Session of 2025
HOUSE BILL No. 2336
By Committee on Taxation
Requested by by Eric Stafford on behalf of the Kansas Chamber of Commerce
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AN ACT concerning taxation; relating to income and privilege taxes;
providing for the apportionment of business income by the single sales
factor and the apportionment of financial institution income by the
receipts factor; establishing deductions from income when using the
single sales factor and receipts factor; providing for the decrease in
corporate income tax rates; determining when sales other than tangible
personal property are made in the state; excluding sales of a unitary
business group of electric and natural gas public utilities; amending
K.S.A. 79-1129, 79-3271, 79-3279 and 79-3287 and K.S.A. 2024 Supp.
79-32,110 and 79-32,113 and repealing the existing sections.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. (a) Commencing with fiscal year 2026, the director of
the budget, in consultation with the director of legislative research, shall
certify, at the end of each such fiscal year, the amount of actual corporate
income tax receipt revenues generated pursuant to K.S.A. 79-32,110(c),
and amendments thereto, that is in excess of the prior fiscal year's
corporate income tax receipts. The director of the budget shall transmit
such certification to the secretary of revenue. Upon receipt of such
certification, the secretary shall compute the reduction of the corporate
income tax rate pursuant to K.S.A. 79-32,110(c), and amendments thereto.
The certified amount shall be computed in dollars by the secretary for a
reduction rounded down to the nearest 0.1% in the corporate income tax
rate, if any, to go into effect for the next calendar year that would reduce
the corporate income tax rate in an amount approximately equal to the
amount computed by the secretary. The secretary shall reduce the normal
tax on corporations. Such rate reductions shall remain in effect unless
further reduced pursuant to law.
(b) The secretary shall publish by October 1, 2027, the new income
tax rates to take effect on January 1, 2028.
Sec. 2. K.S.A. 79-1129 is hereby amended to read as follows: 79-
1129. (a) Except as otherwise specifically provided, a financial institution
whose business activity is taxable both within and without this state shall
allocate and apportion its net income as provided in this act. All items of
nonbusiness income, income which is not includable in the apportionable
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income tax base, shall be allocated pursuant to the provisions of K.S.A.
79-3274 through 79-3278 and amendments thereto. A financial institution
organized under the laws of a foreign country, the commonwealth of
Puerto Rico, or a territory or possession of the United States whose
effectively connected income, as defined under the federal internal revenue
code, is taxable both within this state and within another state, other than
the state in which it is organized, shall allocate and apportion its net
income as provided in this act and its apportionment factors shall include
the part of its property, payroll and receipts that is related to its
apportionable income.
(b) (1) For taxable years prior to January 1, 2028, all business
income shall be apportioned as follows:
(A) All business income, income which is includable in the
apportionable income tax base, shall be apportioned to this state by
multiplying such income by the apportionment percentage. The
apportionment percentage is determined by adding the taxpayer's receipts
factor, as described in K.S.A. 79-1130, and amendments thereto, property
factor, as described in K.S.A. 79-1131, and amendments thereto, and
payroll factor, as described in K.S.A. 79-1132, and amendments thereto,
together and dividing the sum by three. If one of the factors is missing, the
two remaining factors are added and the sum is divided by two. If two of
the factors are missing, the remaining factor is the apportionment
percentage. A factor is missing if both its numerator and denominator are
zero, but it is not missing merely because its numerator is zero.
(B) (i) For tax years commencing on or after January 1, 2025, and
ending before January 1, 2028, at the election of the taxpayer, all business
income that is includable in the apportionable income tax base, may be
apportioned to this state by the taxpayer's receipts factor, as described in
K.S.A. 79-1130, and amendments thereto.
(ii) An election under this subparagraph shall be made by including
a statement with the original tax return for which the election is made
indicating that the taxpayer elects to apply this apportionment method.
The election shall be effective and irrevocable for the taxable year of the
election and shall be binding on all members of a unitary group of
corporations.
(2) For tax years commencing on or after January 1, 2028, all
business income shall be apportioned to this state by multiplying the
business income by the receipts factor.
(c) Each factor shall be computed according to the method of
accounting, cash or accrual basis, used by the taxpayer for the taxable year.
(d) If the allocation and apportionment provisions of this act do not
fairly represent the extent of the taxpayer's business activity in this state,
the taxpayer may petition for or the secretary of revenue may require, in
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respect to all or any part of the taxpayer's business activity, if reasonable:
(1) Separate accounting;
(2) the exclusion of any one or more of the factors;
(3) the inclusion of one or more additional factors which will fairly
represent the taxpayer's business activity in this state; or
(4) the employment of any other method to effectuate an equitable
allocation and apportionment of the taxpayer's income.
