16 Feb 2024 Kansas Statehouse Insider – Week Six
The Legislature, again this week, failed to take up an override vote on Governor Laura Kelly’s veto of the tax bill House Bill 2284. That vote to override will need to come by the end of next week or the governor’s veto of the bill will be sustained.
Committees this week approved and advanced bills before multiple days of floor debate begin next week as we near the legislative ‘turnaround’. In both chambers, various bills have now been introduced that would limit foreign investment in real property in the state. As the issue has broad support in the legislature, stakeholder groups continue to meet to discuss the measures.
After next Friday, the legislature will take a short break before coming back to consider bills that have been passed by the opposite chamber. We continue to hear that this will be a short session, with a goal of a quick adjournment after passage of a tax bill and state budget.
Key 2024 Legislative Deadlines
- February 20 – Last day for committees to meet before Turnaround Day
- February 23 – Last day for non-exempt bills in original Chamber (Turnaround Day)
- March 22 – Last day for non-exempt committees to meet
- March 28 – Last day for non-exempt bills in either Chamber
- April 5 – First Adjournment (Drop Dead Day)
- April 29 – Veto Session begins
Kansas Agricultural Remediation Reimbursement
House Bill 2477 was pre-filed at the request of the Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association. The bill seeks to amend 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. This week, the House passed the bill on a vote of 110-1. A hearing will be held soon in the Senate Committee on Agriculture and Natural Resources.
Single Sales Factor Apportionment
Legislation was introduced in recent years to allow corporate taxpayers to elect which methodology to use when apportioning income between Kansas and other states in which they operate. Past legislation would have allowed certain taxpayers to elect to use a to apportion their corporate income tax liability. Legislation introduced this year, however, will require corporate taxpayers to use the single-sales factor apportionment formula (after a two-year phase-in period) rather than allow for an election. Three separate bills have now been introduced. The Kansas Dept. of Revenue has introduced HB 2796 and SB 507. In addition, HB 2798 was introduced by the Kansas Chamber. This bill includes provisions that offset potential increases in tax liability for some companies, such as a “New Jersey model” tax credit for deferred tax liability. All three bills include provisions on market-based sourcing. Hearings on the bills are likely to be held in two weeks following the legislative “turn-around.”
Property Tax Relief
Property tax relief is a top priority of the Governor, and Republican and Democrat legislators in both the House and Senate. Much of that relief is likely to be specifically focused on residential property owners. Multiple bills have been introduced that would offer various proposals for residential property tax relief, such as:
– discontinuing state property tax levies for the Kansas educational building fund and the state institutions building fund.
– increasing the exemption for residential property from the statewide school levy from $40,000 to $65,000.
– excluding social security payments from household income and increase the appraised value threshold for eligibility of seniors and disabled veterans related to property tax homestead claims.
– transferring state general funds into the LAVTRF and requiring the funds to be distributed directly to residential property taxpayers.
– amending the Kansas Constitution to limit annual increases in real property valuations to 4 percent.
– amending the Kansas constitution to decrease the residential property assessment rate for determining property taxes.
Personal Property Tax Renditions, Reduced Penalties for Failing to File
Senate Bill 8 would reduce penalties for the late filing, or failure to file, personal property renditions annually to the county appraiser. The bill was important to the grain elevator and biofuel industries following a 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. The bill would allow county appraisers to waive late penalties, and to set penalties aside if the machinery and equipment was previously classified as real property. The House Tax Committee placed the contents of SB 8 into Senate Bill 127 and passed the bill out of committee favorably. Stakeholders are seeking Senate concurrence on this bill which would then be sent to the Governor.
Sales Tax Exemption on Installation Services for Reconstruction, Repair to Property
House Bill 2585 would create a new sales tax exemption on services for installing or applying tangible personal property for the reconstruction, restoration, remodeling, renovation, repair or replacement of a building or facility. This tax exemption currently exists for similar services on residential structures. This bill would equalize tax treatment for work performed on commercial and industrial buildings. The House Tax Committee held a hearing on the bill where KGFA, KARA, and Renew Kansas joined other commercial and industrial stakeholders as proponents of the legislation. The bill was scored with a fiscal note of approximately $70M in the first year.
