12 Mar 2022 Kansas Statehouse Insider – Week 09
2022 Legislative Session, Week 9
A snow front on Thursday caused abbreviated work in the Kansas Legislature this week. One major action item was the release of newly proposed state Senate district maps which would pair multiple incumbent Senators against each other in the coming 2024 elections. The Democrats’ proposed Eisenhower Senate map plan creates only one incumbent v. incumbent battle in the 2024 elections, while the Republicans’ Liberty 2 map creates two, and the Kansas League of Women Voters’ BluestemSenate creates three such scraps.
Also, this week, on a vote of 32-5, the Senate confirmed Janet Stanek as the Governor’s nominee for Secretary of the Kansas Department of Health and Environment. In addition, both chambers continue to debate and pass mostly noncontroversial bills, leaving debate on the major issues still to come in the remaining couple weeks of the session – including various tax cut bills, redistricting of legislative districts, and passage of the 2023 state agency budget.
Short Line Railroad Investment Tax Credit
Senate Bill 326 would provide an 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% of the railroad’s annual total income tax bill. Rail siding would qualify for $5,000 per rail project. The bill was amended to limit the transferability of the tax credit to any eligible customer or vendor of the railroad. The tax credit would exist from 2022 through 2031, and the total value of the program could not exceed $8.7 million in any given year. Having passed the Senate on a vote of 29-7, the bill is now scheduled for hearing in the House Tax Committee on Wednesday, March 16.
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. Having passed out of the Senate Transportation Committee, the bill is scheduled for debate on the Senate floor on Monday, March 14.
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. This week, the House Tax Committee amended the bill to add NAICS codes for additional businesses and industries as requested by the Kansas Chamber of Commerce, to include 541690 and 112210. Having gone through the exempt Committee on Taxation, the bill remains alive and has been placed on the House calendar for consideration. The House is holding off acting on tax bills.
Introduced and referred to the Senate Commerce Committee, Senate Bill 361 would eliminate the $155,000 cap on permanent total disability in Kansas’ Workers Compensation Act. The bill would allow an injured worker who is determined to be permanently totally disabled to receive weekly benefits at the rate of the employee’s average weekly wage in effect on the date of the injury for which compensation is being made, starting from the date of maximum medical improvement and continuing for life, or the duration of the disability. A hearing on the bill was held on Tuesday, March 8.
New Water Legislation
Two new bills have been introduced concerning water and groundwater management districts. The bills are scheduled for hearing in the Senate Committee on Agriculture and Natural Resources on Monday, March 14. The first bill, Senate Bill 548, would prohibit groundwater management districts from providing advice and assistance for matters relating to water rights, which Kansas law currently allows for the management of drainage problems, storage, groundwater recharge, surface water management, and all other appropriate matters of concern to the district. SB 548 would also stipulate that recommendations for groundwater must be specifically for irrigation within the district. The second bill, Senate Bill 549, would allow a holder of a water right dedicated to a use other than irrigation to withdraw from a groundwater management district if the point of diversion is located within such district and the authorized place of use is located wholly or partially within such district. These bills are thought to be targeted at groundwater management district number 2 in Southcentral Kansas.
House Concurrent Resolution 5014 would propose a constitutional amendment to increase legislative oversight of agency regulations. If approved by two-thirds of the legislature, the amendment would go before Kansas voters in the 2022 election. During a hearing in the Senate Judiciary Committee, Kansas Agribusiness Retailers Association, Kansas Grain and Feed Association, and Renew Kansas Biofuels Association joined other stakeholders in support of the measure. The committee passed the resolution out favorably on March 9.
Substitute for Senate Bill 34 would require states agencies to review each of its regulations, at least once every five years, to determine if they are still valid and necessary. The bill also allows for a 15-day quick repeal process for outdated regulations. The House Committee on Federal and State Affairs held a hearing on the bill on March 9. Your association testified in support of the measure as amended. We anticipate the bill being passed out of committee next week.
House Bill 2087 would amend a law requiring review of economic impact of proposed regulations by the state budget director. The Senate amended the bill to reduce the review threshold from $3 million to, $1 million, to increase the number of regulations reviewed by the state budget director. The bill is now on the House calendar to either concur or non-concur with the Senate amendment.
KDA Agency Fees
House Bill 2560 would authorize the KS Dept. of Agriculture to extend current fees on agribusiness without increasing those fees. The bill would also extend, 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 Senate committee of the whole passed the bill favorably on a vote of 36-4. It now goes to Governor Kelly for consideration.
Resolution Denouncing Natural Gas “Price Gouging”
Introduced by House Speaker Pro Tem Blaine Finch (R-Ottawa), HCR 5023 denounces price gouging and market manipulation in the natural gas marketplace, and supports investigations into the extraordinary price increases of wholesale natural gas during the extreme cold weather event “Uri” during February 2021 that resulted in increased costs on ratepayers. On Friday, March 11, the Senate Utilities Committee passed the resolution out favorably.
