A tax issue has delayed construction on a new STRATCOM headquarters near Omaha, sending legislators scrambling to resolve the issue with only five days left in the legislative session.
Either state law needs to be changed by the legislature or a form needs to be changed by the Department of Revenue to give the United States Army Corps of Engineers the comfort it needs to claim its rightful exemption from state sales taxes on the material needed for construction.
United States Sen. Ben Nelson told the legislative Revenue Committee that Congress today has approved $120 million to start construction of the new headquarters at Offutt Air Force Base, but the tax issue has delayed construction for four months.
“Amendment 2629 or a similar remedy is absolutely crucial to insuring that the STRATCOM project proceeds without further delay and is done so without assessing taxes to taxpayers on a project that is intended to be exempt,” Nelson stated.
AM 2629 to LB 727, at the moment, is the promoted solution to the problem. No one disputes that the federal government is exempt from state sales taxes on construction projects. The dispute arises from the Corps of Engineers refusal to sign a Department of Revenue document to claim the exemption. The Corps has concerns that signing the document could make the federal government liable for any legal action arising from the conduct of its contractors.
Nelson testified that the problem must be resolved quickly so the new headquarters can be built.
“Which is crucial to our national security,” according to Nelson, “we talk about economic development, but we’re also focused on our national security here, because every day there are more cyber-attacks on our businesses, on our government and on private individuals that we’re experiencing.”
Cost overruns seem to have triggered the concern. Exemption from state sales tax is expected to save the federal government between $15-to-16 million dollars on the project.
The construction delay could stretch out further if the state doesn’t act, according to Nelson.
“The key here is that we do need to resolve this in a quick way for Nebraska, so we can continue to move this project along and then we need to work on it on a larger scale, recognizing that more would need to be done,” Nelson said.
The legislative session ends April 12th.
AUDIO: U.S. Sen. Ben Nelson testifies before legislative Revenue Committee [13 min.]