11 Mar 2023 Kansas Statehouse Insider – Week 09
This week, the legislature continued its consideration of bills that had passed in the opposite chamber and began finalizing work on general agency budget bills for fiscal years 2024, 2025, and 2026. Most committees only have two weeks remaining this session to meet and consider bills before the full House and Senate begin deliberation.
Annual Personal Property Tax Rendition
Senate Bill 8 would reduce statutory penalties for the late filing, or failure to file, of 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 classified as personal property rather than as fixtures to the realty. KGFA 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 adopted the proposed amendments and passed the bill on a unanimous vote. The House Tax Committee has scheduled the bill for hearing on Wednesday, March 15.
PVD Directives in Agency Regulations
Senate Bill 263 was introduced at the request of the Senate Tax Committee Chair. The bill would amend K.S.A. 2022 Supp. 79-505 to require all valuation directives of the Kansas Dept. of Revenue’s Property Valuation Division to be set forth in agency rules and regulations. The Senate Tax Committee has scheduled a hearing on the bill for Thursday, March 16, where Kansas Grain and Feed Association will support the measure as it adds transparency to the guide revision process.
Required Property Valuation Methodology for Grain Elevators and Special Purpose Properties
Senate Bill 274 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 Senate Tax Committee has scheduled a hearing on the bill for Wednesday, March 15. However, the committee is not likely to take action on the bill due to concerns raised by Kansas Grain and Feed Association and other organizations that would be impacted by the bill.
Corporate Income Tax Apportionment
As introduced,House Bill 2110 would allow corporate 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 their 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, where Kansas Grain and Feed Association joined the Kansas Chamber as the only proponents. The committee declined to take further action on the bill while it considered whether to adopt an amendment requested by the Kansas Dept. of Revenue to require all corporations in the state to use the sales single-factor apportionment formula. Most states require use of this apportionment methodology. As industry stakeholders weighed in with varying positions on whether the bill should be made mandatory for all corporate filers, it was decided to hold off on further action on the bill until next year.
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 the Kansas Dept. of Transportation (KDOT) set aside a percentage of the $5 million program funds specifically for rail siding projects. This year’s approved projects were announced this week by the Governor’s office. Kansas agribusiness infrastructure has greatly benefited from this program. In coordination with KDOT, Kansas Grain and Feed Association 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 makes it easier to administer the cost-share grant program and would dedicate $10 million annually from the state highway fund for the program. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail, would be able to directly apply for program funding. KGFA joined the Kansas Agribusiness Retailers Association and the Kansas Cooperative Council in supporting the measure which passed the House 117-5. The Senate Transportation Committee scheduled a hearing on the bill for Thursday, March 16.
Maximum Train Length and Minimum Set Back on Rolling Stock
Senate Bill 271 was introduced and referred to the Senate Committee on Transportation. The bill 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 Senate Transportation Committee held a hearing on the bill on Tuesday, March 7, where the committee chairman stood as a proponent to the bill. There was significant committee discussion on whether, and to what extent, this area of law might be preempted by federal regulations.
Hemp Grain
House Bill 2168 would add industrial hemp seed to the statutory definition of grain in the Kansas grain warehouse law. The Kansas Department of Agriculture is reviewing the bill for other impacts the designation might have. No hemp ingredients have been federally approved for use in animal feed, and it is unknown whether hemp ingredients are safe for animals or can be utilized as a source of nutrition when consumed for extended periods of time. These questions should be answered before hemp is used for commercial feed purposes to ensure the safety of the public, animals, and the agricultural industry. The bill is scheduled for hearing in the House Committee on Agriculture on Wednesday, March 15, where Kansas Grain and Feed Association will oppose.
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 passed the bill favorably on a vote of 115-7. The Senate Commerce Committee held a hearing on the bill on Thursday, March 9, where Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association joined other stakeholders in support of the measure.
Tax Withholding Requirements for Employees in Multiple States
House Bill 2420 would establish withholding tax requirements for employers with employees working 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:
- House Bill 2154 would 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 the Senate Utilities Committee held a hearing on its companion bill, Senate Bill 88.
