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{As Amended by House Committee of the Whole}
As Amended by House Committee
Session of 2025
HOUSE BILL No. 2336
By Committee on Taxation
Requested by Eric Stafford on behalf of the Kansas Chamber of Commerce
2-7
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; providing for the apportionment pursuant to the
three-factor test of a manufacturer who sells alcoholic liquor;
{requiring the use of single sales factor pursuant to the multistate
tax compact;} 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 79-4301} 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 {At the end of} fiscal year
2026 {2028}, 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
{tax} 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 {2028}, the new
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HB 2336—Am. by HCW 2
income tax rates to take effect on January 1 {for all taxable years
commencing after December 31}, 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
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 {commencing} prior to January 1, 2028
2027, 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 2027, all
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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
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
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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 {tax year} 2025 . 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 {privilege} tax rate for corporations in effect for
the tax year pursuant to K.S.A. 79-32,110 {79-1107 and 79-1108} , 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 2027,
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 2027.
(9) For purposes of this subsection:
(A) "Net deferred tax liability" means deferred tax liabilities that
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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
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.
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(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
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){(b)(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
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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
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. {For tax years commencing
before January 1, 2027, 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) {(b)}For the tax years commencing on or after January 1, 2025
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and ending before January 1, 2028 2027, 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) {(b)(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) {(b)(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) {(b)(2)} shall be
made by including a statement with the original tax return indicating that
the taxpayer elects to apply the apportionment method under this
subsection (b)(2) (a)(2) {(b)(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) {(b)(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) {(b)(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)
(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) {(b)(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
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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
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) {(b)(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
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difference of the amount of such tax liability if determined pursuant to
subsection (b)(1) (a)(1) {(b)(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.
(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
{subsection (b)(5)}, 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) {(b)(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
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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
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
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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
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) {(b)(6)}, may extend any required performance date provided
in this subsection (b)(6) (a)(6) {(b)(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){(c)} For tax years commencing on or after January 1, 2028 2027,
all business income shall be apportioned to this state by multiplying the
business income by the sales factor.
(d)(c){(d)} Any taxpayer having previously made an election
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pursuant to subsection (a)(2) {(b)(2)} shall be permitted to make a new
election pursuant to subsection (b) apportion income through the use of
the single sales factor.
(e)(d){(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
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 {tax year} 2025 . 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
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(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 2027,
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
to the extent claimed in the manner prescribed on or before July 1, 2028
2027.
(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) Any manufacturer of alcoholic liquor as defined in K.S.A. 41-
102, and amendments thereto, who sells to a distributor as defined in
K.S.A. 41-102, and amendments thereto, shall be apportioned to this
state by multiplying the business income by a fraction, the numerator
of which is the property factor plus the payroll factor and the sales
factor, and the denominator of which is three.
(g) 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:
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(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{:
(a) For tax years commencing before January 1, 2027:
(1) The income-producing activity is performed in this state; or
(2) 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; and
(b) for tax years commencing after December 31, 2026,} 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){(c)} in the case of dividends, if and to the extent the payor's
commercial domicile is located in this state.
(c){(d)} 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
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sales factor.
(d){(e)} 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 {commencing} before January 1, 2025
{2027}.
(e){(f)} 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:
Not over $15,000........................................... 3.1% of Kansas taxable
income
Over $15,000 but not over $30,000............... $465 plus 5.25% of excess
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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
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
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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. 79-4301 is hereby amended to read as follows: 79-
4301. "The multistate tax compact" is hereby enacted into law and
entered into with all jurisdictions legally joining therein, in the form
substantially as follows:
MULTISTATE TAX COMPACT
ARTICLE I.—Purposes
The purposes of this compact are to:
(1) Facilitate proper determination of state and local tax liability
of multistate taxpayers, including the equitable apportionment of tax
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bases and settlement of apportionment disputes.
(2) Promote uniformity or compatibility in significant
components of tax systems.
(3) Facilitate taxpayer convenience and compliance in the filing of
tax returns and in other phases of tax administration.
(4) Avoid duplicative taxation.
