Kansas 2025-2026 Regular Session

Kansas House Bill HB2336 Compare Versions

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1	1	Session of 2025
2	2	HOUSE BILL No. 2336
3	3	By Committee on Taxation
4	4	Requested by by Eric Stafford on behalf of the Kansas Chamber of Commerce
5	5	2-7
6	6	AN ACT concerning taxation; relating to income and privilege taxes;
7	7	providing for the apportionment of business income by the single sales
8	8	factor and the apportionment of financial institution income by the
9	9	receipts factor; establishing deductions from income when using the
10	10	single sales factor and receipts factor; providing for the decrease in
11	11	corporate income tax rates; determining when sales other than tangible
12	12	personal property are made in the state; excluding sales of a unitary
13	13	business group of electric and natural gas public utilities; amending
14	14	K.S.A. 79-1129, 79-3271, 79-3279 and 79-3287 and K.S.A. 2024 Supp.
15	15	79-32,110 and 79-32,113 and repealing the existing sections.
16	16	Be it enacted by the Legislature of the State of Kansas:
17	17	New Section 1. (a) Commencing with fiscal year 2026, the director of
18	18	the budget, in consultation with the director of legislative research, shall
19	19	certify, at the end of each such fiscal year, the amount of actual corporate
20	20	income tax receipt revenues generated pursuant to K.S.A. 79-32,110(c),
21	21	and amendments thereto, that is in excess of the prior fiscal year's
22	22	corporate income tax receipts. The director of the budget shall transmit
23	23	such certification to the secretary of revenue. Upon receipt of such
24	24	certification, the secretary shall compute the reduction of the corporate
25	25	income tax rate pursuant to K.S.A. 79-32,110(c), and amendments thereto.
26	26	The certified amount shall be computed in dollars by the secretary for a
27	27	reduction rounded down to the nearest 0.1% in the corporate income tax
28	28	rate, if any, to go into effect for the next calendar year that would reduce
29	29	the corporate income tax rate in an amount approximately equal to the
30	30	amount computed by the secretary. The secretary shall reduce the normal
31	31	tax on corporations. Such rate reductions shall remain in effect unless
32	32	further reduced pursuant to law.
33	33	(b) The secretary shall publish by October 1, 2027, the new income
34	34	tax rates to take effect on January 1, 2028.
35	35	Sec. 2. K.S.A. 79-1129 is hereby amended to read as follows: 79-
36	36	1129. (a) Except as otherwise specifically provided, a financial institution
37	37	whose business activity is taxable both within and without this state shall
38	38	allocate and apportion its net income as provided in this act. All items of
39	39	nonbusiness income, income which is not includable in the apportionable
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75	75	income tax base, shall be allocated pursuant to the provisions of K.S.A.
76	76	79-3274 through 79-3278 and amendments thereto. A financial institution
77	77	organized under the laws of a foreign country, the commonwealth of
78	78	Puerto Rico, or a territory or possession of the United States whose
79	79	effectively connected income, as defined under the federal internal revenue
80	80	code, is taxable both within this state and within another state, other than
81	81	the state in which it is organized, shall allocate and apportion its net
82	82	income as provided in this act and its apportionment factors shall include
83	83	the part of its property, payroll and receipts that is related to its
84	84	apportionable income.
85	85	(b) (1) For taxable years prior to January 1, 2028, all business
86	86	income shall be apportioned as follows:
87	87	(A) All business income, income which is includable in the
88	88	apportionable income tax base, shall be apportioned to this state by
89	89	multiplying such income by the apportionment percentage. The
90	90	apportionment percentage is determined by adding the taxpayer's receipts
91	91	factor, as described in K.S.A. 79-1130, and amendments thereto, property
92	92	factor, as described in K.S.A. 79-1131, and amendments thereto, and
93	93	payroll factor, as described in K.S.A. 79-1132, and amendments thereto,
94	94	together and dividing the sum by three. If one of the factors is missing, the
95	95	two remaining factors are added and the sum is divided by two. If two of
96	96	the factors are missing, the remaining factor is the apportionment
97	97	percentage. A factor is missing if both its numerator and denominator are
98	98	zero, but it is not missing merely because its numerator is zero.
99	99	(B) (i) For tax years commencing on or after January 1, 2025, and
100	100	ending before January 1, 2028, at the election of the taxpayer, all business
101	101	income that is includable in the apportionable income tax base, may be
102	102	apportioned to this state by the taxpayer's receipts factor, as described in
103	103	K.S.A. 79-1130, and amendments thereto.
104	104	(ii) An election under this subparagraph shall be made by including
105	105	a statement with the original tax return for which the election is made
106	106	indicating that the taxpayer elects to apply this apportionment method.
107	107	The election shall be effective and irrevocable for the taxable year of the
108	108	election and shall be binding on all members of a unitary group of
109	109	corporations.
110	110	(2) For tax years commencing on or after January 1, 2028, all
111	111	business income shall be apportioned to this state by multiplying the
112	112	business income by the receipts factor.
113	113	(c) Each factor shall be computed according to the method of
114	114	accounting, cash or accrual basis, used by the taxpayer for the taxable year.
115	115	(d) If the allocation and apportionment provisions of this act do not
116	116	fairly represent the extent of the taxpayer's business activity in this state,
117	117	the taxpayer may petition for or the secretary of revenue may require, in
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161	161	respect to all or any part of the taxpayer's business activity, if reasonable:
162	162	(1) Separate accounting;
163	163	(2) the exclusion of any one or more of the factors;
164	164	(3) the inclusion of one or more additional factors which will fairly
165	165	represent the taxpayer's business activity in this state; or
166	166	(4) the employment of any other method to effectuate an equitable
167	167	allocation and apportionment of the taxpayer's income.