- Senate Bill 54 allowing a 0 percent sales tax rate on commercial utilities, was passed out favorably by the Senate Tax Committee. House companion bill House Bill 2221 has not been scheduled for hearing.
- 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.
Transmission Delivery Charges on Energy Users
House Bill 2225 was introduced in an attempt to limit Evergy’s direct recovery of costs related to electric public utility transmission projects. The House Utilities Committee passed the bill out favorably, but stakeholders were asked to work with Evergy to find a compromise position. The bill was then referred back to committee and, on Thursday, an agreed amendment was added to the bill before being passed out favorably. As amended, the bill (1) reduces Evergy’s authorized return on equity (ROE) on local transmission projects, (2) sets up a project review process at the KCC, and (3) requires Evergy to submit testimony on competitive rates and impacts on economic development during any rate case. The major consumer concession was allowing Evergy to continue to assess annual increases through its transmission delivery charge (TDC). The KCC estimates the bill will provide ratepayer savings of $40M to $45M over three years. That includes the cumulative impacts of about $10M/year in upfront savings and approximately $2M/year in annual savings from new projects at the lower ROE. A full House vote on the bill is expected next week. Many thanks to the Kansas Industrial Consumers Group that negotiated for all industrial energy users during this process.
Various Tax Bills
The Senate passed three tax bills that, together, would provide more than $1.1 billion in tax cuts. The bills are scheduled for hearing in the House Tax Committee.
- Income Tax – The Senate passed Senate Bill 169 to create a single 4.75 percent individual income tax rate and eliminate the current progressive three-tier rates. The measure drops the rate on middle (5.25 percent) and high-income (5.7 percent) taxpayers to 4.75 percent and increases the 3.1 percent rate on lower-income Kansans, while increasing the standard deduction. The bill is projected to cost the state more than $550 million a year, and more than $1.3 billion over a three-year period. The bill passed the Senate 22-17, short of the 27 votes needed to override a veto from the Governor.
- Social Security Income Tax – The Senate passed Senate Bill 33 on a vote of 36-3. The bill would eliminate state income tax on Social Security payments and is projected to cost the state $147 million annually. The bill is more costly than what Governor Laura Kelly had proposed. The bill was amended to include other tax cuts, further increasing the cost of the bill.
- Food Sale Tax – Senate Bill 248 would eliminate state and local sales tax on all food and food ingredients beginning next year. The bill, which passed 22-16, would cost the state about $277 million a year.
Penalties for Failing to Timely Remit Withholding Taxes
House Bill 2411 would decrease statutorypenalties for employer failing to timely remit employee withholding income taxes. Under current law, the penalty for the failure of an employer to remit any amount of withholding taxes is 15.0 percent of the amount of underpayment. The bill would set the penalty as a percentage of the amount of the underpayment as follows: 2 percent if remitted within one to five days; 5 percent if remitted within six to 15 days; 10 percent if remitted after 15 days; and 15 percent if remitted after 15 days and the Department has issued a notice to the person regarding the underpayment, but the amount of the underpayment was not remitted within ten days of issuance of the notice. A hearing was held on the bill in the House Tax Committee.
Retailer Collection of Credit Card Fees
Kansas law prohibits the seller or lessor in a retail sales or lease transaction 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 the surcharge. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association supported the bill which passed the House on a vote of 87-35. The bill has been referred to the Senate Committee on Financial Institutions and Insurance which had previously passed out a Senate companion bill Senate Bill 104 favorably.
Prohibiting Foreign Ownership of Real Property
Senate Bill 283 would prohibit the future conveyance of real property in Kansas to “foreign adversaries”, as the term is defined by federal law. The bill was referred to the Senate Judiciary Committee. It will likely be given a hearing on March 21, and then receive committee action the following day. Two similar bills were previously introduced this year in Senate Bill 100 and House Bill 2397. The House Committee on Agriculture held a hearing on House Bill 2397 but did not act on the bill. Senate Bill 100 was referred to the Senate Judiciary committee where it did not receive a hearing. This issue is a high priority item of new Kansas Attorney General Kris Kobach.
