24 Feb 2024 Kansas Legislative Update – Week Seven
This is Turnaround Week of the Kansas legislature, where most bills (with some exceptions) must be passed by their chamber of origin in order to remain alive for further consideration.
In a flurry of floor debate on Wednesday and Thursday, the House and Senate voted on dozens of bills. In addition, the legislature finally attempted an override this week of Governor Laura Kelly’s veto of House Bill 2284, the legislature’s tax bill that includes a single-rate personal income tax. The House failed, by three votes, to override the veto. While the House can take another attempt at the override, through a motion to reconsider, the veto is likely to be sustained. Should this occur, the legislature will need to determine its next steps on assembling and passing tax relief this year. Legislators will want to be able to stump on having provided tax relief when campaigning for re-election this summer.
Most committees will not meet next week as the legislature takes a few days off. Once legislators return to Topeka, committees will begin scheduling hearings on bills passed by their counterparts in the opposite chamber. We continue to hear that this is likely to be a short session, with a goal of a quick adjournment after passage of a tax bill and state budget.
Please find, below, a summary of legislative activity from last week. As always, thank you for allowing us to serve as your eyes and ears at the Kansas State Capitol.
Key 2024 Legislative Deadlines
- February 23 – Last day for non-exempt bills in original Chamber (Turnaround Day)
- March 22 – Last day for non-exempt committees to meet
- March 28 – Last day for non-exempt bills in either Chamber
- April 5 – First Adjournment (Drop Dead Day)
- April 29 – Veto Session begins
Eminent Domain Bills Introduced This Year
SB 312 – requiring county commission approval before exercising eminent domain authority. Hearing held in Senate Local Government.
SB 417 – removing eminent domain authority from the secretary of wildlife and parks. Senate passed on a vote of 25-14.
SB 443 – requiring landowners whose land is taken by eminent domain for electric transmission lines to be compensated not less than 150 percent of fair market value.
SB 457 – prohibiting public utilities from exercising eminent domain for solar placement. Passed Senate Utilities Committee, blessed for further action.
HB 2136 – allowing for an income tax subtraction modification for sales of property subject to eminent domain. Hearing held in House Tax.
HB 2610 – allowing for an income tax subtraction modification for sales of property subject to eminent domain. Hearing held 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 150 percent of fair market value. Referred to Judiciary Committee.
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. Multiple bills have been introduced that would offer various proposals for residential property tax relief, such as:
– discontinuing state property tax levies for the Kansas educational building fund and the state institutions building fund.
– increasing the exemption for residential property from the statewide school levy from $40,000 to $65,000.
– excluding social security payments from household income and increase the appraised value threshold for eligibility of seniors and disabled veterans related to property tax homestead claims.
– transferring state general funds into the LAVTRF and requiring the funds to be distributed directly to residential property taxpayers.
– amending the Kansas Constitution to limit annual increases in real property valuations to 4 percent.
– 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 would allow county appraisers to waive late penalties, and to set penalties aside if the machinery and equipment was previously classified as real property. The House Tax Committee placed the contents of SB 8 into Senate Bill 127 and passed the bill out of committee favorably. Stakeholders are seeking Senate concurrence on this bill which would then be sent to the Governor.
Sales Tax Exemption on Installation Services for Reconstruction, Repair to Property
House Bill 2585 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 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.
Utility Cost Recovery Legislation
Kansas’ largest energy generating company, Evergy, introduced HB 2527, a bill that would make significant changes concerning cost recovery. The House Energy and Utilities Committee held a hearing on the bill which 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. On Thursday, the House passed the bill on a unanimous vote.
HB 2591 – would exempt the Kansas Corporation Commission from Kansas open meetings act (KOMA) concerning docketed proceedings. The bill was intended to allow the KCC members to communicate and deliberate issues without violating KOMA. This week, the bill failed 38-82 on a final action vote in the House.
HB 2597 – extending Kansas corporation commission timelines for making determinations on proposed rate-setting for electric generating or transmission facilities. The bill received a hearing in the House Energy and Utilities Committee on February 8.
HB 2736 – prohibiting the closure of an electric generation facility without a reliable and readily dispatchable replacement and notification of such closure. A similar bill, SB 517, was introduced in the Senate.
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. This week, the Senate Utilities Committee placed the contents of the bill into SB 455, a bill that would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. On Thursday, the full Senate passed SB 455 on a vote of 28-9. In addition, the House Energy Committee held a hearing on the House companion bill HB 2620.
Legislature’s Tax Proposal
In January, the Legislature passed, and sent to Governor Kelly, House Bill 2284 which includes a single (5.25 percent) income tax rate on individuals, an increase to the standard deduction, residential property tax relief, and a 0 percent sales tax rate on food beginning in April of this year. The bill, which would cost the state $550million ($1.6 billion over the first three years), was immediately vetoed by Governor Kelly due to her firm opposition to the single income tax rate provision. This week, the House attempted to override the Governor’s veto but failed by 3 votes. Alternatively, the Senate Tax Committee quickly began assembling a new tax proposal by taking the Governor’s tax bill (Senate Bill 377) and replacing the contents of that bill with some of the contents of HB 2284, to create Substitute for Senate Bill 377. Additionally, in the House Tax Committee, Representative Tom Sawyer introduced Governor Kelly’s tax plan in HB 2586. On February 21, that bill was referred to the House Committee on Interstate Cooperation.
