15 Mar 2024 Kansas Statehouse Insider – Week 10
This week, the Kansas Senate debated and passed, on a vote of 24-15, a $25 billion budget bill for the upcoming fiscal year. Notably, both the House and Senate budget bills would provide about $80 million to increase Medicaid outpatient reimbursement rates.
Additionally, this week, the Senate debated and passed numerous tax relief bills, including a new comprehensive tax bill. The large tax bill would reduce personal income taxes by creating a single rate for individual income taxes, exempting Social Security from income tax, significantly increasing the personal exemption amount, and increasing the standard deduction for single filers. The bill would modestly reduce residential property taxes by increasing an existing exemption of the first $100,000 of appraised value of residential properties (currently the first $40,000 is exempt), which is used to assess a statewide uniform 20-mill property tax to finance public schools. Together, the bills would reduce state revenues by more than $2 billion dollars over the next three years.
Also this week, the House amended and advanced out of committee its bill prohibiting land ownership by foreign countries of concern. The committee amendments excluded from the bill those countries that had been previously verified by certain federal entities. The Senate’s companion bill remains in committee but could see further action next week.
Legislative committees have only one remaining week to meet and take action on preferred legislation, after which the full House and Senate will dedicate multiple days to debating bills.
Key 2024 Legislative Deadlines
March 22 – Last day that non-exempt committees meet
March 28 – Last day for activity on non-exempt bills in either Chamber
April 5 – First Adjournment
April 29 – Veto Session Begins
Elevator Safety Act
Two bills were introduced that would amend the recently-passed Elevator Safety Act. HB 2826 would amend the definition of elevator, licensure requirements, inspection and testing requirements and adoption of rules and regulations. The bill would not affect the existing exemption for elevators within grain elevators and biofuel facilities. In addition, HB 2827 would amend the act to delay enforcement of the act until July 1, 2025. Status: The House Commerce Committee has scheduled a hearing on HB 2826 on Tuesday, March 19.
Kansas Agricultural Remediation Reimbursement
House Bill 2477 seeks to amend the agricultural chemical environmental remediation reimbursement program by increasing the maximum reimbursement from the fund from $200,000 to $300,000 for each eligible facility. The House passed the bill on a vote of 110-1. Status: During a hearing before the Senate Committee on Agriculture, there were multiple proponents and no opponents. The Committee began taking final action on the bill and then continued its final action until next week.
Comprehensive Tax Relief
In an attempt to revive comprehensive tax legislation this session, Republican House leadership referred the Governor’s comprehensive tax bill, House Bill 2586, back to the House Tax Committee where they are likely to heavily amend the bill with their own comprehensive tax plan. In addition, the Senate Tax Committee held a hearing on Senate Bill 539, a bill which would set a single income tax rate for individuals, increase the standard deduction and the personal exemption, exempt social security income from taxation, increase the extent of property tax exemption for residential properties to the first $100,000, and establish a 0 percent state rate on food beginning on July 1, 2024. The Senate Committee on Assessment and Taxation passed the bill out of committee. Governor Kelly has threatened to call the legislature back in for a special session this summer if comprehensive tax relief was not passed. The bill would reduce taxes on Kansans by $1.7 billion over the next three years. Status: This week, the Senate debated and passed SB 539 with a supermajority vote of 29-11, which is important as Governor Kelly may veto the bill due to inclusion of the single individual income tax rate provision.
Single Sales Factor Apportionment
The Kansas Dept. of Revenue (KDOR) introduced HB 2796 and SB 507 to require corporate taxpayers to use a single-sales factor apportionment formula beginning Jan. 1, 2025. KDOR estimates that its bills are essentially revenue neutral to the state. These bills include provisions adopting market-based sourcing. The KDOR bills are estimated to increase state revenues by approximately $3.8M in fiscal year 2025. Alternatively, the Kansas Chamber introduced HB 2798 which would allow for a two-year phase in of the single-sales factor apportionment formula. It includes a two-year election phase for adoption of the new apportionment method. It also includes provisions to offset potential increases in tax liability for some companies, such as a “New Jersey model” tax credit for deferred tax liability. The estimated fiscal cost to the state for the Kansas Chamber’s bill was $162 million in 2025, $87 million in 2026, and $8 million in 2027. Most of this cost is due to the delayed adoption and deferred corporate tax deduction provision and the tax liability off-set provision. The House Tax Committee held hearings on HB 2796 and HB 2798, and the Senate Tax Committee held a hearing on SB 507. Status: The Senate is likely to let the House take the lead on this legislation, and the House Tax Committee is likely to take final action on one of the bills next week.