168	168	(e) In the event a combined report is utilized to determine the Kansas
169	169	income attributable to a unitary group of financial institutions, the
170	170	financial institutions in the combined group shall include only those
171	171	institutions which have a branch or office in Kansas.
172	172	(f) (1) There shall be allowed as a deduction an amount computed in
173	173	accordance with this subsection.
174	174	(2) As of July 1, 2025, only publicly traded companies, including
175	175	affiliated corporations participating in the filing of a publicly traded
176	176	company's financial statements prepared in accordance with generally
177	177	accepted accounting principles, shall be eligible for this deduction.
178	178	(3) If the provisions of this section result in an aggregate increase in
179	179	the taxpayer's net deferred tax liability or an aggregate decrease in the
180	180	taxpayer's net deferred tax asset, or an aggregate change from a net
181	181	deferred tax asset to a net deferred tax liability, the taxpayer shall be
182	182	entitled to a deduction, as determined in this subsection. For the purposes
183	183	of this section, the term "taxpayer" includes a unitary group of businesses
184	184	that is required to file a combined report. The deferred tax impact
185	185	deduction provided under this section for a unitary group of businesses
186	186	that is required to file a combined report shall be calculated using unitary
187	187	net deferred tax assets and liabilities and deducted against unitary group
188	188	income.
189	189	(4) A taxpayer shall be entitled to a deferred tax impact deduction
190	190	from the taxpayer's net business income before apportionment equal to the
191	191	amount necessary to offset the increase in the net deferred tax liability or
192	192	decrease in the net deferred tax asset, or aggregate change from a net
193	193	deferred tax asset to a net deferred tax liability. Such increase in the net
194	194	deferred tax liability, decrease in the net deferred tax asset or the
195	195	aggregate change from a net deferred tax asset to a net deferred tax
196	196	liability shall be computed based on the change that would result from the
197	197	imposition of the single sales factor requirements pursuant to this section,
198	198	excluding the deduction provided under this paragraph, as of the end of
199	199	the tax year prior to the year in which the taxpayer makes an election or is
200	200	required to apportion by the sales factor. The amount of the deduction
201	201	shall equal the annual deferred tax deduction amount set forth in
202	202	paragraph (5).
203	203	(5) The annual deferred tax deduction amount shall be calculated as
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247	247	follows:
248	248	(A) The deferred tax impact determined in paragraph (4) shall be
249	249	divided by the income tax rate for corporations in effect for the tax year
250	250	pursuant to K.S.A. 79-32,110, and amendments thereto;
251	251	(B) the resulting amount shall be further divided by the Kansas
252	252	apportionment factor that was used by the taxpayer in the calculation of
253	253	the deferred tax assets and deferred tax liabilities as provided in this
254	254	subsection; and
255	255	(C) the result multiplied by
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257	257	/10 shall represent the total net deferred
258	258	tax deduction available for the first tax year beginning on or after January
259	259	1, 2035, and the next nine successive tax years.
260	260	(6) The deduction calculated under paragraph (5) shall not be
261	261	adjusted as a result of any events subsequent to such calculation,
262	262	including, but not limited to, any disposition or abandonment of assets.
263	263	Such deduction shall be calculated without regard to any tax liabilities
264	264	under the federal internal revenue code and shall not alter the tax basis of
265	265	any asset. If the deduction under this section is greater than the taxpayer's
266	266	net business income before apportionment, any excess deduction shall be
267	267	carried forward and applied as a deduction for future tax years until fully
268	268	utilized.
269	269	(7) At the discretion of the taxpayer, the taxpayer shall be allowed to
270	270	claim other available tax credits before claiming the deferred tax
271	271	deduction calculated under this section. Any deferred tax deduction
272	272	calculated under this section not claimed on a return shall be carried
273	273	forward and applied as a deduction for future tax years until fully utilized.
274	274	(8) Any taxpayer intending to claim a deduction under this subsection
275	275	shall file a statement with the secretary on or before July 1, 2028,
276	276	specifying the total amount of the deduction that the taxpayer claims. The
277	277	statement shall be made on such form and in such manner as prescribed
278	278	by the secretary and shall contain such information or calculations as the
279	279	secretary may specify. No deduction shall be allowed under this section
280	280	for any taxable year except to the extent claimed in the manner prescribed
281	281	on or before July 1, 2028.
282	282	(9) For purposes of this subsection:
283	283	(A) "Net deferred tax liability" means deferred tax liabilities that
284	284	exceed the deferred tax assets of the taxpayer, as computed in accordance
285	285	with generally accepted accounting principles.
286	286	(B) "Net deferred tax asset" means that deferred tax assets exceed the
287	287	deferred tax liabilities of the taxpayer, as computed in accordance with
288	288	generally accepted accounting principles.
289	289	Sec. 3. K.S.A. 79-3271 is hereby amended to read as follows: 79-
290	290	3271. As used in this act, unless the context otherwise requires: (a) For tax
291	291	years commencing prior to January 1, 2008, "business income" means
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335	335	income arising from transactions and activity in the regular course of the
336	336	taxpayer's trade or business and includes income from tangible and
337	337	intangible property if the acquisition, management, and disposition of the
338	338	property constitute integral parts of the taxpayer's regular trade or business
339	339	operations, except that a taxpayer may elect that all income constitutes
340	340	business income. For tax years commencing after December 31, 2007,
341	341	"business income" means: (1) Income arising from transactions and
342	342	activity in the regular course of the taxpayer's trade or business; (2)
343	343	income arising from transactions and activity involving tangible and
344	344	intangible property or assets used in the operation of the taxpayer's trade or
345	345	business; or (3) income of the taxpayer that may be apportioned to this
346	346	state under the provisions of the Constitution of the United States and laws
347	347	thereof, except that a taxpayer may elect that all income constitutes
348	348	business income. Any election made under this subsection shall be
349	349	effective and irrevocable for the tax year in which the election is made and
350	350	the following nine tax years and shall be binding on all members of a
351	351	unitary group of corporations.