(e) In the event a combined report is utilized to determine the Kansas
income attributable to a unitary group of financial institutions, the
financial institutions in the combined group shall include only those
institutions which have a branch or office in Kansas.
(f) (1) There shall be allowed as a deduction an amount computed in
accordance with this subsection.
(2) As of July 1, 2025, only publicly traded companies, including
affiliated corporations participating in the filing of a publicly traded
company's financial statements prepared in accordance with generally
accepted accounting principles, shall be eligible for this deduction.
(3) If the provisions of this section result in an aggregate increase in
the taxpayer's net deferred tax liability or an aggregate decrease in the
taxpayer's net deferred tax asset, or an aggregate change from a net
deferred tax asset to a net deferred tax liability, the taxpayer shall be
entitled to a deduction, as determined in this subsection. For the purposes
of this section, the term "taxpayer" includes a unitary group of businesses
that is required to file a combined report. The deferred tax impact
deduction provided under this section for a unitary group of businesses
that is required to file a combined report shall be calculated using unitary
net deferred tax assets and liabilities and deducted against unitary group
income.
(4) A taxpayer shall be entitled to a deferred tax impact deduction
from the taxpayer's net business income before apportionment equal to the
amount necessary to offset the increase in the net deferred tax liability or
decrease in the net deferred tax asset, or aggregate change from a net
deferred tax asset to a net deferred tax liability. Such increase in the net
deferred tax liability, decrease in the net deferred tax asset or the
aggregate change from a net deferred tax asset to a net deferred tax
liability shall be computed based on the change that would result from the
imposition of the single sales factor requirements pursuant to this section,
excluding the deduction provided under this paragraph, as of the end of
the tax year prior to the year in which the taxpayer makes an election or is
required to apportion by the sales factor. The amount of the deduction
shall equal the annual deferred tax deduction amount set forth in
paragraph (5).
(5) The annual deferred tax deduction amount shall be calculated as
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follows:
(A) The deferred tax impact determined in paragraph (4) shall be
divided by the income tax rate for corporations in effect for the tax year
pursuant to K.S.A. 79-32,110, and amendments thereto;
(B) the resulting amount shall be further divided by the Kansas
apportionment factor that was used by the taxpayer in the calculation of
the deferred tax assets and deferred tax liabilities as provided in this
subsection; and
(C) the result multiplied by
1
/10 shall represent the total net deferred
tax deduction available for the first tax year beginning on or after January
1, 2035, and the next nine successive tax years.
(6) The deduction calculated under paragraph (5) shall not be
adjusted as a result of any events subsequent to such calculation,
including, but not limited to, any disposition or abandonment of assets.
Such deduction shall be calculated without regard to any tax liabilities
under the federal internal revenue code and shall not alter the tax basis of
any asset. If the deduction under this section is greater than the taxpayer's
net business income before apportionment, any excess deduction shall be
carried forward and applied as a deduction for future tax years until fully
utilized.
(7) At the discretion of the taxpayer, the taxpayer shall be allowed to
claim other available tax credits before claiming the deferred tax
deduction calculated under this section. Any deferred tax deduction
calculated under this section not claimed on a return shall be carried
forward and applied as a deduction for future tax years until fully utilized.
(8) Any taxpayer intending to claim a deduction under this subsection
shall file a statement with the secretary on or before July 1, 2028,
specifying the total amount of the deduction that the taxpayer claims. The
statement shall be made on such form and in such manner as prescribed
by the secretary and shall contain such information or calculations as the
secretary may specify. No deduction shall be allowed under this section
for any taxable year except to the extent claimed in the manner prescribed
on or before July 1, 2028.
(9) For purposes of this subsection:
(A) "Net deferred tax liability" means deferred tax liabilities that
exceed the deferred tax assets of the taxpayer, as computed in accordance
with generally accepted accounting principles.
(B) "Net deferred tax asset" means that deferred tax assets exceed the
deferred tax liabilities of the taxpayer, as computed in accordance with
generally accepted accounting principles.
