Kansas 2023-2024 Regular Session

Kansas Senate Bill SB507 Compare Versions

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1	1	Session of 2024
2	2	SENATE BILL No. 507
3	3	By Committee on Assessment and Taxation
4	4	2-13
5	5	AN ACT concerning income tax; relating to the apportionment of income;
6	6	providing for the apportionment of business income by the single sales
7	7	factor; requiring the use of single sales factor pursuant to the multistate
8	8	tax compact; amending K.S.A. 79-3269, 79-3271, 79-3279, 79-3287,
9	9	79-4301 and 79-4302 and repealing the existing sections; also repealing
10	10	K.S.A. 79-3280, 79-3281, 79-3282, 79-3283 and 79-3284.
11	11	Be it enacted by the Legislature of the State of Kansas:
12	12	Section 1. K.S.A. 79-3269 is hereby amended to read as follows: 79-
13	13	3269. (a) As used in this section:
14	14	(1) "Administrative fee" means those amounts charged by the
15	15	professional employer organization to the client over and above amounts
16	16	applied to the mandatory state and federal taxes, wages of assigned
17	17	workers and amounts applied to premiums or contributions for benefits
18	18	provided for assigned workers.
19	19	(2) "Assigned worker" means a person having an employment
20	20	relationship with both the professional employer organization and the
21	21	client.
22	22	(3) "Client" means a person who contracts with a professional
23	23	employer organization to obtain employer services from another person
24	24	through a professional employer arrangement.
25	25	(4) "Person" means an individual, an association, a company, a firm,
26	26	a partnership, a corporation or any other form of legally recognized entity.
27	27	(5) "Professional employer arrangement" means an arrangement,
28	28	under contract or whereby:
29	29	(A) A professional employer organization agrees to employ all or a
30	30	majority of a client's workforce;
31	31	(B) the arrangement is intended to be, or is, ongoing rather than
32	32	temporary in nature;
33	33	(C) employer responsibilities for workers under the arrangement are
34	34	in fact shared by the professional employer organization and the client;
35	35	and
36	36	(D) for the purposes of this act, a professional employer arrangement
37	37	shall not include:
38	38	(i) Arrangements wherein a person, whose principal business activity
39	39	is not entering into professional employer arrangements, shares employees
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76	76	with a commonly owned company within the meaning of section 414(b)
77	77	and (c) of the federal internal revenue code of 1986, as amended, and
78	78	which does not hold itself out as a professional employer organization.
79	79	(ii) Arrangements in which a person assumes full responsibility for
80	80	the product or service performed by such person or such person's agents
81	81	and retains and exercises, both legally and in fact, a right of direction and
82	82	control over the individuals whose services are supplied under such
83	83	contractual arrangements, and such person and such person's agents
84	84	perform a specified function for the client which is separate and divisible
85	85	from the primary business or operations of the client.
86	86	(iii) Any person otherwise subject to this act if, during any fiscal year
87	87	of the person commencing after July 1, 2000, the person pays total gross
88	88	wages to employees employed by the person in the state under one or more
89	89	professional employer arrangements which do not exceed 5% of the total
90	90	gross wages paid to all employees employed by the person in the state
91	91	during the same fiscal year under all arrangements described in paragraph
92	92	(4) and that each person does not advertise or hold itself out to the public
93	93	as providing services as a professional employer organization.
94	94	(6) "Professional employer organization" means any person engaged
95	95	in providing the services of employees pursuant to one or more
96	96	professional employer arrangements or any person that represents itself to
97	97	the public as providing services pursuant to a professional employer
98	98	arrangement.
99	99	(b) (1) A professional employer organization shall be considered an
100	100	employer for the purposes of withholding state income tax of the assigned
101	101	workers pursuant to the Kansas income tax act. Commencing after
102	102	December 31, 1999, The client shall be considered as the employer of an
103	103	assigned worker under the terms of the professional employer arrangement
104	104	between the client and the professional employer organization, for
105	105	purposes of:
106	106	(1) subsection (d) of (A) K.S.A. 79-32,154(d), subsection (d) of
107	107	K.S.A. 74-50,114(d), K.S.A. 79-32,160a or K.S.A. 74-50,131, and
108	108	amendments thereto; and
109	109	(2) (B) calculating the client's payroll factor under K.S.A. 79-3283
110	110	that shall be a fraction, the numerator of which is the total amount paid in
111	111	this state during the tax period by the taxpayer for compensation, and the
112	112	denominator of which is the total compensation paid everywhere during
113	113	the tax period.
114	114	(2) The client shall provide to the department of revenue the payroll
115	115	information for assigned workers needed for purposes of administering the
116	116	above provisions.
117	117	Sec. 2. K.S.A. 79-3271 is hereby amended to read as follows: 79-
118	118	3271. As used in this act, unless the context otherwise requires:
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162	162	(a) For tax years commencing prior to January 1, 2008, "business
163	163	income" means income arising from transactions and activity in the regular
164	164	course of the taxpayer's trade or business and includes income from
165	165	tangible and intangible property if the acquisition, management, and
166	166	disposition of the property constitute integral parts of the taxpayer's
167	167	regular trade or business operations, except that a taxpayer may elect that
168	168	all income constitutes business income. For tax years commencing after
169	169	December 31, 2007, "Business income" means: (1) Income arising from
170	170	transactions and activity in the regular course of the taxpayer's trade or
171	171	business; (2) income arising from transactions and activity involving
172	172	tangible and intangible property or assets used in the operation of the
173	173	taxpayer's trade or business; or (3) income of the taxpayer that may be
174	174	apportioned to this state under the provisions of the Constitution of the
175	175	United States and laws thereof, except that a taxpayer may elect that all
176	176	income constitutes business income. Any election made under this
177	177	subsection shall be effective and irrevocable for the tax year in which the
178	178	election is made and the following nine tax years and shall be binding on
179	179	all members of a unitary group of corporations.
180	180	(b) "Commercial domicile" means the principal place from which the
181	181	trade or business of the taxpayer is directed or managed.
182	182	(c) "Compensation" means wages, salaries, commissions and any
183	183	other form of remuneration paid to employees for personal services.
184	184	(d) "Financial organization" means any bank, trust company, savings
185	185	bank, industrial bank, land bank, safe deposit company, private banker,
186	186	savings and loan association, credit union, cooperative bank, or any type
187	187	of insurance company, but such term shall not be deemed to include any
188	188	business entity, other than those hereinbefore enumerated, whose primary
189	189	business activity is making consumer loans or purchasing retail installment
190	190	contracts from one or more sellers.
191	191	(e) "Nonbusiness income" means all income other than business
192	192	income.
193	193	(f) "Public utility" means any business entity which owns or operates
194	194	for public use any plant, equipment, property, franchise, or license for the
195	195	transmission of communications, transportation of goods or persons, or the
196	196	production, storage, transmission, sale, delivery, or furnishing of
197	197	electricity, water, steam, oil, oil products or gas.
198	198	(g) "Original return" means the first return filed to report the income
199	199	of a taxpayer for a taxable year or period, irrespective of whether such
200	200	return is filed on a single entity basis or a combined basis.
201	201	(h) "Receipts" or "sales" means, except as otherwise provided in
202	202	K.S.A. 79-3285, and amendments thereto, all gross receipts of the taxpayer
203	203	not allocated under K.S.A. 79-3274 through 79-3278, and amendments
204	204	thereto.
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248	248	(i) "State" means any state of the United States, the District of
249	249	Columbia, the Commonwealth of Puerto Rico, any territory or possession
250	250	of the United States, and any foreign country or political subdivision
251	251	thereof.
252	252	(j) "Telecommunications company" means any business entity or
253	253	unitary group of entities whose primary business activity is the
254	254	transmission of communications in the form of voice, data, signals or
255	255	facsimile communications by wire or fiber optic cable.
256	256	(k) "Distressed area taxpayer" means a corporation which: (1) Is
257	257	located in a county which has a population of not more than 45,000
258	258	persons and which, as certified by the department of commerce, has
259	259	sustained an adverse economic impact due to the closure of a state hospital
260	260	in such county pursuant to the recommendations of the hospital closure
261	261	commission; and (2) which has a total annual payroll of $20,000,000 or
262	262	more for employees employed within such county.
263	263	(l) For the purposes of this subsection and subsection (b)(5) of K.S.A.
