This Week in Topeka
March 22-26, 2021
Business, Economic Development & Local Government News from the Legislative Session
Legislative committees have completed most of their work for the session and the action will now turn to floor debate and conference committees as the legislature moves toward first adjournment. They will spend most of their time on the House and Senate floors this week working legislation passed out from their respective committees.
For many pieces of legislation, it will be necessary to reconcile differences between the two chambers in conference committees where negotiators from both chambers will seek to find an agreeable compromise.
Conference committees are made up of three representatives and three senators with two from each chamber coming from the majority party and one from each chamber hailing from the minority party. The six-member teams seek to iron out differences so that a bill can be finalized and sent to the Governor for her signature.
This also becomes the time of year when bills are frequently merged and a concept from stalled legislation is amended into a bill that has momentum. This makes tracking legislation difficult and gives rise to the adage that no idea in the legislature is truly dead until the final gavel sounds.
Unemployment Update –The Senate Commerce Committee completed its work on HB 2196 and passed out an amended version for consideration by the full Senate. Many of the changes added by the Senate were met with the approval of stakeholders and served to improve the final product that will ultimately be worked out between the House and Senate. Other changes were incorporated to ensure that language in the bill complies with federal guidelines regulating unemployment compensation.
Even with amendments, the bill continues to call for $450 million of federal funds to bolster the trust fund, strengthen fraud provisions and ensure that the business community has a role in advising the Department of Labor on how the new unemployment system will function. Additionally, the proposed revisions to the rate tables will provide more parity for unemployment charges that will have to be paid to replenish the state’s trust fund.
Combined, these changes will save Kansas businesses millions of dollars annually.
Kansas Emergency Management Act – Governor Kelly signed into law SB 40, a bill that enacts sweeping changes to the Kansas Emergency Management Act. Key components of the law include:
- Expansion of the Legislative Coordinating Council (LCC) to eight members by adding the Vice President of the Senate to the list of members;
- Granting the LCC authority to extend states of disaster emergency beyond the initial 15-day order. Previously this authority was granted to the State Finance Council;
- Extension of the COVID-19 state of disaster emergency through May 28, 2021;
- Nullifying current COVID-19 related executive orders on March 31, 2021 and establishing that future executive orders are subject to reversal by the legislature;
- Requiring boards of county commissioners to approve certain health orders issued by the county’s health officer.
Mask Order – among the changes in SB 40 (see previous section) is a provision that sunsets COVID-related executive orders on March 31 and gives the legislature the authority to negate certain executive orders issues by the governor going forward.
The current executive order regarding masks, EO-20-68, will expire on March 31 and Governor Kelly has indicated she intends to reissue a similar order. If she does, it will trigger new oversight provisions in SB 40 allowing the legislature to overturn the order if they elect to do so. Legislative leaders already have indicated their concerns over a new mask executive order so the new oversight provisions contained SB 40 may get tested almost immediately.
Related to this is a new order adopted by the Johnson County Board of County Commissioners on Thursday that addresses mask wearing through April 30, 2021. For details on the new Johnson County order, click here.
The county set benchmarks tied to vaccination rate and other public health measures that would allow for easing the mask order. While predicting when the benchmarks will be achieved is difficult, current progress makes it possible that the benchmarks could be achieved as early as next month based on current progress. The order does ease other restrictions and represents progress by some while others continue to see it as governmental overreach.
Taxes – The federal Tax Cuts and Jobs Act of 2017 made several changes to tax law that triggered tax increases to some Kansas businesses due to our conformity with federal tax code. Despite several attempts last year and earlier this session, lawmakers have struggled to find the right mix of tax code changes to get the bill across the finish line – largely because of the growing fiscal impact to the state’s budget and concerns the bill didn’t provide enough relief for “average” Kansans.
Although it appeared momentum was building early in the session with SB 22, the fiscal note of that bill ballooned to $500 million in just the first year and ultimately weighed down the bill. HB 2421 is a more recent attempt to address the federal tax changes with a much lower fiscal note of just under $375 million over three years.
