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LEGISLATURE OF NEBRASKA
ONE HUNDRED NINTH LEGISLATURE
SECOND SESSION
LEGISLATIVE BILL 1124
Introduced by Sorrentino, 39.
Read first time January 20, 2026
Committee: Revenue
A BILL FOR AN ACT relating to revenue and taxation; to amend section1
77-2602, Revised Statutes Cumulative Supplement, 2024; to state2
intent relating to cigarette tax distributions; to increase the3
cigarette tax and distribute tax proceeds as prescribed; to provide4
an operative date; to repeal the original section; and to declare an5
emergency. 6
Be it enacted by the people of the State of Nebraska,7
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Section 1. Section 77-2602, Revised Statutes Cumulative Supplement,1
2024, is amended to read: 2
77-2602 (1)(a) The Legislature finds that: 3
(i) The State of Nebraska spends in excess of one hundred twenty4
million dollars annually in medicaid expenses related to cancer, disease,5
and illness caused by smoking; 6
(ii) Smoking related cancer, disease, and illness are preventable;7
and 8
(iii) Medicaid costs paid by taxpayers account for more than twenty9
percent of the State of Nebraska's General Fund appropriations and10
continue to increase. 11
(b) It is the intent of the Legislature to direct a portion of the12
cigarette tax revenue to be used for the purposes of medicaid.13
(2) (1) Every stamping agent engaged in distributing or selling14
cigarettes at wholesale in this state shall pay to the Tax Commissioner15
of this state a special privilege tax. This shall be in addition to all16
other taxes. It shall be paid prior to or at the time of the sale, gift,17
or delivery to the retail dealer in the several amounts as follows: On18
each package of cigarettes containing not more than twenty cigarettes,19
one dollar and sixty-four cents per package; and on packages containing20
more than twenty cigarettes, the same tax as provided on packages21
containing not more than twenty cigarettes for the first twenty22
cigarettes in each package and a tax of one-twentieth of the tax on the23
first twenty cigarettes on each cigarette in excess of twenty cigarettes24
in each package. 25
(3) (2) Beginning July 1, 2026 October 1, 2004, the State Treasurer26
shall place the equivalent of fifty-two forty-nine cents of such tax in27
the General Fund. For purposes of this section, the equivalent of a28
specified number of cents of the tax shall mean that portion of the29
proceeds of the tax equal to the specified number divided by the tax rate30
per package of cigarettes containing not more than twenty cigarettes.31
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(4) (3) The State Treasurer shall distribute the remaining proceeds1
of such tax as follows: 2
(a) Beginning July 1, 1980, the State Treasurer shall place the3
equivalent of one cent of such tax in the Nebraska Outdoor Recreation4
Development Cash Fund. For fiscal year distributions occurring after5
FY1998-99, the distribution under this subdivision shall not be less than6
the amount distributed under this subdivision for FY1997-98. Any money7
needed to increase the amount distributed under this subdivision to the8
FY1997-98 amount shall reduce the distribution to the General Fund;9
(b) Beginning July 1, 1993, the State Treasurer shall place the10
equivalent of three cents of such tax in the Health and Human Services11
Cash Fund to carry out sections 81-637 to 81-640. For fiscal year12
distributions occurring after FY1998-99, the distribution under this13
subdivision shall not be less than the amount distributed under this14
subdivision for FY1997-98. Any money needed to increase the amount15
distributed under this subdivision to the FY1997-98 amount shall reduce16
the distribution to the General Fund; 17
(c) Beginning October 1, 2002, and continuing until all the purposes18
of the Deferred Building Renewal Act have been fulfilled, the State19
Treasurer shall place the equivalent of seven cents of such tax in the20
Building Renewal Allocation Fund. The distribution under this subdivision21
shall not be less than the amount distributed under this subdivision for22
FY1997-98. Any money needed to increase the amount distributed under this23
subdivision to the FY1997-98 amount shall reduce the distribution to the24
General Fund; 25
(d) Beginning July 1, 2016, and every fiscal year thereafter, the26
State Treasurer shall place the equivalent of three million eight hundred27
twenty thousand dollars of such tax in the Nebraska Public Safety28
Communication System Cash Fund. If necessary, the State Treasurer shall29
reduce the distribution of tax proceeds to the General Fund pursuant to30
subsection (3) (2) of this section by such amount required to fulfill the31
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distribution pursuant to this subdivision; and 1
(e) Beginning July 1, 2026 2016, and every fiscal year thereafter,2
the State Treasurer shall place the equivalent of ninety-seven cents of3
such tax plus an additional one million two hundred fifty thousand4
dollars of such tax in the Nebraska Health Care Cash Fund. If necessary,5
the State Treasurer shall reduce the distribution of tax proceeds to the6
General Fund pursuant to subsection (3) (2) of this section by such7
amount required to fulfill the distribution pursuant to this subdivision.8
The amount that is equivalent to ninety-seven cents of such tax shall be9
used for purposes of medicaid. 10
(5) (4) If, after distributing the proceeds of such tax pursuant to11
subsections (3) (2) and (4) (3) of this section, any proceeds of such tax12
remain, the State Treasurer shall place such remainder in the Nebraska13
Capital Construction Fund. 14
(6) (5) The Legislature hereby finds and determines that the15
projects funded from the Building Renewal Allocation Fund are of critical16
importance to the State of Nebraska. It is the intent of the Legislature17
that the allocations and appropriations made by the Legislature to such18
fund not be reduced until all contracts and securities relating to the19
construction and financing of the projects or portions of the projects20
funded from such fund are completed or paid, and that until such time any21
reductions in the cigarette tax rate made by the Legislature shall be22
simultaneously accompanied by equivalent reductions in the amount23
dedicated to the General Fund from cigarette tax revenue. Any provision24
made by the Legislature for distribution of the proceeds of the cigarette25
tax for projects or programs other than those to (a) the General Fund,26
(b) the Nebraska Outdoor Recreation Development Cash Fund, (c) the Health27
and Human Services Cash Fund, (d) the Building Renewal Allocation Fund,28
(e) the Nebraska Public Safety Communication System Cash Fund, and (f)29
the Nebraska Health Care Cash Fund shall not be made a higher priority30
than or an equal priority to any of the programs or projects specified in31
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subdivisions (a) through (f) of this subsection. 1
Sec. 2. This act becomes operative on July 1, 2026.2
Sec. 3. Original section 77-2602, Revised Statutes Cumulative3
Supplement, 2024, is repealed. 4
Sec. 4. Since an emergency exists, this act takes effect when5
passed and approved according to law. 6
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