25 Feb 2023 Kansas Statehouse Insider – Week 07
This was ‘Turnaround Week’ in the Kansas legislature where any bill that was not passed by its chamber of origin, or is not otherwise exempt, will no longer be an active bill this session. The House and Senate debated and passed dozens of bills before adjourning late on Thursday evening. The legislature will return to work next Wednesday, March 1, to begin consideration of the bills passed by the opposite chamber. The major issues remaining for the session include various bills on utility rates, sales taxes on food, a single rate for individual income taxes, and debate on how to best spend the state’s estimated $2.3 billion ending cash balance.
Changes Made to Annual Personal Property Tax Rendition
Senate Bill 8 would reduce statutory penalties for the late filing, or failure to file, personal property renditions to the county appraiser. Kansas Grain and Feed Association testified in support of the measure and explained its importance to our industry following the 2022 Kansas Court of Appeals decision finding that grain elevator machinery and equipment should be property classified as personal property rather than as fixtures to the realty. KGFA also successfully amended the bill to: (1) allow county appraisers to waive late penalties, (2) require such penalties to be waived if the machinery and equipment was previously classified as real property, and (3) remove the requirement to annually file the personal property rendering unless there is a change in the property list. The Senate Tax Committee adopted the proposed amendments and passed the bill out favorably. This week, the full Senate passed the bill on a vote of 39-0. The bill now goes to the House for consideration.
Short Line Rail Grant Program
In 2020, the legislature passed the Eisenhower Legacy Transportation Program which included a $15 million, three-year, cost-share grant program for qualified track maintenanceand improvements to short line rail and rail siding. In 2020, 2021, and 2022 KDOT set aside a percentage of the $5 million program funds specifically for rail siding projects. This funding has greatly benefited Kansas agribusiness infrastructure. In coordination with KDOT, KGFA introduced House Bill 2335 to restructure the Short Line Rail Improvement Fund program to combine it with KDOT’s Rail Service Improvement Fund Program. The bill would make it easier to administer this cost-share grant program and would dedicate $10 million annually from the state highway fund to this program. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail, would be able to directly apply for the program. During the committee hearing, the Kansas Grain and Feed Association joined the Kansas Agribusiness Retailers Association and the Kansas Cooperative Council in supporting the measure. This week, the full House passed the bill favorably on a vote of 117-5. The bill now advances to the Senate for consideration.
Required Property Valuation Methodology for Grain Elevators and Special Purpose Properties
This week, Senate Bill 274 was introduced which would require the use of the cost approach for valuing special purpose property for property tax valuation purposes. The bill specifically includes grain elevators in its definition of special purpose properties. The bill will not likely have action this session.
PVD Directives in Agency Regulations
Senate Bill 263 was introduced at the request of the Senate Tax Chair Senator Caryn Tyson. The bill would amend K.S.A. 2022 Supp. 79-505 to require valuation directives of the Kansas Dept. of Revenue’s Property Valuation Division to be set forth in agency rules and regulations. A hearing has not been scheduled on the bill.
Corporate Income Tax Apportionment
House Bill 2110 would allow certain taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula, based on sales in the state, to determine corporate income tax liability. The bill is estimated to have a cost to the state of approximately $20 million. The House Tax Committee held a hearing on the bill on Tuesday. Kansas Grain and Feed Association joined the Kansas Chamber as the only proponents on the bill. The committee was scheduled to take action on the bill this week, but pushed off action as they are considering whether to adopt an amendment requested by the Kansas Dept. of Revenue that would require all corporations to use the single-factor apportionment formula. The committee will likely take action on the bill in the following weeks.
Water Policy Bill Placing New Requirements on GMDs
This week, the House Committee on Water took final action on House Bill 2279, a bill amending the Groundwater Management District act that was introduced by Ranking Member Rep. Lindsay Vaughn (D-Overland Park). The bill would place new annual reporting and conservation action plan requirements on the groundwater management districts. Following the hearing, the Kansas Agribusiness Retailers Association joined other stakeholders in requesting amendments to the bill to make it more user-friendly and practical for the districts. The committee amended the bill before passing it out of committee favorably. Find the amended bill Here. This week, the full House passed the bill favorably on a vote of 116-6. The bill now advances to the Senate for consideration.
Water Funding Bill
This week, the House Committee on Water took final action on House Bill 2302, a bill introduced by Chairman Jim Minnix (R-Scott City) focusing on long-term funding of the state water plan fund and water conservation efforts. The bill would credit 1.231 percent of the state sales tax revenue (approximately $53 million) to the state water plan fund. It would also modify the distribution of current moneys into the state water plan fund, create a water technical assistance fund and a water projects grant fund for water infrastructure projects. Dedicated revenue from the state sales tax would be added to the current fees on the ag sector and municipal water users. The bill would sunset in 5 years. If it were not extended, then the sales tax funding piece would be removed, and the previous state funding mechanisms would be re-installed. The committee amended the bill before passing it out favorably. The amendments were described as technical for purposes of clarification based on conferee feedback. Find the amended version of the bill Here, and specific amendments made to the bill Here. Specifically, the bill would set aside the following funds from the state water plan fund for three years: $5,000,000 to the water technical assistance fund, $15,000,000 to the water projects grant fund, and $15,000,000 to the retirement of water supply storage debt for two state reservoirs. This week, the full House passed the bill favorably on a vote of 119-3. The bill now advances to the Senate for consideration.