Sec. 3. K.S.A. 79-3271 is hereby amended to read as follows: 79-
3271. As used in this act, unless the context otherwise requires: (a) For tax
years commencing prior to January 1, 2008, "business income" means
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income arising from transactions and activity in the regular course of the
taxpayer's trade or business and includes income from tangible and
intangible property if the acquisition, management, and disposition of the
property constitute integral parts of the taxpayer's regular trade or business
operations, except that a taxpayer may elect that all income constitutes
business income. For tax years commencing after December 31, 2007,
"business income" means: (1) Income arising from transactions and
activity in the regular course of the taxpayer's trade or business; (2)
income arising from transactions and activity involving tangible and
intangible property or assets used in the operation of the taxpayer's trade or
business; or (3) income of the taxpayer that may be apportioned to this
state under the provisions of the Constitution of the United States and laws
thereof, except that a taxpayer may elect that all income constitutes
business income. Any election made under this subsection shall be
effective and irrevocable for the tax year in which the election is made and
the following nine tax years and shall be binding on all members of a
unitary group of corporations.
(b) "Commercial domicile" means the principal place from which the
trade or business of the taxpayer is directed or managed.
(c) "Compensation" means wages, salaries, commissions and any
other form of remuneration paid to employees for personal services.
(d) "Financial organization" means any bank, trust company, savings
bank, industrial bank, land bank, safe deposit company, private banker,
savings and loan association, credit union, cooperative bank, or any type
of insurance company, but such term shall not be deemed to include any
business entity, other than those hereinbefore enumerated, whose primary
business activity is making consumer loans or purchasing retail installment
contracts from one or more sellers.
(e) "Nonbusiness income" means all income other than business
income.
(f) "Public utility" means any business entity which that owns or
operates for public use any plant, equipment, property, franchise, or
license for the transmission of communications, transportation of goods or
persons, or the production, storage, transmission, sale, delivery, or
furnishing of electricity, water, steam, oil, oil products or gas.
(g) "Original return" means the first return filed to report the income
of a taxpayer for a taxable year or period, irrespective of whether such
return is filed on a single entity basis or a combined basis.
(h) "Sales" means, except as otherwise provided in K.S.A. 79-3285,
and amendments thereto, all gross receipts of the taxpayer not allocated
under K.S.A. 79-3274 through 79-3278, and amendments thereto.
(i) "State" means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or possession
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of the United States, and any foreign country or political subdivision
thereof.
(j) "Telecommunications company" means any business entity or
unitary group of entities whose primary business activity is the
transmission of communications in the form of voice, data, signals or
facsimile communications by wire or fiber optic cable.
(k) "Distressed area taxpayer" means a corporation which that: (1) Is
located in a county which has a population of not more than 45,000
persons and which, as certified by the department of commerce, has
sustained an adverse economic impact due to the closure of a state hospital
in such county pursuant to the recommendations of the hospital closure
commission; and (2) which has a total annual payroll of $20,000,000 or
more for employees employed within such county.
(l) For the purposes of this subsection and subsection (b)(5) of K.S.A.
79-3279 79-3279(a)(5), and amendments thereto, the following terms are
defined:
(1) "Administration services" include clerical, fund or shareholder
accounting, participant record keeping, transfer agency, bookkeeping, data
processing, custodial, internal auditing, legal and tax services performed
for an investment company;
(2) "distribution services" include the services of advertising,
servicing, marketing, underwriting or selling shares of an investment
company, but, in the case of advertising, servicing or marketing shares,
only where such service is performed by a person who is, or in the case of
a closed end company, was, either engaged in the services of underwriting
or selling investment company shares or affiliated with a person who is
engaged in the service of underwriting or selling investment company
shares. In the case of an open end company, such service of underwriting
or selling shares must be performed pursuant to a contract entered into
pursuant to 15 U.S.C. § 80a-15(b), as in effect on the effective date of this
act;
(3) "investment company", means any person registered under the
federal Investment Company Act of 1940, as in effect on the effective date
of this act, or a company which would be required to register as an
investment company under such act except that such person is exempt to
such registration pursuant to § 80a-3(c)(1) of such act;
(4) "investment funds service corporation" includes any corporation
or S corporation headquartered in and doing business in this state which
derives more than 50% of its gross income from the provision of
management, distribution or administration services to or on behalf of an
investment company or from trustees, sponsors and participants of
employee benefit plans which have accounts in an investment company;
(5) "management services" include the rendering of investment
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advice to an investment company making determinations as to when sales
and purchases of securities are to be made on behalf of the investment
company, or the selling or purchasing of securities constituting assets of an
investment company, and related activities, but only where such activity or
activities are performed:
(A) Pursuant to a contract with the investment company entered into
pursuant to 15 U.S.C. § 80a-15(a), in effect on the effective date of this
act; or
(B) for a person that has entered into such contract with the
investment company;
(6) "qualifying business income" is business income derived from the
provision of management, distribution or administration services to or on
behalf of an investment company or from trustees, sponsors and
participants of employee benefit plans which have accounts in an
investment company; and
(7) "residence" is the fund shareholder's primary residence address.