264	264	79-3279, and amendments thereto, the following terms are defined:
265	265	(1) "Administration services" include clerical, fund or shareholder
266	266	accounting, participant record keeping, transfer agency, bookkeeping, data
267	267	processing, custodial, internal auditing, legal and tax services performed
268	268	for an investment company;
269	269	(2) "distribution services" include the services of advertising,
270	270	servicing, marketing, underwriting or selling shares of an investment
271	271	company, but, in the case of advertising, servicing or marketing shares,
272	272	only where such service is performed by a person who is, or in the case of
273	273	a closed end company, was, either engaged in the services of underwriting
274	274	or selling investment company shares or affiliated with a person who is
275	275	engaged in the service of underwriting or selling investment company
276	276	shares. In the case of an open end company, such service of underwriting
277	277	or selling shares must be performed pursuant to a contract entered into
278	278	pursuant to 15 U.S.C. § 80a-15(b), as in effect on the effective date of this
279	279	act;
280	280	(3) "investment company", means any person registered under the
281	281	federal Investment Company Act of 1940, as in effect on the effective date
282	282	of this act, or a company which would be required to register as an
283	283	investment company under such act except that such person is exempt to
284	284	such registration pursuant to § 80a-3(c)(1) of such act;
285	285	(4) "investment funds service corporation" includes any corporation
286	286	or S corporation headquartered in and doing business in this state which
287	287	derives more than 50% of its gross income from the provision of
288	288	management, distribution or administration services to or on behalf of an
289	289	investment company or from trustees, sponsors and participants of
290	290	employee benefit plans which have accounts in an investment company;
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334	334	(5) "management services" include the rendering of investment
335	335	advice to an investment company making determinations as to when sales
336	336	and purchases of securities are to be made on behalf of the investment
337	337	company, or the selling or purchasing of securities constituting assets of an
338	338	investment company, and related activities, but only where such activity or
339	339	activities are performed:
340	340	(A) Pursuant to a contract with the investment company entered into
341	341	pursuant to 15 U.S.C. § 80a-15(a), in effect on the effective date of this
342	342	act; or
343	343	(B) for a person that has entered into such contract with the
344	344	investment company;
345	345	(6) "qualifying business income" is business income derived from the
346	346	provision of management, distribution or administration services to or on
347	347	behalf of an investment company or from trustees, sponsors and
348	348	participants of employee benefit plans which have accounts in an
349	349	investment company; and
350	350	(7) "residence" is the fund shareholder's primary residence address.
351	351	Sec. 3. K.S.A. 79-3279 is hereby amended to read as follows: 79-
352	352	3279. (a) All business income of railroads and interstate motor carriers of
353	353	persons or property for-hire shall be apportioned to this state by
354	354	multiplying the business income by a fraction, in the case of railroads, the
355	355	numerator of which is the freight car miles in this state and the
356	356	denominator of which is the freight car miles everywhere, and, in the case
357	357	of interstate motor carriers, the numerator of which is the total number of
358	358	miles operated in this state and the denominator of which is the total
359	359	number of miles operated everywhere.
360	360	(b) All business income of any other taxpayer shall be apportioned to
361	361	this state by one of the following methods:
362	362	(1) by multiplying the business income by a fraction, the numerator
363	363	of which is the property factor plus the payroll factor plus the sales factor,
364	364	and the denominator of which is three; or
365	365	(2) at the election of a qualifying taxpayer, by multiplying the
366	366	business income by a fraction, the numerator of which is the property
367	367	factor plus the sales factor, and the denominator of which is two.
368	368	(A) For purposes of this subsection (b)(2), a qualifying taxpayer is
369	369	any taxpayer whose payroll factor for a taxable year exceeds 200% of the
370	370	average of the property factor and the sales factor. Whenever two or more
371	371	corporations are engaged in a unitary business and required to file a
372	372	combined report, the fraction comparison provided by this subsection (b)
373	373	(2) shall be calculated by using the payroll factor, property factor and sales
374	374	factor of the combined group of unitary corporations.
375	375	(B) An election under this subsection (b)(2) shall be made by
376	376	including a statement with the original tax return indicating that the
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420	420	taxpayer elects to apply the apportionment method under this subsection
421	421	(b)(2). The election shall be effective and irrevocable for the taxable year
422	422	of the election and the following nine taxable years. The election shall be
423	423	binding on all members of a unitary group of corporations.
424	424	Notwithstanding the above, the secretary of revenue may upon the request
425	425	of the taxpayer, grant permission to terminate the election under this
426	426	subsection (b)(2) prior to expiration of the ten-year period.
427	427	(3) At the election of a qualifying telecommunications company, by
428	428	multiplying the business income by a fraction, the numerator of which is
429	429	the information carrying capacity of wire and fiber optic cable available
430	430	for use in this state, and the denominator of which is the information
431	431	carrying capacity of wire and fiber optic cable available for use
432	432	everywhere during the tax year.
433	433	(A) For purposes of this subsection (b)(3), a qualifying
434	434	telecommunications company is a telecommunications company that is a
435	435	qualifying taxpayer under paragraph (A) of subsection (b)(2).
436	436	(B) A qualifying telecommunications company shall make the
437	437	election under this subsection (b)(3) in the same manner as provided under
438	438	paragraph (B) of subsection (b)(2).
439	439	(4) At the election of a distressed area taxpayer, by multiplying the
440	440	business income by the sales factor. The election shall be made by
441	441	including a statement with the original tax return indicating that the
442	442	taxpayer elects to apply this apportionment method. The election may be
443	443	made only once, it must be made on or before December 31, 1999 and it
444	444	shall be effective for the taxable year of the election and the following nine
445	445	taxable years for so long as the taxpayer maintains the payroll amount
446	446	prescribed by subsection (j) of K.S.A. 79-3271, and amendments thereto.
447	447	(5) At the election of the taxpayer made at the time of filing of the
448	448	original return, the qualifying business income of any investment funds
449	449	service corporation organized as a corporation or S corporation which
450	450	maintains its primary headquarters and operations or is a branch facility
451	451	that employs at least 100 individuals on a full-time equivalent basis in this
452	452	state and has any investment company fund shareholders residenced in this
453	453	state shall be apportioned to this state as provided in this subsection, as
454	454	follows:
455	455	(A) By multiplying the investment funds service corporation's
456	456	qualifying business income from administration, distribution and
457	457	management services provided to each investment company by a fraction,
458	458	the numerator of which shall be the average of the number of shares
459	459	owned by the investment company's fund shareholders residenced in this
460	460	state at the beginning of and at the end of the investment company's
461	461	taxable year that ends with or within the investment funds service
462	462	corporation's taxable year, and the denominator of which shall be the
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506	506	average of the number of shares owned by the investment company's fund
507	507	shareholders everywhere at the beginning of and at the end of the
508	508	investment company's taxable year that ends with or within the investment
509	509	funds service corporation's taxable year.
510	510	(B) A separate computation shall be made to determine the qualifying
511	511	business income from each fund of each investment company. The
512	512	qualifying business income from each investment company shall be
513	513	multiplied by the fraction calculated pursuant to paragraph (A) for each
514	514	fund of such investment company.
515	515	(C) The qualifying portion of total business income of an investment
516	516	funds service corporation shall be determined by multiplying such total
517	517	business income by a fraction, the numerator of which is the gross receipts
518	518	from the provision of management, distribution and administration
519	519	services to or on behalf of an investment company, and the denominator of
520	520	which is the gross receipts of the investment funds service company. To
521	521	the extent an investment funds service corporation has business income
522	522	that is not qualifying business income, such business income shall be
523	523	apportioned to this state pursuant to subsection (b)(1).
524	524	(D) For tax year 2002, the tax liability of an investment funds service
525	525	corporation that has elected to apportion its business income pursuant to
526	526	paragraph (5) shall be increased by an amount equal to 50% of the
527	527	difference of the amount of such tax liability if determined pursuant to
528	528	subsection (b)(1) less the amount of such tax liability determined with
529	529	regard to paragraph (5).
530	530	(E) When an investment funds service corporation is part of a unitary
531	531	group, the business income of the unitary group attributable to the
532	532	investment funds service corporation shall be determined by multiplying
533	533	the business income of the unitary group by a fraction, the numerator of
534	534	which is the property factor plus the payroll factor plus the sales factor,
535	535	and the denominator of which is three. The property factor is a fraction,
536	536	the numerator of which is the average value of the investment funds
537	537	service corporation's real and tangible personal property owned or rented
538	538	and used during the tax period and the denominator of which is the
539	539	average value of the unitary group's real and tangible personal property
540	540	owned or rented and used during the tax period. The payroll factor is a
541	541	fraction, the numerator of which is the total amount paid during the tax
542	542	period by the investment funds service corporation for compensation, and
543	543	the denominator of which is the total compensation paid by the unitary
544	544	group during the tax period. The sales factor is a fraction, the numerator of
545	545	which is the total sales of the investment funds service corporation during
546	546	the tax period, and the denominator of which is the total sales of the
547	547	unitary group during the tax period.