352	352	(b) "Commercial domicile" means the principal place from which the
353	353	trade or business of the taxpayer is directed or managed.
354	354	(c) "Compensation" means wages, salaries, commissions and any
355	355	other form of remuneration paid to employees for personal services.
356	356	(d) "Financial organization" means any bank, trust company, savings
357	357	bank, industrial bank, land bank, safe deposit company, private banker,
358	358	savings and loan association, credit union, cooperative bank, or any type
359	359	of insurance company, but such term shall not be deemed to include any
360	360	business entity, other than those hereinbefore enumerated, whose primary
361	361	business activity is making consumer loans or purchasing retail installment
362	362	contracts from one or more sellers.
363	363	(e) "Nonbusiness income" means all income other than business
364	364	income.
365	365	(f) "Public utility" means any business entity which that owns or
366	366	operates for public use any plant, equipment, property, franchise, or
367	367	license for the transmission of communications, transportation of goods or
368	368	persons, or the production, storage, transmission, sale, delivery, or
369	369	furnishing of electricity, water, steam, oil, oil products or gas.
370	370	(g) "Original return" means the first return filed to report the income
371	371	of a taxpayer for a taxable year or period, irrespective of whether such
372	372	return is filed on a single entity basis or a combined basis.
373	373	(h) "Sales" means, except as otherwise provided in K.S.A. 79-3285,
374	374	and amendments thereto, all gross receipts of the taxpayer not allocated
375	375	under K.S.A. 79-3274 through 79-3278, and amendments thereto.
376	376	(i) "State" means any state of the United States, the District of
377	377	Columbia, the Commonwealth of Puerto Rico, any territory or possession
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421	421	of the United States, and any foreign country or political subdivision
422	422	thereof.
423	423	(j) "Telecommunications company" means any business entity or
424	424	unitary group of entities whose primary business activity is the
425	425	transmission of communications in the form of voice, data, signals or
426	426	facsimile communications by wire or fiber optic cable.
427	427	(k) "Distressed area taxpayer" means a corporation which that: (1) Is
428	428	located in a county which has a population of not more than 45,000
429	429	persons and which, as certified by the department of commerce, has
430	430	sustained an adverse economic impact due to the closure of a state hospital
431	431	in such county pursuant to the recommendations of the hospital closure
432	432	commission; and (2) which has a total annual payroll of $20,000,000 or
433	433	more for employees employed within such county.
434	434	(l) For the purposes of this subsection and subsection (b)(5) of K.S.A.
435	435	79-3279 79-3279(a)(5), and amendments thereto, the following terms are
436	436	defined:
437	437	(1) "Administration services" include clerical, fund or shareholder
438	438	accounting, participant record keeping, transfer agency, bookkeeping, data
439	439	processing, custodial, internal auditing, legal and tax services performed
440	440	for an investment company;
441	441	(2) "distribution services" include the services of advertising,
442	442	servicing, marketing, underwriting or selling shares of an investment
443	443	company, but, in the case of advertising, servicing or marketing shares,
444	444	only where such service is performed by a person who is, or in the case of
445	445	a closed end company, was, either engaged in the services of underwriting
446	446	or selling investment company shares or affiliated with a person who is
447	447	engaged in the service of underwriting or selling investment company
448	448	shares. In the case of an open end company, such service of underwriting
449	449	or selling shares must be performed pursuant to a contract entered into
450	450	pursuant to 15 U.S.C. § 80a-15(b), as in effect on the effective date of this
451	451	act;
452	452	(3) "investment company", means any person registered under the
453	453	federal Investment Company Act of 1940, as in effect on the effective date
454	454	of this act, or a company which would be required to register as an
455	455	investment company under such act except that such person is exempt to
456	456	such registration pursuant to § 80a-3(c)(1) of such act;
457	457	(4) "investment funds service corporation" includes any corporation
458	458	or S corporation headquartered in and doing business in this state which
459	459	derives more than 50% of its gross income from the provision of
460	460	management, distribution or administration services to or on behalf of an
461	461	investment company or from trustees, sponsors and participants of
462	462	employee benefit plans which have accounts in an investment company;
463	463	(5) "management services" include the rendering of investment
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507	507	advice to an investment company making determinations as to when sales
508	508	and purchases of securities are to be made on behalf of the investment
509	509	company, or the selling or purchasing of securities constituting assets of an
510	510	investment company, and related activities, but only where such activity or
511	511	activities are performed:
512	512	(A) Pursuant to a contract with the investment company entered into
513	513	pursuant to 15 U.S.C. § 80a-15(a), in effect on the effective date of this
514	514	act; or
515	515	(B) for a person that has entered into such contract with the
516	516	investment company;
517	517	(6) "qualifying business income" is business income derived from the
518	518	provision of management, distribution or administration services to or on
519	519	behalf of an investment company or from trustees, sponsors and
520	520	participants of employee benefit plans which have accounts in an
521	521	investment company; and
522	522	(7) "residence" is the fund shareholder's primary residence address.
523	523	Sec. 4. K.S.A. 79-3279 is hereby amended to read as follows: 79-
524	524	3279. (a) All business income of railroads and interstate motor carriers of
525	525	persons or property for-hire shall be apportioned to this state by
526	526	multiplying the business income by a fraction, in the case of railroads, the
527	527	numerator of which is the freight car miles in this state and the
528	528	denominator of which is the freight car miles everywhere, and, in the case
529	529	of interstate motor carriers, the numerator of which is the total number of
530	530	miles operated in this state and the denominator of which is the total
531	531	number of miles operated everywhere.
