would go through the legislative process," Garey said.

In addition to being sent to all senators, the resolution will be included on the agenda in the near future. Resolutions are not binding but a formal expression of opinion, intent or recognition or are used to authorize a study of an issue.

Garey remained optimistic that taxpayers would get their refunds.

"This is a good reminder to the governor and legislature of the need to refund the taxes collected under an unconstitutional act," Garey said.

Rod Confer of the Knudsen Law Firm, in Lincoln, who represented the plaintiffs in the property tax challenge, said although it's understandable that it would take some time for the Legislature to refund the taxes, he hoped it would be "sooner rather than later."

"it's unjust not to repay them," he said.

Knudsen Law Firm is also representing about 90 landowners with irrigated acres in the Republican River Basin, in a lawsuit that contends the occupation tax in LB 701 is unconstitutional. About $6.5 million has been collected by the Republican River Basin NRDs in occupation taxes on irrigated acres.

In that case, briefs from both sides were filed April 6, with the state and NRDs asking that the lawsuit be dismissed as it was not filed at the same time the property tax lawsuit was filed.

District Court Judge Robert Otte of Lancaster District Court in Lincoln has not yet ruled on that motion.