03 May 2024 Kansas Statehouse Insider – Sine Die Adjournment
On Friday, April 26, 2024, the Kansas legislature gaveled back in to begin its brief, “Veto Session,” where the legislature can attempt to override vetoes by the governor. Lawmakers worked Monday and Tuesday of this week before adjourning sine die around 12:30 a.m., on Wednesday morning, officially concluding the regular 2024 legislative session. As this is the second year of the legislative biennium, any bill that was not passed is no longer a live bill.
Throughout the interim at the beginning of the month, Governor Laura Kelly vetoed at least 15 bills that had been passed by the legislature. During the Veto Session, the legislature took action to override about a dozen of those bills.
The legislature also took original final action on about a dozen bills, including a major tax bill and the omnibus budget bill for the current fiscal year and fiscal year 2025. Because the legislature is now adjourned, it will not have an opportunity to attempt to override any of these bills that might be vetoed by the governor.
Governor Kelly – who, according to recent polling is reported as possibly being the eighth-most popular governor in the country – has threatened to call the legislature back in for a Special Session if it did not pass sufficient tax relief. While a major tax relief bill was eventually passed, the governor has indicated she does not believe the bill provides sufficient tax relief and intends to call the legislature back for a Special Session. The timing of the Special Session is significant as both the House and Senate are now actively campaigning for the 2024 election, and a Special Session would place all campaigning and fundraising on hold.
Elevator Safety Act
House Bill 2826 was introduced to amend the Elevator Safety Act. The bill would amend the definition of elevator, licensure requirements, inspection and testing requirements and adoption of rules and regulations. The bill did not impact the existing exemption for elevators within grain elevators and biofuel facilities. The House placed contents of the bill into Senate Bill 143, creating Substitute for Senate Bill 143. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
CDL Military Training Waiver
Senate Bill 462 authorizes 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 amended the bill to add the contents of HB 2682, a bill that disqualifies a person’s commercial vehicle driving privileges if the person is not in compliance with federal motor carriers safety administration drug and alcohol clearinghouse rules. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
Kansas Agricultural Remediation Reimbursement
House Bill 2477 amends 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. Status: Governor Kelly signed the bill into law.
Single Sales Factor Apportionment
The state department of revenue (KDOR) introduced legislation this year (HB 2796 and SB 507) that would have required corporate taxpayers to use a single-sales factor apportionment formula beginning Jan. 1, 2025. The bills included market-based sourcing provisions and were essentially revenue neutral to the state. Industry stakeholders had introduced an alternative bill in HB 2798 which would have allowed for a two-year “election phase-in” of the single-sales factor apportionment formula. The bill also included provisions to offset potential increases in tax liability for some companies. The estimated cost to the state for this bill was $162 million in 2025, $87 million in 2026, and $8 million in 2027. Most of this cost was due to the delayed adoption and deferred corporate tax deduction provision and the tax liability off-set provision. The Senate Tax Committee held a hearing on SB 507, and the House Tax Committee held hearings on HB 2796 and HB 2798. Status: While the bills did not move advance, stakeholders were encouraged to pursue legislation next year.
Personal Property Tax Renditions
Senate Bill 8 would have reduced 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 aside such penalties if the personal property was machinery and equipment that was previously classified as real property. The contents of the bill were placed into CCR on SB 410 and passed by the legislature. Status: Governor Kelly signed the bill into law.
SALT Parity
CCR on SB 410 includes a provision amending 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 are retroactive to tax year 2022. Status: The legislature passed the bill and Governor Kelly signed it into law.
Comprehensive Tax Relief
As one of its final actions of the 2024 legislative session, the legislature passed CCR SB 37, a comprehensive tax relief bill with the following provisions: restructure the individual income tax brackets and rates to provide for a two-bracket system (currently a three-bracket system), increase the standard deduction and personal exemption amounts, completely exempt social security income from taxation; increase the residential property tax exemption from the statewide school levy (from $40k to $100k), decrease the ad valorem mills collected for schools (to 19.5 mills, currently 20 mills), establish a 0% sales tax on food beginning on July 1st, abolish the Local Ad Valorem Tax Reduction Fund and County and City Revenue Sharing Fund, and reduce the privilege tax on financial institutions. The bill would reduce taxes by $1.463 billion over the next three years. Status: Governor Kelly previously vetoed a similar bill and has stated that she does not support moving from three income tax brackets to two. On Thursday afternoon, the Governor’s office released a public announcement stating that “Governor Kelly will veto the tax plan agreed to in Conference Committee Report for Senate Bill 37” and will call the Legislature back for a Special Session.