Single Sales Factor Apportionment
Legislation was introduced in recent years to allow corporate taxpayers to elect which methodology to use when apportioning income between Kansas and other states in which they operate. Past legislation would have allowed certain taxpayers to elect to use a to apportion their corporate income tax liability. Legislation introduced this year, however, will require corporate taxpayers to use the single-sales factor apportionment formula (after a two-year phase-in period) rather than allow for an election. Three separate bills have now been introduced. The Kansas Dept. of Revenue has introduced HB 2796 and SB 507. In addition, HB 2798 was introduced by the Kansas Chamber, includes provisions that offset potential increases in tax liability for some companies, such as a “New Jersey model” tax credit for deferred tax liability. All three bills include provisions on market-based sourcing. The House Tax Committee will not meet next week so we are still waiting for a hearing on HB 2798 to be scheduled. It may be difficult for individual tax bills to advance this year until an agreement is reached on overarching tax relief legislation.
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. Senate Bill 446 was heard in the Senate Committee on Federal and State Affairs. The bill, which had many opponents, would prohibit foreign adversaries from acquiring land after July 1, 2024, unless authorized by a new state land council. HB 2766, introduced in the House, would prohibit foreign principals from countries of concern from holding any interest in certain real property in this state. Ag stakeholders are preparing amendments to that bill which would provide exemptions for CFIUS-confirmed entities. Hearings will be held on the House bills after next week.
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. The Senate Committee on Agriculture and Natural Resources held a hearing on the bill. There were a handful of proponents and one opponent – the Kansas Chapter of the Sierra Club. No further action has been taken.
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 passed the bill on a unanimous vote.
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. This week, the House passed the bill on a unanimous vote.
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 House Commerce Committee held a hearing on the bill. This week, the committee took action on the bill, amended it at the request of Kansas Agribusiness Retailers Association, and then passed the bill out favorably. The House Committee of the Whole will likely debate the bill next week.
Ethanol Blended Fuel Retailer Tax Credit
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 received strong support from the liquid motor fuels industry this week during a hearing in the House Committee on Federal and State Affairs. This week, the House Committee of the Whole passed the bill on a vote of 89-30.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. The Senate passed the bill favorably on a vote of 40-0, and a hearing has been scheduled in the House Committee on Agriculture and Natural Resources for Thursday, Feb. 29.
New Incentives For Big Tech Data Centers
The House Commerce Committee passed Sub Bill for HB 2450 to create a new economic development incentive for data centers that invest at least $600 million in the state. The bill, introduced last year, would exempt data centers from state and local sales taxes for at least 30 years, and possibly indefinitely. The exact cost of the development incentive is unknown because it’s not clear yet what kind of data center would move here or how many people it would employ. Supporters said the bill doesn’t give away tax dollars so much as it’s forfeiting sales tax dollars that would be spent in Kansas. Critics say the data centers will not employ enough people – possibly from 20 to 100 – to make the incentives worthwhile.
Train Legislation
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. Separately, 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.
CDL Military Training Waiver
Bills were introduced in the Senate SB 462 and House HB 2679 that would each waive the knowledge and skills test for a commercial driver’s license applicant when the applicant qualifies for the military even exchange program. HB 2679 was passed favorably by the House Transportation Committee, and then passed by the House on a vote of 120-0. SB 462 was passed favorably by the Senate Transportation Committee, and then passed by the Senate on a vote of 40-0.
Nuisance Abatement
Senate Bill 52 was enacted in 2021 to grant the Sedgwick County Commission authority to order the abatement of nuisances in unincorporated areas of the county, and to recover any costs incurred from the landowner. KGFA and KARA successfully amended that bill to exclude agribusiness facilities. This week, the Senate passed Senate Bill 362 which removes the sunset provision on that law. In addition, this week, the Senate passed Senate Bill 162 which would create a similar nuisance abatement authority in Riley County and Crawford County. This bill includes the agribusiness exemption in the Sedgwick County law, and an amendment with language to strengthen the agribusiness exemption.
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. It may be difficult for tax bills to find traction this year due to disagreement on overarching tax relief legislation.
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. Following a hearing in the House Judiciary Committee on January 31. The bill was blessed and may still advance this year with an agreed amendment.
House Water Committee Update
On Tuesday, Feb. 20, the House Water Committee held a hearing on HB 2695. Committee Chairman Jim Minnix (R-Scott City) indicated that in his opinion the committee had advanced three good bills this session in House Bills 2633, 2634 and 2678. The committee will not meet next week.
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 and amended it with a technical amendment. This week, the full House passed the bill on a unanimous vote.
Water Structure Licensing Fees
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, but no further action has been taken. This week the bill was “blessed” for further action by being referred to the House Committee on Appropriations.
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. 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 single city port authority income tax credit. Hearing in Senate Tax
SB 459 disqualifying commercial vehicle driving privileges when person violates drug & alcohol clearinghouse requirements
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
SB 514 Making supplemental appropriations for fiscal years 2024 and 2025 and appropriations for fiscal years 2025 and 2026 for various state agencies
SB 516 Exempting elevators owned by nonprofit organizations with a maintenance service contract for the elevator from the annual elevator safety act inspection
HB 2590 increasing maximum penalty authority for pipeline safety violations imposed by KCC
HB 2633 providing for additional sources of revenue for water pgm management fund
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
HB 2797 full transferability of tax credits for investments in certain qualified business facilities
HB 2800 enhanced state funding of conservation districts
HB 2802 Making supplemental appropriations for fiscal years 2024 and 2025 and appropriations for fiscal years 2025 and 2026 for various state agencies
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