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592	592	subsection (b)(5) of K.S.A. 79-3279, and amendments thereto, shall only
593	593	be eligible to continue to make such election if the taxpayer maintains at
594	594	least 95% of the Kansas employees in existence at the time the taxpayer
595	595	first makes such an election.
596	596	(6) At the election of a qualifying taxpayer, by multiplying such
597	597	taxpayer's business income by the sales factor. The election shall be made
598	598	by including a statement with the original tax return indicating that the
599	599	taxpayer elects to apply this apportionment method. The election may be
600	600	made only once and must be made on or before the last day of the taxable
601	601	year during which the investment described in paragraph (A) is placed in
602	602	service, but not later than December 31, 2009, and it shall be effective for
603	603	the taxable year of the election and the following nine taxable years or for
604	604	so long as the taxpayer maintains the wage requirements set forth in
605	605	paragraph (A). If the qualifying taxpayer is a member of a unitary group of
606	606	corporations, all other members of the unitary group doing business within
607	607	this state shall apportion their business income to this state pursuant to
608	608	subsection (b)(1).
609	609	(A) For purposes of this subsection, a qualifying taxpayer is any
610	610	taxpayer making an investment of $100,000,000 for construction in
611	611	Kansas of a new business facility identified under the North American
612	612	industry classification system (NAICS) subsectors of 31-33, as assigned
613	613	by the secretary of the department of labor, employing 100 or more new
614	614	employees at such facility after July 1, 2007, and prior to December 31,
615	615	2009, and meeting the following requirements for paying such employees
616	616	higher-than-average wages within the wage region for such facility:
617	617	(i) The taxpayer's new Kansas business facility with 500 or fewer
618	618	full-time equivalent employees will provide an average wage that is above
619	619	the average wage paid by all Kansas business facilities that share the same
620	620	assigned NAICS category used to develop wage thresholds and that have
621	621	reported 500 or fewer employees to the Kansas department of labor on the
622	622	quarterly wage reports;
623	623	(ii) the taxpayer's new Kansas business facility with 500 or fewer
624	624	full-time equivalent employees is the sole facility within its assigned
625	625	NAICS category that has reported wages for 500 or fewer employees to
626	626	the Kansas department of labor on the quarterly wage reports;
627	627	(iii) the taxpayer's new Kansas business facility with more than 500
628	628	full-time equivalent employees will provide an average wage that is above
629	629	the average wage paid by all Kansas business facilities that share the same
630	630	assigned NAICS category used to develop wage thresholds and that have
631	631	reported more than 500 employees to the Kansas department of labor on
632	632	the quarterly wage reports;
633	633	(iv) the taxpayer's new Kansas business facility with more than 500
634	634	full-time equivalent employees is the sole facility within its assigned
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678	678	NAICS category that has reported wages for more than 500 employees to
679	679	the Kansas department of labor on the quarterly wage reports, in which
680	680	event it shall either provide an average wage that is above the average
681	681	wage paid by all Kansas business facilities that share the same assigned
682	682	NAICS category and that have reported wages for 500 or fewer employees
683	683	to the Kansas department of labor on the quarterly wage reports, or be the
684	684	sole Kansas business facility within its assigned NAICS category that has
685	685	reported wages to the Kansas department of labor on the quarterly wage
686	686	reports;
687	687	(v) the number of NAICS digits to use in developing each set of wage
688	688	thresholds for comparison purposes shall be determined by the secretary of
689	689	commerce;
690	690	(vi) the composition of wage regions used in connection with each set
691	691	of wage thresholds shall be determined by the secretary of commerce; and
692	692	(vii) alternatively, a taxpayer may wage-qualify its new Kansas
693	693	business facility if, after excluding the headcount and wages reported on
694	694	the quarterly wage reports to the Kansas department of labor for
695	695	employees at that new Kansas business facility who own five percent or
696	696	more equity in the taxpayer, the average wage calculated for the taxpayer's
697	697	new Kansas business facility is greater than or equal to 1.5 times the
698	698	aggregate state-wide average wage paid by industries covered by the
699	699	employment security law based on data maintained by the secretary of
700	700	labor.
701	701	(B) For the purposes of the wage requirements in paragraph (A), the
702	702	number of full-time equivalent employees shall be determined by dividing
703	703	the number of hours worked by part-time employees during the pertinent
704	704	measurement interval by an amount equal to the corresponding multiple of
705	705	a 40-hour work week and adding the quotient to the average number of
706	706	full-time employees.
707	707	(C) When the qualifying taxpayer is part of a unitary group, the
708	708	business income of the unitary group attributable to the qualifying
709	709	taxpayer shall be determined by multiplying the business income of the
710	710	unitary group by a fraction, the numerator of which is the property factor
711	711	plus the payroll factor plus the sales factor, and the denominator of which
712	712	is three. The property factor is a fraction, the numerator of which is the
713	713	average value of the qualifying taxpayer's real and tangible personal
714	714	property owned or rented and used during the tax period and the
715	715	denominator of which is the average value of the unitary group's real and
716	716	tangible personal property owned or rented and used during the tax period.
717	717	The payroll factor is a fraction, the numerator of which is the total amount
718	718	paid during the tax period by the qualifying taxpayer for compensation,
719	719	and the denominator of which is the total compensation paid by the unitary
720	720	group during the tax period. The sales factor is a fraction, the numerator of
721	721	1
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764	764	which is the total sales of the qualifying taxpayer during the tax period,
765	765	and the denominator of which is the total sales of the unitary group during
766	766	the tax period.
767	767	(D) For purposes of this subsection, the secretary of revenue, upon a
768	768	showing of good cause and after receiving a certification by the secretary
769	769	of commerce of substantial compliance with provisions of this subsection
770	770	(b)(6), may extend any required performance date provided in this
771	771	subsection (b)(6) for a period not to exceed six months.
772	772	Sec. 4. K.S.A. 79-3287 is hereby amended to read as follows: 79-
773	773	3287.
774	774	Sales, other than sales of tangible personal property, are in this state if:
775	775	(a) the income-producing activity is performed in this state; or
776	776	(b) the income-producing activity is performed both in and outside
777	777	this state and a greater proportion of the income-producing activity is
778	778	performed in this state than in any other state, based on costs of
779	779	performance the taxpayer's market for the sales is in this state. The
780	780	taxpayer's market for the sales is in this state if:
781	781	(a) (1) In the case of sale of a service, if and to the extent that the
782	782	service is delivered to a location in this state;
783	783	(2) in the case of intangible property, such property is:
784	784	(A) Rented, leased or licensed, if and to the extent that the property is
785	785	used in this state, if that intangible property utilized in marketing a good
786	786	or service to a consumer is used in this state if that good or service is
787	787	purchased by a consumer who is in this state; or
788	788	(B) that is sold, if and to the extent the property is used in this state
789	789	if:
790	790	(i) A contract right, government license or similar intangible
791	791	property that authorizes the holder to conduct a business activity in a
792	792	specific geographic area is used in this state if the geographic area
793	793	includes all or part of this state; or
794	794	(ii) receipts from intangible property sales that are contingent on the
795	795	productivity, use or disposition of the intangible property shall be treated
796	796	as receipts from rental, lease or licensing of such intangible property
797	797	under paragraph (2)(A);
798	798	(3) in the case of interest from a loan:
799	799	(A) Secured by real property, if and to the extent the property is
800	800	located in this state; or
801	801	(B) not secured by real property, if and to the extent the borrower is
802	802	located in this state; or
803	803	(b) in the case of dividends, if and to the extent the payor's
804	804	commercial domicile is located in this state.
805	805	If the state or states of assignment of receipts under subsection (a)(1)
806	806	or (2) cannot be determined, the state or states of assignment shall be
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850	850	reasonably approximated. If the state or states of assignment of receipts
851	851	cannot be reasonably approximated, then such assignment of receipts shall
852	852	be excluded from the denominator of the sales factor.
853	853	The secretary of revenue may adopt rules and regulations necessary to
854	854	administer the provisions of this section.