Omnibus Budget
The legislature passed an omnibus budget bill CCR HB 2551 with adjustments for fiscal years (FY) 2024 through 2027. Governor Kelly maintains line-item veto authority of any item in the budget. For FY 2024, total state expenditures were $25.4 billion, including $10 billion state general funds (SGF). This is an all funds increase of $1.1 billion, or 4.5 percent, and a SGF increase of $1.2 billion, or 14.2 percent, above FY 2023. For FY 2025, the bill includes expenditures totaling $25.4 billion, including $10.6 billion SGF. This is an all funds increase of $52.8 million, or 0.2 percent, and a SGF increase of $622.4 million, or 6.2 percent, above the FY 2024 budget. Major FY 2024 budget provisions include: $30 million for Human Service Caseloads, $2.5 million SGF for Mirror, Inc. to create a regional inpatient juvenile substance use treatment center in south central Kansas; and $20 million bonding authority from special revenue funds for the construction and equipment of a NIAR technology and innovation building on Wichita State University’s innovation campus. Major the FY 2025 budget provisions include: $45 million to the State Water Plan Fund (SWPF), $7.5 million from the SWPF to the Water Projects Grant Fund, $2.5 million from the SWPF to the Water Technical Assistance Fund, $6 million for small town infrastructure drinking and waste water projects, $5 million SGF for the Eisenhower Library Educational Facility, language distributing revenues above $71.5 million from the State Gaming Revenue Fund to the Attracting Professional Sports to Kansas Fund, and language amending the Build Kansas Matching Grant program to allow a community to request funding for water, transportation, energy, cybersecurity, or broadband infrastructure projects that are eligible for federal funding requiring a match.
Train Set Back Distance
The Transportation Conference Committee placed language into House Bill 2501 to adopt federal minimum set back distance standards for stored rolling stock. The bill requires a railroad to maintain a minimum distance of 250 feet between a near-edge railroad crossing and railroad rolling stock stored on sidings if the railroad crossing does not have electronic warning signals. The bill would authorize the Kansas Department of Transportation (KDOT) to determine a greater or lesser distance at a particular location and permit or order a railroad to maintain the greater or lesser distance. If physical conditions require use of a track temporarily, if or minimum distances cannot be obtained, the minimum distance provisions of the bill would not apply to: cars placed for or awaiting removal after loading or unloading; bad order cars set out from trains; and rolling stock stored on yard tracks unless otherwise ordered by KDOT. The term “rolling stock” includes rolling stock not used for the pickup or delivery of freight and where placement on the railroad-owned siding by a railroad is for the sole convenience of the railroad. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
Train Length Legislation
SB 271 would have created a maximum train length of 8500 feet. Status: 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. However, this week, the U.S. Dept. of Transportation finalized a federal rule establishing minimum safety requirements for the size of train crews. The new rule requires a second crewmember on all trains. The rule permits limited exceptions for smaller railroads to continue or initiate certain one-person train crew operations by notifying FRA and complying with new federal safety standards.
Nuisance Abatement
In 2021, a law was passed granting authority to the Sedgwick County Commission to order the abatement of nuisances in unincorporated areas of the county, and to recover costs incurred from the landowner. At the request of industry, that law specifically excluded agribusiness facilities. This year, Senate Bill 362 was introduced, and passed, to remove a sunset provision in that law. In addition, Senate Bill 162 was introduced to create a similar nuisance abatement authority in Riley County and in Crawford County. The bill includes language strengthening the agribusiness exemption. The legislature placed the contents of Senate Bill 162 into CCR on SB 384. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
Utility Legislation
House Bill 2527 would make significant changes concerning Evergy’s cost recovery to prepare for the planned construction of a new natural gas energy generating facility. The bill would authorize the electric public utility to recover certain expenses from depreciation and construction work in progress. It would also authorize economic development electric rates for certain large electric customers, limit the time that such rates may be implemented, and extend the timeline for the state corporation commission to make a ratemaking determination and treatment prior to the utility constructing or acquiring a stake in a transmission or electric generation facility. The House adopted an agreed amendment between Evergy and ratepayer groups, and the Senate amended the bill to prohibit utilities from recovering reduced revenues from ratepayers. The bill was referred to a conference committee which added in the contents of House Bill 2588 and SB 455. 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. SB 455 would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. The bill would also establish a presumption against retirement of fossil fuel-fired electric generating units and nuclear power generation. A conference committee placed the contents of the bill into CCR HB 2527. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
LEMA Corrective Controls
House Bill 2634 allows 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 provides 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. Status: Governor Laura Kelly signed the bill into law.