ARTICLE II.—Definitions
As used in this compact:
(1) "State" means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any territory or
possession of the United States.
(2) "Subdivision" means any governmental unit or special district
of a state.
(3) "Taxpayer" means any corporation, partnership, firm,
association, governmental unit or agency or person acting as a
business entity in more than one state.
(4) "Income tax" means a tax imposed on or measured by net
income including any tax imposed on or measured by an amount
arrived at by deducting expenses from gross income, one or more
forms of which expenses are not specifically and directly related to
particular transactions.
(5) "Capital stock tax" means a tax measured in any way by the
capital of a corporation considered in its entirety.
(6) "Gross receipts tax" means a tax, other than a sales tax,
which is imposed on or measured by the gross volume of business, in
terms of gross receipts or in other terms, and in the determination of
which no deduction is allowed which would constitute the tax an
income tax.
(7) "Sales tax" means a tax imposed with respect to the transfer
for a consideration of ownership, possession or custody of tangible
personal property or the rendering of services measured by the price
of the tangible personal property transferred or services rendered and
which is required by state or local law to be separately stated from the
sales price by the seller, or which is customarily separately stated from
the sales price, but does not include a tax imposed exclusively on the
sale of a specifically identified commodity or article or class of
commodities or articles.
(8) "Use tax" means a nonrecurring tax, other than a sales tax,
which (a) is imposed on or with respect to the exercise or enjoyment of
any right or power over tangible personal property incident to the
ownership, possession or custody of that property or the leasing of
that property from another including any consumption, keeping,
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retention, or other use of tangible personal property and (b) is
complimentary to a sales tax.
(9) "Tax" means an income tax, capital stock tax, gross receipts
tax, sales tax, use tax, and any other tax which has a multistate
impact, except that the provisions of articles III, IV and V of this
compact shall apply only to the taxes specifically designated therein
and the provisions of article IX of this compact shall apply only in
respect to determinations pursuant to article IV .
ARTICLE III.—Elements of Income Tax Laws
(1) Taxpayer option, state and local taxes. Any taxpayer subject to
an income tax whose income is subject to apportionment and
allocation for tax purposes pursuant to the laws of a party state or
pursuant to the laws of subdivisions in two or more party states may
elect to apportion and allocate his income in the manner provided by
the laws of such state or by the laws of such states and subdivisions
without reference to this compact, or may elect to apportion and
allocate in accordance with article IV, except that for tax years
commencing on or after January 1, 2027, any taxpayer subject to the tax
imposed by K.S.A. 79-32,110(c), and amendments thereto, shall apportion
and allocate in accordance with article 32 of chapter 79 of the Kansas
Statutes Annotated, and amendments thereto, and shall not apportion or
allocate in accordance with article IV. This election for any tax year may
be made in all party states or subdivisions thereof or in any one or
more of the party states or subdivisions thereof without reference to
the election made in the others. For the purposes of this paragraph,
taxes imposed by subdivisions shall be considered separately from
state taxes and the apportionment and allocation also may be applied
to the entire tax base. In no instance wherein article IV is employed
for all subdivisions of a state may the sum of all apportionments and
allocations to subdivisions within a state be greater than the
apportionment and allocation that would be assignable to that state if
the apportionment or allocation were being made with respect to a
state income tax.
(2) Taxpayer option, short form. Each party state or any
subdivision thereof which imposes an income tax shall provide by law
that any taxpayer required to file a return, whose only activities within
the taxing jurisdiction consist of sales and do not include owning or
renting real estate or tangible personal property, and whose dollar
volume of gross sales made during the tax year within the state or
subdivision, as the case may be, is not in excess of $100,000 may elect
to report and pay any tax due on the basis of a percentage of such
volume, and shall adopt rates which shall produce a tax which
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reasonably approximates the tax otherwise due. The multistate tax
commission, not more than once in five years, may adjust the $100,000
figure in order to reflect such changes as may occur in the real value
of the dollar, and such adjusted figure, upon adoption by the
commission, shall replace the $100,000 figure specifically provided
herein. Each party state and subdivision thereof may make the same
election available to taxpayers additional to those specified in this
paragraph.
