21 Mar 2022 Kansas Statehouse Insider – Week 10
2022 Legislative Session, Week 10
The Kansas legislature’s final day for non-exempt committees to meet passed without much fanfare on Friday, March 18. As a rain and snow mixture fell on Topeka Friday, a few lawmakers navigated the statehouse hallways, while the majority of legislators returned home to gear up for a week of late-night floor debate on big-ticket issues as time winds down on the 2022 session.
This week the Senate passed two high-priority pieces of legislation to the House: the 2023 state agency budget and redistricting maps. The House meanwhile is holding off on completing its version of the aforementioned bills, likely leading up to extended hours of conference committees to negotiate differences before adjourning on April 1.
Senate Passes Budget
The Senate passed its version of the state agency budget (Sub SB 444) to the House around 7 o’clock Tuesday evening. Senator Tom Holland and Senator Caryn Tyson tacked on the only successful amendments to include: the federal E-Verify provision for state hiring and contracts of more than $50,000; and, a 15 percent pay raise for legislative employees – not legislators – who were left out of last year’s budget bill. Also included in the Senate budget bill is an allotment of $60,000 from state general funds for the KDA grain warehouse inspection program for years fiscal years 2023 and 2024.
Short Line Railroad Investment Tax Credit
Senate Bill 326 would provide an income tax credit for qualified railroad track maintenance expenditures of short line railroads and associated rail siding owners or lessees. Short line rail investments would qualify for a tax credit of $5,000 per mile of rail, up to 50 percent of the railroad’s annual total income tax bill. Rail siding would qualify for $5,000 per rail project. The bill was amended to limit the transferability of the tax credit to any eligible customer or vendor of the railroad. The tax credit would exist from 2022 through 2031, and the total value of the program could not exceed $8.7 million each year. Having passed the Senate, the bill successfully made it through the House Tax Committee this week with an amendment excluding Class I railroads from qualifying for the program.
Corporate Income Tax Apportionment
Kansas currently uses a three-factor system for apportioning income between states for corporate income tax purposes. House Bill 2186 would allow corporate taxpayers the option to elect which methodology to use when apportioning their corporate income between Kansas and other states in which it operates. The legislation would allow certain taxpayers, based on NAICS codes, to elect to use a single-factor apportionment formula based on sales to determine corporate income tax liability. This week, the House Tax Committee amended the bill to add NAICS codes for additional businesses and industries as requested by the Kansas Chamber of Commerce, to include 541690 and 112210. Having gone through the exempt Committee on Taxation, the bill remains alive and has been placed on the House calendar for consideration. The House is holding off acting on tax bills.
Workers Compensation
Introduced and referred to the Senate Commerce Committee, Senate Bill 361 would eliminate the $155,000 cap on permanent total disability in Kansas’ Workers Compensation Act. The bill would allow an injured worker who is determined to be permanently totally disabled to receive weekly benefits at the rate of the employee’s average weekly wage in effect on the date of the injury for which compensation is being made, starting from the date of maximum medical improvement and continuing for life, or the duration of the disability. A hearing on the bill was held on Tuesday, March 8.
Unemployment Insurance
House Bill 2703 wouldmodify the My Reemployment Plan Program and, with certain exceptions, make use of the program mandatory for those receiving unemployment insurance benefits. The Secretary of Commerce would be allowed to require claimants to participate in reemployment services. In addition, the bill would amend solvency and credit rate schedules for the Employment Security Fund. Having passed the House, the Senate Commerce Committee amended the bill to clarify which individuals are exempt from participation in the My Reemployment Plan including: claimants on temporary layoff with a return-to-work date, claimants that are currently employed or that no longer reside in Kansas, claimants that are current reemployment services and eligibility assessment participants, claimants that are members of a placement union or claimants that are engaged in a training program.