Retailer Collection of Credit Card Fees
Kansas law prohibits the seller or lessor in a retail sales or lease transaction or any credit or debit card issuer from imposing a surcharge on a person who elects to use a credit or debit card to make the purchase. House Bill 2133 would eliminate this prohibition and allow the imposition of such a surcharge. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association supported the bill. This week, the full House passed the bill favorably on a vote of 87-35. The bill now advances to the Senate for consideration. In the Senate, Senate Bill 104 was heard in the Senate Committee on Financial Institutions and Insurance, where KGFA and KARA testified in support. The bill was passed out favorably, and has been “blessed” by Senate leadership for full Senate consideration following the Turnaround this week.
Flat Tax Bill Advanced
This week, the Senate passed Senate Bill 169, a bill which would move the state from its current three bracket system to a single individual income tax rate of 4.75 percent. It is estimated the proposal would cost the state more than $1.3 billion in lost income tax revenues over a three-year period. The bill would provide, beginning in tax year 2024, for a single rate of 4.75 percent to be applied to all Kansans individual taxable income in excess of $10,450 for married individuals filing joint returns and $5,225 for all other individuals. Kansas taxable income less than those amounts would not be taxed. The bill passed 22-17, short of the 27 votes needed to override a veto from the governor.
Maximum Train Length and Minimum Set Back on Rolling Stock
This week, Senate Bill 271 was introduced and referred to the Senate Committee on Transportation that would limit the length of trains on any main line or branch line to 8,500 feet and establish a for minimum distance for storage rolling stock of 250 feet from an intersection. The bill is not yet scheduled for hearing.
Hemp Grain
House Bill 2168 was introduced which would amend the definition of grain to include industrial hemp seed. It is uncertain at this point what other impacts this designation might have, but the Kansas Department of Agriculture is currently reviewing the bill. Ag associations are likely to oppose the bill as no hemp ingredients are currently approved through the animal feed ingredient review pathways, and more data is needed to understand whether hemp ingredients are safe for animals and can be utilized as a source of nutrition when consumed for extended periods of time. These questions should be fully answered before hemp is used for commercial feed purposes to ensure the safety of the public, our animals and the agricultural industry. The bill was referred to the House Ag Committee, and while the committee did not hold a hearing on the bill, it was later referred to an exempt committee ensuring that it will remain alive for the rest of this legislative session.
Prohibiting Foreign Ownership of Real Property
This year, two bills were introduced that would have prohibited the conveyance of real property in Kansas to foreign companies or persons. The House Committee on Agriculture held a hearing on House Bill 2397 but the committee did not take it up for further action. Senate Bill 100, introduced in the Senate, was referred to the Senate Judiciary committee where it did not receive a hearing.
Tax Withholding Requirements for Employees in Multiple States
This week, the Kansas Chamber of Commerce requested introduction ofHouse Bill 2420, a bill which would establish withholding tax requirements for employers with certain employees who work in multiple states. The bill was referred to the House Committee on Taxation and has not been scheduled for hearing.
Electric Utility Rates
Kansas has the highest energy rates in our region, and multiple bills have been introduced to address high electric utility rates while ensuring reliable service:
- Senate Bill 54 allowing a 0 percent sales tax rate on commercial utilities, was passed out favorably by the Senate Tax Committee. House Bill 2221 is the House companion bill.
- Senate Bill 68 would allow state energy producers a Right-of-First-Refusal to build out new electric transmission line assets in the state. Renew Kansas, Kansas Grain and Feed Association, and Kansas Agribusiness Retailers Association joined other commercial and residential utility rate payers in opposing the measure during multi-day hearings, arguing that the bill would remove competition from the build process and result in higher electric energy rates. The Senate Utilities Committee advanced the bill out of committee, but the bill has not been brought up for debate by the full Senate.
- House Bill 2225 would limit cost recovery for electric public utility transmission-related costs. The House Utilities Committee passed the bill out favorably.
- House Bill 2227 would authorize solar power purchase agreements with renewable energy suppliers, exempt the sales of electricity pursuant to power purchase agreements from public utility regulation, and require electric public utilities to enter into parallel generation contracts with certain (non-industrial) customers of the utility. Kansas Grain and Feed Association and Renew Kansas Biofuels Association supported the measure. The bill did not advance.
- House Bill 2228 would increase the capacity limitation of the total amount of net-metered generation systems that may operate within the service territory of an investor-owned electric utility and remove the load-size limitations on certain customers’ net-metered systems. The bill did not advance.
- House Bill 2154 would seek to reform the Kansas Corporation Commission by allowing for the election of commissioners and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings. A hearing was held on the bill, and it has been referred to an exempt committee to keep it alive for the rest of the legislative session. The Senate Utilities Committee held a hearing on its companion bill, Senate Bill 88.
