10 Feb 2024 Kansas Legislative Update – Week Five
The Republican-majority legislature failed, this week, to take up an override vote on Governor Kelly’s veto of the tax bill, House Bill 2284. That vote is expected to come early next week. Whether, or in what form, tax relief is passed this year is still an unanswered question.
This week, committees continued hearings on unemployment insurance legislation, workers compensation max benefits, various tax bills, and other issues. One issue gaining momentum in Kansas, and other states, is the issue of limiting foreign investment in real property in the state. A handful of bills have been introduced that could potentially affect a wide swath of Kansas industry and commerce.
Next week is the final full week that committees can meet and consider bills in their original chamber before the House and Senate spend a few days debating bills on the floor. The legislature will then take a short break before coming back to consider bills that have been passed by the opposite chamber. We continue to hear that this will be a short session, with a goal of a quick adjournment after passage of a tax bill and state budget.
Ethanol Blended Fuel Retailer Tax Credit
This week, HB 2763 was introduced in the House Tax Committee by POET, LLC. The bill would create an income tax credit for fuel retailers of $0.05/gallon for each gallon of E15 to E85 ethanol blended motor fuel sold by a retailer, or by a distributor directly to the final user. The tax credit would have a total value of no more than $5 million each year for six years. A hearing has not been scheduled.
Vehicle Fuel Source Preemption
House Bill 2783 would prohibit a state agency, city, or county from restricting the sale or use of motor vehicles based on the energy source used for the vehicles, allowing a state agency, city and county to have their own purchase policies for motor vehicles. The bill is expected to have strong support from the liquid motor fuel industry. A hearing is scheduled in the House Committee on Federal and State Affairs on Tuesday, Feb. 13. A companion bill, SB 471, was introduced in the Senate.
Nuisance Abatement
In 2021, Senate Bill 52 was enacted to grant the Sedgwick County Commission authority to order the abatement of nuisances from land within an unincorporated area of the county, and to recover any costs incurred from the landowner. KGFA and KARA successfully amended the bill to broadly exclude agribusiness facilities. As the law was set expire this July, Senate Bill 362 was introduced to remove the sunset provision. The Senate Committee on Local Government held a hearing on the bill and passed it out favorably. In addition, an informational hearing was held on Senate Bill 162, a bill that would create a similar nuisance abatement authority in Riley County. This bill includes agribusiness exemption language that ag stakeholders secured in the Sedgwick County law. This week, the committee amended the bill to put strengthen the ag exemption, add in Crawford, County, and then passed the bill out of committee favorably as amended.
Utility Cost Recovery Legislation
Kansas’ largest energy generating company, Evergy, introduced HB 2527, a bill that would make significant changes concerning cost recovery. The bill, which was heard in the House Utilities Committee on February 6, would make the following changes:
- Allow plant-in-service-accounting (PISA), to allow Evergy to collect depreciation expense and return for assets once they are used and useful, versus the current practice of including assets during a rate case proceeding. This change would increase rates without a customer benefit.
- Capital structure changes. In the 2023 rate case, the KCC used Evergy’s corporate holding company capital structure (ratio of debt and equity) for rate setting. This resulted in a significant portion of the rate decrease for Evergy Metro. This provision would require the KCC to only use the capital structure of the operating company, which would increase rates.
- Pre-determination changes. This section creates an opportunity to use a construction-work-in-progress (CWIP) tracker to increase revenues and earning opportunities when constructing a new gas generation facility. This change would increase rates and put additional risk on customers to finance projects.
- Eco/Devo rate changes. This would increase load sizes (from 300kW to 25MW) which allow customers to be eligible for higher discounts and extend the length of discounts from 5 to 10 years. The proposal also deletes the current option to track and defer program costs. This provision will increase rates, but the increased load would lower rates over time.
Other Utility Legislation
HB 2588 introduced on behalf of “Clean Energy Business Council,” the bill would increase the capacity limitation for the total amount of facilities subject to net metering that may operate within the service territory of investor-owned electric utilities. It would require facilities to be appropriately sized based on the customer’s average load and establishing requirements for exporting power to a utility from a facility subject to net metering. The bill was a compromise between the council and Evergy. A hearing was held in the House Utilities Committee on Thursday, Feb. 1. A companion bill (SB 422) was introduced in the Senate.