Third-Party Funded Litigation
Senate Bill 74 would provide for joint liability of costs for third-party funded litigants and also allow for sanctions on third-party funded litigants. The bill would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill was heard in the Senate Judiciary Committee. The bill was referred to an exempt committee to keep it alive for further action this session and stakeholders are working on a possible amendment to address specific concerns.
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. Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association joined other affected industries in supporting the measure. Agribusiness groups supported the initial passage of the measure when it was passed five years ago. The House passed the bill 120-1, and the Senate Judiciary Committee has scheduled the bill for hearing on Tuesday, March 14.
Cotton Bale Secure Load Requirements
HB 2160 would exempt the transport of cotton bales from certain secured load requirements. The House passed the bill on a vote of 121-3. The bill has been referred to the Senate Committee on Transportation for consideration.
State Preemption of Local Plastic Regulations
House Bill 2446 would prohibit cities and counties from regulating plastic and other containers. The bill is scheduled for hearing in the House Committee on Federal and State Affairs on Wednesday, March 15.
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. The House passed the bill 122-0. The Senate Transportation Committee held a hearing on the bill on Thursday, March 9.
Wind Energy Light Mitigation
Senate Bill 49 would require light-mitigating technology systems to be installed on new wind energy conversion systems. The bill passe the Senate on a vote of 39-1, and is scheduled for hearing in the Senate Utilities Committee on Thursday, March 16.
Water Policy Bill Placing New Requirements on GMDs
House Bill 2279, introduced by House Water Committee Ranking Member Rep. Lindsay Vaughn (D-Overland Park), would amend the Groundwater Management District act to place new annual reporting and conservation action plan requirements on the districts. Kansas Agribusiness Retailers Association joined other stakeholders in successfully amending the bill to make it more reasonable for the districts. The full House passed the amended bill 116-6. The Senate Committee on Agriculture and Natural Resources has scheduled the bill for hearing on Tuesday, March 14, with final action scheduled for Thursday, March 16.
State Water Plan Funding Bill
House Bill 2302, introduced by House Water Committee Chairman Jim Minnix (R-Scott City), would enhance funding for the state water plan fund by crediting 1.231 percent of current state sales tax revenues (approximately $53 million) directly to the fund. The bill would also modify the distribution of revenue into the fund and create a water technical assistance fund and a water projects grant fund for water infrastructure projects. The dedicated state sales tax revenue would be added to the current fees collected from agricultural and municipal water users. The bill would sunset in 5 years. Specifically, the bill would set aside the following funds, annually, from the state water plan fund for three years: $5M to a water technical assistance fund, $15M to a water projects grant fund, and at least $15M to the retirement of water supply storage debt for two state reservoirs until the debt is retired. The House passed the bill 119-3. The Senate Committee on Agriculture and Natural Resources has scheduled the bill for hearing on Wednesday, March 15, with final action scheduled for Friday, March 17.
Cannabis Legislation
The following cannabis bills have been introduced this year:
Senate Bill 135 would create the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale, and use of medical cannabis. The bill is scheduled for hearing in the Senate Committee on Federal and State Affairs on Wednesday, March 15.
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.
SB 166 requiring public disclosure of a transmission line siting permit. Passed out of Senate Utilities. Blessed.
SB 168 authorizing cities and counties to exempt sales of food from sales tax. Hearing in Senate Tax.
SB 196 reinstating local ad valorem tax reduction fund transfers. No hearing scheduled.
SB 248 providing a food sales tax exemption, repealing current food sales tax exemption. Passed Senate, Hearing in House Tax.
SB 273 eliminating city planning and zoning authority for land outside a city. Sen Local Gov, no hearing held.
SCR 1606 establishing an initiative and referendum Constitutional Amendment. No hearing, blessed.
HB 2192 creating a Kansas Secretary of State website for grants, applications, awards. No hearing.
HB 2350 establishing the crime of human smuggling. Passed House, hearing in Sen Judiciary.
HB 2366 providing for local ad valorem tax reduction fund transfers. House Tax.
HB 2388 requiring licensing bodies to provide electronic credentials. Passed from House Commerce.
HB 2424 establishing refundable income tax credit for payments by employers to employee student loans. House Tax.
HB 2436 prohibiting public contracts from giving preferential treatment based on ESG criteria. House FII. Hearing March 8.