(3) Coverage. Nothing in this article relates to the reporting or
payment of any tax other than in income tax.
ARTICLE IV .—Division of Income
(1) As used in this article, unless the context otherwise requires:
(a) "Business income" means 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.
(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, small loan company, sales finance company, investment
company, or any type of insurance company.
(e) "Nonbusiness income" means all income other than business
income.
(f) "Public utility" means any business entity (1) which owns or
operates any plant, equipment, property, franchise, or license for the
transmission of communications, transportation of goods or persons,
except by pipeline, or the production, transmission, sale, delivery, or
furnishing of electricity, water or steam; and (2) whose rates of
charges for goods or services have been established or approved by a
federal, state or local government or governmental agency.
(g) "Sales" means all gross receipts of the taxpayer not allocated
under paragraphs of this article.
(h) "State" means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, and any foreign country or political
subdivision thereof.
(i) "This state" means the state in which the relevant tax return is
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filed or, in the case of application of this article to the apportionment
and allocation of income for local tax purposes, the subdivision or
local taxing district in which the relevant tax return is filed.
(2) Any taxpayer having income from business activity which is
taxable both within and without this state, other than activity as a
financial organization or public utility or the rendering of purely
personal services by an individual, shall allocate and apportion his net
income as provided in this article. If a taxpayer has income from
business activity as a public utility but derives the greater percentage
of his income from activities subject to this article, the taxpayer may
elect to allocate and apportion his entire net income as provided in this
article.
(3) For purposes of allocation and apportionment of income
under this article, a taxpayer is taxable in another state if (1) in that
state he is subject to a net income tax, a franchise tax measured by net
income, a franchise tax for the privilege of doing business, or a
corporate stock tax, or (2) that state has jurisdiction to subject the
taxpayer to a net income tax regardless of whether, in fact, the state
does or does not.
(4) Rents and royalties from real or tangible personal property,
capital gains, interest, dividends or patent or copyright royalties, to
the extent that they constitute nonbusiness income, shall be allocated
as provided in paragraphs 5 through 8 of this article.
(5) (a) Net rents and royalties from real property located in this
state are allocable to this state.
(b) Net rents and royalties from tangible personal property are
allocable to this state: (1) If and to the extent that the property is
utilized in this state, or (2) in their entirety if the taxpayer's
commercial domicile is in this state and the taxpayer is not organized
under the laws of or taxable in the state in which the property is
utilized.
(c) The extent of utilization of tangible personal property in a
state is determined by multiplying the rents and royalties by a
fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty period
in the taxable year and the denominator of which is the number of
days of physical location of the property everywhere during all rental
or royalty periods in the taxable year. If the physical location of the
property during the rental or royalty period is unknown or
unascertainable by the taxpayer, tangible personal property is utilized
in the state in which the property was located at the time the rental or
royalty payer obtained possession.
(6) (a) Capital gains and losses from sales of real property located
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in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal
property are allocable to this state if (1) the property had a situs in
this state at the time of the sale, or (2) the taxpayer's commercial
domicile is in this state and the taxpayer is not taxable in the state in
which the property had a situs.
(c) Capital gains and losses from sales of intangible personal
property are allocable to this state if the taxpayer's commercial
domicile is in this state.
(7) Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
(8) (a) Patent and copyright royalties are allocable to this state:
(1) If and to the extent that the patent or copyright is utilized by the
payer in this state, or (2) if and to the extent that the patent copyright
is utilized by the payer in a state in which the taxpayer is not taxable
and the taxpayer's commercial domicile is in this state.
(b) A patent is utilized in a state to the extent that it is employed
in production, fabrication, manufacturing, or other processing in the
state or to the extent that a patented product is produced in the state.
If the basis of receipts from patent royalties does not permit allocation
to states or if the accounting procedures do not reflect states of
utilization, the patent is utilized in the state in which the taxpayer's
commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing or
other publication originates in the state. If the basis of receipts from
copyright royalties does not permit allocation to states or if the
accounting procedures do not reflect states of utilization, the copyright
is utilized in the state in which the taxpayer's commercial domicile is
located.