SALT Parity
HB 2465 would amend the SALT Parity Act to clarify the determination of taxable income of an electing pass-through entity, and to provide for the passing-through of tax credits to electing pass-through entity owners. The bill clarifies that an electing pass-through entity would be subject to tax equal to 5.7 percent of the sum of each resident and nonresident electing pass-through entity’s income attributable to Kansas; and each resident electing passthrough entity owner’s pro rata or distributive share of the electing pass-through entity’s income not attributable to Kansas. The changes would be applied retroactively to tax year 2022. Status: This week, the Senate passed the bill out on a vote of 38-2.
Net Operating Loss Subtraction Modification
HB 2465 would create a subtraction modification allowing taxpayers who carried back federal net operating losses in tax years 2018 through 2020 pursuant to the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act to subtract such amounts from their income for purposes of determining Kansas adjusted gross income. Taxpayers would be permitted to carry forward such net operating loss for up to 20 years if the amount exceeds the Kansas adjusted gross income of the taxpayer. The bill would extend the deadline for eligible taxpayers to file amended returns for tax years 2018 through 2020 until April 15, 2025. Status: This week, the Senate passed the bill out on a vote of 38-2.
Property Tax Relief
House Bill 2815 would repeal the local ad valorem tax reduction fund (LAVTRF) and reduce, by two mills, the 20 mills in dedicated state funding for public education. It was indicated that the two-mill reduction would save homeowners an average of $36/year. The House Tax Committee held a hearing on HB 2815 on March 13. In addition, House Concurrent Resolution 5025 proposes an amendment to the Kansas Constitution to determine valuations of residential property based on the average fair market value of the 10 prior years; and SCR 1611 would propose a Kansas Constitutional amendment to limit, for property tax purposes, the valuation growth of any real property to 4 percent per year. Status: Both HCR 5025 and SCR 1611 are scheduled for a hearing in the House Tax Committee on Tuesday, March 19.
Commercial Property Valuations Under IRC 1031
SB 311 would require that the sale price or value at which a property sells or transfers ownership in a federal Internal Revenue Code Section 1031 exchange would not be considered an indicator of fair market value or as a factor in arriving at fair market value for property tax valuation purposes. Federal Internal Revenue Code Section 1031 exchange transactions would not be used as comparable sales for valuation purposes or as valid sales for purposes of sales ratio studies conducted by the Director of Property Valuation at the Department of Revenue. Proponents argued that commercial properties should be valued at fair market value and not on the amount of potential income the property can generate. The Senate Tax Committee held a hearing on the bill during the 2023 legislative session, and then took final action on the bill on March 13. Status: On March 14, the Senate passed the bill on a vote of 21-19.
Personal Property Tax Renditions
Senate Bill 8 would reduce penalties for the late filing, or failure to file, personal property renditions annually to the county appraiser. The bill would allow county appraisers to waive late penalties, and to set penalties aside if the machinery and equipment was previously classified as real property. The House Tax Committee placed the contents of the bill into House Sub for SB 127 and passed the bill out of committee. Status: The bill is on the House calendar and may receive further action during a tax conference committee.
Train Length Legislation
Introduced last year, SB 271 would have created a maximum train length of 8500 feet and required railroads to maintain a minimum distance of 250 feet between a near-edge railroad crossing and stored railroad rolling stock. Status: After referral to the House Commerce Committee this week, the contents of the bill were removed and replaced with language prohibiting aerial drones from countries of concern.
Two-Man Train Crews
SB 402 was introduced to prohibit KDOT from regulating crew sizes for class II and class III railroads. Status: No action was taken, and this bill is no longer a live bill this year.
CDL Military Training Waiver
SB 462 and HB 2679 would authorize the director of vehicles to waive the knowledge and skills test for driving a commercial vehicle for an applicant that provides evidence that such applicant qualifies for the military even exchange program for commercial driver’s licenses. The House passed HB 2679 on a vote of 120-0. The Senate passed SB 462 unanimously. The House Transportation Committee amended SB 462 to add in the contents of HB 2682, a bill that would disqualify a person’s commercial vehicle driving privileges when such person is in noncompliance with the federal motor carriers safety administration’s drug and alcohol clearinghouse. Status: The House Transportation Committee passed SB 462, as amended, out of committee favorably.