Sec. 4. K.S.A. 79-3279 is hereby amended to read as follows: 79-
3279. (a) All business income of railroads and interstate motor carriers of
persons or property for-hire shall be apportioned to this state by
multiplying the business income by a fraction, in the case of railroads, the
numerator of which is the freight car miles in this state and the
denominator of which is the freight car miles everywhere, and, in the case
of interstate motor carriers, the numerator of which is the total number of
miles operated in this state and the denominator of which is the total
number of miles operated everywhere.
(b) For the tax years commencing on or after January 1, 2025 and
ending before January 1, 2028, all business income of any other taxpayer
shall be apportioned to this state by one of the following methods:
(1) By multiplying the business income by a fraction, the numerator
of which is the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three; or
(2) at the election of a qualifying taxpayer, by multiplying the
business income by a fraction, the numerator of which is the property
factor plus the sales factor, and the denominator of which is two.
(A) For purposes of this subsection (b)(2) (a)(2), a qualifying
taxpayer is any taxpayer whose payroll factor for a taxable year exceeds
200% of the average of the property factor and the sales factor. Whenever
two or more corporations are engaged in a unitary business and required to
file a combined report, the fraction comparison provided by this subsection
(b)(2) (a)(2) shall be calculated by using the payroll factor, property factor
and sales factor of the combined group of unitary corporations.
(B) An election under this subsection (b)(2) (a)(2) shall be made by
including a statement with the original tax return indicating that the
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taxpayer elects to apply the apportionment method under this subsection
(b)(2)(a)(2). The election shall be effective and irrevocable for the taxable
year of the election and the following nine taxable years. The election shall
be binding on all members of a unitary group of corporations.
Notwithstanding the above, the secretary of revenue may upon the request
of the taxpayer, grant permission to terminate the election under this
subsection (b)(2) (a)(2) prior to expiration of the ten-year period.
(3) At the election of a qualifying telecommunications company, by
multiplying the business income by a fraction, the numerator of which is
the information carrying capacity of wire and fiber optic cable available
for use in this state, and the denominator of which is the information
carrying capacity of wire and fiber optic cable available for use
everywhere during the tax year.
(A) For purposes of this subsection (b)(3) (a)(3), a qualifying
telecommunications company is a telecommunications company that is a
qualifying taxpayer under paragraph (A) of subsection (b)(2) (a)(2)(A).
(B) A qualifying telecommunications company shall make the
election under this subsection (b)(3) paragraph in the same manner as
provided under paragraph (B) of subsection (b)(2) (a)(2)(B).
(4) At the election of a distressed area taxpayer, by multiplying the
business income by the sales factor. The election shall be made by
including a statement with the original tax return indicating that the
taxpayer elects to apply this apportionment method. The election may be
made only once, it must be made on or before December 31, 1999 and it
shall be effective for the taxable year of the election and the following nine
taxable years for so long as the taxpayer maintains the payroll amount
prescribed by subsection (j) of K.S.A. 79-3271(j), and amendments
thereto.
(5) At the election of the taxpayer made at the time of filing of the
original return, the qualifying business income of any investment funds
service corporation organized as a corporation or S corporation which
maintains its primary headquarters and operations or is a branch facility
that employs at least 100 individuals on a full-time equivalent basis in this
state and has any investment company fund shareholders residenced in this
state shall be apportioned to this state as provided in this subsection, as
follows:
(A) By multiplying the investment funds service corporation's
qualifying business income from administration, distribution and
management services provided to each investment company by a fraction,
the numerator of which shall be the average of the number of shares
owned by the investment company's fund shareholders residenced in this
state at the beginning of and at the end of the investment company's
taxable year that ends with or within the investment funds service
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corporation's taxable year, and the denominator of which shall be the
average of the number of shares owned by the investment company's fund
shareholders everywhere at the beginning of and at the end of the
investment company's taxable year that ends with or within the investment
funds service corporation's taxable year.
(B) A separate computation shall be made to determine the qualifying
business income from each fund of each investment company. The
qualifying business income from each investment company shall be
multiplied by the fraction calculated pursuant to paragraph (A) for each
fund of such investment company.
(C) The qualifying portion of total business income of an investment
funds service corporation shall be determined by multiplying such total
business income by a fraction, the numerator of which is the gross receipts
from the provision of management, distribution and administration
services to or on behalf of an investment company, and the denominator of
which is the gross receipts of the investment funds service company. To
the extent an investment funds service corporation has business income
that is not qualifying business income, such business income shall be
apportioned to this state pursuant to subsection (b)(1) (a)(1).
