10 Apr 2024 Kansas Legislative Update – First Adjournment
The legislature worked late into the night on Friday, April 5, adjourning around 3:15 a.m., on Saturday morning to wrap up the regular legislative session for 2024. A few items, however, were referred to conference committee where additional action may be taken when legislators return on April 29 for a brief, “Veto Session,” – a time when legislators generally consider taking action to override bills vetoed by the governor.
There was much activity this week, with the legislature taking final action on dozens of bills. Of note, the legislature passed a budget bill for the next few years, school funding legislation, a comprehensive tax relief bill, two other tax-related bills, workers compensation legislation and unemployment insurance legislation.
The major tax package, which did not include the controversial single individual income tax rate provision, passed the House with a unanimous vote. Governor Laura Kelly indicated she would sign a similar tax bill, which looks to provide about $1.56 billion in tax relief over the next three years.
As this is the second year of our state’s two-year legislative biennium, any bill that did not become law this year is no longer a live bill and would need to be reintroduced in 2025. This summer, the entire legislature will stand for reelection and legislators can begin campaigning following final adjournment in late April.
Key 2024 Legislative Deadlines
April 29 – Veto Session Begins
April 30 – Anticipated End of Veto Session
Ethanol Blended Fuel Retailer Tax Credit
HB 2763, introduced by POET, LLC, would have created an income tax credit for fuel retailers and distributors. The tax credit would have been $0.05/gallon for each gallon of E15 to E85 blended ethanol motor fuel sold directly to a final user. The tax credit would have a total value of no more than $5 million each year for six years. During a hearing before the House Tax Committee, the bill received multiple proponents and no opponents. Status: While the House Tax Committee did not take action on the bill, stakeholders were encouraged to bring new legislation next year.
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, but would allow a state agency, city, or county to set its own policies for purchasing their own motor vehicles. After the House passed the bill 89-30, the Senate passed the bill on a vote of 29 to 9 with 2 abstentions from Senators that each own auto dealerships. Status: Governor Laura Kelly has signed the bill into law.
CDL Military Training Waiver
SB 462 would authorize the director of vehicles to waive the knowledge and skills test for driving a commercial vehicle for an applicant that provides evidence that such applicant qualifies for the military even exchange program for commercial driver’s licenses. The House Transportation Committee amended the bill to add in the contents of HB 2682, a bill that would disqualify a person’s commercial vehicle driving privileges when such person is in noncompliance with the federal motor carriers safety administration’s drug and alcohol clearinghouse. Status: After passage by the House and the Senate, the bill was sent to Governor Laura Kelly for consideration.
Elevator Safety Act
House Bill 2826 was introduced to amend the Elevator Safety Act. The bill would amend the definition of elevator, licensure requirements, inspection and testing requirements and adoption of rules and regulations. The bill did not impact the existing exemption for elevators within grain elevators and biofuel facilities. The House placed the contents of the bill into Senate Bill 143, creating Substitute for Senate Bill 143. A conference committee between the House and Senate made minor adjustments to the bill which was passed 36-1 by the Senate and 118-2 by the House. Status: The bill will be presented to Governor Laura Kelly for consideration.
Nuisance Abatement Bills
In 2021, Senate Bill 52 was enacted 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 specifically excludes agribusiness facilities. This year, Senate Bill 362 was introduced to remove a sunset provision in that law. Status: Governor Laura Kelly signed the bill into law. In addition, Senate Bill 162 was introduced to create a similar nuisance abatement authority in Riley County and Crawford County. This bill includes the agribusiness exemption. Status: The contents of Senate Bill 162 were placed into Conference Committee Report on Senate Bill 384 and sent to Governor Laura Kelly for consideration.
