25 Mar 2022 Kansas Statehouse Insider – Week 11
2022 Legislative Session, Week 11
This week was Drop Dead week for the Kansas legislature, where any non-exempt bill not passed both chambers may be dead unless it is referred to a conference committee which meets next week to work out differences in bills. Both the House and Senate debated and passed numerous bills this week, with the Senate, on Wednesday, working until close to 2:00 am. The House passed its budget bill and overwhelmingly approved Sub HB 2737 which will draw new House district lines for the next 10 years.
Legislators will return on Monday, March 28 for one final week of the regular session prior to taking off most of the month of April. They will then return on Monday, April 25 for a likely brief veto session to consider bills vetoed by Governor Laura Kelly.
House Passes Budget
This week, the House passed its version of the state budget House Sub for Sub SB 267 for fiscal years 2022, 2023, 2024 and 2025. The Senate passed its version of a budget bill (Sub SB 444) last week. The two chambers will meet next week to finalize the language.
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 percent 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 each year. Having passed the Senate, the bill successfully made it through the House Tax Committee with an amendment excluding Class I railroads from qualifying for the program. The House has held off action on tax bills, but the bill may be considered during tax conference committees between the two chambers next 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. 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 has held off action on tax bills, but this bill may be considered during tax conference committees between the two chambers next week.
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. The House passed the resolution on a vote of 85-39, and this week, the Senate passed the resolution on a vote of 27-12. Having passed both the House and the Senate, the proposal will now be placed as a question on the November 2022 election ballot.
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. This week, the bill passed the House on a vote of 88-34. The bill now returns to the Senate for a motion to concur with the House Amendments or will be referred to a House and Senate Federal and State Affairs Conference Committee.
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 has been referred to a House and Senate Conference Committee.
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. This week, Governor Laura Kelly signed the bill into law.
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. 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. This week, the Senate placed the bill’s contents into Senate Substitute for House Bill 2239 and passed the bill out favorably. The bill now goes to the House for consideration of a motion to concur with the Senate amendments.
Credit and Debit Card 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 and removed the bills previous contents. The committee passed the bill out as amended.
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 quickly passed through the Senate on a 39-0 vote and was referred to the House Transportation Committee this week. The bill may be considered during transportation conference committees between the two chambers next week.
Senate Bill 546 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. This week, the Senate Committee of the Whole passed the bill on a vote of 24-12. The bill now moves to the House for consideration.
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, the Senate Commerce Committee amended the bill to clarify which individuals are exempt from participation in the My Reemployment Plan including: claimants on temporary layoff with a return-to-work date, claimants that are currently employed or that no longer reside in Kansas, claimants that are current reemployment services and eligibility assessment participants, claimants that are members of a placement union or claimants that are engaged in a training program. After being amended by the Senate, the bill was passed by the Senate on a unanimous vote. The bill now returns to the House where they may consider a motion to concur with the Senate amendments, or the bill will be referred to a Commerce Conference 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. Before sending it to the full House, the Education Committee amended the bill this week to: Specify reimbursement rates for approved standard CTE credentials and approved high-value CTE credentials; provide reimbursement for assessments for standard CTE credentials exclusively for students with an IEP, 504 plan, or as identified by the discretion of the school district. This week, the full House passed the bill favorably on a vote of 122-0.
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 hearing in the House Federal and State Affairs Committee drew a large crowd to the Statehouse. This week, the House Committee of the Whole passed the bill favorably on a vote of 84-38.
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. Having passed the Senate on a vote of 32 to 5, the bill is now in the House for consideration of a motion to concur with the Senate amendments.
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 House Commerce Committee amended the bill slightly to add plastic straws to the definition of “auxiliary container”. Having passed the House Committee of the Whole on a vote of 74-48, the bill now moves to the Senate.
Reimbursement for Government COVID Shutdown
S Sub for HB 2416 would provide for compensation for the use, restriction of use, loss, or destruction of property as a result of governmental actions related to the prevention of or response to contagious or infectious disease. This week, the Senate passed the bill on a vote of 26-11.
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. This week, the Senate passed the bill out on a unanimous vote.
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. Senate Concurrent Resolution 1619 would urge the legislature to adopt the recommendations of the Special Committee. This week, the full Senate adopted the resolution on a vote of 28-11.
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 added a date-change amendment prior to passing the bill out favorably.
KEMA Disaster Emergency Powers
Senate Bill 541 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. This week, the Senate adopted a floor amendment and passed the bill favorably on a vote of 24-14.