Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor
Division of the Budget
January 31, 2023
The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2110 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2110 is
respectfully submitted to your committee.
HB 2110 would allow a qualifying taxpayer to elect to use a single sales factor
apportionment of business income for calculating income taxes. The qualifying taxpayer would
be required to have its principal business activity in the following industries: manufacturing,
production of electricity, storage of electricity, other scientific and technical consulting services
for biofuel facility, petroleum and petroleum products merchant wholesalers, paper and paper
product merchant wholesalers, wireless telecommunication carriers, or involved in certain
agricultural activities. The election would be effective for the taxable year of the election and the
following nine taxable years. The business electing the single sales factor apportionment would
be binding to all members of the unitary group of corporations. The election would be irrevocable
unless given permission to terminate the election by the Secretary of Revenue. The Secretary of
Revenue would be required to submit a written report concerning the number of taxpayers that
have elected the sales factor apportionment rather than the standard apportionment. The report
would be due to the House Committee on Taxation and the Senate Committee on Assessment and
Taxation on or before March 1, 2028.
Estimated State Fiscal Effect
FY 2023
SGF
FY 2023
All Funds
FY 2024
SGF
FY 2024
All Funds
Revenue -- -- ($21,900,000) ($21,900,000)
Expenditure -- -- $34,282 $34,282
FTE Pos. -- -- -- -- The Honorable Adam Smith, Chairperson
Page 2—HB 2110
The Department of Revenue estimates that HB 2110 would decrease State General Fund
revenues by $21.9 million in FY 2024, $22.5 million in FY 2025, and $23.2 million in FY 2026.
To formulate these estimates, the Department of Revenue reviewed data on the apportionment of
business income from the top 600 businesses having at least $1.0 million in taxable income and
found that 200 filers would benefit from making this election to the single sales factor
apportionment of business income. The Department estimates that businesses making this election
would reduce income taxes by approximately $21.9 million. Most of these businesses are in the
manufacturing industry. The Department indicates that it only captures self-reported North
American Industry Classification System (NAICS) codes which may affect the accuracy of the
actual NAICS codes for these businesses.
The Department of Revenue indicates that it would require a total $34,282 from the State
General Fund in FY 2024 to implement the bill and to modify the automated tax system. The
required programming for this bill by itself would be performed by existing staff of the Department
of Revenue. In addition, if the combined effect of implementing this bill and other enacted
legislation exceeds the Department’s programming resources, or if the time for implementing the
changes is too short, additional expenditures for outside contract programmer services beyond the
Department’s current budget may be required. Any fiscal effect associated with HB 2110 is not
reflected in The FY 2024 Governor’s Budget Report.
Sincerely,
Adam Proffitt
Director of the Budget
cc: Lynn Robinson, Department of Revenue