Prohibiting Foreign Ownership of Real Property
Multiple bills have now been introduced to prohibit the conveyance of real property in Kansas to “foreign adversaries.” (Senate Bill 283 and House Bill 2397). This issue is a high priority item for Kansas Attorney General Kris Kobach and House and Senate leadership. Similar legislation has been passed in multiple states. Across the Midwest, state lawmakers are proposing legislation to prevent foreign companies and individuals from buying agricultural land. New bills have been filed in several states, including Nebraska, Iowa, Illinois, Missouri and Michigan. Last year, proposals were introduced in more than 35 states leading to 10 new states adding restrictions. A key provision being debated in Kansas is whether the legislation will be retroactive, to require the divestment of properties currently owned by companies located in certain foreign nations. The House is considering various foreign adversary bills, including prohibiting entities deemed “countries of concern” from purchasing land located within 150 miles of a military installation. There will also likely be legislation prohibiting the selling of drones in the state that are from a country of concern or made with component parts from countries of concern. House Ag Committee Chairman, Rep. Ken Rahjes introduced HB 2638 which is supported by the ag industry. Senate Bill 446 was heard in the Senate Committee on Federal and State Affairs. The bill, which had many opponents, would prohibit foreign adversaries from acquiring land after July 1, 2024, unless authorized by a new state land council. HB 2766, introduced in the House, would prohibit foreign principals from countries of concern from holding any interest in certain real property in this state. Ag stakeholders are preparing amendments to that bill which would provide exemptions for CFIUS-confirmed entities. Hearings will be held on the House bills after next week.
Crop Damage Reimbursement
House Bill 2651 would require a third party that causes damage to crops or land to notify the landowner of such damage, and to reimburse such landowner in accordance with the terms of the existing land lease agreement. The House Committee on Agriculture held a hearing on the bill this week. The bill had only one proponent, House Appropriations Chairman Rep. Troy Waymaster. There were no other proponents or opponents.
Train Legislation
Last year the Senate passed Senate Bill 271, which would create a maximum train length (8500 feet) in Kansas, and require railroads to maintain a minimum distance of 250 feet between a near-edge railroad crossing and stored railroad rolling stock at crossings. The bill was referred to the House Transportation Committee with Chairman Shannon Francis (R-Liberal). There may be separate legislation limited to blocked crossings. This month, the US Supreme Court refused to review a decision from the Ohio Supreme Court which ruled that an Ohio law preventing blocked crossings was preempted by federal law. The state of Kansas had joined in that appeal. Separately, in 2023, the Kansas department of transportation (KDOT) passed a regulation requiring at least two crew members in each lead locomotive operated in Kansas. In response to that regulation, SB 402 has been introduced to prohibit KDOT from regulating crew sizes for class II and class III railroads.
Nuisance Abatement
In 2021, Senate Bill 52 was enacted to grant the Sedgwick County Commission authority to order the abatement of nuisances from land within an unincorporated area of the county, and to recover any costs incurred from the landowner. KGFA and KARA successfully amended the bill to broadly exclude agribusiness facilities. As the law was set expire this July, Senate Bill 362 was introduced to remove the sunset provision. The Senate Committee on Local Government held a hearing on the bill and passed it out favorably. In addition, an informational hearing was held on Senate Bill 162, a bill that would create a similar nuisance abatement authority in Riley County. This bill includes agribusiness exemption language that ag stakeholders secured in the Sedgwick County law. The committee amended the bill to strengthen the ag exemption, and add in Crawford, County. The committee passed the bill out of committee favorably as amended.
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, provide coverage for members of the Kansas National Guard, and modernize elements of the administrative process. Find more specific information here. The Senate Commerce Committee advanced the bill favorably out of committee. The full Senate will debate the bill next week.
Utility Cost Recovery Legislation
Kansas’ largest energy generating company, Evergy, introduced HB 2527, a bill that would make significant changes concerning cost recovery. The bill, which was heard in the House Utilities Committee on February 6, would make the following changes:
1. Allow plant-in-service-accounting (PISA), to allow Evergy to collect depreciation expense and return for assets once they are used and useful, versus the current practice of including assets during a rate case proceeding. This change would increase rates without a customer benefit.
