Magazine article American Banker

Nebraska Officials Claim State's Banks Do Not Pay Enough Corporate Taxes

Magazine article American Banker

Nebraska Officials Claim State's Banks Do Not Pay Enough Corporate Taxes

Article excerpt

LINCOLN, Neb. -- Nebraska banks have a taxing problem -- state officials claim they haven't paid enough.

The Nebraska Revenue Department recently provided a report to the state Legislature showing that through a series of developments in recent years, the state's 460 commercial banks have paid very little in state corporate income taxes.

The report indicated that the banks, in the aggregate, paid a total of $2.4 million in state taxes on profits of $1 billion for the five-year period ending in 1983 -- for an effective tax rate of .2%.

Revenue Department officials say that nonbank corporations would have paid an estimated $45 million in taxes on the same $1 billion income during the five-year period.

"It's at the point where we might as well not be taxing financial institutions at all," said State Tax Commissioner Donna Karnes, whose Revenue Department has drafted a bill to levy a new tax on banks.

But banking industry representatives reacted with displeasure to the suggestion that they aren't carrying their fair share of the cost of government.

"It is misleading and unfair to allege that Nebraska banks have not been good corporate citizens," said A.C. "Skip" Hove, president of the Nebraska Bankers Association. In a prepared statement, he said the Revenue Department statistics "painted an inacurate picture," because they took into account a tax refund resulting from a Nebraska Supreme Court ruling that has returned $23 million to the state's banks so far.

"If you look at the real figures, Nebraska banks actually paid an effective rate of 4.4%, based on federal taxable income, which is well within the state's average corporate tax rate for the time period in question," Mr. Hove said.

Considering New Formula

The state Legislature is currently considering a tax measure that sets a new formula for taxing banks by adding to state corporate taxes some expenses deductible at the federal level. The bill also has a one-year cap for 1985 that sets the tax paid at no more than either the 1984 tax paid or 75 cents per $1,000 of deposits at the bank.

Deb Thomas, counsel for the Legislature's revenue committee, estimated the new tax would raise an additional $3 million.

The bill has the support of Nebraska's Gov. Bob Kerrey, but is opposed by both the Nebraska Bankers Association and the Nebraska Independent Bankers Association.

Ms. Thomas said a major concern of those drafting the legislation was how to structure the tax so that it "didn't continue to bleed" Nebraska's agricultural banks. …

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