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LEGISLATURE OF NEBRASKA
ONE HUNDRED NINTH LEGISLATURE
SECOND SESSION
LEGISLATIVE BILL 1238
Introduced by Hughes, 24.
Read first time January 21, 2026
Committee: Revenue
A BILL FOR AN ACT relating to revenue and taxation; to amend section1
77-2602, Revised Statutes Cumulative Supplement, 2024, and sections2
77-4008 and 81-638, Revised Statutes Supplement, 2025; to change the3
cigarette tax and the distribution of such tax as prescribed; to4
change the taxes imposed under the Tobacco Products Tax Act as5
prescribed; to harmonize provisions; to provide an operative date;6
to repeal the original sections; and to declare an emergency.7
Be it enacted by the people of the State of Nebraska,8
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Section 1. Section 77-2602, Revised Statutes Cumulative Supplement,1
2024, is amended to read: 2
77-2602 (1) Every stamping agent engaged in distributing or selling3
cigarettes at wholesale in this state shall pay to the Tax Commissioner4
of this state a special privilege tax. This shall be in addition to all5
other taxes. It shall be paid prior to or at the time of the sale, gift,6
or delivery to the retail dealer in the several amounts as follows: On7
each package of cigarettes containing not more than twenty cigarettes,8
thirty percent of the purchase price paid by the retail dealer sixty-four9
cents per package; and on packages containing more than twenty10
cigarettes, the same tax as provided on packages containing not more than11
twenty cigarettes for the first twenty cigarettes in each package and a12
tax of one-twentieth of the tax on the first twenty cigarettes on each13
cigarette in excess of twenty cigarettes in each package.14
(2) Beginning July 1, 2026 October 1, 2004 , the State Treasurer15
shall place the equivalent of fifty percent forty-nine cents of such tax16
in the General Fund. For purposes of this section, the equivalent of a17
specified number of cents of the tax shall mean that portion of the18
proceeds of the tax equal to the specified number divided by the tax rate19
per package of cigarettes containing not more than twenty cigarettes.20
(3) The State Treasurer shall distribute the remaining proceeds of21
such tax as follows: 22
(a) Beginning July 1, 2026 1980, the State Treasurer shall place the23
equivalent of two percent one cent of such tax in the Nebraska Outdoor24
Recreation Development Cash Fund. For fiscal year distributions occurring25
after FY1998-99, the distribution under this subdivision shall not be26
less than the amount distributed under this subdivision for FY1997-98.27
Any money needed to increase the amount distributed under this28
subdivision to the FY1997-98 amount shall reduce the distribution to the29
General Fund; 30
(b) Beginning July 1, 2026 1993, the State Treasurer shall place the31
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equivalent of ten percent three cents of such tax in the Health and Human1
Services Cash Fund to carry out sections 81-637 to 81-640. For fiscal2
year distributions occurring after FY1998-99, the distribution under this3
subdivision shall not be less than the amount distributed under this4
subdivision for FY1997-98. Any money needed to increase the amount5
distributed under this subdivision to the FY1997-98 amount shall reduce6
the distribution to the General Fund; 7
(c) Beginning July 1, 2026 October 1, 2002, and continuing until all8
the purposes of the Deferred Building Renewal Act have been fulfilled,9
the State Treasurer shall place the equivalent of twenty-six percent10
seven cents of such tax in the Building Renewal Allocation Fund. The11
distribution under this subdivision shall not be less than the amount12
distributed under this subdivision for FY1997-98. Any money needed to13
increase the amount distributed under this subdivision to the FY1997-9814
amount shall reduce the distribution to the General Fund;15
(d) Beginning July 1, 2026 2016, and every fiscal year thereafter,16
the State Treasurer shall place the equivalent of five percent three17
million eight hundred twenty thousand dollars of such tax in the Nebraska18
Public Safety Communication System Cash Fund. If necessary, the State19
Treasurer shall reduce the distribution of tax proceeds to the General20
Fund pursuant to subsection (2) of this section by such amount required21
to fulfill the distribution pursuant to this subdivision; and22
(e) Beginning July 1, 2026 2016, and every fiscal year thereafter,23