855	855	Sec. 5. K.S.A. 79-4301 is hereby amended to read as follows: 79-
856	856	4301. "The multistate tax compact" is hereby enacted into law and entered
857	857	into with all jurisdictions legally joining therein, in the form substantially
858	858	as follows:
859	859	MULTISTATE TAX COMPACT
860	860	ARTICLE I.—Purposes
861	861	The purposes of this compact are to:
862	862	(1) Facilitate proper determination of state and local tax liability of
863	863	multistate taxpayers, including the equitable apportionment of tax bases
864	864	and settlement of apportionment disputes.
865	865	(2) Promote uniformity or compatibility in significant components of
866	866	tax systems.
867	867	(3) Facilitate taxpayer convenience and compliance in the filing of
868	868	tax returns and in other phases of tax administration.
869	869	(4) Avoid duplicative taxation.
870	870	ARTICLE II.—Definitions
871	871	As used in this compact:
872	872	(1) "State" means a state of the United States, the District of
873	873	Columbia, the Commonwealth of Puerto Rico, or any territory or
874	874	possession of the United States.
875	875	(2) "Subdivision" means any governmental unit or special district of a
876	876	state.
877	877	(3) "Taxpayer" means any corporation, partnership, firm, association,
878	878	governmental unit or agency or person acting as a business entity in more
879	879	than one state.
880	880	(4) "Income tax" means a tax imposed on or measured by net income
881	881	including any tax imposed on or measured by an amount arrived at by
882	882	deducting expenses from gross income, one or more forms of which
883	883	expenses are not specifically and directly related to particular transactions.
884	884	(5) "Capital stock tax" means a tax measured in any way by the
885	885	capital of a corporation considered in its entirety.
886	886	(6) "Gross receipts tax" means a tax, other than a sales tax, which is
887	887	imposed on or measured by the gross volume of business, in terms of gross
888	888	receipts or in other terms, and in the determination of which no deduction
889	889	is allowed which would constitute the tax an income tax.
890	890	(7) "Sales tax" means a tax imposed with respect to the transfer for a
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934	934	consideration of ownership, possession or custody of tangible personal
935	935	property or the rendering of services measured by the price of the tangible
936	936	personal property transferred or services rendered and which is required by
937	937	state or local law to be separately stated from the sales price by the seller,
938	938	or which is customarily separately stated from the sales price, but does not
939	939	include a tax imposed exclusively on the sale of a specifically identified
940	940	commodity or article or class of commodities or articles.
941	941	(8) "Use tax" means a nonrecurring tax, other than a sales tax, which
942	942	(a) is imposed on or with respect to the exercise or enjoyment of any right
943	943	or power over tangible personal property incident to the ownership,
944	944	possession or custody of that property or the leasing of that property from
945	945	another including any consumption, keeping, retention, or other use of
946	946	tangible personal property and (b) is complimentary to a sales tax.
947	947	(9) "Tax" means an income tax, capital stock tax, gross receipts tax,
948	948	sales tax, use tax, and any other tax which has a multistate impact, except
949	949	that the provisions of articles III, IV and V of this compact shall apply only
950	950	to the taxes specifically designated therein and the provisions of article IX
951	951	of this compact shall apply only in respect to determinations pursuant to
952	952	article IV.
953	953	ARTICLE III.—Elements of Income Tax Laws
954	954	(1) Taxpayer option, state and local taxes. Any taxpayer subject to an
955	955	income tax whose income is subject to apportionment and allocation for
956	956	tax purposes pursuant to the laws of a party state or pursuant to the laws of
957	957	subdivisions in two or more party states may elect to apportion and
958	958	allocate his income in the manner provided by the laws of such state or by
959	959	the laws of such states and subdivisions without reference to this compact,
960	960	or may elect to apportion and allocate in accordance with article IV. This
961	961	election for any tax year may be made in all party states or subdivisions
962	962	thereof or in any one or more of the party states or subdivisions thereof
963	963	without reference to the election made in the others. For the purposes of
964	964	this paragraph, taxes imposed by subdivisions shall be considered
965	965	separately from state taxes and the apportionment and allocation also may
966	966	be applied to the entire tax base. In no instance wherein article IV is
967	967	employed for all subdivisions of a state may the sum of all apportionments
968	968	and allocations to subdivisions within a state be greater than the
969	969	apportionment and allocation that would be assignable to that state if the
970	970	apportionment or allocation were being made with respect to a state
971	971	income tax.
972	972	(2) Taxpayer option, short form state and local taxes. Each party state
973	973	or any subdivision thereof which imposes an income tax shall provide by
974	974	law that any taxpayer required to file a return, whose only activities within
975	975	the taxing jurisdiction consist of sales and do not include owning or
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1019	1019	renting real estate or tangible personal property, and whose dollar volume
1020	1020	of gross sales made during the tax year within the state or subdivision, as
1021	1021	the case may be, is not in excess of $100,000 may elect to report and pay
1022	1022	any tax due on the basis of a percentage of such volume, and shall adopt
1023	1023	rates which shall produce a tax which reasonably approximates the tax
1024	1024	otherwise due. The multistate tax commission, not more than once in five
1025	1025	years, may adjust the $100,000 figure in order to reflect such changes as
1026	1026	may occur in the real value of the dollar, and such adjusted figure, upon
1027	1027	adoption by the commission, shall replace the $100,000 figure specifically
1028	1028	provided herein. Each party state and subdivision thereof may make the
1029	1029	same election available to taxpayers additional to those specified in this
1030	1030	paragraph.
1031	1031	(3)(2) Coverage. Nothing in this article relates to the reporting or
1032	1032	payment of any tax other than in income tax.
1033	1033	ARTICLE IV.—Division of Income
1034	1034	(1) As used in this article, unless the context otherwise requires:
1035	1035	(a) "Business income" means:
1036	1036	(i) Income arising from transactions and activity in the regular course
1037	1037	of the taxpayer's trade or business and includes income from tangible and
1038	1038	intangible property if the acquisition, management, and disposition of the
1039	1039	property constitute integral parts of the taxpayer's regular trade or business
1040	1040	operations;
1041	1041	(ii) income arising from transactions and activity involving tangible
1042	1042	and intangible property or assets used in the operation of the taxpayer's
1043	1043	trade or business; or
1044	1044	(iii) income of the taxpayer that may be apportioned to this state
1045	1045	under the provisions of the Constitution of the United States and laws
1046	1046	thereof, except that a taxpayer may elect that all income constitutes
1047	1047	business income. Any election made under this subsection shall be
1048	1048	effective and irrevocable for the tax year in which the election is made and
1049	1049	the following nine tax years and shall be binding on all members of a
1050	1050	unitary group of corporations.
1051	1051	(b) "Commercial domicile" means the principal place from which the
1052	1052	trade or business of the taxpayer is directed or managed.
1053	1053	(c) "Compensation" means wages, salaries, commissions and any
1054	1054	other form of remuneration paid to employees for personal services.
1055	1055	(d) "Financial organization" means any bank, trust company, savings
1056	1056	bank, industrial bank, land bank, safe deposit company, private banker,
1057	1057	savings and loan association, credit union, cooperative bank, small loan
1058	1058	company, sales finance company, investment company, or any type of
1059	1059	insurance company.
1060	1060	(e) "Nonbusiness income" means all income other than business
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1104	1104	income.
1105	1105	(f) "Public utility" means any business entity:
1106	1106	(1) whichThat owns or operates any plant, equipment, property,
1107	1107	franchise, or license for the transmission of communications,
1108	1108	transportation of goods or persons, except by pipeline, or the production,
1109	1109	transmission, sale, delivery, or furnishing of electricity, water or steam;
1110	1110	and
1111	1111	(2) whose rates of charges for goods or services have been
1112	1112	established or approved by a federal, state or local government or
1113	1113	governmental agency.
1114	1114	(g) "Receipts" or "sales" means all gross receipts of the taxpayer not
1115	1115	allocated under paragraphs of this article. In the case of sales of business
1116	1116	assets, other than sales of tangible personal property sold in the ordinary
1117	1117	course of the taxpayer's trade or business, only the net gain from such
1118	1118	sales shall be included in the sales factor.
1119	1119	(h) "State" means any state of the United States, the District of
1120	1120	Columbia, the Commonwealth of Puerto Rico, any territory or possession
1121	1121	of the United States, and any foreign country or political subdivision
1122	1122	thereof.
1123	1123	(i) "This state" means the state in which the relevant tax return is filed
1124	1124	or, in the case of application of this article to the apportionment and
1125	1125	allocation of income for local tax purposes, the subdivision or local taxing
1126	1126	district in which the relevant tax return is filed.