HB 2591 – exempting the Kansas Corporation Commission from Kansas open meetings act (KOMA) concerning docketed proceedings. The bill is intended to allow the KCC members to communicate and deliberate issues without violating KOMA.
HB 2597 – extending Kansas corporation commission timelines for making determinations on proposed rate-setting for electric generating or transmission facilities. The bill was introduced on behalf of ratepayer stakeholders.
HB 2620 – establishing a rebuttable presumption against retirement of fossil fuel-fired electric generating units, and requiring KCC to report on such retirements. A companion bill was introduced in the Senate. A hearing is scheduled in House Energy Committee for Tuesday, February 13.
HB 2736 – prohibiting the closure of an electric generation facility without a reliable and readily dispatchable replacement and notification of such closure.
HB 2768 – providing a property tax exemption for certain new electric generation facilities and sunsetting current property tax exemptions for such facilities.
SB 456 – establishing a rebuttable presumption against retirement of fossil fuel-fired electric generating units. A hearing is scheduled in the Senate Utilities Committee on Thursday, Feb. 15. In addition, a hearing is scheduled on House companion bill HB 2620 on Tuesday in the House Energy Committee.
Eminent Domain
The following bills concerning eminent domain have been introduced:
SB 312 – requiring county commission approval before exercising eminent domain authority.
SB 417 – removing eminent domain authority from the secretary of wildlife and parks. The bill will be heard in the Senate Committee on Agriculture and Natural Resources.
SB 443 – requiring landowners whose land is taken by eminent domain for electric transmission lines to be compensated at not less than fair market value multiplied by 150 percent.
SB 457 – prohibiting public utilities from exercising eminent domain for solar placement.
HB 2136 – allowing for an income tax subtraction modification for sales of property subject to eminent domain.
HB 2610 – allowing for an income tax subtraction modification for sales of property subject to eminent domain. Hearing scheduled in House Tax.
HB 2621 – introduced at the request of Kansas Farm Bureau, the bill would prohibit public utilities from exercising eminent domain for siting solar facilitates.
HB 2691 – introduced at the request of Kansas Farm Bureau, the bill would require landowners whose land is taken by eminent domain for electric transmission lines to be compensated at not less than fair market value multiplied by 150 percent. Referred to Judiciary Committee.
Crop Damage Reimbursement
House Bill 2651 would require a third party that causes damage to crops or land to notify the landowner of such damage, and to reimburse such landowner in accordance with the terms of the existing land lease agreement. The bill was referred to the House Committee on Agriculture and is scheduled for hearing on Tuesday, Feb. 13.
Single Sales Factor Apportionment
Kansas currently uses a three-factor system for apportioning income between states for corporate income tax purposes. Legislation was introduced in recent years to allow corporate taxpayers to elect which methodology to use when apportioning their corporate income between Kansas and other states in which it operates to determine tax liability. Past legislation would have allowed certain taxpayers to elect to use a single-sales factor apportionment formula to apportion their corporate income tax liability. Similar legislation has been introduced this year that will require corporate taxpayers to use the single factor sales method (after a two-year phase-in period), rather than allow for an election. The bill includes provisions that offset potential increases in tax liability for some companies, such as a “New Jersey model” tax credit for deferred tax liability. The bill was introduced this week in the House Tax Committee. The bill does not yet have a bill number assigned. It will likely have a hearing on Monday, Feb. 19, or Tuesday, Feb. 20. It is understood that the KS Dept. of Revenue may be introducing a separate bill.
Property Tax Relief
Property tax relief is a top priority of the Governor, and Republican and Democrat legislators in both the House and Senate. Much of that relief is likely to be specifically focused on residential property owners. Here are just a few of the proposals being discussed:
– Senate Bill 94 discontinuing state property tax levies for the Kansas educational building fund and the state institutions building fund.
– Senate Bill 97 increasing the exemption for residential property from the statewide school levy from $40,000 to $65,000.