Pesticide Applicator Certification
HB 2607 amends 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 update the law could jeopardize the Kansas Dept. of Agriculture’s authority to regulate pesticide applications in the state. The bill, among other things, establishes new training and supervision requirements for pesticide applicators of restricted use pesticides. The bill also grants KDA civil and criminal penalty authority on commercial applicators and private applicators. The bill sets a maximum civil penalty for businesses that violate the act to $5,000 (the amount in current law), while setting a maximum civil penalty for individual applicators at $500. Status: Governor Kelly signed the bill into law.
Net Operating Loss Subtraction Modification
CCR on SB 410 includes a subtraction modification to allow 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 losses for up to 20 years if the amount exceeds the taxpayer’s Kansas adjusted gross income. The bill would extend the deadline for eligible taxpayers to file amended returns for tax years 2018 through 2020 until April 15, 2025. Status: The legislature passed the bill and Governor Kelly signed it into law.
Employee Retention Tax Credit Disallowance
CCR on SB 410 includes a subtraction modification beginning in tax year 2021, in determining Kansas adjusted gross income equal to the amount of federal disallowance related to any federal credit under Subsection (a) of Section 280C of the federal Internal Revenue Code and, effective for tax years 2020 and 2021, 50 percent of the amount of federal disallowance related to the Employee Retention Tax Credit. For the Employee Retention Tax Credit disallowance, the taxpayer would be required to prove that Kansas income tax had previously been paid on the disallowed amount and would be permitted to file a claim for refund or amended return on or before April 15, 2025. Status: The legislature passed the bill and Governor Kelly signed it into law.
Disallowed Business Interest Subtraction Modification
CCR on SB 410 includes a subtraction modification on disallowed business interest. The bill would clarify the addition and subtraction modifications for disallowed business interest to specify that the addition modification is applicable to interest expenses paid or accrued in previous tax years and carried forward to the current tax year and that the subtraction modification is for interest expense actually paid or accrued in the current tax year. The bill would also provide for tax year 2021 to include a subtraction modification for interest expenses paid or accrued in tax year 2021 to include the sum of interest expenses paid or accrued in tax years 2018, 2019, and 2020, less the sum of the amounts allowed as a deduction pursuant to Section 163 of the federal Internal Revenue Code in tax years 2018, 2019, and 2020. Status: The legislature passed the bill and Governor Kelly signed it into law.
Single City Port Authority
CCR on SB 410 includes a provision that extends the single city port authority income tax credit, intended to keep certain short line rail open on the national freight line for select customers in rural Kansas. Status: The legislature passed the bill and Governor Kelly signed it into law.
Personal Property Tax Exemptions
Senate Bill 484 would exempt certain personal property, such as ATVs, watercraft, and trailers from personal property tax. The contents of the bill were placed into CCR on HB 2096 along with many other provisions. During the veto session, the Senate passed the bill 23-11 and the House passed the bill 91-26. Status: The bill now goes to the Governor for consideration.
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 IRC 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 contents of the bill were placed into CCR on HB 2096. During the veto session, the Senate passed the bill 23-11 and the House passed the bill 91-26. Status: The bill now goes to the Governor for consideration.
Economic Development Programs Repeal
SB 546 would have decreased the corporate income tax rate, discontinued tax credits of the high-performance incentive program (HPIP), discontinued payroll withholding tax benefits of the promoting employment across Kansas (PEAK) act and repealed unused tax credits. The Senate Tax Committee amended the bill and placed the contents of the bill into Sub for HB 2201. As amended, the bill would reduce corporate income tax rates and repeal the following tax credits: swine facility improvement; owners Promoting Employment Across Kansas, contributions to an individual development account; business and job development; plugging abandoned oil or gas well; agritourism liability insurance; assistive technology contributions; declared disaster capital investment; and environmental compliance. Status: The bill did not advance further after passage from the Senate Tax Committee.
