Statehouse INSIDER

By: Association Government Affairs

By the time the Winter issue of Seed to Silo hits your inbox the Kansas legislature will have adjourned Sine Die for the remainder of 2023. Lawmakers returned to Topeka in January and worked throughout the proceeding 90 days to evaluate numerous pieces of legislation affecting the grain and agricultural retail industries. The text on the following pages reflects the legislature’s work leading up to its first adjournment on Friday, April 7, 2023.

The final week of the 2023 regular legislative session in Kansas ended on Friday, April 7. Legislators returned on Monday, April 24 for a few days to consider bills vetoed by Governor Laura Kelly and take final action on other remaining bills of interest.

Throughout the session, Kansas Agribusiness Retailers Association (KARA) and Kansas Grain and Feed Association (KGFA) testified and lobbied on nearly 100 bills in furtherance of the associations’ respective policies.

Annual Personal Property Rendition Filing

Senate Bill 8 would reduce statutory penalties for the late filing, or failure to file, of personal property renditions to the county appraiser. KGFA testified in support of the measure and explained its importance to our industry following the 2022 Kansas Court of Appeals decision finding that grain elevator machinery and equipment should be classified as personal property rather than as fixtures to the realty. KGFA successfully amended the bill to: (1) allow county appraisers to waive late penalties, (2) require such penalties to be waived if the machinery and equipment was previously classified as real property, and (3) remove the requirement to annually file the personal property rendering unless there is a change in the property list. The Senate adopted the proposed amendments and passed the bill on a unanimous vote. The House amended the bill to add language from House Bill 2411 that would decrease penalties for failing to timely remit employee withholding taxes. The House passed Senate Bill 8, as amended, 122-2. The bill was then sent to a conference committee where contents of about a dozen other tax bills were added to it to create Conference Committee Report on Senate Bill 8.

Unfortunately, one bill that was added to Senate Bill 8 a bill known as the government competition bill, received strong opposition and barely passed the Senate 24-16, short of the 26 votes needed for a veto override. With the addition of this bill, the House passed CCR SB 8 on a vote of 76-43, well short of the 83 votes necessary for a likely veto by the Governor Laura Kelly.

While the Senate did not take final action on CCR SB 8 before adjourning, they could vote on the bill during the Veto Session on April 26, 2023.

Short Line Rail Grant Program

In 2020, the legislature passed the Eisenhower Legacy Transportation Program which included a $15 million, three-year, cost-share grant program for qualified track maintenance and improvements to short line rail and rail siding. Kansas agribusinesses have greatly benefited from this program. This year, in coordination with KDOT, KGFA introduced House Bill 2335 to restructure the Short Line Rail Improvement Fund program and combine it with KDOT’s Rail Service Improvement Fund Program. The bill dedicates $10 million annually from the state highway fund for the program. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail would be able to

Continued on page 16 apply for program funding. The measure was passed by the House 117-5, and by the Senate, 38-2. The governor has signed this legislation.

Maximum Train Length And Minimum Set Back On Rolling Stock

Senate Bill 271 would limit the length of trains on any main line or branch line to 8,500 feet and establish a minimum distance for stored rolling stock of 250 feet from the edge of a crossing. While the bill drew opposition from Class 1 rail and rail customers, the Senate Transportation Committee chairman testified as a proponent. The committee amended the bill to: (1) clarify that the 250-foot setback only applies at crossings without electronic warning signals, (2) remove KDOT’s duties under the bill, and (3) sunset the maximum train length provision on July 1, 2027. The full Senate passed the bill 27-13, but the bill was not heard in the House. The associations stressed to legislators that we would oppose the maximum train length provisions of the bill as they would disrupt the rail transportation network and that this must remain a federally regulated issue. The legislature could take further action on the bill next year.

Required Property Valuation Methodology For Grain Elevators

Senate Bill 274 would require the use of the cost approach for valuing special purpose property for property tax valuation purposes. The bill specifically includes grain elevators in its definition of special purpose properties. The Senate Tax Committee held a hearing on the bill. KGFA testified with its concerns on the legislation, and the committee did not take further action on the legislation. KGFA will meet with the proponents of the bill to amend it as necessary for next year.

Flat Single Rate Tax Bill

House Sub for Senate Bill 169 is the legislature’s major tax reduction bill this session, and makes various changes to income, sales, and residential property taxes. The bill decreases state revenues by $300 million in FY 2024, $570 million in FY 2025, and $480 million in FY 2026. The bill creates a single 5.15 percent individual income tax rate, removes the state sales tax on food, lowers the corporate income tax rate, increases the individual income tax standard deduction with a cost-of-living adjustment, removes the social security income tax cliff, lowers the bank privilege tax, and increases the amount of appraised value of residential property exempt from the statewide 20 mill school finance levy. The House passed the bill 85-38, and the Senate 24-13. The bill has been presented to the Governor for consideration, where it is likely to face a veto.

Maximum Property Valuation Annual Increase

SCR 1611 would amend section 1 of article 11 of the Kansas Constitution to limit annual increases in real property valuations to four percent. The bill was introduced as a means to help control increases in ad valorem property taxes.

The bill would require a ballot question for voters during the next state-wide election. The Senate passed the resolution on a vote of 28-11 and it is now with the House for consideration.