– Senate Bill 196 transferring money from the state general fund to the Local Ad Valorem Tax Reduction Fund (LAVTRF). The transfer is based on 3.63 percent of the state general fund portion of retail sales and compensating use taxes collected in the previous calendar year. The bill would cost the state $119 million. The last transfer to the LAVTRF occurred in fiscal year 2003, but the legislature has routinely suspended transfers every year since.
– Senate Bill 327 excluding social security payments from household income and increase the appraised value threshold for eligibility of seniors and disabled veterans related to increased property tax homestead claims. The bill would also amend the golden years homestead property tax freeze program.
– Senate Bill 332 transferring state general funds into the LAVTRF in fiscal year 2025 and all fiscal years thereafter, and requiring the funds to be distributed directly to residential property taxpayers. A hearing on this bill is scheduled for Tuesday, Feb. 13 in the Senate Tax Committee.
– SCR 1611 amending the Kansas Constitution to limit annual increases in real property valuations to 4 percent. The bill would require a ballot question for voters to approve the measure during the next state-wide election.
– SCR 1613 amending the Kansas constitution to decrease the residential property assessment rate for determining property taxes.
Personal Property Tax Renditions, Reduced Penalties for Failing to File
Senate Bill 8 would reduce penalties for the late filing, or failure to file, personal property renditions annually to the county appraiser. The bill was important to the grain elevator and biofuel industries following a 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. The bill was amended to allow county appraisers to waive late penalties, and for penalties to be set aside if the machinery and equipment was previously classified as real property. Following passage of the bill, it was placed into a conference committee report with a dozen other bills which caused it to be vetoed by Governor Kelly. This week, the House Tax Committee placed the contents of SB 8 into Senate Bill 127 and passed the bill out of committee favorably.
Sales Tax Exemption on Installation Services for Reconstruction, Repair to Property
House Bill 2585, introduced this week in the House Tax Committee, would create a new sales tax exemption on services for installing or applying tangible personal property for the reconstruction, restoration, remodeling, renovation, repair or replacement of a building or facility. This tax exemption currently exists for similar services on residential structures. This bill would equalize tax treatment for work performed on commercial and industrial buildings. The House Tax Committee held a hearing on the bill on February 7, where KGFA, KARA, and Renew Kansas joined other commercial and industrial stakeholders as proponents of the legislation. The bill was scored with a fiscal note of approximately $70M in the first year.
Prohibiting Foreign Ownership of Real Property
Multiple bills have now been introduced to prohibit the conveyance of real property in Kansas to “foreign adversaries.” (Senate Bill 283 and House Bill 2397). This issue is a high priority item for Kansas Attorney General Kris Kobach and House and Senate leadership. Similar legislation has been passed in multiple states. Across the Midwest, state lawmakers are proposing legislation to prevent foreign companies and individuals from buying agricultural land. New bills have been filed in several states, including Nebraska, Iowa, Illinois, Missouri and Michigan. Last year, proposals were introduced in more than 35 states leading to 10 new states adding restrictions. A key provision being debated in Kansas is whether the legislation will be retroactive, to require the divestment of properties currently owned by companies located in certain foreign nations. The House is considering various foreign adversary bills, including prohibiting entities deemed “countries of concern” from purchasing land located within 150 miles of a military installation. There will also likely be legislation prohibiting the selling of drones in the state that are from a country of concern or made with component parts from countries of concern. House Ag Committee Chairman, Rep. Ken Rahjes introduced HB 2638 which is supported by the ag industry. This bill was referred to House Commerce Committee. Other bills that have been introduced go beyond agricultural land. This week, Senate Bill 446 was heard in the Senate Committee on Federal and State Affairs. The bill would prohibit foreign adversaries from acquiring land after July 1, 2024, unless authorized by a new state land council. The bill received broad opposition. Also this week, the House introduced HB 2766, which would create the Kansas land and military installation protection act to prohibit foreign principals from countries of concern from holding any interest in certain real property in this state.