the State Treasurer shall place the equivalent of six percent one million24
two hundred fifty thousand dollars of such tax in the Nebraska Health25
Care Cash Fund. If necessary, the State Treasurer shall reduce the26
distribution of tax proceeds to the General Fund pursuant to subsection27
(2) of this section by such amount required to fulfill the distribution28
pursuant to this subdivision; and . 29
(f) Beginning July 1, 2026, and every fiscal year thereafter, the30
State Treasurer shall place the equivalent of one percent of such tax in31
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the Nebraska Capital Construction Fund. If necessary, the State Treasurer1
shall reduce the distribution of tax proceeds to the General Fund2
pursuant to subsection (2) of this section by such amount required to3
fulfill the distribution pursuant to this subdivision.4
(4) If, after distributing the proceeds of such tax pursuant to5
subsections (2) and (3) of this section, any proceeds of such tax remain,6
the State Treasurer shall place such remainder in the Nebraska Capital7
Construction Fund. 8
(5) The Legislature hereby finds and determines that the projects9
funded from the Building Renewal Allocation Fund are of critical10
importance to the State of Nebraska. It is the intent of the Legislature11
that the allocations and appropriations made by the Legislature to such12
fund not be reduced until all contracts and securities relating to the13
construction and financing of the projects or portions of the projects14
funded from such fund are completed or paid, and that until such time any15
reductions in the cigarette tax rate made by the Legislature shall be16
simultaneously accompanied by equivalent reductions in the amount17
dedicated to the General Fund from cigarette tax revenue. Any provision18
made by the Legislature for distribution of the proceeds of the cigarette19
tax for projects or programs other than those to (a) the General Fund,20
(b) the Nebraska Outdoor Recreation Development Cash Fund, (c) the Health21
and Human Services Cash Fund, (d) the Building Renewal Allocation Fund,22
(e) the Nebraska Public Safety Communication System Cash Fund, and (f)23
the Nebraska Health Care Cash Fund shall not be made a higher priority24
than or an equal priority to any of the programs or projects specified in25
subdivisions (a) through (f) of this subsection. 26
Sec. 2. Section 77-4008, Revised Statutes Supplement, 2025, is27
amended to read: 28
77-4008 (1)(a) A tax is hereby imposed upon the first owner of29
tobacco products to be sold in this state. 30
(b) The tax on snuff shall be thirty percent of the purchase price31
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paid by the first owner forty-four cents per ounce and a proportionate1
tax at the like rate on all fractional parts of an ounce. Such tax shall2
be computed based on the net weight as listed by the manufacturer.3
(c) The tax on an electronic nicotine delivery system containing4
three milliliters or less of consumable material shall be five cents per5
milliliter of consumable material and a proportionate tax at the like6
rate on all fractional parts of a milliliter. 7
(c) (d) The tax on an electronic nicotine delivery system containing8
more than three milliliters of consumable material shall be thirty ten9
percent of (i) the purchase price of such electronic nicotine delivery10
system paid by the first owner or (ii) the price at which the first owner11
who made, manufactured, or fabricated the electronic nicotine delivery12
system sells the item to others. 13
(d) (e) For electronic nicotine delivery systems in the possession14
of retail dealers for which tax has not been paid, the tax under this15
subsection shall be imposed at the earliest time the retail dealer: (i)16
Brings or causes to be brought into the state any electronic nicotine17
delivery system for sale; (ii) makes, manufactures, or fabricates any18
electronic nicotine delivery system in this state for sale in this state;19
or (iii) sells any electronic nicotine delivery system to consumers20
within this state. 21
(e) (f) The tax on alternative nicotine products shall be thirty22
twenty percent of (i) the purchase price of such products paid by the23
first owner or (ii) the price at which a first owner who made,24
manufactured, or fabricated the product sells the items to others.25
(f) (g) The tax on tobacco products not otherwise provided for in26
this section shall be thirty twenty percent of (i) the purchase price of27