1127	1127	(2) Any taxpayer having income from business activity which is
1128	1128	taxable both within and without this state, other than activity as a financial
1129	1129	organization or public utility or the rendering of purely personal services
1130	1130	by an individual, shall allocate and apportion his net income as provided in
1131	1131	this article. If a taxpayer has income from business activity as a public
1132	1132	utility but derives the greater percentage of his income from activities
1133	1133	subject to this article, the taxpayer may elect to allocate and apportion his
1134	1134	entire net income as provided in this article.
1135	1135	(3) For purposes of allocation and apportionment of income under
1136	1136	this article, a taxpayer is taxable in another state if (1) in that state he is
1137	1137	subject to a net income tax, a franchise tax measured by net income, a
1138	1138	franchise tax for the privilege of doing business, or a corporate stock tax,
1139	1139	or (2) that state has jurisdiction to subject the taxpayer to a net income tax
1140	1140	regardless of whether, in fact, the state does or does not.
1141	1141	(4) Rents and royalties from real or tangible personal property, capital
1142	1142	gains, interest, dividends or patent or copyright royalties, to the extent that
1143	1143	they constitute nonbusiness income, shall be allocated as provided in
1144	1144	paragraphs 5 through 8 of this article. Allocable nonbusiness income shall
1145	1145	be limited to the total nonbusiness income received in excess of any
1146	1146	related expenses that have been allowed as a deduction during the income
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1189	1189	43 SB 507 15
1190	1190	year.
1191	1191	(5) (a) Net rents and royalties from real property located in this state
1192	1192	are allocable to this state.
1193	1193	(b) Net rents and royalties from tangible personal property are
1194	1194	allocable to this state: (1) If and to the extent that the property is utilized in
1195	1195	this state, or (2) in their entirety if the taxpayer's commercial domicile is in
1196	1196	this state and the taxpayer is not organized under the laws of or taxable in
1197	1197	the state in which the property is utilized.
1198	1198	(c) The extent of utilization of tangible personal property in a state is
1199	1199	determined by multiplying the rents and royalties by a fraction, the
1200	1200	numerator of which is the number of days of physical location of the
1201	1201	property in the state during the rental or royalty period in the taxable year
1202	1202	and the denominator of which is the number of days of physical location of
1203	1203	the property everywhere during all rental or royalty periods in the taxable
1204	1204	year. If the physical location of the property during the rental or royalty
1205	1205	period is unknown or unascertainable by the taxpayer, tangible personal
1206	1206	property is utilized in the state in which the property was located at the
1207	1207	time the rental or royalty payer obtained possession.
1208	1208	(6) (a) Capital gains and losses from sales of real property located in
1209	1209	this state are allocable to this state.
1210	1210	(b) Capital gains and losses from sales of tangible personal property
1211	1211	are allocable to this state if (1) the property had a situs in this state at the
1212	1212	time of the sale, or (2) the taxpayer's commercial domicile is in this state
1213	1213	and the taxpayer is not taxable in the state in which the property had a
1214	1214	situs.
1215	1215	(c) Capital gains and losses from sales of intangible personal property
1216	1216	are allocable to this state if the taxpayer's commercial domicile is in this
1217	1217	state.
1218	1218	(7) Interest and dividends are allocable to this state if the taxpayer's
1219	1219	commercial domicile is in this state.
1220	1220	(8) (a) Patent and copyright royalties are allocable to this state: (1) If
1221	1221	and to the extent that the patent or copyright is utilized by the payer in this
1222	1222	state, or (2) if and to the extent that the patent copyright is utilized by the
1223	1223	payer in a state in which the taxpayer is not taxable and the taxpayer's
1224	1224	commercial domicile is in this state.
1225	1225	(b) A patent is utilized in a state to the extent that it is employed in
1226	1226	production, fabrication, manufacturing, or other processing in the state or
1227	1227	to the extent that a patented product is produced in the state. If the basis of
1228	1228	receipts from patent royalties does not permit allocation to states or if the
1229	1229	accounting procedures do not reflect states of utilization, the patent is
1230	1230	utilized in the state in which the taxpayer's commercial domicile is located.
1231	1231	(c) A copyright is utilized in a state to the extent that printing or other
1232	1232	publication originates in the state. If the basis of receipts from copyright
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1276	1276	royalties does not permit allocation to states or if the accounting
1277	1277	procedures do not reflect states of utilization, the copyright is utilized in
1278	1278	the state in which the taxpayer's commercial domicile is located.
1279	1279	(9) All business income shall be apportioned to this state by
1280	1280	multiplying the income by a fraction, the numerator of which is the
1281	1281	property factor plus the payroll factor plus the sales factor, and the
1282	1282	denominator of which is three.
1283	1283	(10) The property factor is a fraction, the numerator of which is the
1284	1284	average value of the taxpayer's real and tangible personal property owned
1285	1285	or rented and used in this state during the tax period and the denominator
1286	1286	of which is the average value of all the taxpayer's real and tangible
1287	1287	personal property owned or rented and used during the tax period.
1288	1288	(11) Property owned by the taxpayer is valued at its original cost.
1289	1289	Property rented by the taxpayer is valued at eight times the net annual
1290	1290	rental rate. Net annual rental rate is the annual rental rate paid by the
1291	1291	taxpayer less any annual rental rate received by the taxpayer from
1292	1292	subrentals.
1293	1293	(12) The average value of property shall be determined by averaging
1294	1294	the values at the beginning and ending of the tax period but the tax
1295	1295	administrator may require the averaging of monthly values during the tax
1296	1296	period if reasonably required to reflect properly the average value of the
1297	1297	taxpayer's property.
1298	1298	(13) The payroll factor is a fraction, the numerator of which is the
1299	1299	total amount paid in this state during the tax period by the taxpayer for
1300	1300	compensation and the denominator of which is the total compensation paid
1301	1301	everywhere during the tax period.
1302	1302	(14) Compensation is paid in this state if:
1303	1303	(a) The individual's service is performed entirely within the state;
1304	1304	(b) The individual's service is performed both within and without the
1305	1305	state, but the service performed without the state is incidental to the
1306	1306	individual's service within the state; or
1307	1307	(c) Some of the service is performed in the state and (1) the base of
1308	1308	operations or, if there is no base of operations, the place from which the
1309	1309	service is directed or controlled is in the state, or (2) the base of operations
1310	1310	or the place from which the service is directed or controlled is not in any
1311	1311	state in which some part of the service is performed, but the individual's
1312	1312	residence is in this state.
1313	1313	(15)(10) The sales factor is a fraction, the numerator of which is the
1314	1314	total sales of the taxpayer in this state during the tax period, and the
1315	1315	denominator of which is the total sales of the taxpayer everywhere during
1316	1316	the tax period. In the case of sales of business assets, other than sales of
1317	1317	tangible personal property sold in the ordinary course of the taxpayer's
1318	1318	trade or business, only the net gain from such sales shall be included in
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1361	1361	43 SB 507 17
1362	1362	the sales factor.
1363	1363	(16)(11) Sales of tangible personal property are in this state if:
1364	1364	(a) The property is delivered or shipped to a purchaser, other than the
1365	1365	United States government, within this state regardless of the f.o.b. point or
1366	1366	other conditions of the sale; or
1367	1367	(b) The property is shipped from an office, store, warehouse, factory,
1368	1368	or other place of storage in this state and (1) the purchaser is the United
1369	1369	States government or (2) the taxpayer is not taxable in the state of the
1370	1370	purchaser.
1371	1371	(17)(12) Sales, other than sales of tangible personal property, are in
1372	1372	this state if:
1373	1373	(a) The income-producing activity is performed in this state; or
1374	1374	(b) The income-producing activity is performed both in and outside
1375	1375	this state and a greater proportion of the income-producing activity is
1376	1376	performed in this state than in any other state, based on costs of
1377	1377	performance the taxpayer's market for the sales is in this state. The
1378	1378	taxpayer's market for the sales is in this state if:
1379	1379	(a) In the case of sale of a service, if and to the extent the service is
1380	1380	delivered to a location in this state;
1381	1381	(b) in the case of intangible property, such property is:
1382	1382	(i) Rented, leased or licensed, if and to the extent the property is used
1383	1383	in this state, if intangible property utilized in marketing a good or service
1384	1384	to a consumer is used in this state if that good or service is purchased by a
1385	1385	consumer who is in this state; or
1386	1386	(ii) is sold, if and to the extent the property is used in this state if:
1387	1387	(A) A contract right, government license or similar intangible
1388	1388	property that authorizes the holder to conduct a business activity in a
1389	1389	specific geographic area is used in this state if the geographic area
1390	1390	includes all or part of this state; or
1391	1391	(B) receipts from intangible property sales that are contingent on the
1392	1392	productivity, use or disposition of the intangible property shall be treated
1393	1393	as receipts from rental, lease or licensing of such intangible property
1394	1394	under paragraph (b)(i);
1395	1395	(c) in the case of interest from a loan:
1396	1396	(i) Secured by real property, if and to the extent the property is
1397	1397	located in this state; or
1398	1398	(ii) not secured by real property, if and to the extent the borrower is
1399	1399	located in this state; or
1400	1400	(d) in the case of dividends, if and to the extent the payor's
1401	1401	commercial domicile is located in this state.