532	532	(b) For the tax years commencing on or after January 1, 2025 and
533	533	ending before January 1, 2028, all business income of any other taxpayer
534	534	shall be apportioned to this state by one of the following methods:
535	535	(1) By multiplying the business income by a fraction, the numerator
536	536	of which is the property factor plus the payroll factor plus the sales factor,
537	537	and the denominator of which is three; or
538	538	(2) at the election of a qualifying taxpayer, by multiplying the
539	539	business income by a fraction, the numerator of which is the property
540	540	factor plus the sales factor, and the denominator of which is two.
541	541	(A) For purposes of this subsection (b)(2) (a)(2), a qualifying
542	542	taxpayer is any taxpayer whose payroll factor for a taxable year exceeds
543	543	200% of the average of the property factor and the sales factor. Whenever
544	544	two or more corporations are engaged in a unitary business and required to
545	545	file a combined report, the fraction comparison provided by this subsection
546	546	(b)(2) (a)(2) shall be calculated by using the payroll factor, property factor
547	547	and sales factor of the combined group of unitary corporations.
548	548	(B) An election under this subsection (b)(2) (a)(2) shall be made by
549	549	including a statement with the original tax return indicating that the
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593	593	taxpayer elects to apply the apportionment method under this subsection
594	594	(b)(2)(a)(2). The election shall be effective and irrevocable for the taxable
595	595	year of the election and the following nine taxable years. The election shall
596	596	be binding on all members of a unitary group of corporations.
597	597	Notwithstanding the above, the secretary of revenue may upon the request
598	598	of the taxpayer, grant permission to terminate the election under this
599	599	subsection (b)(2) (a)(2) prior to expiration of the ten-year period.
600	600	(3) At the election of a qualifying telecommunications company, by
601	601	multiplying the business income by a fraction, the numerator of which is
602	602	the information carrying capacity of wire and fiber optic cable available
603	603	for use in this state, and the denominator of which is the information
604	604	carrying capacity of wire and fiber optic cable available for use
605	605	everywhere during the tax year.
606	606	(A) For purposes of this subsection (b)(3) (a)(3), a qualifying
607	607	telecommunications company is a telecommunications company that is a
608	608	qualifying taxpayer under paragraph (A) of subsection (b)(2) (a)(2)(A).
609	609	(B) A qualifying telecommunications company shall make the
610	610	election under this subsection (b)(3) paragraph in the same manner as
611	611	provided under paragraph (B) of subsection (b)(2) (a)(2)(B).
612	612	(4) At the election of a distressed area taxpayer, by multiplying the
613	613	business income by the sales factor. The election shall be made by
614	614	including a statement with the original tax return indicating that the
615	615	taxpayer elects to apply this apportionment method. The election may be
616	616	made only once, it must be made on or before December 31, 1999 and it
617	617	shall be effective for the taxable year of the election and the following nine
618	618	taxable years for so long as the taxpayer maintains the payroll amount
619	619	prescribed by subsection (j) of K.S.A. 79-3271(j), and amendments
620	620	thereto.
621	621	(5) At the election of the taxpayer made at the time of filing of the
622	622	original return, the qualifying business income of any investment funds
623	623	service corporation organized as a corporation or S corporation which
624	624	maintains its primary headquarters and operations or is a branch facility
625	625	that employs at least 100 individuals on a full-time equivalent basis in this
626	626	state and has any investment company fund shareholders residenced in this
627	627	state shall be apportioned to this state as provided in this subsection, as
628	628	follows:
629	629	(A) By multiplying the investment funds service corporation's
630	630	qualifying business income from administration, distribution and
631	631	management services provided to each investment company by a fraction,
632	632	the numerator of which shall be the average of the number of shares
633	633	owned by the investment company's fund shareholders residenced in this
634	634	state at the beginning of and at the end of the investment company's
635	635	taxable year that ends with or within the investment funds service
636	636	1
637	637	2
638	638	3
639	639	4
640	640	5
641	641	6
642	642	7
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672	672	37
673	673	38
674	674	39
675	675	40
676	676	41
677	677	42
678	678	43 HB 2336 9
679	679	corporation's taxable year, and the denominator of which shall be the
680	680	average of the number of shares owned by the investment company's fund
681	681	shareholders everywhere at the beginning of and at the end of the
682	682	investment company's taxable year that ends with or within the investment
683	683	funds service corporation's taxable year.
684	684	(B) A separate computation shall be made to determine the qualifying
685	685	business income from each fund of each investment company. The
686	686	qualifying business income from each investment company shall be
687	687	multiplied by the fraction calculated pursuant to paragraph (A) for each
688	688	fund of such investment company.
689	689	(C) The qualifying portion of total business income of an investment
690	690	funds service corporation shall be determined by multiplying such total
691	691	business income by a fraction, the numerator of which is the gross receipts
692	692	from the provision of management, distribution and administration
693	693	services to or on behalf of an investment company, and the denominator of
694	694	which is the gross receipts of the investment funds service company. To
695	695	the extent an investment funds service corporation has business income
696	696	that is not qualifying business income, such business income shall be
697	697	apportioned to this state pursuant to subsection (b)(1) (a)(1).
698	698	(D) For tax year 2002, the tax liability of an investment funds service
699	699	corporation that has elected to apportion its business income pursuant to
700	700	paragraph (5) shall be increased by an amount equal to 50% of the
701	701	difference of the amount of such tax liability if determined pursuant to
702	702	subsection (b)(1) (a)(1) less the amount of such tax liability determined
703	703	with regard to paragraph (5).
704	704	(E) When an investment funds service corporation is part of a unitary
705	705	group, the business income of the unitary group attributable to the
706	706	investment funds service corporation shall be determined by multiplying
707	707	the business income of the unitary group by a fraction, the numerator of
708	708	which is the property factor plus the payroll factor plus the sales factor,
709	709	and the denominator of which is three. The property factor is a fraction,
710	710	the numerator of which is the average value of the investment funds
711	711	service corporation's real and tangible personal property owned or rented
712	712	and used during the tax period and the denominator of which is the
713	713	average value of the unitary group's real and tangible personal property
714	714	owned or rented and used during the tax period. The payroll factor is a
715	715	fraction, the numerator of which is the total amount paid during the tax
716	716	period by the investment funds service corporation for compensation, and
717	717	the denominator of which is the total compensation paid by the unitary
718	718	group during the tax period. The sales factor is a fraction, the numerator of
719	719	which is the total sales of the investment funds service corporation during
720	720	the tax period, and the denominator of which is the total sales of the
721	721	unitary group during the tax period.
