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 C. Proffitt, Director Laura Kelly, Governor
Division of the Budget
February 16, 2024
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 2685 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2685 is
respectfully submitted to your committee.
HB 2685 would provide a sales tax exemption to all 501(c)(3) not-for-profit organizations
determined to be in good standing with the Secretary of State beginning on July 1, 2024.
The Department of Revenue estimates that HB 2685 would decrease state and local sales
tax revenue by providing a new sales tax exemption beginning in FY 2025. The bill would reduce
revenues to the State General Fund, State Highway Fund, and local governments by unknown
amounts.
The Department of Revenue reports that the Secretary of State has 21,602 business
registrations that are active and in good standing in categories that may include 501(c)(3) not-for-
profit organizations, but it does not maintain a record of those organizations with this official
classification.
The title of the bill indicates that the exemption is for registered charitable organizations.
The Attorney General maintains a charitable organization registry (KSA 17-1759). It is unclear if
Legislative intent is to limit the exemption to those organizations registered with the Secretary of
State’s business registration or the Attorney General’s charitable organization registration. As of
February 2024, the Attorney General reports 558 registered charitable organizations; however,
many charitable organizations are exempt from this registration process, such as fraternal,
patriotic, social, educational, and alumni organizations and historical societies when solicitations
are confined to their membership; charitable organizations which receive contributions of less than
$10,000 annually; incorporated community chest, united fund, or united way organizations and The Honorable Adam Smith, Chairperson
Page 2—HB 2685
organizations receiving allocations from these groups; and organizations that receive contributions
from less than 100 persons. Without knowing the number and scope of these organizations that
would qualify for this sales tax exemption based on the parameters in the bill, the Department is
unable to estimate the fiscal effect. According to the Department of Revenue, reissuing sales tax
publications and revising forms would cost $1,200 from the State General Fund in FY 2025.
The Kansas Department of Transportation indicates that the bill would reduce state
revenues to the State Highway Fund as noted above. The Secretary of State indicates the bill
would have no fiscal effect on its operations as its Business Services Division already provides
“good standing” classification on its website that is searchable and free of charge. Any fiscal effect
associated with HB 2685 is not reflected in The FY 2025 Governor’s Budget Report.
The Kansas Association of Counties and the League of Kansas Municipalities indicate the
bill would provide a net reduction to local sales tax collections that are used in part to finance local
governments.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Lynn Robinson, Department of Revenue
Brendan Yorkey, Department of Transportation
Wendi Stark, League of Kansas Municipalities
Jay Hall, Kansas Association of Counties
Sandy Tompkins, Office of the Secretary of State