(D) For tax year 2002, the tax liability of an investment funds service
corporation that has elected to apportion its business income pursuant to
paragraph (5) shall be increased by an amount equal to 50% of the
difference of the amount of such tax liability if determined pursuant to
subsection (b)(1) (a)(1) less the amount of such tax liability determined
with regard to paragraph (5).
(E) When an investment funds service corporation is part of a unitary
group, the business income of the unitary group attributable to the
investment funds service corporation shall be determined by multiplying
the business income of the unitary group by a fraction, the numerator of
which is the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three. The property factor is a fraction,
the numerator of which is the average value of the investment funds
service corporation's real and tangible personal property owned or rented
and used during the tax period and the denominator of which is the
average value of the unitary group's real and tangible personal property
owned or rented and used during the tax period. The payroll factor is a
fraction, the numerator of which is the total amount paid during the tax
period by the investment funds service corporation for compensation, and
the denominator of which is the total compensation paid by the unitary
group during the tax period. The sales factor is a fraction, the numerator of
which is the total sales of the investment funds service corporation during
the tax period, and the denominator of which is the total sales of the
unitary group during the tax period.
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(F) A taxpayer seeking to make the election available pursuant to
subsection (b)(5) of K.S.A. 79-3279(a)(5), and amendments thereto, shall
only be eligible to continue to make such election if the taxpayer maintains
at least 95% of the Kansas employees in existence at the time the taxpayer
first makes such an election.
(6) At the election of a qualifying taxpayer, by multiplying such
taxpayer's business income by the sales factor. The election shall be made
by including a statement with the original tax return indicating that the
taxpayer elects to apply this apportionment method. The election may be
made only once and must be made on or before the last day of the taxable
year during which the investment described in paragraph (A) is placed in
service, but not later than December 31, 2009, and it shall be effective for
the taxable year of the election and the following nine taxable years or for
so long as the taxpayer maintains the wage requirements set forth in
paragraph (A). If the qualifying taxpayer is a member of a unitary group of
corporations, all other members of the unitary group doing business within
this state shall apportion their business income to this state pursuant to
subsection (b)(1) (a)(1).
(A) For purposes of this subsection, a qualifying taxpayer is any
taxpayer making an investment of $100,000,000 for construction in
Kansas of a new business facility identified under the North American
industry classification system (NAICS) subsectors of 31-33, as assigned
by the secretary of the department of labor, employing 100 or more new
employees at such facility after July 1, 2007, and prior to December 31,
2009, and meeting the following requirements for paying such employees
higher-than-average wages within the wage region for such facility:
(i) The taxpayer's new Kansas business facility with 500 or fewer
full-time equivalent employees will provide an average wage that is above
the average wage paid by all Kansas business facilities that share the same
assigned NAICS category used to develop wage thresholds and that have
reported 500 or fewer employees to the Kansas department of labor on the
quarterly wage reports;
(ii) the taxpayer's new Kansas business facility with 500 or fewer
full-time equivalent employees is the sole facility within its assigned
NAICS category that has reported wages for 500 or fewer employees to
the Kansas department of labor on the quarterly wage reports;
(iii) the taxpayer's new Kansas business facility with more than 500
full-time equivalent employees will provide an average wage that is above
the average wage paid by all Kansas business facilities that share the same
assigned NAICS category used to develop wage thresholds and that have
reported more than 500 employees to the Kansas department of labor on
the quarterly wage reports;
(iv) the taxpayer's new Kansas business facility with more than 500
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full-time equivalent employees is the sole facility within its assigned
NAICS category that has reported wages for more than 500 employees to
the Kansas department of labor on the quarterly wage reports, in which
event it shall either provide an average wage that is above the average
wage paid by all Kansas business facilities that share the same assigned
NAICS category and that have reported wages for 500 or fewer employees
to the Kansas department of labor on the quarterly wage reports, or be the
sole Kansas business facility within its assigned NAICS category that has
reported wages to the Kansas department of labor on the quarterly wage
reports;
(v) the number of NAICS digits to use in developing each set of wage
thresholds for comparison purposes shall be determined by the secretary of
commerce;
(vi) the composition of wage regions used in connection with each set
of wage thresholds shall be determined by the secretary of commerce; and
(vii) alternatively, a taxpayer may wage-qualify its new Kansas
business facility if, after excluding the headcount and wages reported on
the quarterly wage reports to the Kansas department of labor for
employees at that new Kansas business facility who own five percent or
more equity in the taxpayer, the average wage calculated for the taxpayer's
new Kansas business facility is greater than or equal to 1.5 times the
aggregate state-wide average wage paid by industries covered by the
employment security law based on data maintained by the secretary of
labor.