Water Legislation
Two new bills introduced at the tail-end of the session concerning water and groundwater management districts had hearings in the Senate Committee on Agriculture and Natural Resources this week. The first bill, Senate Bill 548, would prohibit groundwater management districts from providing advice and assistance for matters relating to water rights, which Kansas law currently allows for the management of drainage problems, storage, groundwater recharge, surface water management, and all other appropriate matters of concern to the district. SB 548 would also stipulate that recommendations for groundwater must be specifically for irrigation within the district. The second bill, Senate Bill 549, would allow a holder of a water right dedicated to a use other than irrigation to withdraw from a groundwater management district if the point of diversion is located within such district and the authorized place of use is located wholly or partially within such district. These bills are thought to be targeted at groundwater management district number 2 in Southcentral Kansas. The hearings pitted municipalities against groundwater management districts and Kansas Farm Bureau. With limited time remaining in the session, committee Chairman Dan Kerschen (R-Garden Plain) encouraged parties to continue to work together on solutions, but indicated there wouldn’t be time to move forward with legislation this year.
Industry Regulations
House Concurrent Resolution 5014 would propose a constitutional amendment to increase legislative oversight of agency regulations. If approved by two-thirds of the legislature, the amendment would go before Kansas voters in the 2022 election. The House passed the resolution on a vote of 85-39. The Senate Judiciary Committee passed the resolution out favorably and it now awaits consideration by the full Senate.
Substitute for Senate Bill 34 would require states agencies to review each of its regulations, at least once every five years, to determine if they are still valid and necessary. The bill also allows for a 15-day quick repeal process for outdated regulations. Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association and Renew Kansas Biofuels Association testified in support of the measure prior to the House Committee on Federal and State Affairs passing the bill out of committee favorably on March 17.
House Bill 2087 would amend a law requiring review of economic impact of proposed regulations by the state budget director. The Senate amended the bill to reduce the review threshold from $3 million to, $1 million, to increase the number of regulations reviewed by the state budget director. The bill is now on the House calendar to either concur or non-concur with the Senate amendment.
KDA Agency Fees
House Bill 2560 would authorize the KS Dept. of Agriculture to extend current fees on agribusiness without increasing those fees. The bill would also extend, to 2030, the existing water right transition assistance program (WTAP) administered by the agency. The agribusiness industry testified neutral on the bill and explained that fees on agribusiness are currently higher than most neighboring states and the associations would oppose any attempt to increase the fees. The Senate committee of the whole passed the bill favorably on a vote of 36-4. The bill has reached Governor Laura Kelly’s desk and is awaiting signature.
Resolution Denouncing Natural Gas “Price Gouging”
Introduced by House Speaker Pro Tem Blaine Finch (R-Ottawa), HCR 5023 denounces price gouging and market manipulation in the natural gas marketplace, and supports investigations into the extraordinary price increases of wholesale natural gas during the extreme cold weather event “Uri” during February 2021 that resulted in increased costs on ratepayers. On Friday, March 11, the Senate Utilities Committee passed the resolution out favorably.
Salt (State and Local Tax) Parity Act
Senate Bill 495 would establish the “salt parity act” to allow a S corporation or partnership to annually elect to be subject to income tax at the entity level for the taxable period beginning in tax year 2022. The S corporation or partnership would make the election on the return filed by the S corporation or partnership. The filing of the return would be binding on all electing passthrough entity owners. The election would only be allowed in a taxable year where there is a limitation on state and local tax deductions allowed to individuals under the federal Internal Revenue Code. An electing pass-through entity would be subject to a tax in an amount equal to 5.7 percent of the sum of each electing pass-through entity owner’s distributive share of the electing pass-through entity’s income attributable to the state. Any excess income tax credit, net operating loss, or other modification would be allowed to be carried forward on the electing pass-through entity’s return but would only be utilized in a year in which the electing pass-through entity has made the election, except that any limitation for an income tax credit, the net operating loss, or any other modification would apply to the electing pass-through entity. The bill would allow the electing pass-through entity owners to not be liable for the income tax in their separate or individual capacities, and the electing pass-through entity’s income attributable to the state would not be taken into account by the electing pass-through entity owners. A nonresident individual or fiduciary whose only source of income from this state is income from an electing pass-through entity under the Salt Parity Act would not be required to file an income tax return. A hearing on the bill was held in the Senate Tax Committee on March 10.