722	722	1
723	723	2
724	724	3
725	725	4
726	726	5
727	727	6
728	728	7
729	729	8
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761	761	40
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764	764	43 HB 2336 10
765	765	(F) A taxpayer seeking to make the election available pursuant to
766	766	subsection (b)(5) of K.S.A. 79-3279(a)(5), and amendments thereto, shall
767	767	only be eligible to continue to make such election if the taxpayer maintains
768	768	at least 95% of the Kansas employees in existence at the time the taxpayer
769	769	first makes such an election.
770	770	(6) At the election of a qualifying taxpayer, by multiplying such
771	771	taxpayer's business income by the sales factor. The election shall be made
772	772	by including a statement with the original tax return indicating that the
773	773	taxpayer elects to apply this apportionment method. The election may be
774	774	made only once and must be made on or before the last day of the taxable
775	775	year during which the investment described in paragraph (A) is placed in
776	776	service, but not later than December 31, 2009, and it shall be effective for
777	777	the taxable year of the election and the following nine taxable years or for
778	778	so long as the taxpayer maintains the wage requirements set forth in
779	779	paragraph (A). If the qualifying taxpayer is a member of a unitary group of
780	780	corporations, all other members of the unitary group doing business within
781	781	this state shall apportion their business income to this state pursuant to
782	782	subsection (b)(1) (a)(1).
783	783	(A) For purposes of this subsection, a qualifying taxpayer is any
784	784	taxpayer making an investment of $100,000,000 for construction in
785	785	Kansas of a new business facility identified under the North American
786	786	industry classification system (NAICS) subsectors of 31-33, as assigned
787	787	by the secretary of the department of labor, employing 100 or more new
788	788	employees at such facility after July 1, 2007, and prior to December 31,
789	789	2009, and meeting the following requirements for paying such employees
790	790	higher-than-average wages within the wage region for such facility:
791	791	(i) The taxpayer's new Kansas business facility with 500 or fewer
792	792	full-time equivalent employees will provide an average wage that is above
793	793	the average wage paid by all Kansas business facilities that share the same
794	794	assigned NAICS category used to develop wage thresholds and that have
795	795	reported 500 or fewer employees to the Kansas department of labor on the
796	796	quarterly wage reports;
797	797	(ii) the taxpayer's new Kansas business facility with 500 or fewer
798	798	full-time equivalent employees is the sole facility within its assigned
799	799	NAICS category that has reported wages for 500 or fewer employees to
800	800	the Kansas department of labor on the quarterly wage reports;
801	801	(iii) the taxpayer's new Kansas business facility with more than 500
802	802	full-time equivalent employees will provide an average wage that is above
803	803	the average wage paid by all Kansas business facilities that share the same
804	804	assigned NAICS category used to develop wage thresholds and that have
805	805	reported more than 500 employees to the Kansas department of labor on
806	806	the quarterly wage reports;
807	807	(iv) the taxpayer's new Kansas business facility with more than 500
808	808	1
809	809	2
810	810	3
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812	812	5
813	813	6
814	814	7
815	815	8
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847	847	40
848	848	41
849	849	42
850	850	43 HB 2336 11
851	851	full-time equivalent employees is the sole facility within its assigned
852	852	NAICS category that has reported wages for more than 500 employees to
853	853	the Kansas department of labor on the quarterly wage reports, in which
854	854	event it shall either provide an average wage that is above the average
855	855	wage paid by all Kansas business facilities that share the same assigned
856	856	NAICS category and that have reported wages for 500 or fewer employees
857	857	to the Kansas department of labor on the quarterly wage reports, or be the
858	858	sole Kansas business facility within its assigned NAICS category that has
859	859	reported wages to the Kansas department of labor on the quarterly wage
860	860	reports;
861	861	(v) the number of NAICS digits to use in developing each set of wage
862	862	thresholds for comparison purposes shall be determined by the secretary of
863	863	commerce;
864	864	(vi) the composition of wage regions used in connection with each set
865	865	of wage thresholds shall be determined by the secretary of commerce; and
866	866	(vii) alternatively, a taxpayer may wage-qualify its new Kansas
867	867	business facility if, after excluding the headcount and wages reported on
868	868	the quarterly wage reports to the Kansas department of labor for
869	869	employees at that new Kansas business facility who own five percent or
870	870	more equity in the taxpayer, the average wage calculated for the taxpayer's
871	871	new Kansas business facility is greater than or equal to 1.5 times the
872	872	aggregate state-wide average wage paid by industries covered by the
873	873	employment security law based on data maintained by the secretary of
874	874	labor.
875	875	(B) For the purposes of the wage requirements in paragraph (A), the
876	876	number of full-time equivalent employees shall be determined by dividing
877	877	the number of hours worked by part-time employees during the pertinent
878	878	measurement interval by an amount equal to the corresponding multiple of
879	879	a 40-hour work week and adding the quotient to the average number of
880	880	full-time employees.
881	881	(C) When the qualifying taxpayer is part of a unitary group, the
882	882	business income of the unitary group attributable to the qualifying
883	883	taxpayer shall be determined by multiplying the business income of the
884	884	unitary group by a fraction, the numerator of which is the property factor
885	885	plus the payroll factor plus the sales factor, and the denominator of which
886	886	is three. The property factor is a fraction, the numerator of which is the
887	887	average value of the qualifying taxpayer's real and tangible personal
888	888	property owned or rented and used during the tax period and the
889	889	denominator of which is the average value of the unitary group's real and
890	890	tangible personal property owned or rented and used during the tax period.
