25 May 2022 Kansas Statehouse Insider – Sine Die Adjournment
2022 Legislative Session, Sine Die
The 2022 Kansas Legislature returned on Monday, May 23 for Sine Die – the final day of session. The House and Senate continued work on a few bills and took action on a few bills attempting to override Governor Laura Kelly’s veto. The most anticipated issue of the day, however, was set aside following a ruling last week by the Kansas Supreme Court upholding the Legislature’s new map of Kansas’ four Congressional districts. The legislature finished its work for the year early on Monday afternoon.
Please find, below, a summary of the legislative activity from this week.
Corporate Income Tax Apportionment
Kansas currently uses a three-factor system for apportioning income between states for corporate income tax purposes. House Bill 2186 would allow corporate taxpayers the option to elect which methodology to use when apportioning their corporate income between Kansas and other states in which it operates. The 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 House Tax Committee amended the bill to add NAICS codes 541690 and 112210. The Legislature but did not consider this bill for further action this year.
Senate Bill 546 would allow for the use and regulation of autonomous (driverless) motor vehicles in Kansas. Walmart and an autonomous vehicle developer testified in support of the bill which would allow self-driving vehicles to traverse fixed business-to-business routes. The bill would also preempt cities or counties from prohibiting the vehicles. Forty-four states have created a framework for regulating autonomous vehicles, but Kansas, Missouri and Oklahoma are among six states without such laws. The bill would create a statewide policy for the regulation of autonomous vehicles and would restrict use of automated vehicles to movement between fixed points along repeatable routes. During the veto session, a Transportation Conference Committee placed contents of SB 546 into Conference Committee Report on SB 313. The conference committee report was passed by the House and Senate before being signed into law by Governor Kelly.
House Concurrent Resolution 5014 proposes an amendment to the Kansas Constitution that would increase legislative oversight of agency regulations. Having been approved by two-thirds of the legislature, the amendment will now go before Kansas voters as a ballot question during the November 2022 election. In addition, House Bill 2087 amends current law by requiring the state budget director to review any proposed agency regulation with an economic impact of $1 million or more over a two-year period. The legislature amended the bill to include the original contents of Senate Bill 34, a requiring each state agency to review its regulations at least once every five years to determine if they are still necessary. The bill also allows for a 15-day quick repeal process for outdated regulations. The bill was passed by both chambers and signed into law by Governor Kelly.
Income and Sales Tax Bundle Bills
During the Veto Session, the Legislature passed CCR on House Bill 2136, a multi-part tax bill that eliminates the requirement for retailers to remit an accelerated sales tax payment to the state; creates a sales tax exemption on separately stated delivery charges beginning July of 2023; and includes a $56 million fund for rebates of property taxes levied against small businesses which were ordered closed as “non-essential” during the COVID-19 pandemic response (a maximum of $5,000 rebate per storefront). The measure now goes to Governor Kelly for consideration.
Sales Tax Cut on Food
CCR on House Bill 2106 will phase out the state’s 6.5% sales tax on groceries by cutting the tax to 4% on Jan. 1, 2023, 2% on 2024, and 0% on 2025. The cost of the tax cut to the state – estimated at $250 million in 2024, and $400 million in 2025 and each year thereafter – would be paid for by increases in internet sales tax remitted to the state. The tax cut does not apply to most prepared foods at restaurants or grocery stores. The bill overwhelmingly passed the House and the Senate before being signed into law by Governor Laura Kelly.
Credit and Debit Card Surcharge Fees
Kansas law prohibits the seller or lessor in any sales or lease transaction or any credit or debit card issuer from imposing a surcharge on a card holder who elects to use a credit or debit card in lieu of payment by cash, check or similar means. A surcharge is defined as any additional amount imposed at the time of the sales or lease transaction by the merchant, seller or lessor that increases the charge to the buyer or lessee for the privilege of using a credit or debit card. House Bill 2316 was introduced to eliminate this prohibition and allow the imposition of a surcharge. The Senate Tax Committee placed the contents of HB 2316 into Sub SB 462. During the veto session, the Tax Conference Committee placed the contents of SB 462 into Conference Committee Report on Senate Bill 331. The House passed CCR SB 331, but the Senate did not take the bill up for action.
Motor Carrier Independent Contractor Status
Senate Bill 494 would prohibit altering the employment status of a driver of a motor carrier (as an independent motor carrier) for requiring safety improvements on a vehicle. The bill did not receive further action during the veto session.
Career Technical Education Credential and Transition Pilot Program
House Bill 2631 would enact the Career Technical Education (CTE) Credential and Transition Incentive (CTI) pilot program. The bill would provide a new category of state aid to school districts for students obtaining a CTE credential. In addition, a school district that offers CTE and has students that obtain a CTE credential would receive state aid payments subject to the availability of appropriations. During the veto session, an Education Conference Committee placed contents of HB 2631 into Conference Committee Report on Sub HB 2466. The conference committee report was passed by the House and Senate before being signed into law by Governor Kelly.