1402	1402	If the state or states of assignment of receipts under paragraph (a) or
1403	1403	(b) cannot be determined, the state or states of assignment shall be
1404	1404	reasonably approximated. If the state or states of assignment of receipts
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1448	1448	cannot be reasonably approximated, then such shall be excluded from the
1449	1449	denominator of the sales factor.
1450	1450	(18)(13) If the allocation and apportionment provisions of this article
1451	1451	do not fairly represent the extent of the taxpayer's business activity in this
1452	1452	state, the taxpayer may petition for or the tax administrator may require, in
1453	1453	respect to all or any part of the taxpayer's business activity, if reasonable:
1454	1454	(a) Separate accounting;
1455	1455	(b) The exclusion of any one or more of the factors;
1456	1456	(c) The inclusion of one or more additional factors which will fairly
1457	1457	represent the taxpayer's business activity in this state; or
1458	1458	(d) The employment of any other method to effectuate an equitable
1459	1459	allocation and apportionment of the taxpayer's income.
1460	1460	ARTICLE V.—Elements of Sales and Use Tax Laws
1461	1461	(1) Tax credit. Each purchaser liable for a use tax on tangible personal
1462	1462	property shall be entitled to full credit for the combined amount or
1463	1463	amounts of legally imposed sales or use taxes paid by him with respect to
1464	1464	the same property to another state and any subdivision thereof. The credit
1465	1465	shall be applied first against the amount of any use tax due the state, and
1466	1466	any unused portion of the credit shall then be applied against the amount
1467	1467	of any use tax due a subdivision.
1468	1468	(2) Exemption certificates, vendors may rely. Whenever a vendor
1469	1469	receives and accepts in good faith from a purchaser a resale or other
1470	1470	exemption certificate or other written evidence of exemption authorized by
1471	1471	the appropriate state or subdivision taxing authority, the vendor shall be
1472	1472	relieved of liability for a sales or use tax with respect to the transaction.
1473	1473	ARTICLE VI.—The Commission
1474	1474	(1) Organization and management. (a) The multistate tax commission
1475	1475	is hereby established. It shall be composed of one "member" from each
1476	1476	party state who shall be the head of the state agency charged with the
1477	1477	administration of the types of taxes to which this compact applies. If there
1478	1478	is more than one such agency the state shall provide by law for the
1479	1479	selection of the commission member from the heads of the relevant
1480	1480	agencies. State law may provide that a member of the commission be
1481	1481	represented by an alternate but only if there is on file with the commission
1482	1482	written notification of the designation and identity of the alternate. The
1483	1483	attorney general of each party state or his designee, or other counsel if the
1484	1484	laws of the party state specifically provide, shall be entitled to attend the
1485	1485	meetings of the commission, but shall not vote. Such attorneys general,
1486	1486	designees, or other counsel shall receive all notices of meetings required
1487	1487	under paragraph (1) (e) of this article.
1488	1488	(b) Each party state shall provide by law for the selection of
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1532	1532	representatives from its subdivisions affected by this compact to consult
1533	1533	with the commission member from that state.
1534	1534	(c) Each member shall be entitled to one vote. The commission shall
1535	1535	not act unless a majority of the members are present, and no action shall be
1536	1536	binding unless approved by a majority of the total number of members.
1537	1537	(d) The commission shall adopt an official seal to be used as it may
1538	1538	provide.
1539	1539	(e) The commission shall hold an annual meeting and such other
1540	1540	regular meetings as its bylaws may provide and such special meetings as
1541	1541	its executive committee may determine. The commission bylaws shall
1542	1542	specify the dates of the annual and any other regular meetings, and shall
1543	1543	provide for the giving of notice of annual, regular and special meetings.
1544	1544	Notices of special meetings shall include the reasons therefor and an
1545	1545	agenda of the items to be considered.
1546	1546	(f) The commission shall elect annually, from among its members, a
1547	1547	chairman, a vice-chairman and a treasurer. The commission shall appoint
1548	1548	an executive director who shall serve at its pleasure, and it shall fix his
1549	1549	duties and compensation. The executive director shall be secretary of the
1550	1550	commission. The commission shall make provision for the bonding of
1551	1551	such of its officers and employees as it may deem appropriate.
1552	1552	(g) Irrespective of the civil service, personnel or other merit system
1553	1553	laws of any party state, the executive director shall appoint or discharge
1554	1554	such personnel as may be necessary for the performance of the functions
1555	1555	of the commission and shall fix their duties and compensation. The
1556	1556	commission bylaws shall provide for personnel policies and programs.
1557	1557	(h) The commission may borrow, accept or contract for the services
1558	1558	of personnel from any state, the United States, or any other governmental
1559	1559	entity.
1560	1560	(i) The commission may accept for any of its purposes and functions
1561	1561	any and all donations and grants of money, equipment, supplies, materials
1562	1562	and services, conditional or otherwise, from any governmental entity, and
1563	1563	may utilize and dispose of the same.
1564	1564	(j) The commission may establish one or more offices for the
1565	1565	transacting of its business.
1566	1566	(k) The commission shall adopt bylaws for the conduct of its
1567	1567	business. The commission shall publish its bylaws in convenient form, and
1568	1568	shall file a copy of the bylaws and any amendments thereto with the
1569	1569	appropriate agency or officer in each of the party states.
1570	1570	(l) The commission annually shall make to the governor and
1571	1571	legislature of each party state a report covering its activities for the
1572	1572	preceding year. Any donation or grant accepted by the commission or
1573	1573	services borrowed shall be reported in the annual report of the
1574	1574	commission, and shall include the nature, amount and conditions, if any, of
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1618	1618	the donation, gift, grant or services borrowed and the identity of the donor
1619	1619	or lender. The commission may make additional reports as it may deem
1620	1620	desirable.
1621	1621	(2) Committees. (a) To assist in the conduct of its business when the
1622	1622	full commission is not meeting, the commission shall have an executive
1623	1623	committee of seven members, including the chairman, vice-chairman,
1624	1624	treasurer and four other members elected annually by the commission. The
1625	1625	executive committee, subject to the provisions of this compact and
1626	1626	consistent with the policies of the commission, shall function as provided
1627	1627	in the laws of the commission.
1628	1628	(b) The commission may establish advisory and technical
1629	1629	committees, membership on which may include private persons and public
1630	1630	officials, in furthering any of its activities. Such committees may consider
1631	1631	any matter of concern to the commission, including problems of special
1632	1632	interest to any party state and problems dealing with particular types of
1633	1633	taxes.
1634	1634	(c) The commission may establish such additional committees as its
1635	1635	bylaws may provide.
1636	1636	(3) Powers. In addition to powers conferred elsewhere in this
1637	1637	compact, the commission shall have power to:
1638	1638	(a) Study state and local tax systems and particular types of state and
1639	1639	local taxes.
1640	1640	(b) Develop and recommend proposals for an increase in uniformity
1641	1641	or compatibility of state and local tax laws with a view toward
1642	1642	encouraging the simplification and improvement of state and local tax law
1643	1643	and administration.
1644	1644	(c) Compile and publish information as in its judgment would assist
1645	1645	the party states in implementation of the compact and taxpayers in
1646	1646	complying with state and local tax laws.
1647	1647	(d) Do all things necessary and incidental to the administration of its
1648	1648	functions pursuant to this compact.
1649	1649	(4) Finance. (a) The commission shall submit to the governor or
1650	1650	designated officer or officers of each party state a budget of its estimated
1651	1651	expenditures for such period as may be required by the laws of that state
1652	1652	for presentation to the legislature thereof.