HB 2421 includes language that would allow Kansans to itemize their state returns even if they take the standard deduction at the federal level. It also increases the standard deduction by $500 for individuals, heads of household and married couples. The smaller fiscal note and provisions that are applicable to more Kansans may finally be the right mix to win approval although the House and Senate will need to find common ground before a tax package can advance.
Property Taxes – SB 13, the Truth in Taxation bill was signed into law by Governor Kelly on Friday. The bill eliminates the current property tax lid and replaces it with a mechanism that changes the focus of property taxes from the mill levy to actual revenue generated. The goal of the legislation is to provide more transparency for taxpayers and control rising property tax collections across the state.
Marketplace Facilitators – For several sessions lawmakers have tried to advance legislation that would apply sales taxes to marketplace facilitators, creating parity with local brick-and-mortar stores. SB 50 establishes a $100,000 threshold before taxes are collected from marketplace facilitators – a threshold that was successfully tested in the 2018 South Dakota v. Wayfair decision.
The bill also contains corporate provisions addressing global intangible low-taxed income, net operating loss carry forward, tax policy changes dealing with expensing deductions for small businesses and business meal expenses, and clarifies that identity theft victims will not owe income tax on fraudulently obtained unemployment payments. The bill is scheduled for floor debate Monday.
Wind Energy – SB 279 set up a battle between property owners and proponents of renewable energy. The bill would put into place numerous standards regulating the location and operation of wind turbines.
Proponents of the bill argued that the setbacks and other regulatory provisions were necessary to protect their rights, property values and health. On the other hand, opponents argued the restrictions in the bill encroached on their rights to do what they want with their property and amounts to a moratorium on the wind energy industry in Kansas. Currently the bill doesn’t have support to move out of committee but look for the bill – or a version of it – to resurface in the future.
Child Care Tax Credit – Hearings on bills seeking to expand the childcare tax credit program (HB 2414 and SB 263) were held this week in the House Taxation Committee and Senate Assessment and Taxation Committee, respectively. The bills seek to expand a tax credit program already in existence that incentivizes business to provide childcare benefits to their employees.
Currently the childcare programs must be on-site and the benefit only applies to C-corps and businesses paying privilege fees. The bill would allow the tax credit for shared childcare programs and expands the credit to other business entities. Further, the bill extends the 50% tax credit beyond the first year. Currently employers can get the 50% credit for the first year and 30% thereafter.
Childcare advocates and businesses have seen improvements in employee recruitment and retention efforts, as well as increased productivity for employees who have safe, high-quality childcare options.
Schools – The Senate approved Senate Substitute for HB 2104, 39-0, on Thursday. The bill primarily re-authorizes the 20-mil property tax levy for school years 2021-2022 and 2022-2023 and continues the exemption for residential property for tax years 2021 and 2022.
Additionally, the bill includes language that impacts appraisers, appraisal standards for the Board of Tax Appeals and adjusts the procedures and dates schools are required to follow under SB 13, the Truth in Taxation law signed by Governor Kelly on Friday.
- STAR Bonds - SB 124 extends the STAR Bonds economic development incentive tool that was set to expire this year. The House made substantial changes to the program designed to increase transparency and oversight before passing the bill out of the House Commerce Committee on Friday. The bill is scheduled for floor debate on Monday.
- Angel Investor Tax Credit - SB 66 extends and enhances the Angel Investor Tax Credit. The bill, as approved by the House 109-12, differs from what passed the Senate earlier this session.
- HPIP - SB 65/SB 91 relate to the High-Performance Incentive Fund and were merged into SB 65 by the House Commerce, Labor and Economic Development Committee. The combined bill would decouple HPIP from two other incentive programs and allow HPIP credits to be transferred. The amended bill received strong approval on Thursday when the House gave final action approval 121-1.