891	891	The payroll factor is a fraction, the numerator of which is the total amount
892	892	paid during the tax period by the qualifying taxpayer for compensation,
893	893	and the denominator of which is the total compensation paid by the unitary
894	894	1
895	895	2
896	896	3
897	897	4
898	898	5
899	899	6
900	900	7
901	901	8
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932	932	39
933	933	40
934	934	41
935	935	42
936	936	43 HB 2336 12
937	937	group during the tax period. The sales factor is a fraction, the numerator of
938	938	which is the total sales of the qualifying taxpayer during the tax period,
939	939	and the denominator of which is the total sales of the unitary group during
940	940	the tax period.
941	941	(D) For purposes of this subsection, the secretary of revenue, upon a
942	942	showing of good cause and after receiving a certification by the secretary
943	943	of commerce of substantial compliance with provisions of this subsection
944	944	(b)(6) (a)(6), may extend any required performance date provided in this
945	945	subsection (b)(6) (a)(6) for a period not to exceed six months.
946	946	(b) For tax years commencing on or after January 1, 2025, and
947	947	before January 1, 2028, at the election of the taxpayer, all business income
948	948	of any other taxpayer may be apportioned to this state by multiplying such
949	949	taxpayer's business income by the sales factor. An election under this
950	950	subsection shall be made by including a statement with the original tax
951	951	return for which the election is made indicating that the taxpayer elects to
952	952	apply this apportionment method. The election shall be effective and
953	953	irrevocable for the taxable year of the election.
954	954	(c) For tax years commencing on or after January 1, 2028, all
955	955	business income shall be apportioned to this state by multiplying the
956	956	business income by the sales factor.
957	957	(d) Any taxpayer having previously made an election pursuant to
958	958	subsection (a)(2) shall be permitted to make a new election pursuant to
959	959	subsection (b).
960	960	(e) (1) There shall be allowed as a deduction an amount computed in
961	961	accordance with this subsection.
962	962	(2) As of July 1, 2025, only publicly traded companies, including
963	963	affiliated corporations participating in the filing of a publicly traded
964	964	company's financial statements prepared in accordance with generally
965	965	accepted accounting principles, shall be eligible for this deduction.
966	966	(3) If the provisions of this section result in an aggregate increase in
967	967	the taxpayer's net deferred tax liability or an aggregate decrease in the
968	968	taxpayer's net deferred tax asset, or an aggregate change from a net
969	969	deferred tax asset to a net deferred tax liability, the taxpayer shall be
970	970	entitled to a deduction, as determined in this subsection. For the purposes
971	971	of this section, the term "taxpayer" includes a unitary group of businesses
972	972	that is required to file a combined report. The deferred tax impact
973	973	deduction provided under this section for a unitary group of businesses
974	974	that is required to file a combined report shall be calculated using unitary
975	975	net deferred tax assets and liabilities and deducted against unitary group
976	976	income.
977	977	(4) A taxpayer shall be entitled to a deferred tax impact deduction
978	978	from the taxpayer's net business income before apportionment equal to the
979	979	amount necessary to offset the increase in the net deferred tax liability or
980	980	1
981	981	2
982	982	3
983	983	4
984	984	5
985	985	6
986	986	7
987	987	8
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1016	1016	37
1017	1017	38
1018	1018	39
1019	1019	40
1020	1020	41
1021	1021	42
1022	1022	43 HB 2336 13
1023	1023	decrease in the net deferred tax asset, or aggregate change from a net
1024	1024	deferred tax asset to a net deferred tax liability. Such increase in the net
1025	1025	deferred tax liability, decrease in the net deferred tax asset or the
1026	1026	aggregate change from a net deferred tax asset to a net deferred tax
1027	1027	liability shall be computed based on the change that would result from the
1028	1028	imposition of the single sales factor requirements pursuant to this section,
1029	1029	excluding the deduction provided under this paragraph, as of the end of
1030	1030	the tax year prior to the year in which the taxpayer makes an election or is
1031	1031	required to apportion by the sales factor. The amount of the deduction
1032	1032	shall equal the annual deferred tax deduction amount set forth in
1033	1033	paragraph (5).
1034	1034	(5) The annual deferred tax deduction amount shall be calculated as
1035	1035	follows:
1036	1036	(A) The deferred tax impact determined in paragraph (4) shall be
1037	1037	divided by the income tax rate for corporations in effect for the tax year
1038	1038	pursuant to K.S.A. 79-32,110, and amendments thereto;
1039	1039	(B) the resulting amount shall be further divided by the Kansas
1040	1040	apportionment factor that was used by the taxpayer in the calculation of
1041	1041	the deferred tax assets and deferred tax liabilities as provided in this
1042	1042	subsection; and
1043	1043	(C) the result multiplied by
1044	1044	1
1045	1045	/10 shall represent the total net deferred
1046	1046	tax deduction available for the first tax year beginning on or after January
1047	1047	1, 2035, and the next nine successive tax years.
1048	1048	(6) The deduction calculated under paragraph (5) shall not be
1049	1049	adjusted as a result of any events subsequent to such calculation,
1050	1050	including, but not limited to, any disposition or abandonment of assets.
1051	1051	Such deduction shall be calculated without regard to any tax liabilities
1052	1052	under the federal internal revenue code and shall not alter the tax basis of
1053	1053	any asset. If the deduction under this section is greater than the taxpayer's
1054	1054	net business income before apportionment, any excess deduction shall be
1055	1055	carried forward and applied as a deduction for future tax years until fully
1056	1056	utilized.