such tobacco products paid by the first owner or (ii) the price at which28
a first owner who made, manufactured, or fabricated the tobacco product29
sells the items to others. 30
(g) (h) The tax on tobacco products shall be in addition to all31
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other taxes. 1
(2) Whenever any person who is licensed under section 77-40092
purchases tobacco products from another person licensed under section3
77-4009, the seller shall be liable for the payment of the tax.4
(3) Amounts collected pursuant to this section shall be used and5
distributed pursuant to section 77-4025. 6
Sec. 3. Section 81-638, Revised Statutes Supplement, 2025, is7
amended to read: 8
81-638 (1) Subject to subsection (4) of this section, the9
Legislature shall appropriate for each year from the Health and Human10
Services Cash Fund to the department an amount derived from three and11
one-half percent one cent of the cigarette tax imposed by section12
77-2602, less any amount appropriated from the fund specifically to the13
University of Nebraska Eppley Institute for Research in Cancer and Allied14
Diseases. The department shall, after deducting expenses incurred in the15
administration of such funds, distribute such funds exclusively for16
grants and contracts for research on of cancer and smoking diseases, for17
funding the cancer registry prescribed in sections 81-642 to 81-649.02,18
and for associated expenses due to the establishment and maintenance of19
such cancer registry. Not more than two hundred thousand dollars shall be20
appropriated for funding the cancer registry and associated expenses. The21
University of Nebraska may receive such grants and contracts, and other22
postsecondary institutions having colleges of medicine located in the23
State of Nebraska may receive such contracts. 24
(2) Subject to subsection (4) of this section, the Legislature shall25
appropriate for each year from the Health and Human Services Cash Fund to26
the department for cancer research an amount derived from six and one-27
half percent two cents of the cigarette tax imposed by section 77-2602 to28
be used exclusively for grants and contracts for research on cancer and29
smoking diseases. No amount shall be appropriated or used pursuant to30
this subsection for the operation and associated expenses of the cancer31
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registry. Not more than one-half of the funds appropriated pursuant to1
this subsection shall be distributed to the University of Nebraska2
Medical Center for research in cancer and allied diseases and the3
University of Nebraska Eppley Institute for Research in Cancer and Allied4
Diseases. The remaining funds available pursuant to this subsection shall5
be distributed for contracts with other postsecondary educational6
institutions having colleges of medicine located in Nebraska which have7
cancer research programs for the purpose of conducting research in cancer8
and allied diseases. 9
(3) Any contract between the department and another postsecondary10
educational institution for cancer research under subsection (2) of this11
section shall provide that: 12
(a) Any money appropriated for such contract shall only be used for13
cancer research and shall not be used to support any other program in the14
institution; and 15
(b) No money appropriated for such contract shall be spent for16
travel, building construction, or any other purpose not directly related17
to the research that is the subject of the contract.18
(4) The State Treasurer shall transfer seven million dollars from19
the Health and Human Services Cash Fund to the General Fund on or before20
June 30, 2018, on such dates and in such amounts as directed by the21
budget administrator of the budget division of the Department of22
Administrative Services. It is the intent of the Legislature that the23
transfer to the General Fund in this subsection be from funds credited to24
the Cancer Research subfund of the Health and Human Services Cash Fund25
which were in excess of appropriations established in subsections (1) and26
(2) of this section. 27
Sec. 4. This act becomes operative on July 1, 2026.28
Sec. 5. Original section 77-2602, Revised Statutes Cumulative29
Supplement, 2024, and sections 77-4008 and 81-638, Revised Statutes30
Supplement, 2025, are repealed. 31
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Sec. 6. Since an emergency exists, this act takes effect when1
passed and approved according to law. 2
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