Kansas Gov. Laura Kelly (D) signed bipartisan legislation amending property, sales and income taxes on April 14.
House Bill (HB) 2239 was passed by lawmakers 103-10 after House and Senate members crafted the legislation, which combined 29 separate tax measures into the overall bill.
“With the largest budget surplus in decades, we have the opportunity to help Kansans who are feeling the impact of pandemic-induced inflation,” Kelly tweeted after signing the bill. “That’s why I cut property taxes to provide Kansans with financial relief.”
The tax cuts in HB 2239 total more than $310 million over the next three years, beginning in fiscal year 2023. The most significant tax cut in the bill, the residential property tax exemption, will total $134 million.
The bill increases the amount of the residential exemption of the 20 mill uniform statewide K-12 property tax levy from $20,000 of valuation to $40,000 beginning in the tax year 2022. The amount will be increased in future tax years according to the average percentage change in statewide residential real property for the preceding 10 tax years.
HB 2239 also provides property tax relief for buildings and agricultural improvements listed as real property that were damaged in a gubernatorial-declared disaster with restoration costs equal to or exceeding 50 percent of the pre-damage market value. The bill also provides homestead property tax refunds to eligible taxpayers 65 and over or to disabled veterans whose property values are below $350,000 and incomes are below $50,000.
In addition to property tax relief, HB 2239 contains many smaller tax relief measures. A sales tax exemption for fencing materials purchased to replace or rebuild a fence following a natural disaster is among them. The bill also permanently exempts sales tax on all agricultural fencing materials going forward. The exemption on fencing materials purchased because of a natural disaster would be retroactive, going back to Jan. 1, 2021.
The Kansas Farm Bureau and Kansas Livestock Association pushed for the tax exemption for properties destroyed in disasters and for making the agricultural fencing exemption permanent.
“This bill is drafted in a manner to help others affected by similar disasters in the future, which is good public policy and will allow those affected by these types of natural disasters to know that this tax relief is available,” said Richard Felts, president of the Kansas Farm Bureau.
The bill also provides tax credits for graduates of aerospace and aviation educational programs, employers of program graduates, school and classroom supplies purchased by teachers, and contributions to community colleges and technical colleges. In addition, the bill repeals the sales tax on shipping and handling charges and extends the sunset on the Rural Opportunity Zones program.
HB 2239 enacts the State and Local Tax Parity Act, providing certain pass-through entities with the option of paying state income taxes at the entity level of 5.7 percent rather than being paid by the individual owners of the pass-through entities.
It also allows the Shawnee County Commission to ask voters for a sales tax to fund improvements at Gage Park, the Topeka Zoo and the Kansas Children’s Discovery Center.
In fiscal year 2024, the bill will reduce state receipts by $99.8 million, with an additional $119.6 million in 2025, according to the bill’s summary.
When lawmakers return on April 25, they will consider tax measure HB 2106, which Kelly has been advocating for. The bill would gradually reduce the grocery sales tax to zero by 2025.
“We have the opportunity to help Kansans who are feeling the impact of pandemic-induced inflation,” Kelly said in a statement. “With the largest budget surplus in decades, we can do both—provide property tax relief and finally eliminate the state sales tax on food.” — Charles Wallace, WLJ editor
