05 Mar 2023 Kansas Statehouse Insider – Week 08
This week was the first week following legislative turnaround. Dozens of bills that passed their chamber of origin were read into the opposite chamber and then referred to committees. Following a long weekend, hearings were held on a few bills on Wednesday and Thursday.
The legislature will return to work in earnest next week. One major item this week concerned a two-day informational hearing in the Senate Committee on Federal and State Affairs on the likely negative impacts that would come from the legalization of marijuana in Kansas. Key to this issue is that the House is waiting on the Senate to take action on this item, and any legislation is likely to come from this Senate committee.
Next week, the House Committee on Taxation will begin to wade through the various tax cut bills passed by the Senate which, if passed, would cut state revenues by more than $1 billion annually. Also, next week, the House and Senate Budget Committees will begin finalizing their general agency budget bills for fiscal years 2024, 2025 and 2026, where they are working with a projected state ending balance of at least $2.3 billion for this fiscal year (June 30, 2023).
Changes Made to Annual Personal Property Tax Rendition
Senate Bill 8 would reduce statutory penalties for the late filing, or failure to file, personal property renditions to the county appraiser. Kansas Grain and Feed Association testified in support of the measure and explained its importance to our industry following the 2022 Kansas Court of Appeals decision finding that grain elevator machinery and equipment should be property classified as personal property rather than as fixtures to the realty. KGFA also successfully amended the bill to: (1) allow county appraisers to waive late penalties, (2) require such penalties to be waived if the machinery and equipment was previously classified as real property, and (3) remove the requirement to annually file the personal property rendering unless there is a change in the property list. The Senate adopted the proposed amendments and then passed the bill on a vote of 39-0. The bill has been referred to the House Tax Committee for consideration.
Required Property Valuation Methodology for Grain Elevators and Special Purpose Properties
Senate Bill 274 was introduced which would require the use of the cost approach for valuing special purpose property for property tax valuation purposes. The bill specifically includes grain elevators in its definition of special purpose properties. The bill is not likely to receive a hearing this session.
PVD Directives in Agency Regulations
Senate Bill 263 was introduced at the request of the Senate Tax Chair Senator Caryn Tyson. The bill would amend K.S.A. 2022 Supp. 79-505 to require valuation directives of the Kansas Dept. of Revenue’s Property Valuation Division to be set forth in agency rules and regulations. The Senate Taxation Committee has scheduled a hearing on the bill for Friday, March 10.
Corporate Income Tax Apportionment
House Bill 2110 would allow certain taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula, based on sales in the state, to determine corporate income tax liability. The bill is estimated to have a cost to the state of approximately $20 million. The House Tax Committee held a hearing on the bill on Tuesday. Kansas Grain and Feed Association joined the Kansas Chamber as the only proponents on the bill. The committee was scheduled to take action on the bill this week, but pushed off action as they are considering whether to adopt an amendment requested by the Kansas Dept. of Revenue that would require all corporations to use the single-factor apportionment formula. The committee will likely take the bill up for action soon.
Short Line Rail Grant Program
In 2020, the legislature passed the Eisenhower Legacy Transportation Program which included a $15 million, three-year, cost-share grant program for qualified track maintenanceand improvements to short line rail and rail siding. In 2020, 2021, and 2022 the Kansas Dept. of Transportation (KDOT) set aside a percentage of the $5 million program funds specifically for rail siding projects. This year’s approved projects were announced this week by the Governor’s office. Kansas agribusiness infrastructure has greatly benefited from this program. This year, in coordination with KDOT, Kansas Grain and Feed Association introduced House Bill 2335 to restructure the Short Line Rail Improvement Fund program to combine it with KDOT’s Rail Service Improvement Fund Program. The bill makes it easier to administer the cost-share grant program and would dedicate $10 million annually from the state highway fund. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail, would be able to directly apply for program funding. KGFA joined the Kansas Agribusiness Retailers Association and the Kansas Cooperative Council in supporting the measure which passed out of the House on a vote of 117-5. The Senate Transportation Committee will schedule a hearing on the bill soon.
Electric Utility Rates
Kansas has the highest energy rates in our region, and multiple bills have been introduced to address high electric utility rates while ensuring reliable service:
- Senate Bill 54 allowing a 0 percent sales tax rate on commercial utilities, was passed out favorably by the Senate Tax Committee. House Bill 2221 is the House companion bill.
- Senate Bill 68 would allow state energy producers a Right-of-First-Refusal to build out new electric transmission line assets in the state. Renew Kansas, Kansas Grain and Feed Association, and Kansas Agribusiness Retailers Association joined other commercial and residential utility rate payers in opposing the measure during multi-day hearings, arguing that the bill would remove competition from the build process and result in higher electric energy rates. The Senate Utilities Committee advanced the bill out of committee, but the bill has not been brought up for debate by the full Senate.
- House Bill 2154 would reform the Kansas Corporation Commission by allowing for the election of commissioners and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings. A hearing was held on the bill, and it was referred to an exempt committee to keep it alive for the rest of the legislative session. The Senate Utilities Committee held a hearing on its companion bill, Senate Bill 88.