Food Sales Tax Exemption
The legislature has held hearings on multiple bills, each taking a unique angle at exempting purchases of “food” from state sales tax. This week, the House Tax Committee passed House Bill 2711, a bill that would cut the state sales tax while gradually lowering the sales tax on food with a goal of eliminating it within three years. The bill would cut the state sales tax by two-tenths of a penny to 6.3% beginning July 1 of this year, while starting a slow reduction in the sales tax on food over time.
Motor Carrier Independent Contractor Status
Senate Bill 494 would prohibit altering the employment status of a driver of a motor carrier (as an independent motor carrier) for requiring safety improvements on a vehicle. The bill quickly passed through the Senate on a 39-0 vote and was referred to the House Transportation Committee this week.
Autonomous Vehicles
This week, the Senate Transportation Committee held a hearing on Senate Bill 546, a bill that would allow for the use and regulation of autonomous (driverless) motor vehicles in Kansas. Walmart and autonomous vehicle developer Gatik testified in support of the bill which would allow self-driving vehicles to traverse fixed business-to-business routes. The bill would also preempt cities or counties from establishing barriers to deployment of the vehicles. Forty-four states have created a framework for regulating autonomous vehicles, but Kansas, Missouri and Oklahoma are among six states without such laws. The bill would create a statewide policy for the regulation of autonomous vehicles and would restrict use of automated vehicles to movement between fixed points along repeatable routes. The committee did not have a quorum present to take action on the bill, however, the chairman indicated it would be worked as soon as possible.
Technical Education Credential and Transition Incentive
House Bill 2631 would enact the Career Technical Education (CTE) Credential and Transition Incentive (CTI) for Employment Success Act. The bill would provide a new category of state aid to school districts for students obtaining a CTE credential. In addition, a school district that offers CTE and has students that obtain a CTE credential would receive state aid payments subject to the availability of appropriations. Before sending it to the full House, the Education Committee amended the bill this week to: Specify reimbursement rates for approved standard CTE credentials and approved high-value CTE credentials; provide reimbursement for assessments for standard CTE credentials exclusively for students with an IEP, 504 plan, or as identified by the discretion of the school district; provide provisions of the bill would only apply to school districts listed in the bill; and remove provisions providing for transfer of moneys from the State General Fund to fund state aid reimbursement as provided in the bill.
Bill Opposing Sanctuary Cities
House Bill 2717 would prohibit any Kansas municipality from preventing the enforcement of federal immigration laws, requiring municipal law enforcement agencies to provide written notice to each law enforcement officer of the officer’s duty to cooperate with state and federal agencies in the enforcement of immigration laws and requiring any municipal identification card to state on its face that it is not valid for state identification. The hearing in the House Federal and State Affairs Committee on Tuesday drew a large crowd to the Statehouse as nearly 70 pieces of testimony were submitted and discussed on the record. Committee chairman Rep. John Barker (R-Abilene) closed the hearing stating his intention to move forward working on the legislation with the time remaining in the session this year.
Rural Opportunity Zones
The Rural Opportunity Zones Program offers individuals who relocate to a county that has been designated as a Rural Opportunity Zone the opportunity to participate in a Student Loan Forgiveness Program through FY 2021 and receive a 100.0 percent state income tax credit through tax year 2021. House Bill 2237 would extend the sunset for the student loan forgiveness program to FY 2023 and extend the sunset on the income tax credit to tax year 2023. The Senate passed the bill on a vote of 32 to 5. The bill now moves to the House for consideration.
Plastic Regulation, State Level Preemption
Senate Bill 493 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. The House Commerce Committee amended the bill slightly to add plastic straws to the definition of “auxiliary container” before sending it to the full House for consideration.
Work-Based Learning Program Liability
In 2021, House Sub for SB 91 was introduced with the purpose of providing businesses with immunity from general liability for participating in work-based learning programs with students. Under the bill, schools would insure against this liability in the same way that they insure students during field trips and sporting events. This reasonable legislation is beneficial for businesses as they seek to increase the Kansas workforce. A conference committee between the House and the Senate has been appointed to determine final language on the bill.
