14 Feb 2021 Kansas Capitol Review – Week Five
Week Five of the Kansas Legislative Session
Scores of new bills were introduced again this week on a wide range of issues as the Kansas Legislature approached the February 12 deadline for non-exempt committee bill introductions. This week also brought further committee hearings on bills relating to the state unemployment insurance trust fund. Numerous hearings have already been scheduled for the coming week which may be shortened due to pending winter weather.
Kansas Economic Recovery Bill Sent to Governor
This week, the House passed Senate Bill 15 on a vote of 122-1. This bill creates a new Economic Recovery Linked Deposit Loan Program for businesses in response to the economic downturn caused by the COVID-19 pandemic. This 10-year program, administered by the State Treasurer, would allow up to $60 million available for low-interest businesses loans (2 percent below market rate). The loans would be capped at $250,000. The bill had passed the Senate on a vote of 39-0. Renew Kansas Biofuels Association joined other industry stakeholders in supporting the bill. The bill will now be sent to Governor Kelly for consideration.
Industrial Hemp Restrictions
The House Committee on Agriculture held a hearing on House Bill 2244, a bill concerning the Commercial Industrial Hemp Act. The bill would transfer the responsibilities for registration and regulation of industrial hemp processors to the State Fire Marshal (currently assigned to the Kansas Department of Agriculture (KDA)). The Fire Marshal would be required to maintain a registry of all hemp producers in the state, with registration annual fees not to exceed $1,000. Disposal of industrial hemp would remain the responsibility of the KDA.
Underground Petroleum Storage Tank Funds
On Thursday, February 11, the House Committee on Agriculture held a hearing on Senate Bill 27, a bill extending the sunset on the state’s underground petroleum storage tank (UST) fund and redevelopment fund. These funds, which are managed by the Kansas Dept. of Health and Environment, can be utilized by fuel retailers when replacing single-walled fuel storage tanks with double-walled tanks, and when remediating petroleum from soil. The bill extends the life of the funds, and increases the maximum fund reimbursement. Kansas Grain and Feed Association offered testimony in support of the measure. The Senate had passed the bill favorably on a vote of 39-0.
Unemployment Insurance Trust Fund Hearings Continued
This week brought additional hearings on the unemployment insurance fraud issue through House Bill 2195 and House Bill 2196. House Bill 2195 which would hold Kansas employers harmless for fraudulent unemployment claims, and provide for reimbursement of the Unemployment Insurance Trust Fund with money from the State General Fund (SGF). The actual amount to be transferred from SGF would be determined following the certification of all fraudulent claims, but could be as high as $500 million. Hearings were also continued on House Bill 2196. Along with the provisions in HB 2195, this bill allows for the creation of an Unemployment Compensation Modernization and Improvement Council. Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association and Renew Kansas Biofuels Association provided testimony in support of both bills.
Next week, the Senate Commerce Committee has scheduled three days of hearings for Senate Bill 177. This bill would amend the employment security law by, inter alia: creating an unemployment compensation modernization and improvement council; developing a new unemployment insurance information technology system; providing tax information to claimants; requiring publication of trust fund data; transferring money from the state general fund to the unemployment insurance trust fund to cover fraudulent benefit payments; and amending the shared work compensation program and other unemployment trust fund provisions.
Federal Decoupling of Corporate Taxation, Bill Advanced
On Tuesday, the Senate debated into the evening, heavily amended, and then passed, Senate Bill 22 on a vote of 24-15. The bill, which had been heavily amended by the Senate Committee on Taxation, would exempt certain types of foreign corporate income from taxation (repatriated income and global intangible low tax income/GILTI) that is now taxable at the state level following passage of the federal tax cuts and jobs act of 2017. The various amendments to the bill on the Senate floor can be found Here. As passed by the full Senate, the bill would decouple from federal income tax deductions, allowing Kansans who do not itemize on their federal income taxes to itemize on their state returns. It also cleans up fraudulent unemployment compensation reports and will allow some non-state pension benefits to be income tax-exempt. In its current form, the bill is essentially just a vehicle for the House and Senate to discuss further in conference committee. While an official fiscal note on the amended bill was not available by Friday, it was announced during Senate floor debate that an estimated revised fiscal note on the bill was $634 million in the first year, and more than $1 billon over first three years.