(9) All business income shall be apportioned to this state by
multiplying the 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.
(10) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in this state during the tax period
and the denominator of which is the average value of all the taxpayer's
real and tangible personal property owned or rented and used during
the tax period.
(11) Property owned by the taxpayer is valued at its original cost.
Property rented by the taxpayer is valued at eight times the net annual
rental rate. Net annual rental rate is the annual rental rate paid by the
taxpayer less any annual rental rate received by the taxpayer from
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subrentals.
(12) The average value of property shall be determined by
averaging the values at the beginning and ending of the tax period but
the tax administrator may require the averaging of monthly values
during the tax period if reasonably required to reflect properly the
average value of the taxpayer's property.
(13) The payroll factor is a fraction, the numerator of which is the
total amount paid in this state during the tax period by the taxpayer
for compensation and the denominator of which is the total
compensation paid everywhere during the tax period.
(14) Compensation is paid in this state if:
(a) The individual's service is performed entirely within the state;
(b) The individual's service is performed both within and without
the state, but the service performed without the state is incidental to
the individual's service within the state; or
(c) Some of the service is performed in the state and (1) the base
of operations or, if there is no base of operations, the place from which
the service is directed or controlled is in the state, or (2) the base of
operations or the place from which the service is directed or controlled
is not in any state in which some part of the service is performed, but
the individual's residence is in this state.
(15) The sales factor is a fraction, the numerator of which is the
total sales of the taxpayer in this state during the tax period, and the
denominator of which is the total sales of the taxpayer everywhere
during the tax period.
(16) Sales of tangible personal property are in this state if:
(a) The property is delivered or shipped to a purchaser, other
than the United States government, within this state regardless of the
f.o.b. point or other conditions of the sale; or
(b) The property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and (1) the purchaser is
the United States government or (2) the taxpayer is not taxable in the
state of the purchaser.
(17) 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.
(18) If the allocation and apportionment provisions of this article
do not fairly represent the extent of the taxpayer's business activity in
this state, the taxpayer may petition for or the tax administrator may
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require, in respect to all or any part of the taxpayer's business activity,
if reasonable:
(a) Separate accounting;
(b) The exclusion of any one or more of the factors;
(c) The inclusion of one or more additional factors which will
fairly represent the taxpayer's business activity in this state; or
(d) The employment of any other method to effectuate an
equitable allocation and apportionment of the taxpayer's income.
ARTICLE V .—Elements of Sales and Use Tax Laws
(1) Tax credit. Each purchaser liable for a use tax on tangible
personal property shall be entitled to full credit for the combined
amount or amounts of legally imposed sales or use taxes paid by him
with respect to the same property to another state and any subdivision
thereof. The credit shall be applied first against the amount of any use
tax due the state, and any unused portion of the credit shall then be
applied against the amount of any use tax due a subdivision.
(2) Exemption certificates, vendors may rely. Whenever a vendor
receives and accepts in good faith from a purchaser a resale or other
exemption certificate or other written evidence of exemption
authorized by the appropriate state or subdivision taxing authority,
the vendor shall be relieved of liability for a sales or use tax with
respect to the transaction.
ARTICLE VI.—The Commission
(1) Organization and management. (a) The multistate tax
commission is hereby established. It shall be composed of one
"member" from each party state who shall be the head of the state
agency charged with the administration of the types of taxes to which
this compact applies. If there is more than one such agency the state
shall provide by law for the selection of the commission member from
the heads of the relevant agencies. State law may provide that a
member of the commission be represented by an alternate but only if
there is on file with the commission written notification of the
designation and identity of the alternate. The attorney general of each
party state or his designee, or other counsel if the laws of the party
state specifically provide, shall be entitled to attend the meetings of the
commission, but shall not vote. Such attorneys general, designees, or
other counsel shall receive all notices of meetings required under
paragraph (1) (e) of this article.
(b) Each party state shall provide by law for the selection of
representatives from its subdivisions affected by this compact to
consult with the commission member from that state.