Commercial Property Valuations Under IRC 1031
SB 311 would require that the sale price or value at which a property sells or transfers ownership in a federal Internal Revenue Code Section 1031 exchange would not be considered an indicator of fair market value or as a factor in arriving at fair market value for property tax valuation purposes. Federal Internal Revenue Code Section 1031 exchange transactions would not be used as comparable sales for valuation purposes or as valid sales for purposes of sales ratio studies conducted by the Director of Property Valuation at the Department of Revenue. Proponents argued that commercial properties should be valued at fair market value and not on the amount of potential income the property can generate. The contents of the bill were placed into Conference Committee Report on HB 2096. Status: The Senate passed the bill on a vote of 23-14, but the House referred the bill back to conference committee.
Utility Legislation
HB 2527 would make significant changes concerning Evergy’s cost recovery to prepare for the planned construction of a new natural gas energy generating facility. The bill would authorize the electric public utility to recover certain expenses from depreciation and construction work in progress. It would also authorize economic development electric rates for certain large electric customers, limit the time that such rates may be implemented, and extend the timeline for the state corporation commission to make a ratemaking determination and treatment prior to the utility constructing or acquiring a stake in a transmission or electric generation facility. The House adopted an agreed amendment between Evergy and ratepayer groups, and the Senate amended the bill to prohibit utilities from recovering reduced revenues from ratepayers. The bill was referred to a conference committee which added in the contents of House Bill 2588 and SB 455. 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. SB 455 would authorize electric public utilities to retain certain electric generating facilities in the utility’s rate base. The bill would also establish a presumption against retirement of fossil fuel-fired electric generating units and nuclear power generation. The House passed the Conference Committee Report HB 2527 on a vote of 119-0, and the Senate passed the measure on a vote of 33-2. Status: The bill will be presented to Governor Laura Kelly for consideration.
Eminent Domain
This session, the legislature considered eight separate measures intended to strengthen landowner rights concerning the exercise of eminent domain. The bills would have required county commission approval before exercising eminent domain authority; removed eminent domain authority from the secretary of wildlife and parks; required landowners whose land was taken by eminent domain for electric transmission lines to be compensated not less than 150 percent of fair market value; and allowed for an income tax subtraction modification for sales of property subject to eminent domain. On a unanimous vote, the legislature passed Conference Committee Report on SB 455, which prohibits public utilities from exercising eminent domain for the purpose of siting or placement of solar facilities.
Budget
The legislature passed an agreed budget bill, Senate Bill 28, for fiscal years (FY) ending 2024, 2025, 2026, and 2027. The bill contains supplemental funding in FY 2024, funding for state agencies for FY 2025, and adjustments for FY 2026 through FY 2028. Total state expenditures for FY 2024 were adjusted to $25.4 billion, including $10.0 billion in state general funds (SGF). This is an all funds increase of $1.1 billion, or 4.4 percent, and a SGF increase $1.2 billion, or 14.1 percent, above FY 2023. For FY 2025, the bill includes expenditures totaling $25.1 billion, including $10.4 billion of SGF. Major additions to the FY 2024 budget include: $24.7 million SGF to pay off the remaining balance and debt obligation for bonds; $20 million SGF to call and pay off the remaining balance of Series 2016H bonds in FY 2024 for a variety of capital improvement projects; $4.7 million SGF to pay off the remaining balance of Series 2020S bonds for the National Bio and Agro-Defense Facility and renovations to the Kansas Statehouse; $20 million, all from the State Highway Fund, for the Central Dispatch facility and a firing range with language directing the agency to purchase up to 200 acres in Salina ($900,000), construct a Central Dispatch facility ($11.0 million), and an indoor/outdoor firing range ($7.5 million); $15.7 million SGF for a Southwest border mission; $10.8 million to address the Pay Plan Shortfall in 2023; $10 million SGF for the Career Campus match for the Lansing Correctional Facility; $7 million SGF for the centralized electronic credentials verification system required by 2023 SB 66; Kansas State Department of Education expenditures; $6.2 million SGF for expenditures associated with furnishing and moving into the new KDHE laboratory building; and other items.
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. Both the House and Senate passed the bill on a unanimous vote. Status: The bill has been presented to Governor Laura Kelly for consideration.