(B) For the purposes of the wage requirements in paragraph (A), the
number of full-time equivalent employees shall be determined by dividing
the number of hours worked by part-time employees during the pertinent
measurement interval by an amount equal to the corresponding multiple of
a 40-hour work week and adding the quotient to the average number of
full-time employees.
(C) When the qualifying taxpayer is part of a unitary group, the
business income of the unitary group attributable to the qualifying
taxpayer shall be determined by multiplying the business income of the
unitary group by a fraction, the numerator of which is the property factor
plus the payroll factor plus the sales factor, and the denominator of which
is three. The property factor is a fraction, the numerator of which is the
average value of the qualifying taxpayer's real and tangible personal
property owned or rented and used during the tax period and the
denominator of which is the average value of the unitary group's real and
tangible personal property owned or rented and used during the tax period.
The payroll factor is a fraction, the numerator of which is the total amount
paid during the tax period by the qualifying taxpayer for compensation,
and the denominator of which is the total compensation paid by the unitary
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group during the tax period. The sales factor is a fraction, the numerator of
which is the total sales of the qualifying taxpayer during the tax period,
and the denominator of which is the total sales of the unitary group during
the tax period.
(D) For purposes of this subsection, the secretary of revenue, upon a
showing of good cause and after receiving a certification by the secretary
of commerce of substantial compliance with provisions of this subsection
(b)(6) (a)(6), may extend any required performance date provided in this
subsection (b)(6) (a)(6) for a period not to exceed six months.
(b) For tax years commencing on or after January 1, 2025, and
before January 1, 2028, at the election of the taxpayer, all business income
of any other taxpayer may be apportioned to this state by multiplying such
taxpayer's business income by the sales factor. An election under this
subsection shall be made by including a statement with the original tax
return for which the election is made indicating that the taxpayer elects to
apply this apportionment method. The election shall be effective and
irrevocable for the taxable year of the election.
(c) For tax years commencing on or after January 1, 2028, all
business income shall be apportioned to this state by multiplying the
business income by the sales factor.
(d) Any taxpayer having previously made an election pursuant to
subsection (a)(2) shall be permitted to make a new election pursuant to
subsection (b).
(e) (1) There shall be allowed as a deduction an amount computed in
accordance with this subsection.
(2) As of July 1, 2025, only publicly traded companies, including
affiliated corporations participating in the filing of a publicly traded
company's financial statements prepared in accordance with generally
accepted accounting principles, shall be eligible for this deduction.
(3) If the provisions of this section result in an aggregate increase in
the taxpayer's net deferred tax liability or an aggregate decrease in the
taxpayer's net deferred tax asset, or an aggregate change from a net
deferred tax asset to a net deferred tax liability, the taxpayer shall be
entitled to a deduction, as determined in this subsection. For the purposes
of this section, the term "taxpayer" includes a unitary group of businesses
that is required to file a combined report. The deferred tax impact
deduction provided under this section for a unitary group of businesses
that is required to file a combined report shall be calculated using unitary
net deferred tax assets and liabilities and deducted against unitary group
income.
(4) A taxpayer shall be entitled to a deferred tax impact deduction
from the taxpayer's net business income before apportionment equal to the
amount necessary to offset the increase in the net deferred tax liability or
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decrease in the net deferred tax asset, or aggregate change from a net
deferred tax asset to a net deferred tax liability. Such increase in the net
deferred tax liability, decrease in the net deferred tax asset or the
aggregate change from a net deferred tax asset to a net deferred tax
liability shall be computed based on the change that would result from the
imposition of the single sales factor requirements pursuant to this section,
excluding the deduction provided under this paragraph, as of the end of
the tax year prior to the year in which the taxpayer makes an election or is
required to apportion by the sales factor. The amount of the deduction
shall equal the annual deferred tax deduction amount set forth in
paragraph (5).
(5) The annual deferred tax deduction amount shall be calculated as
follows:
(A) The deferred tax impact determined in paragraph (4) shall be
divided by the income tax rate for corporations in effect for the tax year
pursuant to K.S.A. 79-32,110, and amendments thereto;
(B) the resulting amount shall be further divided by the Kansas
apportionment factor that was used by the taxpayer in the calculation of
the deferred tax assets and deferred tax liabilities as provided in this
subsection; and
(C) the result multiplied by
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/10 shall represent the total net deferred
tax deduction available for the first tax year beginning on or after January
1, 2035, and the next nine successive tax years.
(6) The deduction calculated under paragraph (5) shall not be
adjusted as a result of any events subsequent to such calculation,
including, but not limited to, any disposition or abandonment of assets.
