02 Mar 2024 Kansas Legislature Update – Week Eight
Following Turnaround Week in the Kansas legislature, the second half of the legislative session began with a slow start. Last week, the Republican tax cut plan died when Governor Laura Kelly vetoed it and the House failed to override the veto. In similar fashion, the governor’s tax cut proposal is effectively dead, as the Senate gutted its version of the bill and House Republicans redirected the House version to a committee that never meets.
Next steps toward any large tax relief package this session are uncertain at best, which may impact the forward progress of other unrelated tax bills. In addition, the Chairman of the House Tax Committee was involved in a farming accident last weekend and his committee is not yet scheduled to meet next week.
House Republicans this week, in an attempt to provide solutions to healthcare issues and possibly to head off calls for debate on Medicaid expansion, added $33.9 million to the state budget to increase physician provider codes, and $45.2 million to increase outpatient hospital rates. The investments are intended to increase access to care and support hospitals.
Committee work for next week so far looks light, but various committees will begin meeting to consider 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 state budget and, possibly, a tax bill.
Key 2024 Legislative Deadlines
- 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
Transformation of Passenger and Freight Vehicle Industry Act
On Thursday, the House Commerce, Labor and Economic Development Committee held a hearing on HB 2471, a bill that would enact the Transformation of Passenger and Freight Vehicle Industry Act (Act) and Program, to be administered by the Department of Commerce. The purpose of the program would be to attract businesses engaged in electric motor vehicle and hydrogen-powered vehicle production industries to build new business facilities and operations, research and development operations, or new national headquarters in Kansas and to encourage the development of a Kansas-based supply chain for those enterprises. Under the program, qualified companies would be eligible for various incentives including investment tax credits up to 10.0 percent of qualified investments, retention of up to 100.0 percent of withholding taxes, reimbursement of eligible employee training and education expenses up to $5.0 million per qualifying project, and sales tax exemptions for construction costs of a business facility until construction of the facility is completed. To be eligible, the company must hire a minimum of 250 employees, make an investment of at least $250M over five years, and meet other requirements. The Department of Revenue estimates HB 2471 would decrease State General Fund revenues by at least $10.5 million in FY 2025, $5.5 million in FY 2026 through FY 2029 and $500,000 in FY 2030 through FY 2034.
Ethanol Blended Fuel Retailer Tax Credit
HB 2763, introduced by POET, LLC, 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. Status: 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 House passed the bill on a vote of 89-30. Status: A hearing will be held soon in the Senate Committee on Federal and State Affairs.
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, referred to House Ag Committee.
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. On Senate Calendar pending consideration.
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 to prohibit public utilities from exercising eminent domain for siting solar facilitates.
HB 2691 – introduced at the request of Kansas Farm Bureau to require compensation 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. Status Update: While multiple bills have been introduced offering various proposals for residential property tax relief, none of those bills have advanced from committee.
Personal Property Tax Renditions
Senate Bill 8 would reduce penalties for the late filing, or failure to file, personal property renditions annually to the county appraiser. 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 the bill into House Sub for SB 127 and passed the bill out of committee. Status: The bill is on the House calendar pending action.
Utility Legislation
- Kansas’ largest energy generating company, Evergy, introduced HB 2527 to make significant changes concerning its cost recovery. The changes would arguably have negatively affected ratepayers. The House Energy and Utilities Committee held a hearing on the bill. Status: Following negotiations between Evergy and ratepayer groups, an agreed amendment has been reached and the Committee will take final action on the bill soon.
- HB 2588 would, among other things, 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. Find more information on the bill here. The House passed the bill on a unanimous vote. Status: The bill is scheduled for hearing in the Senate Utilities Committee on Tuesday, March 5.
- SB 455 would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. The bill includes language from SB 456 establishing a rebuttable presumption against retirement of fossil fuel-fired electric generating units. The Senate passed SB 455 on a vote of 28-9. Status: The bill has been referred to the House Committee on Energy and Utilities.
Comprehensive Tax Proposals
The House, by 3 votes, failed to override the Governor’s veto of its tax plan in HB 2284. The bill had an annual cost of $550 million and included various provisions, including 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 next month. Governor Laura Kelly was strongly opposed to the single income tax rate provision. The Senate has gutted the Governor’s alternative tax proposal and House Republicans redirected the House version of the bill to a committee that never meets. The prospect of comprehensive tax reductions for Kansans this year is not promising.
Single Sales Factor Apportionment
The Kansas Dept. of Revenue has introduced HB 2796 and SB 507 to require corporate taxpayers to use a single-sales factor apportionment formula beginning January 1, 2025. Alternatively, the Kansas Chamber introduced HB 2798 which would allow for a two-year phase in of the single-sales factor apportionment formula. It 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. Status: SB 507 is scheduled for hearing in the Senate Tax Committee on Wednesday, March 6 at 9:30 am. Hearings have not yet been scheduled for the other two bills.
