12 May 2021 Kansas Capitol Review – Veto Session
Legislative Veto Session Report
The legislature met for additional legislative action last week during a time referred to as the Veto Session – historically meant to provide the legislature with a brief period to consider bills vetoed by the Governor. During this final week of action, lawmakers voted to override multiple vetoes of bills by Governor Laura Kelly. The legislature worked late into the evening on Friday, May 7, with the House adjourning at 1:40 a.m. on Saturday morning and the Senate adjourning at 2:15 a.m. The legislature passed a handful of new bills, including two multi-million-dollar COVID-response measures that could provide grants and property tax refunds to small businesses that were negatively impacted by state and local government shutdown orders. In addition, the legislature passed an education funding budget for fiscal years 2021 through 2023, and an omnibus budget for fiscal years 2021 through 2023. The legislature will return on May 26 for one final day of session known as sine die.
Legislature Overrides Governor’s Veto of Global Intangible Low-Taxed Income Measure
After multiple attempts to pass similar legislation in previous years, Senate Bill 50 will now become law. This bill provides corporate income tax modifications for global intangible low-taxed income, business interest, and capital contributions. The GILTI provision in Senate Bill 50 makes 100% of GILTI deductible (exempt) beginning in tax year 2021. The bill also contains provisions allowing net operating losses to be carried forward indefinitely, and extends the corporate income tax filing deadline. Following a veto of this bill by Governor Kelly, the legislature brought the measure up this week for an override vote. The House passed the veto override 84-39, and the Senate passed the veto override 30-10.
Legislature Passes COVID-19 Small Business Relief Act
Late on Friday, May 7, the legislature passed Senate Bill 273 creating the COVID-19 Small Business Relief Act. This bill allows certain for-profit Kansas businesses, with 50 or fewer employees, which sustained financial losses due to the pandemic, to apply for reimbursement from a COVID-19 small business relief fund that is financed by federal pandemic funds to Kansas. The bill creates a three-member panel that will have authority to receive, and review, claims for reimbursement from businesses that suffered loss during the pandemic due to restrictions on the business caused by state or local pandemic orders. Money received from the fund can be used for employee pay, salary, compensation or benefits. The state Legislative Coordinating Council will make final decisions on who receives reimbursement from the fund, and how much. The bill now goes to the Governor for consideration.
Retail Store Front Property Tax Relief Act Sent to Governor
On Friday, May 7, the legislature passed S Sub for HB 2313 on a veto-proof vote. Beginning January 1, 2022, this bill would create a COVID-19 Retail Storefront Property Tax Relief Act to provide businesses access to partial property tax refunds if their business is constrained by either a state or local government emergency order. The bill, which is prospective only, would provide for reimbursements from the county general fund to the owner of any building maintaining a business on the property that is shut down or limited in any capacity pursuant to a declared disaster emergency. The reimbursement would be 1/365 of the amount of taxes levied for every day the business is shut down and 1/365 the amount of taxes levied multiplied by the percentage restricted for every day the business is required to restrict operations. “Restricted” would mean any occupancy limitation, limitation on periods of operation, or the exertion by any governmental entity or other significant control on business resources or functionality. If the State or a city, issues an order shutting down or restricting the business, such governmental entity would be required to reimburse the county for the cost of the reimbursement. The measure was passed on a vote of 108-3 in the House, and 35-0 in the Senate. The bill now goes to the Governor for consideration.
Governor Signs Unemployment Insurance Bill
On April 26, Governor Kelly signed into law Senate Sub for HB 2196. This bill creates the Unemployment Compensation Modernization and Improvement Council to recommend changes to the unemployment insurance system. The bill also requires the Kansas Department of Labor to modernize its information technology (IT) infrastructure, make changes to the Employment Security Review Board, and alter the employment security rate tables. In addition, the bill provides for certain employer account protections, adjusts thresholds for maximum benefits, and makes other employment security compensation changes. The bill also ensures that employers are held harmless for any fraudulent unemployment claims filed in the business’ name. Employers who have paid for these claims since March 15, 2020, are to be refunded through the unemployment insurance trust fund. The bill will reimburse the unemployment insurance trust fund up to $500 million from federal funds. Find more information Here.
Emergency Temporary Employee Withholding Provision Passed by Legislature
On Wednesday, May 5, the Kansas Senate passed, on a vote of 40-0, the Conference Committee report (CCR) on Senate Bill 47. Among other things, the bill includes a provision on income tax withholding and provides that, for calendar years 2021 and 2022, for wages paid to employees temporarily teleworking in a state other than their primary work location, employers have the option to withhold income taxes based on the state of each employee’s primary work location instead of the state in which the employee is teleworking. Previously, on April 1, 2021, Governor Kelly had issued Executive Order 21-18 providing temporary provisions for employer payment of income tax withholding for work performed in another state. The bill now goes to the Governor for consideration.
Legislature Passes Short Line Tax Credit Extension
On Wednesday, May 5, the legislature passed Senate Bill 47, a bill which extends, for three years, an income tax credit for a Single City Port Authority in Southeast and Southcentral Kansas. The tax incentive assists the short line rail to maintain track that services grain and agribusiness facilities. The bill was introduced at the request of Watco Railroad, and was supported by Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Kansas Cooperative Council. In addition, the bill extends the corporate income tax filing deadline; and extends, to 2023, the Rural Opportunity Zone economic development program and expands the program to all counties with under 40,000 residents (all but 10 counties). The bill now goes to the Governor for consideration.
Governor Signs Bill Creating New Kansas Promise Scholarship
On April 23, Governor Kelly signed into law House Bill 2064, which creates the Kansas Promise Scholarship Act. Administered by the Board of Regents, the act creates a new scholarship for students attending any Kansas community college, technical college, or two-year associate degree program or career and technical education program offered by a private postsecondary educational institution with its primary location in Kansas. The scholarship would be eligible for students pursing certain fields of study, including manufacturing, construction and others.
Business Liability Exemption for Work-Based Learning Programs
After passage by the House, the Senate teed up a conference committee on SB 91, a bill exempting businesses from certain liability claims from a secondary student engaged in a work-based learning program at the business or work site. The bill would allow school districts to purchase insurance contracts to insure against liability claims and increase school districts’ exposure to liability for students participating in work-based learning programs. The bill was supported by multiple business interests, including: Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, Renew Kansas Biofuels Association, Kansas Cooperative Council, and the Kansas Chamber. Although the bill did not receive final passage this year, it will be primed for final action in 2022.
Proposed Air Emissions Fee Increase
In recent years, the Kansas Department of Health and Environment (KDHE) has looked at increasing the emissions fees to supplement a decrease in Air Quality Fee Fund revenues. Last year, the legislature included a budget proviso which restricted KDHE from raising fees and encouraged it to hold stakeholder meetings to find a compromise. This year, the department brought the proposal forward again, which includes a more than $1 million increase in industry fees. Class 1 and Class 2 emitters continue to work with KDHE and legislative leadership to pursue an agreed fee increase that would likely begin in 2025. Any proposal offered will maintain the integrity of the state program while minimizing the financial impact on industry.
Other Bills of Note:
Sub for SB158 legalizing medical marijuana. Passed the House. Will be carried over to 2022.
SB 279 concerning wind turbine set-back requirements. In Senate Utilities Committee. Will be carried over to 2022.
HB 2087 concerning regulations review by the state budget director. Amended by the Senate with $1 M review threshold. Will be carried over to 2022.
HB 2272 requiring the escrow of certain property taxes paid under protest. Below the line in the House. Will be carried over to 2022.