Such deduction shall be calculated without regard to any tax liabilities
under the federal internal revenue code and shall not alter the tax basis of
any asset. If the deduction under this section is greater than the taxpayer's
net business income before apportionment, any excess deduction shall be
carried forward and applied as a deduction for future tax years until fully
utilized.
(7) At the discretion of the taxpayer, the taxpayer shall be allowed to
claim other available tax credits before claiming the deferred tax
deduction calculated under this section. Any deferred tax deduction
calculated under this section not claimed on a return shall be carried
forward and applied as a deduction for future tax years until fully utilized.
(8) Any taxpayer intending to claim a deduction under this subsection
shall file a statement with the secretary on or before July 1, 2028,
specifying the total amount of the deduction that the taxpayer claims on
such form and in such manner as prescribed by the secretary and shall
contain such information or calculations as the secretary may specify. No
deduction shall be allowed under this section for any taxable year except
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to the extent claimed in the manner prescribed on or before July 1, 2028.
(9) For purposes of this subsection:
(A) "Net deferred tax liability" means deferred tax liabilities that
exceed the deferred tax assets of the taxpayer, as computed in accordance
with generally accepted accounting principles.
(B) "Net deferred tax asset" means that deferred tax assets exceed the
deferred tax liabilities of the taxpayer, as computed in accordance with
generally accepted accounting principles.
(f) The amendments made to this section by this act shall apply
commencing on and after January 1, 2025.
Sec. 5. K.S.A. 79-3287 is hereby amended to read as follows: 79-
3287. Sales, other than sales of tangible personal property, are in this state
if:
(a) the income-producing activity is performed in this state; or
(b) the income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity is
performed in this state than in any other state, based on costs of
performance the taxpayer's market for the sales is in this state. The
taxpayer's market for the sales is in this state if:
(a) (1) In the case of sale of a service, if and to the extent that the
service is delivered to a location in this state;
(2) in the case of intangible property, such property is:
(A) Rented, leased or licensed, if and to the extent that the property is
used in this state, if that intangible property utilized in marketing a good
or service to a consumer is used in this state, provided that such good or
service is purchased by a consumer who is in this state; or
(B) that is sold, if and to the extent the property is used in this state,
if:
(i) A contract right, government license or similar intangible
property that authorizes the holder to conduct a business activity in a
specific geographic area is used in this state if the geographic area
includes all or part of this state; or
(ii) net gains from intangible property sales that are contingent on
the productivity, use or disposition of the intangible property shall be
treated as receipts from the rental, lease or licensing of such intangible
property under paragraph (2)(A);
(3) in the case of interest from a loan:
(A) Secured by real property, if and to the extent the property is
located in this state; or
(B) not secured by real property, if and to the extent the borrower is
located in this state; or
(b) in the case of dividends, if and to the extent the payor's
commercial domicile is located in this state.
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(c) If the state or states of assignment of receipts under subsection (a)
(1) or (2) cannot be determined, the state or states of assignment shall be
reasonably approximated. If the state or states of assignment of receipts or
net gains cannot be reasonably approximated, such assignment of receipts
shall be excluded from the denominator of the sales factor.
(d) Notwithstanding the provisions of this section, a communications
service provider may assign sales, other than sales of tangible personal
property, to this state pursuant to this section as it applied to tax years
ending before January 1, 2025.
(e) For purposes of this subsection:
(A) "Communications service" means telecommunications service as
defined in K.S.A. 79-3602, and amendments thereto, internet access as
defined in section 1105(5) of the internet tax freedom act, 47 U.S.C. § 151,
note, and cable service as defined in 47 U.S.C. § 522(6), or any
combination thereof.
(B) "Communications service provider" means any person,
corporation, partnership or other entity that provides communications
service in this state.
Sec. 6. K.S.A. 2024 Supp. 79-32,110 is hereby amended to read as
follows: 79-32,110. (a) Resident individuals. Except as otherwise provided
by K.S.A. 79-3220(a), and amendments thereto, a tax is hereby imposed
upon the Kansas taxable income of every resident individual, which tax
shall be computed in accordance with the following tax schedules:
(1) Married individuals filing joint returns.
(A) For tax years 2018 through 2023:
If the taxable income is: The tax is:
Not over $30,000...........................................3.1% of Kansas taxable
income
Over $30,000 but not over $60,000...............$930 plus 5.25% of excess
over $30,000
Over $60,000..................................................$2,505 plus 5.7% of excess
over $60,000
(B) For tax year 2024, and all tax years thereafter:
If the taxable income is: The tax is:
Not over $46,000 5.2% of Kansas taxable
income
Over $46,000..................................................$2,392 plus 5.58% of excess
over $46,000
(2) All other individuals.
