14 Feb 2021 Kansas Legislative Update – 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.
Renew Kansas Receives Biofuels Commitment from Governor
Midway through the week Renew Kansas Biofuels Association had the full attention of the legislature and Governor Laura Kelly. Starting off the week on Tuesday, Renew Kansas held its third annual Biofuels Day on the Hill via Zoom. Nearly 40 members joined the hour-long meeting and discussed the state of the biofuels industry with elected officials. Senate President Ty Masterson (R-Andover) committed to assisting biofuel processors in efforts to fairly improve the property tax valuation system in Kansas.
Governor Laura Kelly provided a 10-minute pro-biofuels address in which she committed her administration to supporting sustainable, affordable solutions for all Kansans.
“My administration will continue to support the year-round sale of E15,” Kelly said. “Together, we’ll strengthen your industry and provide Kansans with access to fuel that is friendly to the environment and to their wallets.”
Kelly followed up on her pledge to support biofuels by offering to submit a letter to the new administrator of the United States Environmental Protection Agency (EPA) urging the agency to quickly approve an amendment to the Kansas State Implementation Plan (SIP). Passage of the amendment would allow for year-round E15 (15 percent ethanol blend) fuel to be sold in the Kansas City Metropolitan Area. EPA has published the amendment for public comment, however, following the election, the new Biden Administration, as is customary, directed federal agencies to slow down the regulatory process in order to allow for time to review pending rules. Proposed rule changes, such as this, are now required to undergo an additional (up to 60 days) review. The Kansas SIP change is scheduled to become final around February 18, but the freeze could push it out as far out as mid-April.
Biofuels Take Center Stage in House Ag Committee
At the request of House Agriculture Committee Chairman Ken Rahjes (R-Agra), Renew Kansas, Kansas Corn and Kansas Soybeans provided an informational hearing on biofuels on Wednesday, Feb. 10.
The commodity groups testified on the science and positive economic impact producing biofuels has on corn and soybean price and demand.
Renew Kansas meanwhile spoke to issues the legislative body has some control in influencing including the effects of high energy costs and ever-rising property taxes. As a benefit to all Kansans through reduced fuel prices and less harmful toxins in the atmosphere, the ability of Renew Kansas members to operate a competitive business is of the utmost importance. Renew Kansas requested the legislature be cognizant of a forward-looking electric policy to lead Kansas to regionally competitive electric rates and reliable service. The association also pushed for greater certainty, transparency and fairness in the property tax valuation and assessment process.
To drive the benefits of the renewable fuels industry home, Renew Kansas spoke to biofuels’ role in reducing greenhouse gas emissions by nearly 50 percent and conveyed the importance of biofuels as an immediate way to achieve reduction in carbon and air toxins. Renew Kansas also presented statistics on E15, including nearly-completed plans to amend the Kansas SIP and allow year-round E15 sales in the Kansas City Metropolitan Area.
The hearing closed with the 17-person committee gaining a greater understanding of how common-sense, practical legislation affecting biofuels can lead to an improved Kansas economy.
Read the full testimony from the day below.
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.
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 backtheir 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.
Elevator Safety Act, Hearing Scheduled
On Thursday, February 18, the Senate Committee on Federal and State Affairs will hold a hearing on Senate Bill 181, establishing the Elevator Safety Act. The legislation would require regulation of the design, construction, operation, inspection, testing, maintenance, and repairs of all elevators, man-lifts, and moving walkways. That legislation would also grant state inspectors the authority to adopt regulations over the industry, and prohibit any inspections of elevators and conveyance equipment unless by a state-licensed inspection company. Similar legislation has been passed in Colorado, Missouri, and Oklahoma. Kansas Grain and Feed Association worked with proponents of the bill to ensure that language was included to exempt grain elevators, grain warehouses, seed processing facilities, grain processing facilities, biofuel processing facilities, feed mills, flour mills or any similar pet food, feed or agricultural commodity processing facilities.
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
Bills We’re Tracking
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