Workforce Development Scholarship
Last year, Governor Kelly signed into law a workforce development bill creating the Kansas Promise Scholarship Act which provides educational scholarships to students attending a Kansas community college, technical college, or two-year associate degree program or career and technical education programs. The scholarship would be eligible for students pursing certain fields of study, including manufacturing, construction, and others. This year, Senate Bill 340 was introduced to authorize additional programs and fields of study. During the veto session, an Education Conference Committee placed contents of SB 340 into Conference Committee Report on S Sub for HB 2567. The conference committee report was passed by the House and Senate before being signed into law by Governor Kelly.
Rural Housing Incentive and Child Care Tax Credit
Conference Committee Report on HB 2237 includes multipleeconomic development provisions. It would enact the Kansas Housing Investor Tax Credit, and the Kansas Affordable Housing Tax Credit, to incentive rural and urban housing construction. The bill would also enact the Kansas Rural Home Loan Guarantee Act. In addition, the bill would authorize appraisers to exclude the sales comparison approach in rural county mortgage financing appraisals if the property is unique in style or square footage and if there exists a lack of available comparable sales. The bill also creates an income tax credit for child day care services. The conference committee report was passed by the House and Senate before being signed into law by Governor Kelly.
State Level Preemption of Plastic Regulation
Senate Bill 493 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. After receiving a veto by Governor Kelly, the Senate overrode the veto on a vote 27-12. However, the House did not take action to override, and the veto was sustained.
Factions within the Legislature are eager to see recreational and medicinal use of marijuana be legalized in the state and various bills were introduced this year for that purpose. Marijuana is now a Schedule 1 Controlled Substance under federal law, which makes illegal the interstate transportation of most forms of medical marijuana. The Senate Federal and State Affairs Committee deliberated on SB 560, a bill regulating medical marijuana, and on House Sub for SB 158, a bill that would have created the Kansas Medical Marijuana Regulation Act. During the veto session, a Federal and State Affairs Conference Committee worked to combine provision of the two bills. However, the Legislature did not take this legislation up for action this year.
Government Response to COVID Pandemic
CCR on Senate Bill 286 would amend and extend the expiration dates and effectiveness of provisions regarding the governmental response to the COVID-19 pandemic; amend certain healthcare provider immunity provisions related to the COVID-19 public health emergency; create the crime of interference with the conduct of a hospital; and increase the penalty for the crime of battery when committed against a healthcare provider. After receiving a veto by Governor Kelly, the Senate did not take override action and the veto was sustained.
Multi-Part Public Health Bill Addressing KEMA Powers, COVID Testing, COVID passports, Face Mask and Quarantine Orders
Late in the evening on Thursday, the Legislature passed Conference Committee Report on Sub SB 34, which includes provisions from Senate Bill 541 and Senate Bill 489. The new bill would create law regarding actions by governmental entities or public officials affecting face mask requirements as a response to a contagious or infectious disease and would prohibit a COVID-19 vaccination passport be required. The bill would amend the Kansas Emergency Management Act (KEMA) and public health statutes regarding face mask requirements and judicial review of governmental action in response to state of disaster emergencies and state of local disaster emergencies. The bill would remove the authority of the Secretary of Health and Environment (Secretary) or a local health officer to order any law enforcement officer of the state or any subdivision to assist in the execution or enforcement of any order regarding infectious and contagious diseases. The bill would also amend student health statutes regarding certification of tests or inoculations for first-time enrollment in a school or preschool or day care program operated by a school to specify the tests or inoculations the Secretary would be prohibited from requiring. The measure had passed narrowly the Senate on a vote of 23-17 and the House on a vote of 64-53. After receiving a veto by Governor Kelly, the Senate did not take override action and the veto was sustained.
Multi-Provision Tax Bill
CCR on House Bill 2239 contains myriad provisions concerning income taxes, property taxes, and sales taxes, and was the only bill to be passed by the legislature during the regular session. The bill, which was signed into law by Governor Kelly, contains inter alia the following:
- Short Line Railroad Investment Tax Credit. This provision provides a transferable income tax credit for qualified railroad track maintenance expenditures of short line railroads and associated rail siding owners or lessees. Short line rail investments would qualify for a tax credit of $5,000 per mile of rail, up to 50 percent of the railroad’s annual total income tax bill. Rail siding would qualify for $5,000 per rail project. The tax credit exists from 2022 through 2031.
- Sales Tax Exemption for Delivery Services. This provision excludes separately stated delivery charges from sales and compensating use tax.
- Rural Opportunity Zones (ROZ) Program. This provision extends the sunset on the ROZ student loan repayment program to July 1, 2026, and extends the sunset on the income tax credit to January 1, 2027.