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(c) Each member shall be entitled to one vote. The commission
shall not act unless a majority of the members are present, and no
action shall be binding unless approved by a majority of the total
number of members.
(d) The commission shall adopt an official seal to be used as it
may provide.
(e) The commission shall hold an annual meeting and such other
regular meetings as its bylaws may provide and such special meetings
as its executive committee may determine. The commission bylaws
shall specify the dates of the annual and any other regular meetings,
and shall provide for the giving of notice of annual, regular and
special meetings. Notices of special meetings shall include the reasons
therefor and an agenda of the items to be considered.
(f) The commission shall elect annually, from among its members,
a chairman, a vice-chairman and a treasurer. The commission shall
appoint an executive director who shall serve at its pleasure, and it
shall fix his duties and compensation. The executive director shall be
secretary of the commission. The commission shall make provision for
the bonding of such of its officers and employees as it may deem
appropriate.
(g) Irrespective of the civil service, personnel or other merit
system laws of any party state, the executive director shall appoint or
discharge such personnel as may be necessary for the performance of
the functions of the commission and shall fix their duties and
compensation. The commission bylaws shall provide for personnel
policies and programs.
(h) The commission may borrow, accept or contract for the
services of personnel from any state, the United States, or any other
governmental entity.
(i) The commission may accept for any of its purposes and
functions any and all donations and grants of money, equipment,
supplies, materials and services, conditional or otherwise, from any
governmental entity, and may utilize and dispose of the same.
(j) The commission may establish one or more offices for the
transacting of its business.
(k) The commission shall adopt bylaws for the conduct of its
business. The commission shall publish its bylaws in convenient form,
and shall file a copy of the bylaws and any amendments thereto with
the appropriate agency or officer in each of the party states.
(l) The commission annually shall make to the governor and
legislature of each party state a report covering its activities for the
preceding year. Any donation or grant accepted by the commission or
services borrowed shall be reported in the annual report of the
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commission, and shall include the nature, amount and conditions, if
any, of the donation, gift, grant or services borrowed and the identity
of the donor or lender. The commission may make additional reports
as it may deem desirable.
(2) Committees. (a) To assist in the conduct of its business when
the full commission is not meeting, the commission shall have an
executive committee of seven members, including the chairman, vice-
chairman, treasurer and four other members elected annually by the
commission. The executive committee, subject to the provisions of this
compact and consistent with the policies of the commission, shall
function as provided in the laws of the commission.
(b) The commission may establish advisory and technical
committees, membership on which may include private persons and
public officials, in furthering any of its activities. Such committees
may consider any matter of concern to the commission, including
problems of special interest to any party state and problems dealing
with particular types of taxes.
(c) The commission may establish such additional committees as
its bylaws may provide.
(3) Powers. In addition to powers conferred elsewhere in this
compact, the commission shall have power to:
(a) Study state and local tax systems and particular types of state
and local taxes.
(b) Develop and recommend proposals for an increase in
uniformity or compatibility of state and local tax laws with a view
toward encouraging the simplification and improvement of state and
local tax law and administration.
(c) Compile and publish information as in its judgment would
assist the party states in implementation of the compact and taxpayers
in complying with state and local tax laws.
(d) Do all things necessary and incidental to the administration of
its functions pursuant to this compact.
(4) Finance. (a) The commission shall submit to the governor or
designated officer or officers of each party state a budget of its
estimated expenditures for such period as may be required by the laws
of that state for presentation to the legislature thereof.
(b) Each of the commission's budget of estimated expenditures
shall contain specific recommendations of the amounts to be
appropriated by each of the party states. The total amount of
appropriations requested under any such budget shall be apportioned
among the party states as follows: One-tenth in equal shares; and the
remainder in proportion of the amount of revenue collected by each
party state and its subdivisions from income taxes, capital stock taxes,
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gross receipts taxes, sales and use taxes. In determining such amounts,
the commission shall employ such available public sources of
information as, in its judgment, present the most equitable and
accurate comparisons among the party states. Each of the
commission's budgets of estimated expenditures and requests for
appropriations shall indicate the sources used in obtaining
information employed in applying the formula contained in this
paragraph.