2. Capital structure changes. In the 2023 rate case, the KCC used Evergy’s corporate holding company capital structure (ratio of debt and equity) for rate setting. This resulted in a significant portion of the rate decrease for Evergy Metro. This provision would require the KCC to only use the capital structure of the operating company, which would increase rates.
3. Pre-determination changes. This section creates an opportunity to use a construction-work-in-progress (CWIP) tracker to increase revenues and earning opportunities when constructing a new gas generation facility. This change would increase rates and put additional risk on customers to finance projects.
4. Eco/Devo rate changes. This would increase load sizes (from 300kW to 25MW) which allow customers to be eligible for higher discounts and extend the length of discounts from 5 to 10 years. The proposal also deletes the current option to track and defer program costs. This provision will increase rates, but the increased load would lower rates over time.
Other Utility Legislation
HB 2588 introduced on behalf of “Clean Energy Business Council,” the bill would 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. It would require facilities to be appropriately sized based on the customer’s average load and establishing requirements for exporting power to a utility from a facility subject to net metering. On Thursday, the House passed the bill on a unanimous vote.
HB 2591 – exempting the Kansas Corporation Commission from Kansas open meetings act (KOMA) concerning docketed proceedings. The bill is intended to allow the KCC members to communicate and deliberate issues without violating KOMA. Following a hearing in the House Energy and Utilities Committee, the bill was passed out favorably.
HB 2597 – extending Kansas corporation commission timelines for making determinations on proposed rate-setting for electric generating or transmission facilities. The bill received a hearing in the House Energy and Utilities Committee on February 8.
HB 2736 – prohibiting the closure of an electric generation facility without a reliable and readily dispatchable replacement and notification of such closure. A similar bill, SB 517, was introduced in the Senate.
HB 2768 – providing a property tax exemption for certain new electric generation facilities and sunsetting current property tax exemptions for such facilities.
SB 456 – establishing a rebuttable presumption against retirement of fossil fuel-fired electric generating units. The Senate Utilities Committee held a hearing on the bill on Feb. 15. Final committee action on the bill will likely take place next week, where it might be combined with SB 455, a bill that would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. In addition, the House Energy Committee held a hearing on the House companion bill HB 2620.
Sales Tax, Origin Source Determination
House Bill 2566 would create an origin-source rule for determining where a sale takes place for purposing of assessing a sales and compensating use tax rate. While Kansas is currently a destination-based state for determining sales tax rates, it was previously a point of origin of the sale (origin-source) state. Kansas changed to a destination-based state when it joined a multi-state sales tax compact a few decades ago. It is argued that the bill will ease sales tax compliance for Kansas businesses. The bill has not yet received a hearing.
Animal and Ag Facilities Protection
In 2021, the 10th Circuit U.S. Court of Appeals found unconstitutional parts of a law – often referred to as the “ag-gag law” – that was intended to keep undercover investigators off the property of animal facilities with the intent of exposing certain activities at the facility. Critics of the law said that it criminalized undercover investigations to expose conditions at animal facilities. The law, which had been on the books since the 1990s, was held to be an unconstitutional violation of the right to free speech. In an attempt to make the law comply with constitutional requirements, animal ag stakeholders introduced SB 389 to amend the law to apply to physical trespass or making a false statement on an employment application to gain entry. This week, the Senate Committee on Agriculture and Natural Resources held a hearing on the bill. There were a handful of proponents and one opponent – the Kansas Chapter of the Sierra Club.
Unemployment Insurance
House Bill 2570 would make comprehensive changes to the Kansas employment security law. The bill would define “benefit year”, “temporary unemployment” and other terms in the law. 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. This week, the House Commerce Committee passed the bill out favorably for passage.