1057	1057	(7) At the discretion of the taxpayer, the taxpayer shall be allowed to
1058	1058	claim other available tax credits before claiming the deferred tax
1059	1059	deduction calculated under this section. Any deferred tax deduction
1060	1060	calculated under this section not claimed on a return shall be carried
1061	1061	forward and applied as a deduction for future tax years until fully utilized.
1062	1062	(8) Any taxpayer intending to claim a deduction under this subsection
1063	1063	shall file a statement with the secretary on or before July 1, 2028,
1064	1064	specifying the total amount of the deduction that the taxpayer claims on
1065	1065	such form and in such manner as prescribed by the secretary and shall
1066	1066	contain such information or calculations as the secretary may specify. No
1067	1067	deduction shall be allowed under this section for any taxable year except
1068	1068	1
1069	1069	2
1070	1070	3
1071	1071	4
1072	1072	5
1073	1073	6
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1105	1105	38
1106	1106	39
1107	1107	40
1108	1108	41
1109	1109	42
1110	1110	43 HB 2336 14
1111	1111	to the extent claimed in the manner prescribed on or before July 1, 2028.
1112	1112	(9) For purposes of this subsection:
1113	1113	(A) "Net deferred tax liability" means deferred tax liabilities that
1114	1114	exceed the deferred tax assets of the taxpayer, as computed in accordance
1115	1115	with generally accepted accounting principles.
1116	1116	(B) "Net deferred tax asset" means that deferred tax assets exceed the
1117	1117	deferred tax liabilities of the taxpayer, as computed in accordance with
1118	1118	generally accepted accounting principles.
1119	1119	(f) The amendments made to this section by this act shall apply
1120	1120	commencing on and after January 1, 2025.
1121	1121	Sec. 5. K.S.A. 79-3287 is hereby amended to read as follows: 79-
1122	1122	3287. Sales, other than sales of tangible personal property, are in this state
1123	1123	if:
1124	1124	(a) the income-producing activity is performed in this state; or
1125	1125	(b) the income-producing activity is performed both in and outside
1126	1126	this state and a greater proportion of the income-producing activity is
1127	1127	performed in this state than in any other state, based on costs of
1128	1128	performance the taxpayer's market for the sales is in this state. The
1129	1129	taxpayer's market for the sales is in this state if:
1130	1130	(a) (1) In the case of sale of a service, if and to the extent that the
1131	1131	service is delivered to a location in this state;
1132	1132	(2) in the case of intangible property, such property is:
1133	1133	(A) Rented, leased or licensed, if and to the extent that the property is
1134	1134	used in this state, if that intangible property utilized in marketing a good
1135	1135	or service to a consumer is used in this state, provided that such good or
1136	1136	service is purchased by a consumer who is in this state; or
1137	1137	(B) that is sold, if and to the extent the property is used in this state,
1138	1138	if:
1139	1139	(i) A contract right, government license or similar intangible
1140	1140	property that authorizes the holder to conduct a business activity in a
1141	1141	specific geographic area is used in this state if the geographic area
1142	1142	includes all or part of this state; or
1143	1143	(ii) net gains from intangible property sales that are contingent on
1144	1144	the productivity, use or disposition of the intangible property shall be
1145	1145	treated as receipts from the rental, lease or licensing of such intangible
1146	1146	property under paragraph (2)(A);
1147	1147	(3) in the case of interest from a loan:
1148	1148	(A) Secured by real property, if and to the extent the property is
1149	1149	located in this state; or
1150	1150	(B) not secured by real property, if and to the extent the borrower is
1151	1151	located in this state; or
1152	1152	(b) in the case of dividends, if and to the extent the payor's
1153	1153	commercial domicile is located in this state.
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1197	1197	(c) If the state or states of assignment of receipts under subsection (a)
1198	1198	(1) or (2) cannot be determined, the state or states of assignment shall be
1199	1199	reasonably approximated. If the state or states of assignment of receipts or
1200	1200	net gains cannot be reasonably approximated, such assignment of receipts
1201	1201	shall be excluded from the denominator of the sales factor.
1202	1202	(d) Notwithstanding the provisions of this section, a communications
1203	1203	service provider may assign sales, other than sales of tangible personal
1204	1204	property, to this state pursuant to this section as it applied to tax years
1205	1205	ending before January 1, 2025.
1206	1206	(e) For purposes of this subsection:
1207	1207	(A) "Communications service" means telecommunications service as
1208	1208	defined in K.S.A. 79-3602, and amendments thereto, internet access as
1209	1209	defined in section 1105(5) of the internet tax freedom act, 47 U.S.C. § 151,
1210	1210	note, and cable service as defined in 47 U.S.C. § 522(6), or any
1211	1211	combination thereof.
1212	1212	(B) "Communications service provider" means any person,
1213	1213	corporation, partnership or other entity that provides communications
1214	1214	service in this state.
1215	1215	Sec. 6. K.S.A. 2024 Supp. 79-32,110 is hereby amended to read as
1216	1216	follows: 79-32,110. (a) Resident individuals. Except as otherwise provided
1217	1217	by K.S.A. 79-3220(a), and amendments thereto, a tax is hereby imposed
1218	1218	upon the Kansas taxable income of every resident individual, which tax
1219	1219	shall be computed in accordance with the following tax schedules:
1220	1220	(1) Married individuals filing joint returns.
1221	1221	(A) For tax years 2018 through 2023:
1222	1222	If the taxable income is: The tax is:
1223	1223	Not over $30,000...........................................3.1% of Kansas taxable
1224	1224	income
1225	1225	Over $30,000 but not over $60,000...............$930 plus 5.25% of excess
1226	1226	over $30,000
1227	1227	Over $60,000..................................................$2,505 plus 5.7% of excess
1228	1228	over $60,000
1229	1229	(B) For tax year 2024, and all tax years thereafter:
1230	1230	If the taxable income is: The tax is:
1231	1231	Not over $46,000 5.2% of Kansas taxable
1232	1232	income
1233	1233	Over $46,000..................................................$2,392 plus 5.58% of excess
1234	1234	over $46,000
1235	1235	(2) All other individuals.
