SESSION OF 2023
SUPPLEMENTAL NOTE ON HOUSE SUBSTITUTE FOR
SENATE BILL NO. 169
As Recommended by House Committee on
Taxation
Brief*
House Sub. for SB 169 would make various changes to
income, sales, and property tax law. Specifically, the bill
would:
●Replace individual income tax brackets with a
single rate of 5.25 percent;
●Reduce corporation income and privilege tax rates
and discontinue corporate rate reductions required
by the Attracting Powerful Economic Expansion Act
(APEX);
●Expand the exemption on Social Security income;
●Increase the standard deduction for single filers
and provide for annual standard deduction
increases by a cost of living adjustment;
●Accelerate the elimination of state sales and
compensating use tax on food and food ingredients
to 0.0 percent and the associated repeal of the
food sales tax credit and disposition of revenue
changes; and
●Increase the amount of the appraised value of
residential property exempt from the statewide
uniform 20 mill school finance levy to $65,000.
____________________
*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 The bill would be in effect upon publication in the
Kansas Register.
Individual Income Tax Flat Rate
The bill would provide, beginning in tax year 2024, for a
single individual income tax rate of 5.25 percent to be applied
to all Kansas taxable income in excess of $12,300 for married
individuals filing joint returns and $6,150 for all other
individuals. Kansas taxable income less than those amounts
would not be taxed.
Corporation Income and Financial Institutions Privilege
Tax Rate Changes
The bill would reduce, beginning in tax year 2024, the
tax rates applied to corporations and financial institutions.
For corporations, the normal tax rate would be set at 3.0
percent. [Note: The normal corporate rate is currently
scheduled to be reduced from 4.0 to 3.5 percent in tax year
2024 due to an agreement under APEX.]
For banks, the normal tax rate would be reduced from
2.25 percent to 1.625 percent. For trust companies and
savings and loan associations, the normal tax rate would be
reduced from 2.25 percent to 1.61 percent for tax year 2025
and all years thereafter.
[Note: The surtaxes on corporations and financial
institutions would not be affected by the bill.]
The bill would discontinue, beginning July 1, 2024,
possible future corporate rate decreases resulting from
agreements under APEX.
2- 169 Social Security Benefit Income Taxation Cliff Phase Out
Beginning in tax year 2023, the bill would expand the
existing income tax exemption for federally taxable Social
Security benefits available to taxpayers with $75,000 or less
federal adjusted gross income (FAGI) to phase out taxpayer
eligibility for the exemption through a linear transition formula
from $75,000 in FAGI to $100,000 in FAGI.
Standard Deduction Increase and Cost of Living
Adjustment
The bill would raise the standard deduction from $3,500
to $4,000 for taxpayers filing single returns beginning in tax
year 2023, and beginning in tax year 2024, provide for all
Kansas individual income tax standard deduction amounts to
be annually increased by the cost of living adjustment
provided for by Section 1(f)3) of the Internal Revenue Code.
Food Sales Tax Changes
The bill would accelerate the reduction of the state sales
and compensating use tax rate on food and food ingredients
to 0.0 percent to July 1, 2023. [Note: Under current law, the
rate is scheduled to be reduced to 2.0 percent on January 1,
2024, and to 0.0 percent on January 1, 2025.]
The bill would raise the percentage of sales tax revenue
distributed to the State Highway Fund to 18.0 percent of sales
and use tax receipts beginning July 1, 2023.
[Note: Under current law, the proportion of sales and use
tax receipts distributed to the State Highway Fund will be
increased to 18.0 percent beginning January 1, 2025.]
The bill would sunset the food sales tax credit at the end
of tax year 2022. [Note: Under current law, the credit is
scheduled to be sunset after tax year 2024.]
3- 169 School Finance Levy Residential Exemption
The bill would increase, beginning in tax year 2023, the
amount of residential property exempt from the statewide
uniform 20 mill school finance levy from $40,000 to $65,000
of appraised value.
A formula to increase the amount of the exemption
based upon the statewide average increase in residential
valuation over the preceding ten years would be delayed in
implementation from tax year 2023 to 2024.
