SESSION OF 2024
SUPPLEMENTAL NOTE ON SENATE SUBSTITUTE FOR
HOUSE BILL NO. 2416
As Recommended by Senate Committee on
Assessment and Taxation
Brief*
Senate Sub. for HB 2416 would enact the Adoption
Savings Account Act (Act) and establish modifications to the
Kansas adjusted gross income (KAGI) of an individual for
contributions to an adoption savings account (account).
Adoption Savings Accounts
The bill would allow an individual, on and after July 1,
2025, to open an account with a financial institution and
designate the entirety of the account as an account that
would be used to pay or reimburse a designated beneficiary’s
eligible expenses for the adoption of a child. The bill would
allow an individual to be the account holder of multiple
accounts or jointly own an account, provided the individuals
file a joint income tax return.
The bill would require the account holder, by April 15 of
the year after the taxable year in which the account holder
established the account, to designate a prospective adoptive
parent as the beneficiary of the account. The bill would not
prohibit an account holder from designating the account
holder as the designated beneficiary. An account holder
would be allowed to change the designated beneficiary at any
time, but no account could have more than one designated
beneficiary at one time. An individual could be the designated
beneficiary of more than one account if the accounts are held
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org by separate account holders, but no account holder would be
authorized to designate the same designated beneficiary on
multiple accounts held by the same account holder, except
when opening certificates of deposit.
The bill would apply the following limits to an account
established pursuant to the Act:
●Maximum contribution to an account in any tax
year:
○$6,000 for an individual; and
○$12,000 for a married couple filing a joint
return;
●Maximum amount of all contributions to an account
in all tax years:
○$48,000 for an individual; and
○$96,000 for a married couple filing a joint
return; and
●The maximum total allowable amount in an
account would be $100,000.
The bill would allow moneys to remain in an account for
an unlimited duration without the interest or income being
subject to recapture or penalty. Further, the bill would prohibit
the account holder from using moneys in an account to pay
expenses for administering the account, except for a service
fee that may be deducted by a financial institution. In addition,
the account holder would be responsible for maintaining
documentation for the account and for eligible expenses
related to the designated beneficiary’s purchase or
construction of a primary residence.
2- 2416 Account Moneys
Use of Account Moneys
The bill would allow the moneys in an account to be
used for the following:
●Eligible expenses related to a designated
beneficiary’s adoption of a child, which would
include:
○Reasonable fees for legal and other
professional services rendered in connection
with an adoption or placement for an
adoption;
○Reasonable fees of a licensed child-placing
agency;
○Actual and necessary expenses incidental to
the adoption or placement proceeding;
○Actual medical expenses of the mother
attributable to the pregnancy or birth;
○Actual medical expenses of the child; and
○Reasonable living expenses of the mother
that are incurred during or as a result of the
pregnancy;
●Eligible expenses that would have qualified
pursuant to this section, in cases in which the
adoption was not completed;
●Transfers to another newly created account;
●Investment in certificates of deposit opened and
designated as adoption savings accounts; and
●Payment of service fees assessed by the financial
institution.
3- 2416 Recapture of Account Moneys and Penalties
The bill would subject moneys withdrawn from an
account to recapture by the Secretary of Revenue (Secretary)
in the tax year in which they were withdrawn if:
●The time of withdrawal is less than a year since the
first deposit in the account; or
●The moneys are used for any purpose other than
the expenses or transactions authorized pursuant
to the uses outlined in this section.
Moneys subject to recapture would be an amount equal
to the amount withdrawn from an account and would be
added to the KAGI of the account holder or of the designated
beneficiary, if the account holder is deceased. If any moneys
are subject to recapture, the account holder would be
required to pay a penalty in the following amounts:
●If the withdrawal of moneys occurred 10 or fewer
years after the first deposit of the account, 5.0
percent of the amount subject to recapture; or
●If the withdrawal of moneys occurred more than 10
years after the first deposit in the account, 10.0
percent of the amount subject to recapture.
The penalties would not apply if the withdrawn moneys
are from an account in which the designated beneficiary is
deceased and the account holder did not designate a new
designated beneficiary during the same tax year.
