AGO Opinion 85008
January 25, 1985
Senator Howard Lamb
Nebraska State Legislature
State Capitol, Room 2004
Lincoln, Ne 68509
Dear Senator Lamb:
You have requested our opinion regarding wheter the provisions of LB 38 would withstand constitutional challenge. LB 38 generally provides that each owner of real property in the state shall be entitled to receive a ten per cent rebate for all property taxes paid. Section 3 of the bill provides the Nebraska Department of Revenue to calculate the rebate due and remit this amouont to the owner of the real property.
Article VIII, Section 4 of the Nebraska Constitution provides, in pertinent part:
Except as to tax and assessment charges against real property remaining delinquent and unpaid for a period of fifteen years or longer, the Legislature shall have no power to release or discharge any county, city, township, town, or district whatever, or the inhabitants thereof, or any corporation, or the property therein, from their or its proportionate share of taxes to be levied for state purposes, or due any municipal corporation, nor shall commutation for such taxes be authorized in any form whatever;
In Steinacher v. Swanson, 131 Neb. 439, 268 N.W. 317 (1936), the Nebraska Supreme Court, constructing the prohibition contained in Article VIII, Section 4, state:
It is quite apparent that the framers of the Constitution of 1875, the one first containing this provision, and the members of all subsequent constitutional conventions, have been imbued with the idea that all taxpayers are entitled to the same treatment by the government they support. For this reason they have expressly written into our Constitution that the legislature not only shall have no power to release or discharge any one from the payment of his share of taxes, but a commutation for taxes in any form whatever is prohibited. Clearly, under this constitutional provision, the legislature cannot reduce the amount of the tax, extend the time of payment, or in any manner change the method of payment.
Id. at 446, 268 N.W. at 321
In County of Lancaster v. Trimble, 33 Neb. 121, 49 N.W. 938 (1891), the court held a statute permitting counties to purchase tax sales certificates and foreclose them, provided that no action could be brought unless the amount due exceeded $200, violated the above-quoted constitutional provision. The court in Trimble stated:
The legislature is without power to release any inhabitant or corporation from his or its proportionate share of taxes, nor can it confer such authority upon county commissioners. It has authorize them to purchase real estate at tax sale, but has provided for the foreclosure of tax certificates in their hands only when the amount due thereon exceeds a specified sum. The legislature is powerless to confer such authority. It cannot do indirectly what the Consitution prohibits it from doing directly; that is clear.
The ten percent rebate on the amount of real property taxes paid provided by LB 38 would, in effect, constitute a reduction in real property taxes paid to all owners of real property in the state. Arguably, the rebate provided under LB 38 could be viewed as a form of commutation of taxes by the Legislature in violation of Article VIII, Section 4. It could therefore be contended the procedure established under LB 38 would allow the Legislature to accomplish indirectly what it could not do directly, in view of the prohibition in Article VIII, Section 4.
On the other hand, the providing of tax relief through the payment of a rebate of this nature does not seem to clearly constitute a release, discharge, or commutation of taxes as contemplated under Article VIII, Section 4. While we express some reservation as to the Legislature's authority to provide tax releif to real property owners in this manner, we cannot conclude the rebate provided by LB 38 is clearyl violative of this constitutional provision.
An additional constitutional question raised by LB 38 concerns Article XIII, Section 3, which provides, in pertinent part: 'The credit of the state shall never be given or loaned in aid of any individual, association, or corporation.
3086 The Nebraska Supreme Court has interpreted the prohibition in Article XIII, Section 3, to prevent the state, or any politiclal subdivision therof, from extending its credit to private enterprises. United Community Services v. Omaha National Bank, 162 Neb. 786, 77 N.W. 2d 576 (1956); State ex rel. Beck v. City of York, 164 Neb. 223, 82 N.W. 2d 269 (1957). In determining wheter legislation providing for the expenditure of public funds is constitutionally impermissible under Article XIII, Section 3, the crucial inquiry is whether the act in question serves a public purpose.
Lenstrom v Thone, 209 Neb. 783, 311 N.W. 2d 884 (1981), involved the issue of the constitutionality of a statutory scheme establishing a scholarship award program providing financial assistance to eligible undegraduate state resients to receive eduational services in public and private postsecondary educational institutions in the state.
Aside from the question of the constitutional validity of LB 38, we also feel constrained to note that we can envision various administrative problems which could arise under its present provisions. Rather than attempting to outline such concerns in detail, we recommend that you seek the advice of the Department of Revenue, the agency which would bear the responsibility of administering the rebate program, regarding any administrative problems posed by the bill.
In summary, it is our opinion that, while we believe some questions may exist as to the constitutionality of the rebate system established under LB 38, we constitutional provision.
Very truly yours,
A. Eugene Crump
Deputy Attorney General