Foreign Ownership of Real Property
The legislature has considered multiple bills this year to increase oversight of “foreign adversaries” or “countries of concern” in Kansas. The House passed House Sub for SB 172, a bill that would prohibit principals from federally-designated countries of concern from holding or acquiring any interest in real property in the state within 100 miles of a military installation. As amended, the bill exempts individuals and properties previously verified by the federal interagency Committee on Foreign Investment in the United States. During the Veto Session, the House passed CCR on SB 172 on a vote of 86-39, and the Senate passed the bill on a vote of 24-14. Status: The bill now goes to the Governor for consideration. Should the Governor veto the bill, the legislature would have no opportunity to override the veto.
Drone Technology Critical Components
Hse Sub for SB 271 would prohibit government entities in the state from acquiring drone technology with critical components from countries of concern. 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. The bill impacts ariel drones only and not ground drones. The House passed a conference committee report on the bill on a vote of 90-30, and the Senate passed the measure on a vote of 21-12. Governor Laura Kelly vetoed the bill. Status: During the Veto Session, the Senate failed to gain sufficient votes to override the Governor’s veto and the veto was sustained.
Animal and Ag Facilities Protection
Senate Bill 389 would prohibit entering or remaining on, and knowingly making false statements to gain access to, animal facilities and field crop production areas. The bill would amend current law to apply to physical trespass or making a false statement on an employment application to gain entry into an animal or ag research facility. 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. The Senate placed the contents of the bill into House Bill 2047. In a conference committee, language from House Bill 2543 was added to the bill which requires the state animal health commissioner’s approval of livestock brand applications, and increases the maximum amount for brand registration and renewal fees. During the Veto Session, the Senate passed the bill 34-2 and the House passed it 108-12. Status: The bill now goes to Governor Kelly for 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: During the Veto Session, contents of the bill were included as a proviso in the omnibus budget bill and sent to the Governor for 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. The bill raises the maximum amount of compensation benefits from $300,000 to $500,000. Find more specific information here. Both the House and Senate passed the bill with a unanimous vote. Status: Governor Laura Kelly signed the bill into law.
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% of Kansas employers immediate savings in their unemployment tax payments. Find a detailed summary of the substitute bill here. The bill was amended to address forgiveness of certain companies’ large negative balances. Status: The House passed the bill with a unanimous vote, and the Senate passed it with only “no” vote. Status: Governor Laura Kelly signed the bill into law.
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. Status: Following a hearing in the House Tax Committee, no further action was taken on the bill.
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. Following passage by the House (82-36), and Senate (27-13), the bill was vetoed by Governor Kelly. Status: During the Veto Session, the Senate voted to override the Governor’s veto on a vote of 27-12, and the House on a vote of 87-38. The bill now becomes law, notwithstanding the Governor’s veto.
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: Governor Laura Kelly signed the bill into law.
Retailer Sales Tax Collection Tax Credit
Senate Bill 41 was introduced to create a sales and use tax remittance credit for retailers. The bill was intended to compensate retailers for their work in collecting and remitting sales tax 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 Senate Tax Committee passed the bill out of committee, but it did not advance further.
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. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
Third-Party Litigation Funding
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 amended the bill to exempt nonprofit 3rd parties from the requirements. The House passed the bill on a vote of 83-39. Status: The bill was discussed in a House and Senate conference committee but did not advance further.
Solid Waste Management Fund
Senate Bill 331 amends 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. Status: The bill was passed by the legislature and signed into law by Governor Kelly.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. The bill was approved by the Senate and the House. Status: Governor Kelly signed the bill into law.
Medicaid Expansion in Kansas
Medicaid expansion in the state was Governor Laura Kelly’s top policy priority this year. The House Committee on Health and Human Services held a hearing on its Medicaid expansion bill, House Bill 2556, but did not pass the bill out of committee. Similarly, during the Veto Session, the Senate debated a motion to pull its Medicaid expansion bill from committee. With 24 votes needed, the motion failed on a vote of 18-17. Status: No further action was taken on the issue this year.
Medical Marijuana
Senate Bill 555 would create the Medical Cannabis Pilot Program Act and Pilot Program to be administered by the Secretary of Health and Environment. Under the bill, no person would be allowed to grow, harvest, process, sell, barter, transport, deliver, furnish, or otherwise possess any form of cannabis except as proved in the bill or the Commercial Industrial Hemp Act. The bill would define “qualifying medical conditions.” Following a two-hour hearing in the Senate Committee on Federal and State Affairs, with multiple proponents and opponents, the measure was tabled for the rest of this year. During the Veto Session a motion was made to pull the bill from committee to be debated by the full Senate. With 24 votes needed, the motion failed on a vote of 12-25. Status: No further action was taken on the issue this year.