Prohibiting Foreign Ownership of Real Property
Multiple bills have now been introduced to prohibit the conveyance of real property in Kansas to “foreign adversaries.” 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. Senate Bill 446, heard in the Senate Committee on Federal and State Affairs, would prohibit foreign countries from acquiring land after July 1, 2024, unless authorized by a new state land council. HB 2766, introduced in the House, would prohibit principals from countries of concern from holding or acquiring, any interest in real property in this state within 150 miles of a military installation. Status: HB 2766 is scheduled for hearing in the House Commerce Committee on Monday, March 4, where an amendment will be proposed to exempt CFIUS-confirmed entities from the bill.
Animal and Ag Facilities Protection
The 10th Circuit U.S. Court of Appeals found unconstitutional parts of a law intended to keep undercover investigators off the property of animal facilities with the intent of exposing certain activities at the facility. 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, but no further action was taken. Status: a companion House bill was introduced in HB 2816 and has been scheduled for hearing in the House Committee on Agriculture on Wednesday, March 6.
Conservation District Funding
House Bill 2800 would amend current law pertaining to conservation districts. The bill would increase the cap on the amount of funding disbursed to conservation districts from $25,000, to $50,000, beginning in FY 2025. Additionally, the bill would provide an increased matching basis for state funding disbursed to conservation districts ($2 state funding to $1 county funding) based on amounts allocated by the board of county commissioners. A hearing is scheduled in the House Agriculture and Natural Resources Committee on Wednesday, March 6.
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 and modernize elements of the administrative process. Find more specific information here. The Senate passed the bill on a unanimous vote. Status: This week, the House Commerce Committee quickly reviewed the bill, passed it out favorably, and placed it on the House Consent Calendar, avoiding further debate.
Unemployment Insurance
House Bill 2570 would make comprehensive changes to the Kansas employment security law, including defining “benefit year”, “temporary unemployment” and other terms. 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. Find more specific information here. The House passed the bill on a unanimous vote. Status: The bill is scheduled for hearing in the Seante Commerce Committee on Thursday, March 7.
Rules and Regulations
House Bill 2648 was introduced to revise the rules and regulations procedure for state agencies to increase protections for industry against burdensome, restrictive, and expensive regulations, or regulations which exceed legislative intent.. The bill requires agencies proposing new regulations with an economic impact greater than $1 million over the first five years to introduce, and pass, a bill by the full legislature. The House Commerce Committee amended the bill and passed it out favorably. Status: The full House will debate the bill next week.
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 40-0. Status: A hearing was held this week in the House Committee on Agriculture and Natural Resources.
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). Status: no further action has been taken on this bill.
Two-Man Train Crews
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, SB 402 was introduced to prohibit KDOT from regulating crew sizes for class II and class III railroads. Status: no action has been taken on this bill.
CDL Military Training Waiver
SB 462 and HB 2679 were introduced to waive the knowledge and skills test for a commercial driver’s license applicant when the applicant qualifies for the military even exchange program. Status: The House passed HB 2679 on a vote of 120-0, and the bill was referred to the Senate Committee on Transportation. Similarly, the Senate passed SB 462 unanimously and the bill was referred to the House Transportation Committee.
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. That law excludes agribusiness facilities. This year, Senate Bill 162 was introduced to create a similar nuisance abatement authority in Riley County and Crawford County. SB 162 includes the agribusiness exemption from the Sedgwick County law and was amended to strengthen that exemption. The Senate passed the bill 34-5. Status: The bill has been referred to the House Committee on Local Government.
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. Status: On Senate Calendar pending consideration.
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. A hearing was held in the House Judiciary Committee. Status: bill is still alive for further action.
House Water Committee Update
The House Water Committee is scheduled to meet on Tuesday and Thursday of next week. On Thursday, the committee will hold a hearing on SB 331 a bill removing the definition of lead-free and an exception for leaded joints in the public water supply systems law and allowing cities to receive funds for pesticide waste disposal programs from the solid waste management fund.
LEMA Corrective Controls
House Bill 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 passed the bill on a unanimous vote. Status: The bill has been referred to the Senate Committee on Agriculture and Natural Resources.
Water Structure Licensing Fees
HB 2526 would install graduated agency inspections of dams, based on hazard level, and provide KDA civil penalty authority for non-compliance. It would also allow KDA to assess registration fees and increase permit fees. The House Water Committee held a hearing on the bill. Status: The bill remains in committee and may receive further action.
Defining Lead-Free Pipes and Amending Solid Waste Management Fund
Senate Bill 331 would 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. A companion bill, HB 2486 was introduced in the House. The Senate passed SB 331 unanimously. Status: SB 331 is scheduled for hearing in the House Committee on Agriculture on Thursday, March 7.
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