Medical Marijuana – the year’s long fight to allow for medical marijuana in Kansas is still plodding along, but the politically-charged issue is still a tough sell. The House Federal and State Affairs Committee continued its effort to create a bill that could muster enough support to pass. The Committee considered multiple amendments to HB 2184 and initially cued up the bill for further consideration before reversing course. Kansas, one of three states that has not acted on medical marijuana, has found it difficult to find a balance that would gain the necessary votes to advance the proposal. The Committee is scheduled to continue work on its bill next Monday and Tuesday.
The bill currently contains 21 conditions for which medical marijuana could be prescribed and language that would allow additional conditions to be added in the future.
Immunizations/Business Rights – We previously reported on SB 213, a bill that would prohibit employers from taking adverse actions against employees due to their vaccination status. The business community rallied against the bill as an intrusion on business rights. Despite a chilly reception, the bill was “blessed” by leadership. In legislative parlance, a “blessed” bill is a bill that becomes exempt from future legislative deadlines, keeping it alive for further consideration.
SB 212 deals with immunizations and changes the statutory authority to make changes to the list of required immunizations for attending school or childcare. Currently the authority rests with the secretary of health and environment. This bill would turn that authority over to the legislature. On Thursday the Senate Public Health and Welfare Committee merged the two bills and recommended the updated proposal be approved by the full Senate. Health care advocates and the business community have joined forces to fight the legislation.
Professional Licensure – HB 2066, the bill streamlining the process by which holders of out-of-state professional licenses and certification can work in Kansas, is now in conference committee. Proponents of the bill have argued passage of this bill will allow holders of professional licenses and certifications to move to Kansas and begin working in their trained fields with minimal delay.
Provisions of the bill pertaining to military personnel and spouses gives Kansas better standing with the United States Department of Defense as they evaluate future base realignments and closures. The bill received strong support in the House and Senate.
University Engineering Initiative Act (UEIA) – HB 2101 received committee approval and will head to the House floor for debate. The bill extends the UEIA that is designed to enhance engineering programs at KU, KSU and WSU and increase the number of engineering graduates at these schools. The House Ways and Means Committee added language requiring an analysis of the number of engineering graduates who remain in Kansas.
COVID-19 Claims – Lawmakers continue to wrestle with a process to reimburse businesses and property owners who raised concerns that government-issued orders during the pandemic harmed their business. SB 286 appears to be the bill that is gaining momentum to address the issue raised by a Wichita gym owner who filed suit. Parties to the lawsuit agreed to put the case on hold to allow the legislature time to address the issue. Details are still being fine-tuned. Conceptually, the bill calls for federal pandemic relief money to be dedicated to a designated fund out of which approved claims would be paid. The attorney general would have the responsibility of assessing the claims and calculating damages, if any, due to a claimant.
Liquor Laws – Under the terms of HB 2406 approved by the House 80-42, you’ll be able to pick up your favorite adult beverage on your way home from church as the bill allows for beer, liquor and wine sales beginning at 9 am. Current law doesn’t allow retailers to sell these products before noon on Sundays.
Other alcohol-related bills in play this session include:
- HB 2137 continues the “liquor to go” provisions initially authorized during last year’s special session and later extended by passage of SB 14. Other provisions of the bill deal with liquor licenses and common consumption areas. This bill has passed both chambers although the chambers will now have to iron out differences in the two versions.
- SB 2 would expand the area in which attendees of the Kansas State Fair could obtain beer and wine. This bill passed the Senate 31-8 and awaits action in the House.
- HB 2377 would amend current law and allow for reinstatement of driving privileges under specified conditions and modify the conditions under which ignition interlock devices could be used. This bill has passed the House.
Tax Deadline – if you are procrastinator, you may want to eventually send Governor Kelly a note of thanks. Late last week she changed the state’s individual income tax filing deadline to May 17, 2021, giving you an extra month to file your taxes this year.
This change is like recently announced guidance related to federal returns. For details, click here.
Kevin Walker, IOM
Senior Vice President of Public Policy
(913) 766-7602 | (913) 526-6855