Rules and Regulations
House Bill 2648 was introduced to revise the rules and regulations procedure for state agencies. The bill adds protections for industry by requiring an agency proposing new regulations which have an economic impact greater than $1 million over the first five years to introduce, and pass, a bill by the full legislature. If the agency fails to complete a proper economic impact statement, the director of the budget must reject the proposed regulation. The amendments are intended to provide protections for industry against burdensome, restrictive, and expensive regulations, or regulations which exceed legislative intent. This week, the House Commerce Committee held a hearing on the bill. There were no opponents, and the bill could receive final committee action early next week.
Remote Worker Grace Period
House Bill 2420 would allow a grace period for remote workers regarding paycheck withholding requirements. establish withholding requirements for certain employees who work in multiple states and determine employer penalties for not complying with these requirements. This 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. There is no economic impact to the state. This week, the House Tax Committee held a hearing on the bill. While there were no opponents to the bill, it may be difficult for tax bills to find traction this year due to disagreement on overarching tax relief legislation.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. This week, the Senate passed the bill favorably on a vote of 40-0.
Retailer Sales Tax Collection Tax Credit
SB 41 would create a sales and use tax remittance credit for retailers. The bill is intended to compensate retailers, in part, for their work in collecting and remitting sales taxes 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. The Senate Tax Committee passed the bill out favorably.
Third-Party Funded Litigation
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. Following a hearing in the House Judiciary Committee on January 31, no further action has been taken on the bill.
Defining Lead-Free Pipes and Amending Solid Waste Management Fund
Senate Bill 331 was introduced to remove an exception for leaded joints from public water supply system laws. The bill would also update terminology relating to hazardous waste generated by certain persons. The bill would also amend 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. The Senate passed the bill favorably on a vote of 34-0. The bill was sent to the House and referred to the House Committee on Agriculture. A companion bill, HB 2486 was introduced in the House.
House Water Committee Update
On Tuesday, the House Water Committee held hearings on House Bill 2696 and House Bill 2697, before taking final action on House Bill 2678.
House Bill 2696 would amend current law to allow a groundwater management district the opportunity to provide a “written comment,” rather than a “recommendation,” to the Chief Engineer in the Dept. of Agriculture for a proposed water conservation area and management plan. Proponents included the Kansas Livestock Association. The KDA Division of Water Resources joined GMD5 in appearing neutral on the bill. However, GMD2, GMD3, and Kansas Farm Bureau opposed the measure. According to Rep. Lindsay Vaughn, the purpose of the bill was to clarify the role and authority of the GMDs.
House Bill 2697 would amend current law to allow groundwater management district boards to provide “relevant information” rather than “advice and assistance” on the management of drainage problems, storage, groundwater recharge, surface water management, and all other appropriate matters of concern to the district. There were no proponents to the bill. Big Bend GMD5 appeared neutral on the bill, as did KDA Division of Water Resources and REAP. Opposing the measure were GMD2, GMD3, and Kansas Farm Bureau.
House Water Committee Agenda for Next Week
Tuesday, Feb. 20: The committee will hold a hearing on HB 2695 and may take final action on HB 2696 and 2697.
GMD District Voter Petition
House Bill 2695 was introduced in the House Water Committee by Rep. Lindsay Vaughn (D-Overland Park). The bill would amend current law pertaining to groundwater management districts to allow a majority of eligible voters in a current groundwater management district or a majority of eligible voters in an area for a proposed extension or reduction of a district to petition the Chief Engineer in the Dept. of Agriculture to extend or reduce the territory of any groundwater management district. Current law only allows the board of a groundwater management district to petition to the Chief Engineer. Additionally, if the eligible voters in the current or proposed district petition to the Chief Engineer, the bill would remove the requirement that a board pass a resolution. The House Water Committee will hold a hearing on the bill on Tuesday, Feb. 20 at 9:00 a.m.
LEMA Corrective Controls
HB 2634 would allow 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 would provide 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. During a hearing in the House Water Committee, the following appeared as proponents: Big Bend GMD5, GMD1, GMD4, Kansas Livestock Association, Kansas Farm Bureau, and Kansas Corn. On February 12, the Committee amended the bill with a technical amendment before passing it out favorably. The bill now moves to the full House for consideration.