- House Bill 2225 would limit cost recovery for electric public utility transmission-related costs. The House Utilities Committee passed the bill out favorably. Stakeholders are discussing language for a possible agreed amendment to the bill.
Budget Amendment Temporarily Blocked
This week, the House Appropriations Committee received reports from subcommittees on agency budgets for the next three fiscal years. During the review of the budget for the Kansas Dept. of Health and Environment, Division of Environment, a motion was made to add a proviso ordering a broad study of the health and environmental effects of various energy and industrial impacts including wind turbines, power transmission lines, solar panels, and “hydrogen hubs”. The proposed amendment also required a review of the “hazards and effects of runoff and drift of herbicides and pesticides”. The amendment was brought at the request of new House member Rep. Carrie Barth (R-Baldwin City). While the committee voted down the amendment on a vote of 13-8, it is likely to be brought up again as a floor amendment when the full House debates the budget (HB 2273).
Water Policy Bill Placing New Requirements on GMDs
House Bill 2279, introduced by House Water Committee Ranking Member Rep. Lindsay Vaughn (D-Overland Park) would amend the Groundwater Management District act. The bill would place new annual reporting and conservation action plan requirements on the districts. Kansas Agribusiness Retailers Association joined other stakeholders in successfully amending the bill to make it more reasonable for the districts. The House passed the amended bill on a vote of 116-6. The bill has been referred to the Senate Committee on Agriculture and Natural Resources for consideration.
Water Funding Bill
House Bill 2302, introduced by House Water Committee Chairman Jim Minnix (R-Scott City), would enhance funding for the state water plan fund by crediting 1.231 percent of current state sales tax revenues (approximately $53 million) directly to the fund. The bill would also modify the distribution of current moneys into the state water plan fund, create a water technical assistance fund and a water projects grant fund for water infrastructure projects. The dedicated state sales tax revenue would be added to the current fees on agriculture and municipal water users. The bill would sunset in 5 years. If it is not extended at that time, then the sales tax funding piece would be removed, and the previous state funding mechanisms would be re-installed. Specifically, the bill would set aside the following funds, annually, from the state water plan fund for three years: $5,000,000 to a water technical assistance fund, $15,000,000 to a water projects grant fund, and at least $15,000,000 to the retirement of water supply storage debt for two state reservoirs. Find specific committee amendments to the bill here. The House passed the bill on a vote of 119-3, and it has now been referred to the Senate Committee on Agriculture and Natural Resources for consideration.
Senate Passes Tax Bills
The Senate has passed three tax bills that, together, would provide more than $1 billion in tax cuts. The bills will now be considered by the House Tax Committee.
- Income Tax – The Senate passed Senate Bill 169 to create a single 4.75 percent individual income tax rate and eliminate the current progressive three-tier rates. The measure drops the rate on middle (5.25 percent) and high-income (5.7 percent) taxpayers to 4.75 percent and increases the 3.1 percent rate on lower-income Kansans, while increasing the standard deduction. The bill is projected to cost the state more than $550 million a year, and more than $1.3 billion over a three-year period. The bill passed the Senate 22-17, short of the 27 votes needed to override a veto from the Governor.
- Social Security Income Tax – The Senate passed Senate Bill 33 on a vote of 36-3. The bill would eliminate state income tax on Social Security payments and is projected to cost the state $147 million annually. The bill is more costly than what Governor Laura Kelly had proposed. The bill was amended to include other tax cuts, further increasing the cost of the bill.
- Food Sale Tax – Senate Bill 248 would eliminate state and local sales tax on all food and food ingredients beginning next year. The bill, which passed 22-16, would cost the state about $277 million a year.
Maximum Train Length and Minimum Set Back on Rolling Stock
Senate Bill 271 was introduced and referred to the Senate Committee on Transportation. The bill would limit the length of trains on any main line or branch line to 8,500 feet and establish a for minimum distance for storage rolling stock of 250 feet from an intersection. The Senate Transportation Committee has scheduled a hearing on the bill for Tuesday, March 7.
House Bill 2168 would add industrial hemp seed to the statutory definition of grain in the Kansas grain warehouse law. It is uncertain at this point what other impacts this designation might have, but the Kansas Department of Agriculture is currently reviewing the bill. No hemp ingredients have been federally approved for use in animal feed. It is unknown whether hemp ingredients are safe for animals or can be utilized as a source of nutrition when consumed for extended periods of time. These questions should be answered before hemp is used for commercial feed purposes to ensure the safety of the public, animals, and the agricultural industry. The bill was referred to an exempt committee to keep it alive for the rest of this session, and it has now been referred back to the House Committee on Agriculture.
Retailer Collection of Credit Card Fees
Kansas law prohibits the seller or lessor in a retail sales or lease transaction from imposing a surcharge on a person who elects to use a credit or debit card to make the purchase. House Bill 2133 would eliminate this prohibition and allow the imposition of such a surcharge. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association supported the bill which passed the House on a vote of 87-35. The bill has been referred to the Senate Committee on Financial Institutions and Insurance. This committee favorably passed out a Senate companion bill in Senate Bill 104.