Salt (State and Local Tax) Parity Act
Senate Bill 495 would establish the “salt parity act” to allow 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. The election would only be allowed in a taxable year where there is a limitation on state and local tax deductions allowed to individuals under the federal Internal Revenue Code. An electing pass-through entity would be subject to a tax in an amount equal to 5.7 percent of the sum of each electing pass-through entity owner’s distributive share of the electing pass-through entity’s income attributable to the state. Any excess income tax credit, net operating loss, or other modification would be allowed to be carried forward on the electing pass-through entity’s return but would only be utilized in a year in which the electing pass-through entity has made the election, except that any limitation for an income tax credit, the net operating loss, or any other modification would apply to the electing pass-through entity. The bill would allow the electing pass-through entity owners to not be liable for the income tax in their separate or individual capacities, and the electing pass-through entity’s income attributable to the state would not be taken into account by the electing pass-through entity owners. A nonresident individual or fiduciary whose only source of income from this state is income from an electing pass-through entity under the Salt Parity Act would not be required to file an income tax return. A hearing on the bill was held in the Senate Tax Committee on March 10.
This week, the Senate Transportation Committee held a hearing on Senate Bill 546, a bill that would allow for the use and regulation of autonomous (driverless) motor vehicles in Kansas. Walmart and autonomous vehicle developer Gatik 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 establishing barriers to deployment of 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. Hearings are continued for next week.
House Bill 2703 wouldmodify the My Reemployment Plan Program and, with certain exceptions, make use of the program mandatory for those receiving unemployment insurance benefits. The Secretary of Commerce would be allowed to require claimants to participate in reemployment services. In addition, the bill would amend solvency and credit rate schedules for the Employment Security Fund. Having passed the House, a hearing on the bill is scheduled for Monday, March 14 in the Senate Commerce Committee.
Technical Education Credential and Transition Incentive
House Bill 2631 would enact the Career Technical Education (CTE) Credential and Transition Incentive (CTI) for Employment Success Act. 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. The House Education Committee held a hearing on the bill on Tuesday, March 8.
Bill Opposing Sanctuary Cities
House Bill 2717 would prohibit 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 is scheduled for a hearing in the House Committee on Federal and State Affairs on Tuesday, March 15.
Rural Opportunity Zones
The Rural Opportunity Zones Program offers individuals who relocate to a county that has been designated as a Rural Opportunity Zone the opportunity to participate in a Student Loan Forgiveness Program through FY 2021 and receive a 100.0 percent state income tax credit through tax year 2021. House Bill 2237 would extend the sunset for the student loan forgiveness program to FY 2023 and extend the sunset on the income tax credit to tax year 2023. The Senate passed the bill on a vote of 32 to 5. The bill now moves to the House for consideration.
Plastic Regulation, State Level Preemption
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. The bill was heard by the House Commerce Committee on March 9.
Work-Based Learning Program Liability
In 2021, 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 would 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. A conference committee between the House and the Senate has been appointed to determine final language on the bill.
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 modify the act to authorize additional programs and fields of study. On March 10, the Senate Ways and Means Committee amended the bill and passed it out favorably as amended.
Special Legislative Tax Committee Recommendations
In November of 2021, a Special Committee on Taxation met to review current tax exemptions and abatements in Kansas. The committee made multiple recommendations on, inter alia, the use of state general fund ending balances, constitutional amendment proposals limiting taxes or expenditures, and the taxation of energy production in the state. On March 10, the Senate Committee on Taxation held a hearing on Senate Concurrent Resolution 1619 which urges the legislature to adopt the recommendations of the Special Committee. While no testimony was offered during the hearing, the committee recommended that the full Senate adopt SCR 1619.
Research and Development Income Tax Credit
House Bill 2394 would establish a 6.5 percent research and development tax credit for LLCs and small businesses. Currently, Kansas law provides this tax credit for corporations only, and has a one-time transferability. The tax credit is based on the amount above the average of actual qualified research and development expenses in the tax year and the previous two tax years. HB 2394 would allow all taxpayers the ability to claim this tax credit and increases the initial tax credit calculation from 6.5 percent to 10.0 percent. The House Tax Committee is scheduled to take final committee action on the bill on Monday, March 14.
KEMA Disaster Emergency Powers
The Senate Judiciary Committee held a hearing on Senate Bill 541, a bill that would, inter alia, limit the authority of the governor, and other governmental entities in issuing and enforcing orders for face mask mandates, gathering limitations, and business restrictions related to a contagious or infectious disease. The bill would also prohibit post-secondary educational institutions, the State Board of Education, local boards, schools, and school officials from requiring a COVID-19 vaccination and from issuing or requiring a COVID-19 passport. Schools would be required to recognize exemptions for mask requirements and alternative measures regarding religious exemptions for vaccinations. The bill would also give local boards of education and governing bodies of community and technical colleges the authority to issue orders or policies for contagious or infectious diseases instead of the current authority given during the state of disaster emergency related to the COVID-19 health emergency. SB 541 would also remove the sunset for the Contact Tracing Privacy Act. The bill would prohibit schools and childcare facilities from denying access to their facilities unless there were reasonable grounds that a person was infected with a disease suspected of being infectious or contagious. On Friday, March 11, the committee amended the bill and passed it out favorably. We anticipate a floor amendment to clarify that the bill does not apply to animal infectious disease and quarantine orders.