2019 Kansas Statehouse Insider – Week 10

It was a dramatic 10th week in the Kansas Legislature. Committees forwarded several bills and the major tax legislation of the year was presented to Governor Laura Kelly. As deadlines approach, the speed has continued to quicken. Friday was the final day for non-exempt committees to meet and consider bills for the year. The House and Senate are debating bills on the floor all day next Monday and Tuesday due to Wednesday’s deadline for all non-exempt bills to pass both chambers. Lawmakers are hoping for a short week before April 5’s first adjournment until April 30.

Tax Bill Presented to the Governor
On Tuesday, Senate Bill 22 was enrolled and presented to Governor Laura Kelly. The bill decouples portions of the Kansas corporate tax code from the federal corporate tax code following passage of the 2017 Federal tax cuts and jobs act. The House amended the bill to include language which reduces the state sales tax on food by 1 percent (to 5.5 percent). In order to pay for the sales tax reduction on food, the bill was also amended to require a tax on sales in Kansas conducted over the internet. The House amendments to the bill were intended to give the Governor a reason not to veto the bill, as lowering sales tax on food has broad support. The Governor, who has stated that she is not in favor of any tax cut bills this session, has 10 days to either sign the bill, veto the bill, or let it become law without her signature. Without action by the Governor, the bill would become law on Friday, March 29th. The bill was passed by the House on a vote of 76-43, and by the Senate on a vote of 24-16.

Senate Approves 2020 Budget
On Thursday, the Senate approved, on a vote of 21-18, a budget for fiscal year 2020 of $18.5 billion. The budget provides money to meet the Supreme Court order on schools, and $160 million for transportation. The budget does not fund a pay increase for state employees or judicial branch employees, as requested by the Governor.

Energy Rate Study Bill Passes out of House Committee
On Thursday, following a hearing on Tuesday, the House Utilities Committee passed out Substitute for Senate Bill 69, a bill which authorizes a study of retail rates of Kansas electric public utilities. The bill contains compromise language between energy consumers and utilities. This comprehensive rate study bill will help the Legislature determine what steps to take to lower rates. The bill would require the LCC to select an independent organization to evaluate electric utilities and include input from residential, commercial and industrial customers, as well as advanced energy stakeholders. The bill would establish the issues the study must address and would require Kansas electric public utilities to provide relevant information upon request. The intent of the bill is to provide solutions for the Legislature to consider regarding how to lower rates in Kansas, and make Kansas rates more competitive with the region. The bill now moves to the full House for consideration.

Bill Advanced on Escrow of Taxes Paid Under Protest
On Thursday, the House Taxation Committee passed out favorably House Bill 2340, a bill which would prohibit county treasurers from distributing the portion of property taxes that are in dispute for certain residential and commercial property when the taxes are paid under protest until the appeal process is final. The bill would apply to residential property with an amount of property tax exceeding the previous year’s amount by $500, and to commercial property with the amount of property tax exceeding the previous year’s amount by $5,000. Proponents of the bill included Representative Dave Baker, Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, Renew Kansas Biofuels Association, Kansas Soybean Association, and Kansas Chamber of Commerce. The bill was amended with agreed language between proponents and local units of government. The bill was amended to include appeal of the classification of machinery and equipment as a reason to trigger the escrow. The bill now moves to the full House for consideration.

Interim Commerce Secretary Hearing Turns South
On Wednesday and Thursday of this week, the Senate Commerce Committee held two days of contentious hearings on the confirmation of David Toland, Governor Laura Kelly’ nominee for Kansas Secretary of Commerce. Members of the Committee criticized Toland on multiple fronts, including partisanship and posts on social media by Toland’s staff that parodied Governor Brownback and a State Senator. On Thursday, the Committee voted to recommend that the full Senate not confirm the appointment. The nomination now goes to the full Senate for consideration, where the confirmation is now less than certain.

Economic Incentive Transparency Bill Advances 
On Friday, the Senate Commerce Committee advanced favorably House Bill 2006. This bill would create a publicly available examination of economic development incentives for Kansas businesses, including tax credits and property tax exemptions of $50,000 or more annually. The bill would authorize the Legislative Post Audit Committee to conduct a systematic and comprehensive review and evaluation of each “economic development program,” every three years.  The Post Auditor would include in each report: 1) A description of the economic development incentive program; 2) An assessment of the program’s design and administration; 3) An estimate of the economic and fiscal impact; 4) A “return on investment calculation,” as that term would be defined by the bill; and 5) Other information as requested by the Committee. The bill will now be considered by the full Senate.

Net Operating Loss Extension
On Thursday, the House Taxation Committee passed out favorably House Bill 2388, a bill concerning the carry-forward of net operating losses against corporate income tax, and addition and subtraction modifications for property depreciation. This bill would have allowed net operating losses to be carried forward for 20 years, and allowed for a 100 percent deduction of the net loss. Currently Kansas law allows a carry-forward period of 10 years. The bill would also have amended the bonus depreciation guidelines by allowing the taxpayer to elect out of bonus depreciation at the state level, similar to current federal law. The Committee amended the bill to remove all portions of the bill except to allow net operating losses on Kansas businesses to be carried forward for twenty years at 80 percent. The bill was passed favorably as amended to the full House.

