“No governmental entity in the State of Nebraska.” Section 14 does not define what a “governmental entity” is, nor does it define what “in the State” actually means. While, generally speaking, the term “governmental entity” is capable of being reasonably interpreted by the Legislature, the term “in” poses an issue. For example, the question would be whether the state of Nebraska itself is considered to be “in” itself. If not, then this entire prohibition under Section 14 would not apply to the state of Nebraska. The result would be that the state of Nebraska may impose whatever taxes in whatever manner it may choose to impose, based on the pre-existing provisions of the Nebraska Constitution. “May impose taxes.” This does not prevent any governmental entity from imposing other types of charges, such as user fees (like some of the “taxes” in the Popeye movie). Since the term “taxes” is not defined by Section 14, it would be up to the Legislature to define this. However, the Legislature would not be free to define this term without regard to the commonly understood meaning of a “tax” as compared to a “user fee.” “Other than retail consumption taxes or excises taxes.” This section does not define these terms. This is discussed next with regard to Section 15. Review of Proposed Section 15 This is the second of the two petitions. It states: “To add a new section 15 Article VIII of the Nebraska State Constitution: VIII – 15 Beginning January 1, 2026, the State of Nebraska shall impose a retail consumption tax or an excise tax on all new goods and services, and the Legislature may authorize political subdivisions to do the same. There shall be no exemptions from such taxes except for grocery items purchased for off-premises consumption.” Our comments on this new Section 15 include the following: “The State of Nebraska shall impose.” This is mandatory. It is not optional. Under this proposal, the state must do this (even if Section 14 does not apply to it). This is not self-executing. The Legislature and the Governor would presumably implement such a mandate. “A retail consumption tax or an excise tax.” This language contains both clarity and ambiguity. Clearly, the word “retail” only refers to the “consumption tax” and not the “excise tax” because of the presence of the words “a” and “an,” respectively, in front of each. The term “or” seems to say that the state has to make a choice. It appears that this choice must apply for “all” of the “new goods and services.” In other words, could the Legislature choose to apply the state retail consumption tax on some new goods and services and the excise tax on other goods and services? Perhaps not. Neither of these tax terms is defined. While the Nebraska Legislature would seek to include definitions within its legislation, that legislation would have limits based on the ordinary meaning of these words in the context of case law, which can be found in various cases throughout the country. (For some discussion of the meaning of these terms, see the Dec. 7, 2022, report from the Congressional Budget Office titled “Impose a Tax on Consumption” at www.cbo.gov/budget-options/58637.) “On all new goods and services.” Grammatically, there are no exceptions when the word “all” is used. Also, grammatically, the word “new” applies to both goods and services. While the Legislature would need to define the terms “new,” “goods,” and “services,” it would be limited to only taxing those that are considered “new” with respect to the ordinary meaning of this word. “No exemptions from such taxes.” No exemption means no exemption, meaning none. This seems pretty clear and is consistent with the requirement that the tax be imposed on “all,” as stated above. Section 15 does allow an exemption for “grocery items purchased for off-premises consumption.” This might be read to say that this is either an exemption the Legislature is authorized (but not required) to enact or this is a mandatory exemption the Legislature must enact. In addition, the Section 15 drafters chose to use the term “grocery items” rather than the exemption utilized by Nebraska Statute which exempts “food.” The common meaning of the term “grocery” is not limited to just food but instead includes food and other items or supplies that you purchase in a food or grocery store or supermarket (and the reference to off-premises “consumption” is the same word used in the permitted “consumption tax,” so consumption here isn’t limited to that which can be eaten). EPIC Issues With the U.S. Constitution All state tax systems need to run the gamut of, and comply with, the U.S. Constitution limits and prohibitions. These include the Import-Export Clause, the Commerce Clause, the Equal Protection Clause, the Due Process Clause, the Privileges and Immunity Clause, and the Supremacy Clause. Certain federal statutes also must be satisfied. This is an analysis for another day. For some cases in Nebraska’s history which show the willingness of the courts to apply these limits, see, for example, Trailer Train v. Leuenberger, 885 F. 2d 415 (8th Cir. 1988), MAPCO Ammonia Pipeline v. State Bd. of Equalization & Assessment, 238 Neb. 565 (Neb. S. Ct. 1991), Kellogg Co. v. Herrington, 216 Neb. 138 (Neb. S. Ct. 1984), Natural Gas Pipeline Co. v. State Bd. of Equalization & Assessment, 237 Neb. 357 (Neb. S. Ct. 1991), and Jaksha v. State, 241 Neb. 106 (Neb. S. Ct. 1992). CONTINUED FROM PAGE 19 20 Nebraska CPA
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