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Minutes for HB2798 - Committee on Taxation
Short Title
Providing for the apportionment of business income by the single sales factor and the apportionment of financial institution income by the receipts factor, deductions from income when using the single sales factor and receipts factor and the decrease in corporate income tax rates.
Minutes Content for Wed, Mar 6, 2024
Chairperson Smith opened the hearing for HB2798.
Mr. Siebers provided an overview for HB2798 that would apportion business income for taxpayers by multiplying the business income by the sales factor and provide for a decrease in corporate income tax rates. (Attachment 5) Mr. Siebers stood for questions from Committee members.
Kathleen Smith provided an overview on the fiscal note for HB2798 that would decrease the State General Fund Revenues by at least $162.4 million in FY2025, $87.7 million in FY2026, and $7.9 million in FY2027. Provisions in the bill is giving an option on the single factor for tax years 2024 and 2025 and then would go to the single sales factor in tax year 2026. Based on tax year 2021 data, an optional single sales factor would decrease corporate tax liability by $103 .2 million per tax year. For FY2025 and FY2026 there would be an increase in the tax liability of $10.4 million when going to the single factor. The impact on privilege tax was estimated using the impacts for corporate tax and 2021 collection data. KDOR is estimating there would be a decrease in privilege tax liability by $9.5 million in both tax years 2025 and 2026 and a increase tax liability by $1.0 million in tax year 2027.
Ms. Smith noted the interstate motor carriers, three factor data is not available. The Kansas Department of Revenue estimated based upon those companies that were doing business in multiple states and came up with an estimated decrease in tax collections by at least $12.2 million per tax year. Ms. Smith stood for questions from Committee members.
Proponents:
Eric Stafford testified as a proponent for HB2798 that would move Kansas to a single-factor apportionment state for corporate income tax purposes. As stated in his testimony for HB2796, the Kansas Chamber membership requested some provisions to help offset an increase tax liability. HB2798 includes two such provisions which are a buy-down of the corporate rate with any change in corporate income tax receipts caused by such change; and a provision known as a deferred tax liability credit. Additionally, the Kansas Chamber members requested if they could have a two-year election period where taxpayers can choose between single-factor and three-factor, before moving fully to a single factor apportionment in the third year and the request was included in HB2798. (Attachment 6) Mr. Stafford stood for questions from Committee members.
Written only testimony was submitted by Randy Stookey, Kansas Grain and Feed Association,(Attachment 7); Alex Orel, Kansas Bankers Association, (Attachment 8); Erin Browner, Hallmark Cards, Inc., (Attachment 9); Patrick Fucik, T-Mobile, (Attachment 10)
Opponent:
Michael Mazerov, Senior Fellow, Center on Budget and Policy Priorities, Washington D.C., testified via Webex as an opponent for HB2798. An increasing number of states, lobbyists for large multistate corporations have been pushing for the enactment of a new tax break called deferred tax relief. The tax break, a new deduction from gross income, often increases corporations state income tax payments. This tax giveaway is unusual that eventually causes states to forgo real revenue needed to fund education, health care, public safety, road maintenance, and other services to offset a paper expense that some corporations must report on their financial statements. Mr. Mazerov also provided a 2019 report he wrote regarding proposals for deferred tax deductions. (Attachment 11) (Attachment 12) Mr. Mazerov stood for questions from Committee members.
Chairperson Smith advised the Committee there was no neutral testimony submitted for HB2798.
Chairperson Smith closed the hearing for HB2798 and adjourned the meeting.