Animal and Ag Facilities Protection
In 2021, the 10th Circuit U.S. Court of Appeals found unconstitutional parts of a law – often referred to as the “ag-gag law” – that was intended to keep undercover investigators off the property of animal facilities with the intent of exposing certain activities at the facility. Critics of the law said that it criminalized undercover investigations to expose conditions at animal facilities. The law, which had been on the books since the 1990s, was held to be an unconstitutional violation of the right to free speech. In an attempt to make the law comply with constitutional requirements, animal ag stakeholders introduced SB 389 to amend the law to apply to physical trespass or making a false statement on an employment application to gain entry. A hearing has been scheduled for Wednesday, February 14, in the Senate Committee on Agriculture and Natural Resources.
House Water Committee Update
The House Water Committee held hearings on HB 2634 and HB 2678, and then took final committee action on HB 2634 and passed the bill out favorably.
House Water Committee Agenda for Next Week
Tuesday, Feb. 13: The committee will take final action on HB 2634, and hold hearings on the following bills:
HB 2696 – allowing a GMD opportunity to provide a written comment rather than a recommendation to the chief engineer for a proposed water conservation area and management plan.
HB 2697 – allowing GMDs boards to provide relevant information rather than advice and assistance regarding groundwater management and other matters of concern to the district.
Thursday, Feb. 15: The committee will take final action on multiple bills.
LEMA Corrective Controls
HB 2634 would allow MYFA-like flexibility in an IGUCA or LEMA that is established or amended by an order of the Chief Engineer. Such flexibility is currently only allowed in water conservation areas (WCA). The bill would provide an additional corrective control provision for the chief engineer to consider when issuing orders of designations for local enhanced managements areas and intensive groundwater use control areas. The House Water Committee held a hearing on the bill on February 6, and is likely to take the bill up for final action next week. Proponents to the bill included Big Bend GMD5, GMD1, GMD4, Kansas Livestock Association, Kansas Farm Bureau, and Kansas Corn.
Water Structure Licensing Fees
This week, KDA requested introduction of HB 2526 amending the Stream Obstruction Act. The legislation would install graduated agency inspections of dams, based on hazard level. The bill would also provide KDA authority to assess civil penalties for lack of action on non-compliance issues and allow KDA to assess registration fees and increase permit fees. The House Water Committee held a hearing on the bill on February 6, and is likely to take final action on the bill next week.
Workers Compensation Benefits
Senate Bill 430 was introduced to provide comprehensive amendments to the workers compensation law and is presented as a compromise bill between industry and labor stakeholders. Among other things, the bill would increase lifetime benefit maximums, provide coverage for members of the Kansas National Guard, and modernize elements of the administrative process. Find more specific information here. This week, the Senate Commerce Committee advanced the bill favorably out of committee.
Unemployment Insurance
House Bill 2570 would make comprehensive changes to the Kansas employment security law. The bill would define “benefit year”, “temporary unemployment” and other terms in the law. It would also require electronic filing for certain employers, establish qualifications for employment security board of review candidates, extend the deadline for new accounts following business acquisitions, make certain changes to the employer rate schedules, enable employers to report claimant work search issues, confirm legislative coordinating council oversight for the new unemployment insurance information technology system implementation, authorize the secretary to grant temporary unemployment, require the secretary to annually publish certain data, and abolish the employment security interest assessment fund. The House Commerce Committee will take final committee action on the bill next Wednesday.
Rules and Regulations
House Bill 2648 was introduced to revise the rules and regulations procedure for state agencies. The bill adds protections for industry by requiring an agency proposing new regulations which have an economic impact greater than $1 million over the first five years to introduce, and pass, a bill by the full legislature. If the agency fails to complete a proper economic impact statement, the director of the budget must reject the proposed regulation. The amendments are intended to provide protections for industry against burdensome, restrictive, and expensive regulations, or regulations which exceed legislative intent. The bill is scheduled for hearing in the House Commerce Committee on Tuesday, February 13, 2024.