Nuisance Abatement
In 2021, Senate Bill 52 was enacted to grant the Sedgwick County Commission authority to order the abatement of nuisances in unincorporated areas of the county, and to recover any costs incurred from the landowner. That law specifically excludes agribusiness facilities. This year, the Senate passed Senate Bill 362 which removes a sunset provision in the Sedgwick County law. Following passage by the Senate, the House Committee on Local Government passed SB 362 without amendment. In addition, Senate Bill 162 would create a similar nuisance abatement authority in Riley County and Crawford County. This bill includes the agribusiness exemption in the Sedgwick County law and an amendment strengthening that exemption. After passage by the Senate, the House Committee on Local Government passed SB 162 without amendment. Status: SB 162 and SB 362 will now move to the full House for further consideration.
Utility Legislation
- Kansas’ largest energy generating company introduced HB 2527 to make significant changes concerning its cost recovery to prepare for the planned construction of a new natural gas energy generating facility. The proposed changes would have negatively affected ratepayers. Following negotiations between Evergy and ratepayer groups, an agreed amendment was reached. The House passed the bill following adoption of the agreed amendment. Status: The bill is scheduled for hearing in the Senate Utilities Committee on Monday, March 18.
- HB 2588 would, among other things, increase the capacity limitation for the total amount of facilities subject to “net metering” that may operate within the service territory of investor-owned electric utilities. Find more information on the bill here. After passage by the House, the Senate Utilities Committee amended the bill and passed it out as amended. Status: The bill now goes to the full Senate for consideration.
- SB 455 would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. The bill includes language from SB 456 establishing a rebuttable presumption against retirement of fossil fuel-fired electric generating units. Status: The Senate passed SB 455, as amended, on a vote of 28-9. The House Committee on Energy and Utilities held a hearing on the bill on March 14. Status: The committee is likely to take final action on the bill early next week.
Budget Bills
On Monay, the House Appropriations Committee finished work on its budget bill, Sub HB 2273, and passed the bill out of committee. Find a breakdown on the bill here. On Thursday, the Senate passed its Senate Budget bill SB 514. The Senate budget bill makes appropriations for fiscal years ending 2024, 2025, 2026, and 2027. The bill spends about $1.9 billion on general government services, $8.6 billion on human services, $4.3 billion on higher education, $2.3 billion on transportation and $6.5 billion on K-12 education but without new money for special education. For fiscal year 2025, the bill includes expenditures totaling $25.1 billion, including $10.2 billion in state general funds. This would be an all funds decrease of 1 percent compared to 2024. Some specific expenditures include money to fight the fentanyl crisis, build a new cancer research facility, fund passenger rail service and airports, fund the World Cup in Kansas City, and purchase a new plane for the Kansas Highway Patrol. The bill also includes more than $174 million for a 5 percent pay raise for state employees, increases Medicaid reimbursements for hospitals and childcare, and earmarks about $16 million to send National Guard troops to the Texas border and a budget proviso directing the governor to send the guard there to fight issues related to illegal immigration. In addition, the budget would withhold $35.7 million from state universities unless the schools can show they haven’t participated in diversity, equity and inclusion practices related to hiring, admissions and tenure decisions.
Credit Card Surcharge Notice Requirements
S Sub HB 2247 would, among other things, allow retailers to collect a surcharge on a customer who elects to use a credit card as payment if the retailer discloses the amount of such surcharge through a clear and conspicuous notice to the customer in advance of the transaction either at the point of sale or point of entry. The Senate passed the bill 33-6. This week, the House voted to concur with the Senate amendments on the bill on a vote of 111-1. Status: The bill is now on its way to Governor Kelly for consideration.
Economic Development Program Repeal
Senate Tax Committee Chair Senator Caryn Tyson introduced SB 546, a bill that would amend Kansas law to decrease the corporate income tax rate, discontinue tax credits of the high performance incentive program (HPIP), discontinue payroll withholding tax benefits of the promoting employment across Kansas (PEAK) act, and repeal certain unused tax credits. Status: The bill is scheduled for hearing on Tuesday, March 19 in the Senate Committee on Assessment and Taxation. It is understood that conferees will ask for an interim review of the programs and then proposed ways to improve the programs next year.
Foreign Ownership of Real Property
Multiple bills have been introduced this year to increase oversight of “foreign adversaries” or “countries of concern” in Kansas. SB 446, heard in the Senate Committee on Federal and State Affairs, would prohibit foreign countries from acquiring land after July 1, 2024, unless authorized by a new state land council. No further action has been taken on this bill. In the House, the Committee on Commerce held a hearing on HB 2766, a bill that would prohibit principals from countries of concern from holding or acquiring, any interest in real property in this state within 150 miles of a military installation. This week, the Committee amended the bill to exempt those individuals and properties that were previously verified by the federal interagency Committee on Foreign Investment in the United States. The committee placed the contents of the bill into House Sub for SB 172 and then passed the bill out of committee.