Property Tax Valuation Notice And Appeals

House Bill 2002 was introduced to extend reimbursement from the taxpayer notification costs fund for printing and postage costs for county clerks for 2024. The bill would also modify and prescribe the contents of the revenue neutral rate hearing notice. The House passed the bill 114-7. The Senate amended the bill to allow property owners to make payments under protest appeals even if the property owner taxpayer had previously appealed their property valuation through an informal equalization appeal. After passing the Senate 34-6, the bill was sent to a conference committee which added in the contents of a few other bills. On April 7, the Senate passed Conference Committee Report on HB 2002 on a vote of 37-0. The House may take final action on the bill during the Veto Session on April 26, 2023.

Pvd Directives In Agency Regulations

Senate Bill 263 would require all KDOR valuation directives to be set forth in agency rules and regulations. KGFA testified in support of the measure as it adds transparency to the guide revision process. The Senate Tax Committee amended the bill to give PVD more time to place its directives into regulations and then passed the bill out favorably. The bill remains on the Senate calendar where no further action has been taken.

Corporate Income Tax Apportionment

House Bill 2110 would allow corporate taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula, based on sales in the state, to determine their income tax liability. The bill is estimated to cost the state $20 million. The House Tax Committee held a hearing on the bill, where KGFA joined the Kansas Chamber of Commerce as the only proponents. The committee declined to take further action on the bill while it considered whether to adopt an amendment requested by the Kansas Dept. of Revenue that would require all corporations in the state to use the

Continued on page 18 sales single-factor apportionment formula. Most states already require use of this apportionment methodology. The bill may be taken up for further action next year.

Transmission Delivery Charges On Energy

Kansas has the highest energy rates in our region. Your associations supported multiple bills aimed at lowering those rates or stemming any increase in the rates while ensuring reliable service. House Bill 2225 was introduced to limit Evergy’s direct recovery of costs related to electric public utility transmission delivery projects. The House passed the bill with an agreed amendment between Evergy and rate payer stakeholders. The bill (1) reduces Evergy’s authorized return on equity (ROE) on local transmission projects, (2) sets up a project review process at the KCC, and (3) requires Evergy to submit testimony on competitive rates and impacts on economic development during any rate case. It is estimated the bill will provide ratepayer savings of $40 million to $45 million over three years. KARA and KGFA testified in support of this bill which passed the House and Senate overwhelmingly and was signed into law by Governor Laura Kelly.

Apprenticeship Tax Credit Act

House Bill 2292 would establish a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The tax credit would be up to $2,500 for each apprentice so employed and may be awarded to up to 20 apprentices per year. The program would be administered by the Kansas Department of Commerce. KGFA joined other stakeholders in support of the measure which passed the House 115-7. The Senate amended the bill to place a cap on the amount of the grant provision per year and added a provision that any unused balance in the fund would be transferred to the state general fund. The bill passed the Senate 30-7 and has been presented to the governor for consideration.

Right Of First Refusal

Senate Bill 68 was introduced by large state-regulated utility generating companies, such as Evergy, to allow these companies a Right-of-First-Refusal to build out new electric transmission line assets in the state. KGFA joined other utility rate payers in opposing the measure during multi-day hearings, arguing that the bill would remove competition from the build process and result in higher electric energy rates. The Senate Utilities Committee advanced the bill out of committee, but the bill was not brought up for debate by the full Senate. The bill is still alive for next year, and the Senate may schedule an interim committee this summer to discuss the matter.

Unemployment Insurance

House Bill 2401, as introduced, would (1) define the “benefit year” and “temporary unemployment” in the employment security law, (2) require electronic filing of reports for employers with 25 or more employees, and (3) extend the time required for establishment of a new account due to a business acquisition. The House Commerce Committee amended the bill by adding in language that would allow for extensions of temporary unemployment for up to 12 weeks. The House passed the bill, as amended, on a vote of 119-4. Further action may still be taken on the bill this year.

Workers Compensation Permanent Disability Benefit

Senate Bill 38 would increase the maximum Kansas workers compensation benefits payable by an employer for permanent total disability suffered by an injured employee. Under current law, the maximum workers compensation benefit payable to an employee for permanent total disability is $155,000. SB 38 would increase the amount to $350,000. Permanent total disability is paid out over time using an average weekly wage up to the statutory cap. The bill was intended to initiate conversations between labor and industry, and further action is likely to be taken on the bill next year.

State Water Plan Funding

House Bill 2302, as introduced, would have created a new funding mechanism for the state water plan fund (SWPF) by crediting 1.23 percent of state sales tax revenues (approximately $53 million) directly to the fund. The House passed the bill 119-3. The bill directs funds to two new programs for three years: $5 million to a water technical assistance fund, and $15 million to a water projects grant fund. The Senate amended the bill to pay off debt on two state reservoirs in fiscal year 2023 using a $52 million transfer from the state general fund (SGF). The Senate also removed the sales tax funding mechanism and replaced it with annual transfers of $35 million to the SWPF from SGF. This transfer is in addition to the $8 million the SWPF currently receives from SGF and EDIF, and the $12 million in fees collected annually from agricultural and municipal water users – providing for total SWPF funding of $55 million annually for five years. The bill sunsets in 5 years. The Senate passed the bill 39-1. In a conference committee, the House concurred with most of the Senate’s amendments. Both the House and Senate passed CCR on HB 2302.

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