The Senate Tax Committee had removed a provision that would have allowed businesses to seek refunds for taxes they paid in previous years. As it left the Senate Tax Committee, the bill would also:
- Exempts global intangible low-taxed income starting in 2021. However, businesses would not be able to capture money from the GILTI tax going back in time. Under the original bill, in the two years before 2020, global intangible low-taxed income would have been treated as a foreign dividend and only 20 percent of the income would have been taxed. The committee removed that provision, reducing the cost to the state by around $57 million in 2022.
The committee removed a section that would have allowed taxpayers to carry back their net operating losses as provided by tax code changes made by the CARES Act. Under the original bill, a net operating loss from tax years beginning in 2018, 2019 or 2020 could have been carried back five years and carried forward indefinitely. The carryback element of the bill would have cost the state about $100 million in the first year, and $20 million in each of the following two years.
Electric Utility Rate Relief
Kansas has the highest utility rates in our region. This important issue resulted in the Legislature commissioning a study in 2019 to determine the reasons for these high electric rates and ways in which they might be lowered. Last year, legislation was successfully passed which removed the income tax assessment on certain public utilities, and required the savings to the utilities to be passed on to rate payers. This measure was estimated to save Kansas residential and industrial rate payers over $40 million annually. This week, the Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association, joined other stakeholders in supporting the following legislation to address high utility rates:
- Senate Bill 80and House Bill 2180, requiring energy companies to have any transmission delivery rate changes approved through the Kansas Corporation Commission (KCC),and
- Senate Bill 81and House Bill 2181, requiring the KCC to provide the legislature with an annual report covering electric public utility rates across the region.
High Performance Incentive Program
This week, the Senate Commerce Committee passed Senate Bill 65 out favorably for passage. Amending the High Performance Incentive Program (HPIP) economic development program, the bill would decouple certain workforce training requirements from the program. Under current law, taxpayers that claim the HPIP investment tax credit are required to participate in either the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) programs. The bill would decouple the tax credit from participating in those programs. Removing the training requirement from HPIP will provide more flexibility in using the training programs, and will likely increase the number of companies that qualify for the HPIP tax credit.
Proposed Constitutional Amendment Granting Counties Power of Home Rule
On Tuesday, February 16, the Senate Local Government Committee will hold a hearing on SCR 1606, which would allow for the amendment of Article 9 of the Kansas Constitution to provide a constitutional basis for county home rule. A county could enact a charter resolution to exempt itself from non-uniform state laws that apply to the county and provide substitute or additional provisions to that law. The legislature could preempt counties from exercising home rule powers by the passage of uniform state laws that apply to all counties in the exact same manner. Counties could pass home rule resolutions to legislate locally on matters not covered by state law.
Corporate Income Tax Apportionment Bill To Be Heard
On Tuesday, February 16, the House Committee on Taxation will hold a hearing on House Bill 2186, a bill which would allow corporate taxpayers the option to elect how to apportion their corporate income tax liability between Kansas and other states in which it operates. Kansas currently uses a three-factor system for apportioning income between states for corporate income tax purposes. The proposed legislation would allow certain taxpayers, based on NAICS codes, to elect to use a single-factor apportionment formula based on sales to determine corporate income tax liability. The fiscal note on this bill is estimated to be $20 million annually. The following NAICS codes will be included in an amendment to the bill: 541690, Other Scientific and Technical Consulting Services (biofuel facilities), and 112210, hog farming / certain agricultural activities. Testimony on House Bill 2186 can be emailed to House Tax Committee Assistant Lea Gerard, at: Lea.Gerard@House.ks.gov.
Property Tax Measure Advances
This week, the House Tax Committee amended, and then passed out favorably, Senate Bill 13. This bill would repeal the existing property tax lid which requires a vote of the public to increase property taxes above a certain threshold. The bill would also require notice and public hearings in order for any taxing authority to increase taxes above their revenue neutral rate. Other provisions in the bill would prohibit valuation increases due to normal maintenance, and allow the collection of partial payments or establishing payment plans for property taxes. The Senate passed the bill on a vote of 34-1.
Hazardous Chemical Spill Notification Bill
On Wednesday, the House Agriculture Committee passed House Bill 2155 out favorably without amendment. The bill would authorize the Kansas Dept. Health and Environment (KDHE) to establish reportable minimum quantities of hazardous chemical spills in agency regulations. Currently, all spills of hazardous chemicals must be reported to KDHE, regardless of the amount. This bill would also allow the agency to provide technical guidance during a clean-up response, and permit cost-recovery from the responsible party for any state expenses related to a response to a release. In addition, the bill would allow KDHE to levy penalties for illegal dumping, refusal by a responsible party to clean up a release, or failure to timely report a release. KDHE has indicated that it intends to establish minimum thresholds in agency regulations that are consistent with federal requirements (EPA’s list of lists). Renew Kansas Biofuels Association, Kansas Agribusiness Retailers Association, and Kansas Grain and Feed Association, testified in support of the bill. In previous years, those associations worked with KDHE and other stakeholders to amend the bill language to limit the total civil penalty authority and limit the effect on agriculture chemicals.