- Senate Bill 78 and House Bill 2155 would require the state corporation commission to review the regional rate competitiveness of electric utility rates. The bills did not receive a hearing.
- Senate Bill 214 would prohibit public utilities from recovering dues or contributions to a charitable organization through rates. The bill did not receive a hearing.
- House Bill 2310 would increase the number of commissioners on the state corporation commission. The bill did not receive a hearing.
Third-Party Funded Litigation
Senate Bill 74 concerns litigation funding by third parties. The bill provides for joint liability of costs and also allows for sanctions in third-party funded litigation. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill was heard in the Senate Judiciary Committee on February 2. Stakeholders are currently working on tweaking language to address specific concerns. This week, the bill was referred to an exempt committee to keep it alive for further action this session.
Scrap Metal Act Extension
House Bill 2326 would extend the sunset date on the current scrap metal theft reduction act and clarify that catalytic converters are covered by the act. The House Judiciary Committee held a hearing on the bill where Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association testified in support of the measure. Agribusiness groups supported the initial passage of the measure when it was passed five years ago. This week, the full House passed the bill favorably on a vote of 120-1. The bill now moves to the Senate for consideration.
Cotton Bale Secure Load Requirements
HB 2160 would exempt the transport of cotton bales from the secured load requirements. This week, the full House passed the bill favorably on a vote of 121-3. The bill now advances to the Senate for consideration.
State Preemption of Plastic Container Regulations
Senate Bill 47 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. The Senate Commerce Committee held a hearing on the bill. The bill did not make it out of committee, but a substitute bill is being drafted to alleviate certain expressed concerns.
Motor Carrier Independent Driver Status
House Bill 2020 was introduced to clarify that the employment status of a driver of a motor carrier does not change as a result of the inclusion of safety improvements made to the vehicle. This week, the full House passed the bill on a vote of 122-0. The bill now goes to the Senate for consideration.
Kansas Apprenticeship Tax Credit Act
HB 2292 would establish a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The credit would be up to $2,500 for each apprentice so employed, and the tax credit may be awarded up to 20 apprentices per year. The program would be administered by the Kansas Department of Commerce. The House Commerce committee held a hearing on the bill, where Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association joined other stakeholders in support of the measure. This week, the bill was considered by the full House which passed the bill favorably on a vote of 115-7. The bill now moves to the Senate for consideration.
Kansas Promise Scholarship Expansion for CDL Training
House Bill 2132 would expand the Kansas Promise Scholarship Act to add new eligible fields of study, including transportation and commercial driver license training. Scholarships could total $8 million this academic school year, with the program likely reaching a statutory cap of $10 million next year as interest and demand for scholarships builds. The House Committee on Education passed the bill out of committee favorably. However, the full House did not take the bill up for consideration and did not bless the bill to keep it alive for action this year.
Cannabis Legislation
The following cannabis bills have been introduced this year, but are not currently scheduled for hearing:
Senate Bill 135 would create the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale, and use of medical cannabis.
Senate Bill 171 would create the veterans first medical cannabis act to regulate the cultivation, distribution, sale, possession and use of medical cannabis.
Senate Bill 276 would specify the delta-9 tetrahydrocannabinol concentration amount for final hemp products and allow hemp products to be manufactured, marketed, or sold.
House Bill 2367 would establish the adult use cannabis regulation act to allow for the lawful cultivation, manufacture, possession, and sale of cannabis in this state.
House Bill 2417 creating the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale and use of medical cannabis.
Other Bills We Are Monitoring:
SB 79 authorizing counties to impose a county earnings tax. Hearing held in Senate Tax Committee
SB 166 requiring public disclosure of a transmission line siting permit under KCC jurisdiction. Hearing held in Senate Utilities Committee.
SB 168 would authorize cities and counties to exempt sales of food and food ingredients from sales tax. Hearing held in Senate Tax Committee.
SB 196 reinstating transfers to the local ad valorem tax reduction fund (LAVTRF). Not scheduled for hearing.
SB 248 providing a sales tax exemption for healthy food, repealing current food sales tax exemption. Senate passed 22-16.
SB 273 eliminating city authority to adopt planning and zoning regulations for land located outside a city. Hearing scheduled in Senate Local Government, Thursday, March 2.
SCR 1606 establishing an initiative and referendum Constitutional Amendment
HB 2192 creating a Kansas Secretary of State website for grants, applications, and awards.
HB 2222 prohibiting enforcement of federal regs and enforcement of state regulations to carry them out. Bill did not advance.
HB 2350 establishing the crime of human smuggling. Passed the House.
HB 2366 providing for transfers to local ad valorem tax reduction fund.
HB 2368 enacting the making work pay act to increase the Kansas minimum wage. Bill did not advance.
HB 2388 requiring licensing bodies to provide electronic credentials. Referred to an exempt committee.
HB 2424 establishing a refundable income tax credit for direct payments by employers to qualified employee student loans
HB 2436 prohibiting public contracts from giving preferential treatment based on ESG criteria