Train Max Length, Set Back Distances, and Blocked Crossings
Last year the Senate passed Senate Bill 271, which would create a maximum train length (8500 feet) in Kansas, and require railroads to maintain a minimum distance of 250 feet between a near-edge railroad crossing and stored railroad rolling stock at crossings. The bill was referred to the House Transportation Committee with Chairman Shannon Francis (R-Liberal). There may be separate legislation limited to blocked crossings. This month, the US Supreme Court refused to review a decision from the Ohio Supreme Court which ruled that an Ohio law preventing blocked crossings was preempted by federal law. The state of Kansas had joined in that appeal.
Two Person Train Crew Legislation
In 2023, the Kansas department of transportation (KDOT) passed a regulation requiring at least two crew members in each lead locomotive operated in Kansas. In response to that regulation, SB 402 has been introduced to prohibit KDOT from regulating crew sizes for class II and class III railroads.
Retailer Sales Tax Collection Tax Credit
SB 41 would create a sales and use tax remittance credit for retailers. The bill is intended to compensate retailers, in part, for their work in collecting and remitting sales taxes to the state. The credit would be an amount equal to 1.5 percent of the amount of sales and use tax being remitted by the retailer, with a monthly cap of $300 per retailer. The Senate Tax Committee passed the bill out favorably.
Third-Party Funded Litigation
House Bill 2510 was introduced to require disclosure of third parties that fund litigation and allow for joint liability of costs and sanctions against third-party funded litigants. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The House Judiciary Committee held a hearing on the bill on January 31. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association provided proponent testimony.
Defining Lead-Free Pipes and Amending Solid Waste Management Fund
Senate Bill 331 was introduced to remove an exception for leaded joints from public water supply system laws. The bill would also update terminology relating to hazardous waste generated by certain persons. The bill would also amend the solid waste management fund, administered by KDHE, to allow it to be used to reimburse counties or cities who conduct programs for the collection of “agricultural pesticide wastes” along with other household hazardous wastes. This week, the Senate passed the bill favorably on a vote of 34-0. The bill was sent to the House and referred to the House Committee on Agriculture. A companion bill, HB 2486 was introduced in the House.
Other Bills of Interest
SB 376 extends the time period for single city port authority income tax credit. Hearing in Senate Tax on Thursday, 2/8/2024
SB 459 disqualifying commercial vehicle driving privileges when person violates drug & alcohol clearinghouse requirements
SB 462 CDL with military experience
SB 468 prohibiting local govs that grant property tax exemptions from exceeding their revenue neutral rates for property tax
SB 470 allowing Wichita technical institute to participate in Kansas promise scholarship act
SB 478 defining benefit year, temporary unemployment and other terms in the employment security law
SB 484 Providing property tax exemptions for off-road vehicles
SB 486 Changing fee charged by the department of commerce for applications for certain economic development programs
HB 2590 increasing maximum penalty authority for pipeline safety violations imposed by KCC
HB 2610 providing an income tax subtraction modification for sales of property subject to eminent domain
HB 2633 providing for additional sources of revenue for water pgm management fund
HB 2679 CDL with military experience
HB 2681 updating the definition of gross truck weight
HB 2682 disqualifying commercial vehicle driving privileges when person violates drug & alcohol clearinghouse requirements
HB 2684 authorizing cities to propose an earnings tax for ballot question
HB 2734 Imposing a five-year expiration on all improvement districts and community improvement districts if no improvements are carried out within the five-year period
HB 2744 establishing the transformation of passenger and freight vehicle industry act program to attract businesses engaged in electric and hydrogen-powered vehicle production
HB 2767 Requiring entities subject to the administrative procedure act to confirm receipt of service of an order prior to the imposition of fines or penalties
HB 2775 Changing application fee for economic development programs from a flat fee to a certain percentage of the total economic development incentive
HB 2776 workers compensation act
HB 2788 requiring cities, counties to report local eco devo program information to the secretary of commerce and posted on website
HB 2795 excluding the state mandated 20 mills levied by a school district from the revenue neutral rate
HCR 5017 constitutional amendment to grant counties home rule powers
HCR 5021 constitutional amendment to reduce ad valorem residential property assessment to 9 percent
HCR 5022 constitutional amendment classifying all-terrain vehicles for tax purposes
HCR 5024 constitutional amendment reserving the power of initiative to the people of Kansas