Pesticide Waste Disposal Bills Pass Both Chambers
This week, the House passed House Bill 2103 favorably on a unanimous vote. This bill would establish the Kansas Pesticide Waste Disposal Program, permitting up to $50,000 to be transferred annually from the existing Kansas Agriculture Remediation fund. Through this program, persons could apply to the Kansas Dept. of Agriculture (KDA) for assistance in covering the costs of appropriately disposing of pesticide waste products. The Senate has passed a companion bill Senate Bill 38, with a minor amendment. The bills will now go to conference committee.
Kansas Agricultural Loan Guarantee Program
On Wednesday, February 17, the House Committee on Financial Institutions and Rural Development will hold a hearing on House Bill 2282, a bill enacting a Kansas agricultural loan guarantee program. The bill would allow the state treasurer to enter into agreements with eligible applicants to guarantee agricultural loans up to 80% of the value of the loan. The bill would also create a committee to review and approve applications for agricultural loan guarantees.
Local Government Consolidation
On Tuesday, February 9 , the Senate Local Government Committee held a hearing on Senate Bill 118, a bill which would help local units of government consolidate more easily by establishing a procedure for cities or counties to assume the powers, responsibilities, and duties of any special district located within a city’s corporate limits or a county’s boundaries and would provide for the dissolution of the special district. Special districts would include airport authorities, cemetery districts, draining districts, fire districts, port authorities, and similar taxing authorities. Enactment of the bill could result in efficiencies and consolidation of services, which may decrease expenditures for local units of government. Proponents to the bill included the Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, Renew Kansas Biofuels Association, League of Kansas Municipalities, and the Kansas Chamber. The committee passed the bill out favorably and placed it on the Senate Consent Calendar. The House Committee on Local Government previously held a hearing on companion bill HB 2177.
Property Tax Relief Following COVID Related Shutdowns
On Tuesday, the House Tax Committee held a hearing on HB 2142, a bill which would allow owners of any commercial real property to apply to the county commission for reimbursement of property taxes if their business was shut down or capacity was limited by the county government. The county treasurer would be required to reimburse all property owners that file a valid application from the county general fund. If the business was shut down they would be reimbursed 1/12 of their total property taxes for each month they were shut down. The reimbursement would be 1/12 of the total taxes multiplied by the percentage of the capacity limitation and then multiplied by the number of months of the limitation. The bill would apply to tax year 2020 and future tax years. The bill requires that the county government reimburse all property taxes from the county general fund, including the taxes collected on behalf of other taxing authorities. The Department of Revenue does not have data to determine the number of businesses that were affected, or the assessed valuation of those properties. Proponents included the Kansas Chamber and various restaurants. The bill was opposed by the Kansas Association of Counties.
Multi-Year Flex Account Water Legislation
On Wednesday, the House Water Committee amended House Bill 2172 and then passed it out favorably. The bill would amend existing law concerning multi-year flex accounts and the ability for those who did not have a perfected water right by 2009 to utilize these accounts. The bill would also allow for water right owners to apply net irrigation requirements as a substitute for past use in order to establish flex account totals. Committee amendments to the bill can be found Here.
Other Bills of Interest:
- SB 67: amends definitions of all terrain and off highway vehicles from 50” to 55”. Advanced favorably from Senate Transportation Committee and placed on consent calendar
- HB 2105: new withholding requirements for multi-state employees. Final Action in House Taxation Committee on Monday, 2/15
- HB 2242: increasing the amount the state fire marshal may levy on fire insurance premiums caused by fire. Hearing in House Insurance and Pensions, Wednesday, 2/17
- HB 2239: providing an extension of the net operating loss carryforward for corporations. Hearing in House Taxation Committee, Wednesday, 2/17
- HCR 5007: constitutional amendment concerning initiative and referendum, introduced, referred to House Committee on Elections
- SCR 1605: constitutional amendment concerning initiative and referendum, introduced, referred to Senate Judiciary Committee
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