Water Structure Licensing Fees
The Kansas Dept. of Agriculture requested introduction of HB 2526 to install graduated agency inspections of dams, based on hazard level, and provide KDA civil penalty authority for non-compliance. The bill would also allow KDA to assess registration fees and increase permit fees. The Senate included language from the bill in Senate Bill 524.
Irrigation District Board Elections
Senate Bill 524 would amend current law pertaining to the election of members of the board of directors of irrigation districts, which are not a part of groundwater management districts. The bill would amend the terms of office of board members to include a three-year term, if established by the board of directors by passage of a resolution. The Senate Committee on Ways and Means amended the bill to add language from HB 2526 regarding inspections of dams, and granting civil penalty authority to the Kansas Dept. of Agriculture for non-compliance with the water structures act. The bill would also allow KDA to assess registration fees and increase permit fees. The Senate further amended the bill to change the definition of dam and water structure, as the terms relate to agriculture use. The Senate passed SB 524 with a unanimous vote. Status: The bill did not advance further.
Comprehensive Tax Relief
This week, the legislature passed House Bill 2036, a comprehensive tax relief bill with the following provisions: restructure the individual income tax brackets and rates to provide for a two-bracket system (Married individuals filing jointly: taxed at 5.15 percent on the first $46,000 of income, and 5.55 percent on income above that. All other filers: taxed at 5.15 percent on the first $23,000 of income, and 5.55 percent on income above that); increase the standard deduction and personal exemption amounts; completely exempt social security income from taxation; increase the residential property tax exemption from the statewide school levy (from $40k to $100k), and decrease the ad valorem mills collected for schools (to 19.5 mills, currently 20 mills); establish a 0 percent sales tax on food beginning on July 1, 2024; abolish the Local Ad Valorem Tax Reduction Fund and County and City Revenue Sharing Fund; and reduce privilege tax rates on banks. The bill would reduce taxes by $1.56 billion over the next three years. Status: Governor Kelly is expected to sign the bill into law.
Single Sales Factor Apportionment
The state department of revenue (KDOR) introduced two bills this year (HB 2796 and SB 507) that would have required corporate taxpayers to use a single-sales factor apportionment formula beginning Jan. 1, 2025. These bills included market-based sourcing provisions and were essentially revenue neutral to the state. Industry stakeholders had introduced an alternative bill in HB 2798 which would have allowed for a two-year “election phase-in” of the single-sales factor apportionment formula. The bill also included provisions to offset potential increases in tax liability for some companies, such as a “New Jersey model” tax credit for deferred tax liability. The estimated cost to the state for this bill was $162 million in 2025, $87 million in 2026, and $8 million in 2027. Most of this cost is due to the delayed adoption and deferred corporate tax deduction provision and the tax liability off-set provision. The Senate Tax Committee held a hearing on SB 507, and the House Tax Committee held hearings on HB 2796 and HB 2798. Status: While neither committee ultimately took final action on these bills, stakeholders were encouraged by the Tax Committee Chairs to pursue new legislation next year.
SALT Parity
HB 2465 would amend the SALT Parity Act to clarify the determination of taxable income of an electing pass-through entity, and to provide for the passing-through of tax credits to electing pass-through entity owners. The bill clarifies that an electing pass-through entity would be subject to tax equal to 5.7 percent of the sum of each resident and nonresident electing pass-through entity’s income attributable to Kansas; and each resident electing passthrough entity owner’s pro rata or distributive share of the electing pass-through entity’s income not attributable to Kansas. The changes would be applied retroactively to tax year 2022. The contents of the bill were placed into Conference Committee Report on SB 410 and passed by the legislature. Status: The bill will be presented to Governor Laura Kelly for consideration.