Counties Seek Constitutional Home Rule Protection
On Wednesday, the House Committee on Local Government held an informational hearing on House Concurrent Resolution 5007, which would amend the Kansas Constitution to grant home rule powers to counties. This power is currently reserved to cities. Proponents to the bill included the Kansas Association of Counties. Opponents included the Kansas Farm Bureau and the Kansas Livestock Association, arguing that this increase in local authority would be detrimental to agriculture as zoning laws would become more prevalent and burdensome to the industry.

Vocational Training Bill Advances
On Friday, the House Committee on Commerce, Labor and Economic Development advanced House Bill 2354 out of committee. This bill would allow student workers in unpaid, school-based vocational training and apprenticeship programs to be covered by the school district’s liability insurance.

Scrap Metal Theft Reduction Act 
On Friday, the Senate Judiciary Committee advanced Senate Bill 219 out of committee after amending the bill (now Substitute for Senate Bill 219). As introduced, the bill would amend the scrap metal theft reduction act by assessing an excise tax on scrap metal at $1.00 per ton. The bill will also create the scrap metal data repository fund, and authorize the Kansas Bureau of Investigation to administer the program. The Committee amendments removed the excise tax and reduced the registration fee on scrap metal dealers to no more than $500. The bill now moves to the full Senate, but in order to continue to move forward proponents of the bill will need to secure approximately $180,000 from the state general fund to cover the costs of administering the program.

Center for Entrepreneurship Tax Credit
On Friday, the House Commerce Committee passed out favorably Senate Bill 90, a bill allowing financial institutions to claim the Center for Entrepreneurship tax credit beginning in tax year 2019. The bill would also increase the maximum amount of tax credits that any one taxpayer could claim from $50,000 to $100,000; however, the total amount of tax credits that could be claimed for all taxpayers would remain at $2 million per fiscal year.  This bill is supported by the Kansas Bankers Association and was overwhelmingly approved by the Senate. The bill now moves to the full House for consideration.

Kansas Enterprise Zone Bills Pass the Senate 
On Wednesday, the Senate passed two bills concerning the Rural Opportunity Zone program. Senate Bill 125 would extend the program until 2026, and Senate Bill 135 would add the following counties to the program: Atchison, Cowley, Crawford, Dickinson, Ford, Franklin, Miami, and Pottawatomie.

House Committee Advances Highway Bill  
On Thursday, the House Committee on Transportation passed out favorably House Bill 2373, creating a transportation planning program (TPP) for the next state highway plan. The bill would direct the Sectary of Transportation to initiate a TPP to plan, develop and operate or coordinate the development and operation of the various modes and systems of transportation in the state. The TPP would provide for the construction, improvement, reconstruction and maintenance of the state highway system. The TPP would provide for the selection of projects, allowing for flexibility to meet emerging and economic needs. TPP expenditures may include, but are not limited to, preservation projects; expansion and economic opportunity projects; or, modernization projects.

Other Transportation Plan Bills

• House Bill 2214: increasing the motor fuels tax. The bill was amended with the contents of Senate Bill 189, providing for an increase in registration fees for electric and hybrid vehicles.
• House Bill 2369: authorizing the secretary of transportation to designate or construct toll projects; changing toll project financing requirements. A hearing was held in House Appropriations Committee on Wednesday.
• House Bill 2371: The bill would increase the annual permit for overweight trucks to $300, currently at $150. On Thursday, the House Tax Committee amended the bill to set the annual overweight permit at $200 to be consistent with the annual overweight permit for ag products. KGFA had requested this change.
• House Bill 2372: would increase registration fees for electric and hybrid vehicles. On Thursday, the House Tax Committee passed the bill out favorably.

Other bills we are monitoring:

• Medicaid Expansion: on Wednesday, the House amended House Bill 2066 to add language expanding Medicaid in Kansas. On Thursday, the measure passed the House on a final vote of 69-54. The bill now heads to the Senate for consideration.
• Rails To Trails Subcommittee: on Wednesday, a Subcommittee of the House Committee on Agriculture met to discuss proposed amendments to the Kansas Rails to Trails act. No action was recommended by the subcommittee, although there was interest mentioned on meeting over the summer in an interim hearing.
• House Bill 2127: Eliminating the marking requirements for trucks and trailers less than 26,000 lbs. On Thursday, the bill passed the full Senate of final action.
• House Bill 2173: On Tuesday, the House Committee on Agriculture amended and then passed out favorably this bill which would establish a commercial industrial hemp program in Kansas.
• House Bill 2178: On Tuesday, the Senate Judiciary Committee passed this bill out favorably which would amend the Kansas underground utility damage prevention act so that utility companies would no longer be required to mark privately owned utilities past the point of ownership.
• Senate Bill 126: On Thursday, the Senate Utilities Committee held a hearing on this bill which would exempt certain public utilities from income tax. The bill is intended to find pass through costs which can be eliminated to lower the cost of utility rates on customers. The Committee will not work the bill this year.