Further, if the account holder or account holders are
deceased and the account does not have a surviving transfer-
on-death beneficiary, the moneys in the account resulting
from contributions or income earned from assets in the
account would be subject to recapture in the tax year of the
death or deaths, but no penalty would be assessed.
4- 2416 Reports
The bill would require the Secretary to establish forms
for an account holder to annually report information about any
accounts held by the account holder. An account holder
would be required to annually file relevant supporting
information with the account holder’s state income tax return.
The bill would require the Secretary to adopt rules and
regulations necessary to administer the Act prior to July 1,
2025.
Financial Institutions
The bill would state financial institutions would not be
required to:
●Designate an account as an adoption savings
account or designate the beneficiaries of an
account in the financial institution’s account
contracts or systems in any way;
●Track the use of moneys withdrawn from an
account; or
●Report any information to the Department of
Revenue or any other governmental agency that is
not otherwise required by law.
The bill would state financial institutions would not be
responsible or liable for:
●Determining or ensuring an account holder is
eligible for a KAGI modification;
●Determining or ensuring moneys in the account are
used for eligible expenses; or
5- 2416 ●Reporting or remitting taxes or penalties related to
the use of account moneys.
State Treasurer Marketing
The bill would grant the State Treasurer non-exclusive
authority to market the program to account holders and
financial institutions throughout the state and report on such
marketing in the Office of the State Treasurer’sannual report.
Modifications to Kansas Adjusted Gross Income of an
Individual
The bill would add, for purposes of determining the
KAGI of an individual, to the federal adjusted gross income
for all taxable years beginning after December 31, 2024:
●The amount of any contributions to, or earnings
from, an account if:
○Distributions from the account were not used
to pay for expenses or transactions
authorized by the bill; or
○Were not held for the minimum length of time
pursuant to the bill; and
●Contributions to, or earnings from, the account,
including any amount resulting from the account
holder not designating a surviving transfer-on-
death beneficiary pursuant to the bill.
The bill would also create a subtraction modification
from the federal adjusted gross income for all taxable years
beginning after December 31, 2024, in the following amounts:
●The amount contributed to an adoption savings
account in an amount not to exceed $6,000 for an
individual or $12,000 for a married couple filing a
joint return; or
6- 2416 ●Amounts received as income earned from assets in
an account.
Background
HB 2416 was introduced by the House Committee on
Taxation at the request of Representative Wasinger and
related to sales tax exemptions for certain Area Agencies on
Aging and other non-profits. These provisions were enacted
into law by 2023 HB 2002.
The Senate Committee on Assessment and Taxation
removed those contents and inserted the amended contents
of SB 494.
SB 494 (Adoption Savings Account)
SB 494 was introduced by the Senate Committee on
Assessment and Taxation at the request of Senator Blasi.
Senate Committee on Assessment and Taxation
In the Senate Committee hearing, proponent testimony
was provided by Representative Estes, Senator Blasi, and a
private citizen. The proponents generally stated the bill would
provide a vehicle for saving for adoptions, which can be
financially burdensome.
Written-only proponent testimony was provided by the
State Treasurer and representatives of Kansas Bankers
Association, Kansas Catholic Conference, Kansas Credit
Union Association, and Kansas Family Voice.
No other testimony was provided.
The Senate Committee amended the bill to increase
dollar amounts for contributions and balances in adoption
savings accounts and subtraction modifications; make
7- 2416 technical amendments to the provisions related to certificates
of deposit; and remove provisions restricting the use of funds
in adoption savings accounts to adoptions in Kansas.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department of
Revenue estimates enactment of the bill would reduce state
revenues by $200,000 in FY 2026 and by $300,000 in FY
2027. The Department also indicates the implementation of
the bill would require the Department to hire an additional 1.0
FTE (full-time equivalent) position and expend $161,401 from
the State General Fund in FY 2025 to implement and manage
the program.
A fiscal note on the amended bill was not immediately
available. Any fiscal effect associated with enactment of the
bill is not reflected in The FY 2025 Governor’s Budget Report.
Adoption; Adoption Savings Account Act; taxation; income tax; subtraction
modification
8- 2416