(A) For tax years 2018 through 2023:
If the taxable income is: The tax is:
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Not over $15,000...........................................3.1% of Kansas taxable
income
Over $15,000 but not over $30,000...............$465 plus 5.25% of excess
over $15,000
Over $30,000..................................................$1,252.50 plus 5.7% of
excess over $30,000
(B) For tax year 2024, and all tax years thereafter:
If the taxable income is: The tax is:
Not over $23,000...........................................5.2% of Kansas taxable
income
Over $23,000..................................................$1,196 plus 5.58% of excess
over $23,000
(b) Nonresident individuals. A tax is hereby imposed upon the Kansas
taxable income of every nonresident individual, which tax shall be an
amount equal to the tax computed under subsection (a) as if the
nonresident were a resident multiplied by the ratio of modified Kansas
source income to Kansas adjusted gross income.
(c) Corporations. A tax is hereby imposed upon the Kansas taxable
income of every corporation doing business within this state or deriving
income from sources within this state. Such tax shall consist of a normal
tax and a surtax and shall be computed as follows unless otherwise
modified pursuant to K.S.A. 2024 Supp. 74-50,321 and section 1, and
amendments thereto:
(1) The normal tax shall be in an amount equal to 4% of the Kansas
taxable income of such corporation; and
(2) the surtax shall be in an amount equal to 3% of the Kansas taxable
income of such corporation in excess of $50,000.
(d) Fiduciaries. A tax is hereby imposed upon the Kansas taxable
income of estates and trusts at the rates provided in subsection (a)(2).
(e) Notwithstanding the provisions of subsections (a) and (b), for tax
years 2018 through 2023, married individuals filing joint returns with
taxable income of $5,000 or less, and all other individuals with taxable
income of $2,500 or less, shall have a tax liability of zero.
Sec. 7. K.S.A. 2024 Supp. 79-32,113 is hereby amended to read as
follows: 79-32,113. (a) A person or organization exempt from federal
income taxation under the provisions of the federal internal revenue code
shall also be exempt from the tax imposed by this act in each year in which
such person or organization satisfies the requirements of the federal
internal revenue code for exemption from federal income taxation. If the
exemption applicable to any person or organization under the provisions of
the federal internal revenue code is limited or qualified in any manner, the
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exemption from taxes imposed by this article shall be limited or qualified
in a similar manner.
(b) Notwithstanding the provisions of subsection (a), the unrelated
business taxable income, as computed under the provisions of the federal
internal revenue code, of any person or organization otherwise exempt
from the tax imposed by this act and subject to the tax imposed on
unrelated business income by the federal internal revenue code shall be
subject to the tax which would have been imposed by this act but for the
provisions of subsection (a).
(c) In addition to the persons or organizations exempt from federal
income taxation under the provision of the federal internal revenue code,
there shall also be exempt from the tax imposed by this act, insurance
companies, banks, trust companies, savings and loan associations, credit
unions and any other organizations, entities or persons specifically exempt
from Kansas income taxation under the laws of the state of Kansas.
(d) Notwithstanding the provisions of K.S.A. 79-32,110, and
amendments thereto, the following entities shall be exempt from the tax
imposed by the Kansas income tax act pursuant to K.S.A. 79-32,110, and
amendments thereto:
(1) Any utility that is a cooperative as defined in K.S.A. 66-104d, and
amendments thereto, or owned by one or more such cooperatives; and
(2) effective for tax years ending on or after January 1, 2021, every
electric and natural gas public utility as defined in K.S.A. 66-104, and
amendments thereto, that is subject to rate regulation by the state
corporation commission.
(e) Every electric and natural gas public utility as defined in K.S.A.
66-104, and amendments thereto, not including any such utility that is a
cooperative as defined in K.S.A. 66-104d, and amendments thereto, or
owned by one or more such cooperatives shall:
(1) Not be permitted to be included in a consolidated or unitary
combined return; and
(2) except as provided in K.S.A. 2024 Supp. 66-1,239, and
amendments thereto, not collect, as a component of such utility's retail
rates, Kansas income tax expenses; and
(3) exclude sales from the sales factor from sales to the affiliated
utility by members in a unitary business group.
Sec. 8. K.S.A. 79-1129, 79-3271, 79-3279 and 79-3287 and K.S.A.
2024 Supp. 79-32,110 and 79-32,113 are hereby repealed.
Sec. 9. This act shall take effect and be in force from and after its
publication in the statute book.
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