1236	1236	(A) For tax years 2018 through 2023:
1237	1237	If the taxable income is: The tax is:
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1281	1281	Not over $15,000...........................................3.1% of Kansas taxable
1282	1282	income
1283	1283	Over $15,000 but not over $30,000...............$465 plus 5.25% of excess
1284	1284	over $15,000
1285	1285	Over $30,000..................................................$1,252.50 plus 5.7% of
1286	1286	excess over $30,000
1287	1287	(B) For tax year 2024, and all tax years thereafter:
1288	1288	If the taxable income is: The tax is:
1289	1289	Not over $23,000...........................................5.2% of Kansas taxable
1290	1290	income
1291	1291	Over $23,000..................................................$1,196 plus 5.58% of excess
1292	1292	over $23,000
1293	1293	(b) Nonresident individuals. A tax is hereby imposed upon the Kansas
1294	1294	taxable income of every nonresident individual, which tax shall be an
1295	1295	amount equal to the tax computed under subsection (a) as if the
1296	1296	nonresident were a resident multiplied by the ratio of modified Kansas
1297	1297	source income to Kansas adjusted gross income.
1298	1298	(c) Corporations. A tax is hereby imposed upon the Kansas taxable
1299	1299	income of every corporation doing business within this state or deriving
1300	1300	income from sources within this state. Such tax shall consist of a normal
1301	1301	tax and a surtax and shall be computed as follows unless otherwise
1302	1302	modified pursuant to K.S.A. 2024 Supp. 74-50,321 and section 1, and
1303	1303	amendments thereto:
1304	1304	(1) The normal tax shall be in an amount equal to 4% of the Kansas
1305	1305	taxable income of such corporation; and
1306	1306	(2) the surtax shall be in an amount equal to 3% of the Kansas taxable
1307	1307	income of such corporation in excess of $50,000.
1308	1308	(d) Fiduciaries. A tax is hereby imposed upon the Kansas taxable
1309	1309	income of estates and trusts at the rates provided in subsection (a)(2).
1310	1310	(e) Notwithstanding the provisions of subsections (a) and (b), for tax
1311	1311	years 2018 through 2023, married individuals filing joint returns with
1312	1312	taxable income of $5,000 or less, and all other individuals with taxable
1313	1313	income of $2,500 or less, shall have a tax liability of zero.
1314	1314	Sec. 7. K.S.A. 2024 Supp. 79-32,113 is hereby amended to read as
1315	1315	follows: 79-32,113. (a) A person or organization exempt from federal
1316	1316	income taxation under the provisions of the federal internal revenue code
1317	1317	shall also be exempt from the tax imposed by this act in each year in which
1318	1318	such person or organization satisfies the requirements of the federal
1319	1319	internal revenue code for exemption from federal income taxation. If the
1320	1320	exemption applicable to any person or organization under the provisions of
1321	1321	the federal internal revenue code is limited or qualified in any manner, the
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1365	1365	exemption from taxes imposed by this article shall be limited or qualified
1366	1366	in a similar manner.
1367	1367	(b) Notwithstanding the provisions of subsection (a), the unrelated
1368	1368	business taxable income, as computed under the provisions of the federal
1369	1369	internal revenue code, of any person or organization otherwise exempt
1370	1370	from the tax imposed by this act and subject to the tax imposed on
1371	1371	unrelated business income by the federal internal revenue code shall be
1372	1372	subject to the tax which would have been imposed by this act but for the
1373	1373	provisions of subsection (a).
1374	1374	(c) In addition to the persons or organizations exempt from federal
1375	1375	income taxation under the provision of the federal internal revenue code,
1376	1376	there shall also be exempt from the tax imposed by this act, insurance
1377	1377	companies, banks, trust companies, savings and loan associations, credit
1378	1378	unions and any other organizations, entities or persons specifically exempt
1379	1379	from Kansas income taxation under the laws of the state of Kansas.
1380	1380	(d) Notwithstanding the provisions of K.S.A. 79-32,110, and
1381	1381	amendments thereto, the following entities shall be exempt from the tax
1382	1382	imposed by the Kansas income tax act pursuant to K.S.A. 79-32,110, and
1383	1383	amendments thereto:
1384	1384	(1) Any utility that is a cooperative as defined in K.S.A. 66-104d, and
1385	1385	amendments thereto, or owned by one or more such cooperatives; and
1386	1386	(2) effective for tax years ending on or after January 1, 2021, every
1387	1387	electric and natural gas public utility as defined in K.S.A. 66-104, and
1388	1388	amendments thereto, that is subject to rate regulation by the state
1389	1389	corporation commission.
1390	1390	(e) Every electric and natural gas public utility as defined in K.S.A.
1391	1391	66-104, and amendments thereto, not including any such utility that is a
1392	1392	cooperative as defined in K.S.A. 66-104d, and amendments thereto, or
1393	1393	owned by one or more such cooperatives shall:
1394	1394	(1) Not be permitted to be included in a consolidated or unitary
1395	1395	combined return; and
1396	1396	(2) except as provided in K.S.A. 2024 Supp. 66-1,239, and
1397	1397	amendments thereto, not collect, as a component of such utility's retail
1398	1398	rates, Kansas income tax expenses; and
1399	1399	(3) exclude sales from the sales factor from sales to the affiliated
1400	1400	utility by members in a unitary business group.
1401	1401	Sec. 8. K.S.A. 79-1129, 79-3271, 79-3279 and 79-3287 and K.S.A.
1402	1402	2024 Supp. 79-32,110 and 79-32,113 are hereby repealed.
1403	1403	Sec. 9. This act shall take effect and be in force from and after its
1404	1404	publication in the statute book.
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