Background
SB 169 was introduced by the Senate Committee on
Assessment and Taxation at the request of Senator Tyson.
The bill, as introduced, would have would provided for a
single individual income tax rate of 4.75 percent, beginning in
tax year 2024. The House Committee on Taxation removed
the contents of SB 169 and inserted the contents of HB 2457.
The House Committee recommended a substitute bill with
additional amendments to the original contents of HB 2457.
The House Committee amendments:
●Replace the phase out of all Social Security
income from taxation with a provision to smooth out
the cliff from $75,000 to $100,000;
●Increase the flat tax rate to 5.25 percent and raise
minimum taxable income levels;
●Delay implementation of reductions to corporate
income and privilege taxes to FY 2024; and
●Change the effective date of the bill to publication
in the Kansas Register.
4- 169 HB 2457
HB 2457 was introduced by the House Committee on
Taxation at the request of Representative Adam Smith.
House Committee on Taxation
In the House Committee hearing, proponent testimony
was provided by representatives of Americans for Prosperity-
Kansas, the Kansas Bankers Association, and the Kansas
Chamber. Proponents generally stated the bill would provide
needed tax relief to Kansans and Kansas businesses, make
the Kansas more competitive and contribute to economic
growth, and help the State retain residents.
Written-only proponent testimony was provided by
representatives of the Kansas Association of Realtors and
Kansas Policy Institute.
Opponent testimony was provided by an economics
professor of the University of Kansas and by representatives
of Kansas Action for Children and the Kansas National
Education Association. Opponents generally stated the bill
would substantially reduce state revenues available to
provide services to Kansans and would disproportionally
benefit wealthy taxpayers.
Written-only opponent testimony was provided by a
private citizen and representatives of The Family
Conservancy, Kansas Appleseed, Kansas Interfaith Action,
and REACH Healthcare Foundation.
Neutral testimony was provided by a representative of
the Kansas League of Municipalities.
5- 169 Fiscal Information
The Department of Revenue indicates House Sub. for
SB 169 is estimated to have the following fiscal effects:
(Dollars in Millions)
FY 2024FY 2025FY 2026
Individual Income Tax Single Bracket
5.25%
$(76.0) $(254.2) $(256.8)
Corporate Rate Reductions TY 2024 (12.1) (40.6) (41.4)
Privilege Tax Rate Reductions TY 2024 (2.2) (7.3) (7.5)
Social Security Exemption Linear
Transition
(20.5) (16.0) (16.1)
Standard Deduction Increase and Indexing(19.8) (28.6) (38.3)
Food Sales Tax to 0.0% Acceleration (254.1) (122.7) -
Food Sales Tax Credit Repeal Acceleration10.3 10.3 -
Subtotal – State General Fund $(374.4) $(459.1) $(360.1)
Food Sales Tax to 0.0% Acceleration$(6.6) $ 3.6 $ -
Subtotal – State Highway Fund $(6.6) $3.6 $ -
Res. Property Tax Exempt. to $65,000$(55.6) $(58.8) $(62.3)
Subtotal – State School District
Finance Fund
$(55.6) $(58.8) $(62.3)
Total All Funds $(436.6) $(514.3) $(422.4)
The Department of Revenue also indicated the bill has
the potential to reduce revenues pledged to repay STAR
bond projects by unknown amounts beginning in FY 2025,
and the reduction in property tax revenue would require a
corresponding appropriation for State Foundation Aid from
the State General Fund in order to maintain Base Aid for
Student Excellence in the school finance formula at $5,103
for FY 2024, as included in The FY 2024 Governor’s Budget
Report.
The fiscal effect associated with enactment of the Social
Security income taxation phase out, food sales tax rate
reduction, and sales tax revenue distribution change
6- 169 provisions of the bill are partially reflected in The FY 2024
Governor’s Budget Report.
Taxation; income tax; brackets; privilege tax; surtax; rates; Social Security benefits;
phase out; sales tax; food sales tax; food sales tax credit; State Highway Fund;
property tax; mill levies; school finance; exemption
7- 169