Prohibiting Foreign Ownership of Real Property
This week, Senate Bill 283 was introduced which would prohibit the conveyance of certain real property in Kansas to foreign adversaries. The bill was referred to the Senate Committee on Federal and State Affairs. Two similar bills were previously introduced this year – Senate Bill 100 and House Bill 2397 – but they did not advance. The House Committee on Agriculture held a hearing on House Bill 2397 but did not act on the bill. Senate Bill 100 was referred to the Senate Judiciary committee where it did not receive a hearing. This issue is a high priority item of new Kansas Attorney General Kris Kobach.
Tax Withholding Requirements for Employees in Multiple States
House Bill 2420 would establish withholding tax requirements for employers with employees working in multiple states. The bill was referred to the House Committee on Taxation and has not been scheduled for hearing.
Third-Party Funded Litigation
Senate Bill 74 would provide for joint liability of costs for third-party funded litigants and also allow for sanctions on third-party funded litigants. The bill would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill was heard in the Senate Judiciary Committee on February 2. The bill was referred to an exempt committee to keep it alive for further action this session and stakeholders are working on a possible amendment to address specific concerns.
Scrap Metal Act Extension
House Bill 2326 would extend the sunset date on the current scrap metal theft reduction act and clarify that catalytic converters are covered by the act. Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association joined other affected industries in supporting the measure. Agribusiness groups supported the initial passage of the measure when it was passed five years ago. The House passed the bill on a vote of 120-1. The bill has been referred to the Senate Judiciary Committee for consideration.
Cotton Bale Secure Load Requirements
HB 2160 would exempt the transport of cotton bales from certain secured load requirements. The House passed the bill on a vote of 121-3. The bill has been referred to the Senate Committee on Agriculture for consideration.
State Preemption of Local Plastic Container Regulations
Senate Bill 47 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. The Senate Commerce Committee held a hearing on the bill but did not vote it out of committee. A new bill, House Bill 2446, was introduced this week to address certain expressed concerns. The bill was referred to the House Committee on Federal and State Affairs.
Motor Carrier Independent Driver Status
House Bill 2020 was introduced to clarify that the employment status of a driver of a motor carrier does not change as a result of the inclusion of safety improvements made to the vehicle. The House passed the bill 122-0. The bill is scheduled for hearing in the Senate Transportation Committee on Thursday, March 9.
Kansas Apprenticeship Tax Credit Act
HB 2292 would establish a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The credit would be up to $2,500 for each apprentice so employed, and the tax credit may be awarded up to 20 apprentices per year. The program would be administered by the Kansas Department of Commerce. The House passed the bill favorably on a vote of 115-7. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association joined other stakeholders in support of the measure. The bill is scheduled for hearing in the Senate Commerce Committee on Thursday, March 9.
The following cannabis bills were introduced this year in an exempt committee, and so will be live bills for the rest of the session:
Senate Bill 135 would create the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale, and use of medical cannabis.
Senate Bill 171 would create the veterans first medical cannabis act to regulate the cultivation, distribution, sale, possession and use of medical cannabis.
Senate Bill 276 would specify the delta-9 tetrahydrocannabinol concentration amount for final hemp products and allow hemp products to be manufactured, marketed, or sold.
House Bill 2367 would establish the adult use cannabis regulation act to allow for the lawful cultivation, manufacture, possession, and sale of cannabis in this state.
House Bill 2417 creating the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale and use of medical cannabis.
Other Bills We Are Monitoring:
SB 79 authorizing counties to impose a county earnings tax. Hearing held in Senate Tax Committee
SB 166 requiring public disclosure of a transmission line siting permit. Hearing held in Senate Utilities Committee. Blessed.
SB 168 authorizing cities and counties to exempt sales of food from sales tax. Hearing held in Senate Tax Committee.
SB 196 reinstating local ad valorem tax reduction fund transfers. No hearing scheduled.
SB 248 providing a food sales tax exemption, repealing current food sales tax exemption. Senate passed 22-16.
SB 273 eliminating city planning and zoning authority for land outside a city. Senate Local Gov Committee. Blessed.
SCR 1606 establishing an initiative and referendum Constitutional Amendment. No hearing, blessed.
HB 2192 creating a Kansas Secretary of State website for grants, applications, awards. No hearing.
HB 2350 establishing the crime of human smuggling. Passed House, referred to Sen Judiciary.
HB 2366 providing for local ad valorem tax reduction fund transfers. House Tax.
HB 2388 requiring licensing bodies to provide electronic credentials. House Commerce. Blessed.
HB 2424 establishing refundable income tax credit for payments by employers to employee student loans. House Tax.
HB 2436 prohibiting public contracts from giving preferential treatment based on ESG criteria. There is a hearing scheduled in the House Financial Institutions and Insurance Committee on March 8.