Drone Technology Critical Components
House Bill 2820 was introduced to prohibit the acquisition of critical components of drone technology from countries of concern and require the divesture of such technology. The bill would prohibit a government agency from purchasing, acquiring, or otherwise using any drone or any related services or equipment if the critical components were produced in any country of concern or produced or owned by any foreign principal. This week, the House Commerce Committee held a hearing on the bill. The committee amended the bill to include a new drone rehabilitation reimbursement fund to help government agencies replace their current drones. The bill was amended to impact ariel drones only and not ground drones. The Committee placed the contents of the bill into Hse Sub for SB 271 and passed the bill out of committee.
Animal and Ag Facilities Protection
Animal ag stakeholders introduced HB 2816 to amend the law to apply to physical trespass or making a false statement on an employment application to gain entry. The bill was introduced in response to the 10th Circuit U.S. Court of Appeals decision which found unconstitutional parts of a law intended to keep undercover investigators off the property of animal facilities with the intent of exposing certain activities at the facility. A companion bill in the Senate failed to advance out of committee. The House Agriculture Committee passed the bill out of committee. Status: The bill is now on the House calendar for further consideration.
Conservation District Funding
House Bill 2800 would amend current law pertaining to conservation districts. The bill would increase the cap on the amount of funding disbursed to conservation districts from $25,000, to $50,000, beginning in FY 2025. Additionally, the bill would provide an increased matching basis for state funding disbursed to conservation districts ($2 state funding to $1 county funding) based on amounts allocated by the board of county commissioners. Status: The House Agriculture Committee passed the bill out of committee. The bill is on the House calendar for further consideration.
Workers Compensation Benefits
Senate Bill 430 was introduced to provide comprehensive amendments to the workers compensation law and is presented as a compromise bill between industry and labor stakeholders. Among other things, the bill would increase lifetime benefit maximums and modernize elements of the administrative process. Find more specific information here. The Senate passed the bill on a unanimous vote. The House Commerce Committee passed the bill out of committee. Status: The bill is on the House Calendar pending action, and many amendments are likely to be offered during floor debate.
Unemployment Insurance
House Bill 2570 would make comprehensive changes to the Kansas employment security law, including defining “benefit year”, “temporary unemployment” and other terms. It would also require electronic filing for certain employers, establish qualifications for employment security board of review candidates, extend the deadline for new accounts following business acquisitions, make certain changes to the employer rate schedules, enable employers to report claimant work search issues, confirm legislative coordinating council oversight for the new unemployment insurance information technology system implementation, authorize the secretary to grant temporary unemployment, require the secretary to annually publish certain data, and abolish the employment security interest assessment fund. The bill is likely to provide more than 97 percent of Kansas employers immediate savings in their unemployment tax payments. Find a detailed summary of the substitute bill here. During a hearing in the Senate Commerce Committee, it was stated that the bill will need further amendments to address an issue concerning the proposed forgiveness of companies with large negative balances. Status: The Senate Commerce Committee is likely to amend the bill next week to address the negative balance issue.
Remote Worker Grace Period
House Bill 2420 would allow a grace period for remote workers regarding paycheck withholding requirements, establish withholding requirements for employees who work in multiple states, and determine employer penalties for not complying with these requirements. The bill would exempt certain employees who perform employment duties in more than one state from income tax withholding and reporting requirements unless the earnings occurred in the state of the employee’s residence, or in a state that the employee performed employment duties for more than 30 days during the calendar year. The House Tax Committee held a hearing on the bill which has no cost to the state. Status: The bill might be placed into a tax conference committee report.
Rules and Regulations
House Bill 2648 was introduced to revise the rules and regulations procedure for state agencies to increase protections for industry against burdensome, restrictive, and expensive regulations, or regulations which exceed legislative intent. The bill requires agencies proposing new regulations with an economic impact greater than $1 million over the first five years to introduce, and pass, a bill by the full legislature. The House passed the bill on a vote of 82-36. Status: The Senate Commerce Committee has scheduled a hearing on the bill for Tuesday, March 19.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. Following passage by the Senate, the House passed the bill on a vote of 121-1. Status: The bill now goes to the Governor for consideration.