Net Operating Loss Subtraction Modification
HB 2465 would create a subtraction modification allowing taxpayers who carried back federal net operating losses in tax years 2018 through 2020 pursuant to the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act to subtract such amounts from their income for purposes of determining Kansas adjusted gross income. Taxpayers would be permitted to carry forward such net operating loss for up to 20 years if the amount exceeds the Kansas adjusted gross income of the taxpayer. The bill would extend the deadline for eligible taxpayers to file amended returns for tax years 2018 through 2020 until April 15, 2025. The contents of the bill were placed into Conference Committee Report on SB 410 and passed by the legislature. Status: The bill will be presented to Governor Laura Kelly for consideration.
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 contents of the bill were placed into Conference Committee Report on SB 410 and passed by the legislature. Status: The bill will be presented to Governor Laura Kelly for consideration.
Single City Port Authority
SB 376 extends the single city port authority income tax credit, intended to keep short rail lines open on the national freight line for select customers in rural Kansas. The contents of the bill were placed into Conference Committee Report on SB 410 and passed by the legislature. Status: The bill will be presented to Governor Laura Kelly for consideration.
Personal Property Tax Exemptions
SB 484 would have exempted certain personal property, such as ATVs, watercraft, and trailers from personal property tax. The bill would have decreased local property taxes. The contents of the bill were placed into Conference Committee Report on HB 2096. Status: The Senate passed the bill on a vote of 23-14, but the House referred the bill back to conference committee.
Economic Development Program Repeal
SB 546 would have decreased the corporate income tax rate, discontinued tax credits of the high-performance incentive program (HPIP), discontinued payroll withholding tax benefits of the promoting employment across Kansas (PEAK) act and repealed unused tax credits. The Senate Tax Committee amended the bill and placed the contents of the bill into Sub for HB 2201. The bill would have reduced corporate income tax rates and repealed the following tax credits: swine facility improvement; contributions to an individual development account; business and job development; plugging abandoned oil or gas well; agritourism liability insurance; assistive technology contributions; declared disaster capital investment; environmental compliance; and owners Promoting Employment Across Kansas. Status: After passage from the Tax Committee the bill did not advance.
Foreign Ownership of Real Property
The legislature has considered multiple bills this year to increase oversight of “foreign adversaries” or “countries of concern” in Kansas. The Senate Committee on Federal and State Affairs was unable to advance its bill, SB 446, out of committee. The House passed House Sub for SB 172, a bill that would prohibit principals from countries of concern from holding or acquiring, any interest in real property in this state within 100 miles of a military installation. As amended, the bill exempts individuals and properties previously verified by the federal interagency Committee on Foreign Investment in the United States. Status: While the House passed an amended version of the bill on a vote of 84-36, the bill failed to pass in the Senate on a vote of 19-14 (a measure must receive at least 20 votes to pass). On a motion to reconsider, the bill was sent back to conference committee where it may receive further attention during the Veto Session.
Drone Technology Critical Components
Hse Sub for SB 271 would prohibit government entities in the state from acquiring drone technology with critical components from countries of concern. The bill would prohibit a government agency from purchasing, acquiring, or otherwise using any drone or any related services or equipment if the critical components were produced in any country of concern or produced or owned by any foreign principal. The bill impacts ariel drones only and not ground drones. The House passed a conference committee report on the bill on a vote of 90-30, and the Senate passed the measure on a vote of 21-12. Status: The bill will be presented to Governor Laura Kelly for consideration.
Animal and Ag Facilities Protection
SB 389 would prohibit entering or remaining on, and knowingly making false statements to gain access to, animal facilities and field crop production areas. The bill would amend current law to apply to physical trespass or making a false statement on an employment application to gain entry into an animal or ag research facility. The bill was introduced in response to the 10th Circuit U.S. Court of Appeals decision which 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. The Senate Committee on Agriculture and Natural Resources placed the contents of SB 389 into HB 2047, creating Senate Sub for House Bill 2047. Status: The bill was referred to a conference committee, but no further action was taken.
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. The House passed the bill 120-3. Status: While the Senate did not take the bill up for action, the contents of the bill may be included in the omnibus budget bill for fiscal year 2024, which will be put together and finalized during the veto session.