Water Structure Licensing Fees
HB 2526 amending the Stream Obstruction Act. The legislation would install graduated agency inspections of dams, based on hazard level. The bill would also provide KDA authority to assess civil penalties for lack of action on non-compliance issues and allow KDA to assess registration fees and increase permit fees. The House Water Committee held a hearing on the bill on February 6, but no further action has been taken.
Private Pesticide Applicator Certification
Introduced by the Kansas Dept. of Agriculture (KDA), HB 2607 is a 20-page bill amending 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. The bill would, among other things, establish new training requirements and supervision requirements for pesticide applicators of restricted use pesticides, following changes to EPA pesticide regulations in 2017. As introduced, the bill would also have granted KDA civil and criminal penalty authority on commercial and private applicators, of up to $5,000 per violation, and each day a violation continues could be deemed a separate violation. The House Committee on Agriculture held a hearing on the bill. KDA representatives testified that if the bill were amended in any way, then the agency would need to resubmit the amended bill to EPA for review and approval. Failure to receive EPA’s ongoing approval of KDA’s proposed updates to the Kansas pesticide law could jeopardize the agency’s authority to regulate pesticide applications in the state. This week, the Committee amended the bill multiple times and then passed the bill out favorably as amended. One amendment reduced the agency’s maximum civil penalty authority under the act to $500 per violation with a maximum penalty for ongoing violations of $2,500. The bill now advances to the full House for consideration.
Other Bills of Interest
SB 349 establishing an intercity passenger rail service program and making transfers annually into the passenger rail service revolving fund
SB 376 extends the time period for single city port authority income tax credit. Hearing in Senate Tax
SB 459 disqualifying commercial vehicle driving privileges when person violates drug & alcohol clearinghouse requirements
SB 462 CDL with military experience
SB 468 prohibiting local govs that grant property tax exemptions from exceeding their revenue neutral rates for property tax
SB 470 allowing Wichita technical institute to participate in Kansas promise scholarship act
SB 474 eliminating the administrative ordinance restriction in the city initiative statute
SB 478 defining benefit year, temporary unemployment and other terms in the employment security law
SB 484 Providing property tax exemptions for off-road vehicles
SB 486 Changing fee charged by the department of commerce for applications for certain economic development programs
SB 514Making supplemental appropriations for fiscal years 2024 and 2025 and appropriations for fiscal years 2025 and 2026 for various state agencies
SB 516Exempting elevators owned by nonprofit organizations with a maintenance service contract for the elevator from the annual elevator safety act inspection
HB 2679 CDL with military experience
HB 2681 updating the definition of gross truck weight
HB 2682 disqualifying commercial vehicle driving privileges when person violates drug & alcohol clearinghouse requirements
HB 2684 authorizing cities to propose an earnings tax for ballot question
HB 2734 Imposing a five-year expiration on all improvement districts and community improvement districts if no improvements are carried out within the five-year period
HB 2767 Requiring entities subject to the administrative procedure act to confirm receipt of service of an order prior to the imposition of fines or penalties
HB 2768 Providing a property tax exemption for certain new electric generation facilities and sunsetting current property tax exemptions for such facilities
HB 2774 Creating the Kansas workforce pathway act
HB 2775 Changing application fee for economic development programs from a flat fee to a certain percentage of the total economic development incentive
HB 2776 workers compensation act
HB 2788 requiring cities, counties to report local eco devo program information to the secretary of commerce and posted on website
HB 2795 excluding the state mandated 20 mills levied by a school district from the revenue neutral rate
HB 2797 full transferability of tax credits for investments in certain qualified business facilities
HB 2800 enhanced state funding of conservation districts
HB 2802Making supplemental appropriations for fiscal years 2024 and 2025 and appropriations for fiscal years 2025 and 2026 for various state agencies
HCR 5017 constitutional amendment to grant counties home rule powers
HCR 5021 constitutional amendment to reduce ad valorem residential property assessment to 9%
HCR 5022 constitutional amendment classifying all-terrain vehicles for tax purposes
HCR 5024 constitutional amendment reserving the power of initiative to the people of Kansas