Private Pesticide Applicator Certification
Introduced by the Kansas Dept. of Agriculture (KDA), HB 2607 is a 20-page bill amending the Kansas pesticide law following changes made by the EPA to their agency pesticide applicator regulations which Kansas is now also required to adopt to maintain authority to regulate the industry. Failure to receive EPA’s ongoing approval of KDA’s proposed updates to the Kansas pesticide law could jeopardize the agency’s authority to regulate pesticide applications in the state. The bill would, among other things, establish new training requirements and supervision requirements for pesticide applicators of restricted use pesticides. The bill would also grant KDA civil and criminal penalty authority on commercial applicators and private applicators. The House Agriculture Committee amended the bill multiple times. One amendment reduced the agency’s maximum civil penalty authority on businesses and individuals to $500 per violation. The House passed the bill on a vote of 118-1. Status: During a hearing before the Senate Committee on Agriculture, there were multiple proponents and no opponents. The Committee has one week remaining to take final action on the bill.
Retailer Sales Tax Collection Tax Credit
SB 41 would create a sales and use tax remittance credit for retailers. The bill is intended to compensate retailers, in part, for their work in collecting and remitting sales taxes to the state. The credit would be an amount equal to 1.5 percent of the amount of sales and use tax being remitted by the retailer, with a monthly cap of $300 per retailer. Status: The bill is on the Senate Calendar pending further consideration.
Third-Party Funded Litigation
House Bill 2510 was introduced to require disclosure of third parties that fund litigation and allow for joint liability of costs and sanctions against third-party funded litigants. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The House Judiciary Committee amended the bill and passed it out of committee favorably. The amendment was described as exempting nonprofit 3rd parties from the requirements of the bill. Status: The bill is likely to be debated on the House floor next week.
Defining Lead-Free Pipes and Amending Solid Waste Management Fund
Senate Bill 331 would also amend the solid waste management fund, administered by KDHE, to allow it to be used to reimburse counties or cities who conduct programs for the collection of “agricultural pesticide wastes” along with other household hazardous wastes. After passage by the Senate, the bill was heard and approved by the House Committee on Water. Status: The bill is now on the House calendar for consideration.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. The Senate passed the bill 40-0. Status: This week, the House passed the bill 121 to 1. The bill now goes to the Governor for consideration.
House Water Committee Update
Next Tuesday, the House Water Committee will receive an informational presentation from the Kansas Geological Survey. The Committee is not scheduled to meet on Thursday.
LEMA Corrective Controls
House Bill 2634 would allow MYFA-like flexibility in an IGUCA or LEMA that is established or amended by an order of the Chief Engineer. Such flexibility is currently only allowed in water conservation areas (WCA). The bill would provide an additional corrective control provision for the chief engineer to consider when issuing orders of designations for local enhanced managements areas and intensive groundwater use control areas. The House passed the bill on a unanimous vote. Status: This week, the bill received a hearing in the Senate Committee on Agriculture and Natural Resources where there were multiple proponents and no opponents. The Committee has one week remaining to take final action on the bill.
Water Structure Licensing Fees
The Kansas Dept. of Agriculture requested introduction of HB 2526 which would install graduated agency inspections of dams, based on hazard level, and provide KDA civil penalty authority for non-compliance. The bill would also allow KDA to assess registration fees and increase permit fees. Status: The bill was referred to the House Committee on Appropriations but has not received a hearing.
Irrigation District Board Elections
Senate Bill 524 would amend current law pertaining to the election of members of the board of directors of irrigation districts, which are not a part of groundwater management districts. The bill would amend the terms of office of board members to include a three-year term, if established by the board of directors by passage of a resolution. Status: The bill received a hearing in the Senate Ways and Means Committee on Thursday, March 14.
Other Bills of Interest
SB 376 extends the single city port authority income tax credit. Hearing in Senate Tax
SB 474 eliminating the administrative ordinance restriction in the city initiative statute
SB 478 defining benefit year, temporary unemployment and other terms in the employment security law
SB 484 Providing property tax exemptions for off-road vehicles
SB 516 Exempting certain elevators owned by nonprofit organizations from annual elevator safety act
HB 2684 authorizing cities to propose an earnings tax for ballot question
HB 2795 excluding the state mandated 20 mills levied by a school district from the revenue neutral rate
HB 2797 full transferability of tax credits for investments in certain qualified business facilities
HCR 5017 constitutional amendment to grant counties home rule powers
HCR 5021 constitutional amendment to reduce ad valorem residential property assessment to 9 percent
HCR 5022 constitutional amendment classifying all-terrain vehicles for tax purposes
HCR 5024 constitutional amendment reserving the power of initiative to the people of Kansas
HCR 5025 constitutional amendment creating a ten year average for determining fair market value of residential properties