1653	1653	(b) Each of the commission's budget of estimated expenditures shall
1654	1654	contain specific recommendations of the amounts to be appropriated by
1655	1655	each of the party states. The total amount of appropriations requested
1656	1656	under any such budget shall be apportioned among the party states as
1657	1657	follows: One-tenth in equal shares; and the remainder in proportion of the
1658	1658	amount of revenue collected by each party state and its subdivisions from
1659	1659	income taxes, capital stock taxes, gross receipts taxes, sales and use taxes.
1660	1660	In determining such amounts, the commission shall employ such available
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1704	1704	public sources of information as, in its judgment, present the most
1705	1705	equitable and accurate comparisons among the party states. Each of the
1706	1706	commission's budgets of estimated expenditures and requests for
1707	1707	appropriations shall indicate the sources used in obtaining information
1708	1708	employed in applying the formula contained in this paragraph.
1709	1709	(c) The commission shall not pledge the credit of any party state. The
1710	1710	commission may meet any of its obligations in whole or in part with funds
1711	1711	available to it under paragraph (1) (i) of this article: Provided, That the
1712	1712	commission takes specific action setting aside such funds prior to
1713	1713	incurring any obligation to be met in whole or in part in such manner.
1714	1714	Except where the commission makes use of funds available to it under
1715	1715	paragraph (1) (i), the commission shall not incur any obligation prior to the
1716	1716	allotment of funds by the party states adequate to meet the same.
1717	1717	(d) The commission shall keep accurate accounts of all receipts and
1718	1718	disbursements. The receipts and disbursements of the commission shall be
1719	1719	subject to the audit and accounting procedures established under its
1720	1720	bylaws. All receipts and disbursements of funds handled by the
1721	1721	commission shall be audited yearly by a certified or licensed public
1722	1722	accountant and the report of the audit shall be included in and become part
1723	1723	of the annual report of the commission.
1724	1724	(e) The accounts of the commission shall be open at any reasonable
1725	1725	time for inspection by duly constituted officers of the party states and by
1726	1726	any persons authorized by the commission.
1727	1727	(f) Nothing contained in this article shall be construed to prevent
1728	1728	commission compliance with laws relating to audit or inspection of
1729	1729	accounts by or on behalf of any government contributing to the support of
1730	1730	the commission.
1731	1731	ARTICLE VII.—Uniform Regulations and Forms
1732	1732	(1) Whenever any two or more party states, or subdivisions of party
1733	1733	states, have uniform or similar provisions of law relating to an income tax,
1734	1734	capital stock tax, gross receipts tax, sales or use tax, the commission may
1735	1735	adopt uniform regulations for any phase of the administration of such law,
1736	1736	including assertion of jurisdiction to tax, or prescribing uniform tax forms.
1737	1737	The commission may also act with respect to the provisions of article IV
1738	1738	of this compact.
1739	1739	(2) Prior to the adoption of any regulation, the commission shall:
1740	1740	(a) As provided in its bylaws, hold at least one public hearing on due
1741	1741	notice to all affected party states and subdivisions thereof and to all
1742	1742	taxpayers and other persons who have made timely request of the
1743	1743	commission for advance notice of its regulation-making proceedings.
1744	1744	(b) Afford all affected party states and subdivisions and interested
1745	1745	persons an opportunity to submit relevant written data and views, which
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1789	1789	shall be considered fully by the commission.
1790	1790	(3) The commission shall submit any regulations adopted by it to the
1791	1791	appropriate officials of all party states and subdivisions to which they
1792	1792	might apply. Each such state and subdivision shall consider any such
1793	1793	regulation for adoption in accordance with its own laws and procedures.
1794	1794	ARTICLE VIII.—Interstate Audits
1795	1795	(1) This article shall be in force only in those party states that
1796	1796	specifically provide therefor by statute.
1797	1797	(2) Any party state or subdivision thereof desiring to make or
1798	1798	participate in an audit of any accounts, books, papers, records or other
1799	1799	documents may request the commission to perform the audit on its behalf.
1800	1800	In responding to the request, the commission shall have access to and may
1801	1801	examine, at any reasonable time, such accounts, books, papers, records,
1802	1802	and other documents and any relevant property or stock of merchandise.
1803	1803	The commission may enter into agreements with party states or their
1804	1804	subdivisions for assistance in performance of the audit. The commission
1805	1805	shall make charges, to be paid by the state or local government or
1806	1806	governments for which it performs the service, for any audits performed
1807	1807	by it in order to reimburse itself for the actual costs incurred in making the
1808	1808	audit.
1809	1809	(3) The commission may require the attendance of any person within
1810	1810	the state where it is conducting an audit or part thereof at a time and place
1811	1811	fixed by it within such state for the purpose of giving testimony with
1812	1812	respect to any account, book, paper, document, other record, property or
1813	1813	stock of merchandise being examined in connection with the audit. If the
1814	1814	person is not within the jurisdiction, he may be required to attend for such
1815	1815	purpose at any time and place fixed by the commission within the state of
1816	1816	which he is a resident: Provided, That such state has adopted this article.
1817	1817	(4) The commission may apply to any court having power to issue
1818	1818	compulsory process for orders in aid of its powers and responsibilities
1819	1819	pursuant to this article and any and all such courts shall have jurisdiction
1820	1820	to issue such orders. Failure of any person to obey any such order shall be
1821	1821	punishable as contempt of the issuing court. If the party or subject matter
1822	1822	on account of which the commission seeks an order is within the
1823	1823	jurisdiction of the court to which application is made, such application
1824	1824	may be to a court in the state or subdivision on behalf of which the audit is
1825	1825	being made or a court in the state in which the object of the order being
1826	1826	sought is situated. The provisions of this paragraph apply only to courts in
1827	1827	a state that has adopted this article.
1828	1828	(5) The commission may decline to perform any audit requested if it
1829	1829	finds that its available personnel or other resources are insufficient for the
1830	1830	purpose or that, in the terms requested, the audit is impracticable of
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1874	1874	satisfactory performance. If the commission, on the basis of its experience,
1875	1875	has reason to believe that an audit of a particular taxpayer, either at a
1876	1876	particular time or on a particular schedule, would be of interest to a
1877	1877	number of party states or their subdivisions, it may offer to make the audit
1878	1878	or audits, the offer to be contingent on sufficient participation therein as
1879	1879	determined by the commission.
1880	1880	(6) Information obtained by any audit pursuant to this article shall be
1881	1881	confidential and available only for tax purposes to party states, their
1882	1882	subdivisions or the United States. Availability of information shall be in
1883	1883	accordance with the laws of the states or subdivisions on whose account
1884	1884	the commission performs the audit, and only through the appropriate
1885	1885	agencies or officers of such states or subdivisions. Nothing in this article
1886	1886	shall be construed to require any taxpayer to keep records for any period
1887	1887	not otherwise required by law.
1888	1888	(7) Other arrangements made or authorized pursuant to law for
1889	1889	cooperative audit by or on behalf of the party states or any of their
1890	1890	subdivisions are not superseded or invalidated by this article.
1891	1891	(8) In no event shall the commission make any charge against a
1892	1892	taxpayer for an audit.
1893	1893	(9) As used in this article, "tax," in addition to the meaning ascribed
1894	1894	to it in article II, means any tax or license fee imposed in whole or in part
1895	1895	for revenue purposes.
1896	1896	ARTICLE IX.—Arbitration
1897	1897	(1) Whenever the commission finds a need for settling disputes
1898	1898	concerning apportionments and allocations by arbitration, it may adopt a
1899	1899	regulation placing this article in effect, notwithstanding the provisions of
1900	1900	article VII.
1901	1901	(2) The commission shall select and maintain an arbitration panel
1902	1902	composed of officers and employees of state and local governments and
1903	1903	private persons who shall be knowledgeable and experienced in matters of
1904	1904	tax law and administration.
1905	1905	(3) Whenever a taxpayer who has elected to employ article IV, or
1906	1906	whenever the laws of the party state or subdivision thereof are
1907	1907	substantially identical with the relevant provisions of article IV, the
1908	1908	taxpayer, by written notice to the commission and to each party state or
1909	1909	subdivision thereof that would be affected, may secure arbitration of an
1910	1910	apportionment or allocation, if he is dissatisfied with the final
1911	1911	administrative determination of the tax agency of the state or subdivision
1912	1912	with respect thereto on the ground that it would subject him to double or
1913	1913	multiple taxation by two or more party states or subdivisions thereof. Each
1914	1914	party state and subdivision thereof hereby consents to the arbitration as
1915	1915	provided herein, and agrees to be bound thereby.
