LB 1124 — Increase the cigarette tax and state intent and change provisions relating to the distribution of cigarette tax proceeds

AM2447AM2253 AM2447AM2253 LB1124 LB1124 AJC - 03/04/202602/23/2026 AJC - 03/04/202602/23/2026 AMENDMENTS TO LB1124 (Amendments to Standing Committee amendments, AM2253)   Introduced by Hughes,Revenue. 24.

Strike the original sections and all amendments thereto and insert the following new sections:

Section 77-2602, Revised Statutes Cumulative Supplement, 2024, is amended to read:

77-2602 (1)(a) The Legislature finds that:

(i) The State of Nebraska spends in excess of one hundred twenty million dollars annually in medicaid expenses related to cancer, disease, and illness caused by smoking;

(ii) Smoking related cancer, disease, and illness are preventable;

and (iii) Medicaid costs paid by taxpayers account for more than twenty percent of the State of Nebraska's General Fund appropriations and continue to increase.

(b) It is the intent of the Legislature to direct a portion of the cigarette tax revenue to be used for the purposes of medicaid.

(2) (1) Every stamping agent engaged in distributing or selling cigarettes at wholesale in this state shall pay to the Tax Commissioner of this state a special privilege tax.

This shall be in addition to all other taxes.

It shall be paid prior to or at the time of the sale, gift, or delivery to the retail dealer in the several amounts as follows:

On each package of cigarettes containing not more than twenty cigarettes, one dollar and sixty-four cents per package;

and on packages containing more than twenty cigarettes, the same tax as provided on packages containing not more than twenty cigarettes for the first twenty cigarettes in each package and a tax of one-twentieth of the tax on the first twenty cigarettes on each cigarette in excess of twenty cigarettes in each package.

-1- AM2253 AM2253 LB1124 LB1124 AJC - 02/23/2026 AJC - 02/23/2026 (3) (2) Beginning July 1, 2026 October 1, 2004, the State Treasurer shall place the equivalent of fifty-two forty-nine cents of such tax in the General Fund.

For purposes of this section, the equivalent of a specified number of cents of the tax shall mean that portion of the proceeds of the tax equal to the specified number divided by the tax rate per package of cigarettes containing not more than twenty cigarettes.

(4) (3) The State Treasurer shall distribute the remaining proceeds of such tax as follows:

(a) Beginning July 1, 1980, the State Treasurer shall place the equivalent of one cent of such tax in the Nebraska Outdoor Recreation Development Cash Fund.

For fiscal year distributions occurring after FY1998-99, the distribution under this subdivision shall not be less than the amount distributed under this subdivision for FY1997-98.

Any money needed to increase the amount distributed under this subdivision to the FY1997-98 amount shall reduce the distribution to the General Fund;

(b) Beginning July 1, 1993, the State Treasurer shall place the equivalent of three cents of such tax in the Health and Human Services Cash Fund to carry out sections 81-637 to 81-640.

For fiscal year distributions occurring after FY1998-99, the distribution under this subdivision shall not be less than the amount distributed under this subdivision for FY1997-98.

Any money needed to increase the amount distributed under this subdivision to the FY1997-98 amount shall reduce the distribution to the General Fund;

(c) Beginning October 1, 2002, and continuing until all the purposes of the Deferred Building Renewal Act have been fulfilled, the State Treasurer shall place the equivalent of seven cents of such tax in the Building Renewal Allocation Fund.

The distribution under this subdivision shall not be less than the amount distributed under this subdivision for FY1997-98.

Any money needed to increase the amount distributed under this subdivision to the FY1997-98 amount shall reduce the distribution to the General Fund;

-2- AM2253 AM2253 LB1124 LB1124 AJC - 02/23/2026 AJC - 02/23/2026 (d) Beginning July 1, 2016, and every fiscal year thereafter, the State Treasurer shall place the equivalent of three million eight hundred twenty thousand dollars of such tax in the Nebraska Public Safety Communication System Cash Fund.

If necessary, the State Treasurer shall reduce the distribution of tax proceeds to the General Fund pursuant to subsection (3) (2) of this section by such amount required to fulfill the distribution pursuant to this subdivision;

and (e) Beginning July 1, 2016, and every fiscal year thereafter, the State Treasurer shall place the equivalent of one million two hundred fifty thousand dollars of such tax in the Nebraska Health Care Cash Fund.

If necessary, the State Treasurer shall reduce the distribution of tax proceeds to the General Fund pursuant to subsection (3) (2) of this section by such amount required to fulfill the distribution pursuant to this subdivision;

and .

(f) Beginning July 1, 2026, and every fiscal year thereafter, the State Treasurer shall place the equivalent of ninety-seven cents of such tax in the Medicaid Expense Offset Cash Fund.

If necessary, the State Treasurer shall reduce the distribution of tax proceeds to the General Fund pursuant to subsection (3) of this section by such amount required to fulfill the distribution pursuant to this subdivision.

(5) (4) If, after distributing the proceeds of such tax pursuant to subsections (3) (2) and (4) (3) of this section, any proceeds of such tax remain, the State Treasurer shall place such remainder in the Nebraska Capital Construction Fund.

(6) (5) The Legislature hereby finds and determines that the projects funded from the Building Renewal Allocation Fund are of critical importance to the State of Nebraska.

It is the intent of the Legislature that the allocations and appropriations made by the Legislature to such fund not be reduced until all contracts and securities relating to the construction and financing of the projects or portions of the projects funded from such fund are completed or paid, and that until such time any -3- AM2253 AM2253 LB1124 LB1124 AJC - 02/23/2026 AJC - 02/23/2026 reductions in the cigarette tax rate made by the Legislature shall be simultaneously accompanied by equivalent reductions in the amount dedicated to the General Fund from cigarette tax revenue.

Any provision made by the Legislature for distribution of the proceeds of the cigarette tax for projects or programs other than those to (a) the General Fund, (b) the Nebraska Outdoor Recreation Development Cash Fund, (c) the Health and Human Services Cash Fund, (d) the Building Renewal Allocation Fund, (e) the Nebraska Public Safety Communication System Cash Fund, and (f) the Nebraska Health Care Cash Fund, and (g) the Medicaid Expense Offset Cash Fund shall not be made a higher priority than or an equal priority to any of the programs or projects specified in subdivisions (a) through (g) (f) of this subsection.

Sec.

2.

The Medicaid Expense Offset Cash Fund is created.

The fund shall contain the money received pursuant to section 77-2602.