- Property Tax Abatement for Disaster-Destroyed Property. This provision grants county commissions the authority to abate property taxes for all buildings and agricultural improvements listed as real property in situations where such property has been damaged in a gubernatorial-declared disaster, and restoration costs would equal or exceed 50 percent of the pre-damage market value. The bill would be retroactive to tax year 2019, and applications would be permitted until December 20, 2022, for natural disasters occurring in 2019 or 2020.
- Salt (State And Local Tax) Parity Act. This provision allows a S corporation or partnership to annually elect to be subject to income tax at the entity level for the taxable period beginning in tax year 2022. The S corporation or partnership would make the election on the return filed by the S corporation or partnership. The filing of the return would be binding on all electing passthrough entity owners. Find more information Here.
- Research and Development Income Tax Credit. This provision establishes a research and development tax credit from 6.5 percent to 10.0 percent for LLCs and small businesses. Currently, Kansas law provides this tax credit for corporations only, and has a one-time, non-refundable transferability.
- Agricultural Fencing Sales Tax Exemption. This provision allows for a sales tax exemption for purchases to reconstruct, repair or replace fencing used to enclose agricultural land that was damaged or destroyed by wildfire or other natural disaster occurring on or after January 1, 2021. To be eligible for the exemption, the property containing the fence would be required to be located within an area declared to be a disaster by the federal, state, or local government and the purchases would be required to be made within two years of the date of the applicable disaster declaration. For applicable purchases already made, taxpayers would be entitled to a refund of sales tax upon provision of appropriate documentation. In addition, beginning July 1, 2022, the bill exempts from sales tax all sales of tangible personal property and services necessary to construct, reconstruct, repair, or replace any fence used to enclose agricultural land.
Elevator Safety Act
Senate Bill 181 creates the Elevator Safety Act – establishing a new state level regulatory scheme for all elevators, man-lifts, and conveyance systems. The bill grants state inspectors the authority to adopt regulations over the elevator inspection industry and prohibits any inspection of elevators and conveyance equipment unless by a state-licensed company. The bill was amended to specifically exempt grain elevators, feed mills, and biofuel facilities from the act. In addition, elevator inspection companies that are currently certified in another state would not be regulated by the act. Kansas Grain and Feed Association and Renew Kansas Biofuels Association testified neutral on the bill so long as those industries were exempt. Contents of the bill were placed into Conference Committee Report on House Bill 2005. The bill was passed by both chambers and signed into law by Governor Kelly.
Unlawful Legal Solicitation
Senate Bill 150 defines and prohibits certain deceptive lawsuit advertising practices and restrict the use or disclosure of protected health information to solicit individuals for legal services. The bill, supported by business and industry, was signed into law by Governor Kelly.
Retailer Tax Credit for Collection of State Sales Tax
Senate Bill 463 would allow retailers to retain 1.5 percent of the retail sales and compensating use tax that they collect each month up to $300. Any retailer that files a consolidated return for reporting retail sales and compensating use tax prior to January 1, 2022, would be subject to the $300 per retailer limitation. The bill would decrease sales tax revenue to the state by an estimated $50 million in fiscal year 2023. The Senate Tax Committee passed the bill out favorably, but the bill did not advance further this year.
KDA Agency Fees
House Bill 2560 authorizes the KS Dept. of Agriculture to extend current fees on agribusiness without increasing those fees. The bill also extends, to 2030, the existing water right transition assistance program (WTAP) administered by the agency. The agribusiness industry testified neutral on the bill and explained that fees on agribusiness are currently higher than most neighboring states and the associations would oppose any attempt to increase the fees. The bill was signed into law by Governor Kelly.
House Bill 2703 modifies the My Reemployment Plan Program and, with certain exceptions, make use of the program mandatory for those receiving unemployment insurance benefits. The bill also lowers credit rate schedules for payments made by employers into the Employment Security Fund, which will potentially save employers millions of dollars in payments to the fund. Both chambers passed Conference Committee Report on HB 2703 and the bill was signed into law by Governor Kelly.
Bill Opposing Sanctuary Cities
House Bill 2717 prohibits any Kansas municipality from preventing the enforcement of federal immigration laws, requiring municipal law enforcement agencies to provide written notice to each law enforcement officer of the officer’s duty to cooperate with state and federal agencies in the enforcement of immigration laws and requiring any municipal identification card to state on its face that it is not valid for state identification. The bill was signed into law by Governor Kelly.
Student Work-Based Learning Program Liability
House Sub for SB 91 was introduced with the purpose of providing businesses with immunity from general liability for participating in work-based learning programs with students. Under the bill, schools will be able to insure against this liability in the same way that they insure students during field trips and sporting events. This reasonable legislation is beneficial for businesses as they seek to increase the Kansas workforce. Both chambers passed Conference Committee Report on SB 91 and the bill was signed into law by Governor Kelly.