Workforce Development Scholarship
Last year, Governor Kelly signed into law a workforce development bill creating the Kansas Promise Scholarship Act which provides educational scholarships to students attending a Kansas community college, technical college, or two-year associate degree program or career and technical education programs. The scholarship would be eligible for students pursing certain fields of study, including manufacturing, construction, and others. This year, Senate Bill 340 was introduced to modify the act to authorize additional programs and fields of study. On March 10, the Senate Ways and Means Committee amended the bill and passed it out favorably as amended.
Special Legislative Tax Committee Recommendations
In November of 2021, a Special Committee on Taxation met to review current tax exemptions and abatements in Kansas. The committee made multiple recommendations on, inter alia, the use of state general fund ending balances, constitutional amendment proposals limiting taxes or expenditures, and the taxation of energy production in the state. On March 10, the Senate Committee on Taxation held a hearing on Senate Concurrent Resolution 1619 which urges the legislature to adopt the recommendations of the Special Committee. While no testimony was offered during the hearing, the committee recommended that the full Senate adopt SCR 1619.
Research and Development Income Tax Credit
House Bill 2394 would establish a 6.5 percent research and development tax credit for LLCs and small businesses. Currently, Kansas law provides this tax credit for corporations only, and has a one-time transferability. The tax credit is based on the amount above the average of actual qualified research and development expenses in the tax year and the previous two tax years. HB 2394 would allow all taxpayers the ability to claim this tax credit and increases the initial tax credit calculation from 6.5 percent to 10.0 percent. The House Tax Committee added a date-change amendment prior to passing the bill out favorably this week.
KEMA Disaster Emergency Powers
The Senate Judiciary Committee held a hearing on Senate Bill 541, a bill that would, inter alia, limit the authority of the governor, and other governmental entities in issuing and enforcing orders for face mask mandates, gathering limitations, and business restrictions related to a contagious or infectious disease. The bill would also prohibit post-secondary educational institutions, the State Board of Education, local boards, schools, and school officials from requiring a COVID-19 vaccination and from issuing or requiring a COVID-19 passport. Schools would be required to recognize exemptions for mask requirements and alternative measures regarding religious exemptions for vaccinations. The bill would also give local boards of education and governing bodies of community and technical colleges the authority to issue orders or policies for contagious or infectious diseases instead of the current authority given during the state of disaster emergency related to the COVID-19 health emergency. SB 541 would also remove the sunset for the Contact Tracing Privacy Act. The bill would prohibit schools and childcare facilities from denying access to their facilities unless there were reasonable grounds that a person was infected with a disease suspected of being infectious or contagious. On Friday, March 11, the committee amended the bill and passed it out favorably. We anticipate a floor amendment to clarify that the bill does not apply to animal infectious disease and quarantine orders.
State Contractor Foreign Disclosure Requirement
Senator Kellie Warren (R-Leawood) introduced SB 537 late in the session requiring state agencies, political subdivisions, state contractors and vendors to disclose certain contracts, gifts or grants received from foreign sources and state educational institutions to screen certain foreign applicants seeking employment in certain research positions, prohibiting agreements with or accepting grants from certain foreign countries of concern and establishing research integrity offices and international travel and approval programs at state educational institutions. Warren indicated the bill likely will not move forward this year, but she introduced it to, “Get the conversation on this topic started.”
Senate Judiciary Committee Hears Bill Concerning CDL Disqualification Penalties
On Friday, the Senate Judiciary Committee met and discussed SB 533 which would, among other things, increase the period of time that a person is disqualified from driving a commercial motor vehicle for certain violations. Current law in subsection provides that a person who is convicted of operating a commercial motor vehicle in violation of an out-of-service order shall be disqualified from driving a commercial motor vehicle for a period of not less than 90 days nor more than one year on a first violation and not less than two years and not more than five years on a second violation when such prior violation was committed within the 10 years immediately preceding the date of the present violation. The bill changes the minimum period of such disqualification to 180 days on a first violation and two years on a second violation. The bill received only one conferee, Ted Smith, an attorney appearing as a proponent to the legislation for the Kansas Department of Revenue.