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. The bill raises the maximum amount of compensation benefits from $300,000 to $500,000. Find more specific information here. Both the House and Senate passed the bill with a unanimous vote. Status: The bill has been presented to Governor Laura Kelly for consideration.
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. The bill is likely to provide more than 97 percent of Kansas employers immediate savings in their unemployment tax payments. Find a detailed summary of the substitute bill here. The bill was amended to address forgiveness of certain companies’ large negative balances. Status: The bill was passed this week with a unanimous vote in the House, and only “no” vote in the Senate. The bill will soon be presented to Governor Laura Kelly for consideration.
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 passed the bill on a vote of 82-36, and the Senate passed the bill on a vote of 27-13. Status: The bill has been presented to Governor Laura Kelly for consideration.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. Following passage by the Senate, the House passed the bill on a vote of 121-1. Status: Governor Laura Kelly has signed the bill into law.
Train Length Legislation
SB 271, as introduced, would have created a maximum train length of 8500 feet. Status: The contents of the bill were removed and replaced with language prohibiting aerial drones from countries of concern.
Train Set Back Distance
The Transportation Conference Committee placed language into House Bill 2501 to adopt federal minimum set back distance standards for stored rolling stock. The bill requires a railroad to maintain a minimum distance of 250 feet between a near-edge railroad crossing and railroad rolling stock stored on sidings if the railroad crossing does not have electronic warning signals. The bill would authorize the Kansas Department of Transportation (KDOT) to determine a greater or lesser distance at a particular location and permit or order a railroad to maintain the greater or lesser distance. If physical conditions require use of a track temporarily, if or minimum distances cannot be obtained, the minimum distance provisions of the bill would not apply to: cars placed for or awaiting removal after loading or unloading; bad order cars set out from trains; and rolling stock stored on yard tracks unless otherwise ordered by KDOT. The term “rolling stock” includes rolling stock not used for the pickup or delivery of freight and where placement on the railroad-owned siding by a railroad is for the sole convenience of the railroad. Status: The bill was passed by the legislature and will be presented to Governor Laura Kelly for consideration.
Two-Man Train Crews
SB 402 was introduced to prohibit KDOT from regulating crew sizes for class II and class III railroads. Status: No action was taken, and this bill is no longer a live bill. However, this week, the U.S. Dept. of Transportation finalized a federal rule establishing minimum safety requirements for the size of train crews. The new rule requires a second crewmember on all trains. The rule permits limited exceptions for smaller railroads to continue or initiate certain one-person train crew operations by notifying FRA and complying with new federal safety standards.
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: The bill did not receive further action.
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 amended the bill to exempt nonprofit 3rd parties from the requirements. The House passed the bill on a vote of 83-39. Status: The bill was discussed in a House and Senate conference committee but did not advance further.
Defining Lead-Free Pipes and Amending Solid Waste Management Fund
Senate Bill 331 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 34-0, and the House passed the bill 122-1. Status: Governor Laura Kelly signed the bill into law.
Underground Petroleum Storage Tank Permits
Senate Bill 336 would remove the requirement for underground storage tank operating permits to be renewed annually. The bill was approved by the Senate and the House. Status: Governor Laura Kelly has signed the bill into law.
Medicaid Expansion in Kansas
Governor Kelly has made Medicaid expansion a top policy priority for her administration. The House Committee on Health and Human Services held a hearing on its Medicaid expansion bill, HB 2556. Status: No further action was taken on the issue this year.
Medical Marijuana
The Senate Committee on Federal and State Affairs held a hearing on Senate Bill 555, a bill that would create the Medical Cannabis Pilot Program Act and Pilot Program to be administered by the Secretary of Health and Environment. Under the bill, no person would be allowed to grow, harvest, process, sell, barter, transport, deliver, furnish, or otherwise possess any form of cannabis except as proved in the bill or the Commercial Industrial Hemp Act. The bill would define “qualifying medical conditions.” Following a two-hour hearing with multiple proponents and opponents, the measure was tabled for the rest of the year.