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1959	1959	(4) The arbitration board shall be composed of one person selected by
1960	1960	the taxpayer, one by the agency or agencies involved, and one member of
1961	1961	the commission's arbitration panel. If the agencies involved are unable to
1962	1962	agree on the person to be selected by them, such person shall be selected
1963	1963	by lot from the total membership of the arbitration panel. The two persons
1964	1964	selected for the board in the manner provided by the foregoing provisions
1965	1965	of this paragraph shall jointly select the third member of the board. If they
1966	1966	are unable to agree on the selection, the third member shall be selected by
1967	1967	lot from among the total membership of the arbitration panel. No member
1968	1968	of a board selected by lot shall be qualified to serve if he is an officer or
1969	1969	employee or is otherwise affiliated with any party to the arbitration
1970	1970	proceeding. Residence within the jurisdiction of a party to the arbitration
1971	1971	proceeding shall not constitute affiliation within the meaning of this
1972	1972	paragraph.
1973	1973	(5) The board may sit in any state or subdivision party to the
1974	1974	proceeding, in the state of the taxpayer's incorporation, residence or
1975	1975	domicile, in any state where the taxpayer does business, or in any place
1976	1976	that it finds most appropriate for gaining access to evidence relevant to the
1977	1977	matter before it.
1978	1978	(6) The board shall give due notice of the times and places of its
1979	1979	hearings. The parties shall be entitled to be heard, to present evidence, and
1980	1980	to examine and cross-examine witnesses. The board shall act by majority
1981	1981	vote.
1982	1982	(7) The board shall have power to administer oaths, take testimony,
1983	1983	subpoena and require the attendance of witnesses and the production of
1984	1984	accounts, books, papers, records, and other documents, and issue
1985	1985	commissions to take testimony. Subpoenas may be signed by any member
1986	1986	of the board. In case of failure to obey a subpoena, and upon application
1987	1987	by the board, any judge of a court of competent jurisdiction of the state in
1988	1988	which the board is sitting or in which the person to whom the subpoena is
1989	1989	directed may be found may make an order requiring compliance with the
1990	1990	subpoena, and the court may punish failure to obey the order as a
1991	1991	contempt. The provisions of this paragraph apply only in states that have
1992	1992	adopted this article.
1993	1993	(8) Unless the parties otherwise agree the expenses and other costs of
1994	1994	the arbitration shall be assessed and allocated among the parties by the
1995	1995	board in such manner as it may determine. The commission shall fix a
1996	1996	schedule of compensation for members of arbitration boards and of other
1997	1997	allowable expenses and costs. No officer or employee of a state or local
1998	1998	government who serves as a member of a board shall be entitled to
1999	1999	compensation therefor unless he is required on account of his service to
2000	2000	forego the regular compensation attaching to his public employment, but
2001	2001	any such board member shall be entitled to expenses.
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2045	2045	(9) The board shall determine the disputed apportionment or
2046	2046	allocation and any matters necessary thereto. The determinations of the
2047	2047	board shall be final for purposes of making the apportionment or
2048	2048	allocation, but for no other purpose.
2049	2049	(10) The board shall file with the commission and with each tax
2050	2050	agency represented in the proceeding: The determination of the board; the
2051	2051	board's written statement of its reasons therefor; the record of the board's
2052	2052	proceedings; and any other documents required by the arbitration rules of
2053	2053	the commission to be filed.
2054	2054	(11) The commission shall publish the determinations of boards
2055	2055	together with the statements of the reasons therefor.
2056	2056	(12) The commission shall adopt and publish rules of procedure and
2057	2057	practice and shall file a copy of such rules and of any amendment thereto
2058	2058	with the appropriate agency or officer in each of the party states.
2059	2059	(13) Nothing contained herein shall prevent at any time a written
2060	2060	compromise of any matter or matters in dispute, if otherwise lawful, by the
2061	2061	parties to the arbitration proceeding.
2062	2062	ARTICLE X.—Entry Into Force and Withdrawal
2063	2063	(1) This compact shall enter into force when enacted into law by any
2064	2064	seven states. Thereafter, this compact shall become effective as to any
2065	2065	other state upon its enactment thereof. The commission shall arrange for
2066	2066	notification of all party states whenever there is a new enactment of the
2067	2067	compact.
2068	2068	(2) Any party state may withdraw from this compact by enacting a
2069	2069	statute repealing the same. No withdrawal shall affect any liability already
2070	2070	incurred by or chargeable to a party state prior to the time of such
2071	2071	withdrawal.
2072	2072	(3) No proceeding commenced before an arbitration board prior to the
2073	2073	withdrawal of a state and to which the withdrawing state or any
2074	2074	subdivision thereof is a party shall be discontinued or terminated by the
2075	2075	withdrawal, nor shall the board thereby lose jurisdiction over any of the
2076	2076	parties to the proceeding necessary to make a binding determination
2077	2077	therein.
2078	2078	ARTICLE XI.—Effect on Other Laws and Jurisdiction
2079	2079	Nothing in this compact shall be construed to:
2080	2080	(a) Affect the power of any state or subdivision thereof to fix rates of
2081	2081	taxation, except that a party state shall be obligated to implement article III
2082	2082	(2) (1) of this compact.
2083	2083	(b) Apply to any tax or fixed fee imposed for the registration of a
2084	2084	motor vehicle or any tax on motor fuel, other than a sales tax: Provided,
2085	2085	That the definition of "tax" in article VIII (9) may apply for the purposes
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2129	2129	of that article and the commission's powers of study and recommendation
2130	2130	pursuant to article VI (3) may apply.
2131	2131	(c) Withdraw or limit the jurisdiction of any state or local court or
2132	2132	administrative officer or body with respect to any person, corporation or
2133	2133	other entity or subject matter, except to the extent that such jurisdiction is
2134	2134	expressly conferred by or pursuant to this compact upon another agency or
2135	2135	body.
2136	2136	(d) Supersede or limit the jurisdiction of any court of the United
2137	2137	States.
2138	2138	ARTICLE XII.—Construction and Severability
2139	2139	This compact shall be liberally construed so as to effectuate the
2140	2140	purposes thereof. The provisions of this compact shall be severable and if
2141	2141	any phrase, clause, sentence or provision of this compact is declared to be
2142	2142	contrary to the constitution of any state or of the United States or the
2143	2143	applicability thereof to any government, agency, person or circumstance is
2144	2144	held invalid, the validity of the remainder of this compact and the
2145	2145	applicability thereof to any government, agency, person or circumstance
2146	2146	shall not be affected thereby. If this compact shall be held contrary to the
2147	2147	constitution of any state participating therein, the compact shall remain in
2148	2148	full force and effect as to the remaining party states and in full force and
2149	2149	effect as to the state affected as to all severable matters.
2150	2150	Sec. 6. K.S.A. 79-4302 is hereby amended to read as follows: 79-
2151	2151	4302. The provisions of article III (2) (1) of the multistate tax compact [,
2152	2152	K.S.A. 79-4301], and amendments thereto, shall apply to the Kansas
2153	2153	income tax act and to every income tax hereafter adopted by any taxing
2154	2154	subdivision of this state. It is the intent of the legislature that the
2155	2155	provisions of articles III and IV of the multistate tax compact supplement
2156	2156	the Kansas income tax act and any income tax hereafter adopted by any
2157	2157	taxing subdivision of this state and not as an alternative method of
2158	2158	allocating and apportioning income or classifying income in a manner
2159	2159	other than as specified in the Kansas income tax act or any income tax
2160	2160	hereafter adopted by any taxing subdivision of this state. Any amendments
2161	2161	to the Kansas income tax act or any income tax hereafter adopted by any
2162	2162	taxing subdivision of this state shall, where applicable, be deemed to have
2163	2163	repealed any provisions of the multistate tax compact that are inconsistent
2164	2164	with such amendments. In the event of a conflict between the Kansas
2165	2165	income tax act or any income tax hereafter adopted by any taxing
2166	2166	subdivision of this state and the provisions contained in the multistate tax
2167	2167	compact, the Kansas income tax act or income tax hereafter adopted by
2168	2168	any taxing subdivision of this state shall apply.
2169	2169	Sec. 7. K.S.A. 79-3269, 79-3271, 79-3279, 79-3280, 79-3281, 79-
2170	2170	3282, 79-3283, 79-3284, 79-3287, 79-4301 and 79-4302 are hereby
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2214	2214	repealed.
2215	2215	Sec. 8. This act shall take effect and be in force from and after
2216	2216	January 1, 2025, and its publication in the statute book.
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