(c) The commission shall not pledge the credit of any party state.
The commission may meet any of its obligations in whole or in part
with funds available to it under paragraph (1) (i) of this article:
Provided, That the commission takes specific action setting aside such
funds prior to incurring any obligation to be met in whole or in part in
such manner. Except where the commission makes use of funds
available to it under paragraph (1) (i), the commission shall not incur
any obligation prior to the allotment of funds by the party states
adequate to meet the same.
(d) The commission shall keep accurate accounts of all receipts
and disbursements. The receipts and disbursements of the commission
shall be subject to the audit and accounting procedures established
under its bylaws. All receipts and disbursements of funds handled by
the commission shall be audited yearly by a certified or licensed public
accountant and the report of the audit shall be included in and become
part of the annual report of the commission.
(e) The accounts of the commission shall be open at any
reasonable time for inspection by duly constituted officers of the party
states and by any persons authorized by the commission.
(f) Nothing contained in this article shall be construed to prevent
commission compliance with laws relating to audit or inspection of
accounts by or on behalf of any government contributing to the
support of the commission.
ARTICLE VII.—Uniform Regulations and Forms
(1) Whenever any two or more party states, or subdivisions of
party states, have uniform or similar provisions of law relating to an
income tax, capital stock tax, gross receipts tax, sales or use tax, the
commission may adopt uniform regulations for any phase of the
administration of such law, including assertion of jurisdiction to tax,
or prescribing uniform tax forms. The commission may also act with
respect to the provisions of article IV of this compact.
(2) Prior to the adoption of any regulation, the commission shall:
(a) As provided in its bylaws, hold at least one public hearing on
due notice to all affected party states and subdivisions thereof and to
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all taxpayers and other persons who have made timely request of the
commission for advance notice of its regulation-making proceedings.
(b) Afford all affected party states and subdivisions and
interested persons an opportunity to submit relevant written data and
views, which shall be considered fully by the commission.
(3) The commission shall submit any regulations adopted by it to
the appropriate officials of all party states and subdivisions to which
they might apply. Each such state and subdivision shall consider any
such regulation for adoption in accordance with its own laws and
procedures.
ARTICLE VIII.—Interstate Audits
(1) This article shall be in force only in those party states that
specifically provide therefor by statute.
(2) Any party state or subdivision thereof desiring to make or
participate in an audit of any accounts, books, papers, records or
other documents may request the commission to perform the audit on
its behalf. In responding to the request, the commission shall have
access to and may examine, at any reasonable time, such accounts,
books, papers, records, and other documents and any relevant
property or stock of merchandise. The commission may enter into
agreements with party states or their subdivisions for assistance in
performance of the audit. The commission shall make charges, to be
paid by the state or local government or governments for which it
performs the service, for any audits performed by it in order to
reimburse itself for the actual costs incurred in making the audit.
(3) The commission may require the attendance of any person
within the state where it is conducting an audit or part thereof at a
time and place fixed by it within such state for the purpose of giving
testimony with respect to any account, book, paper, document, other
record, property or stock of merchandise being examined in
connection with the audit. If the person is not within the jurisdiction,
he may be required to attend for such purpose at any time and place
fixed by the commission within the state of which he is a resident:
Provided, That such state has adopted this article.
(4) The commission may apply to any court having power to issue
compulsory process for orders in aid of its powers and responsibilities
pursuant to this article and any and all such courts shall have
jurisdiction to issue such orders. Failure of any person to obey any
such order shall be punishable as contempt of the issuing court. If the
party or subject matter on account of which the commission seeks an
order is within the jurisdiction of the court to which application is
made, such application may be to a court in the state or subdivision on
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behalf of which the audit is being made or a court in the state in which
the object of the order being sought is situated. The provisions of this
paragraph apply only to courts in a state that has adopted this article.
(5) The commission may decline to perform any audit requested
if it finds that its available personnel or other resources are
insufficient for the purpose or that, in the terms requested, the audit is
impracticable of satisfactory performance. If the commission, on the
basis of its experience, has reason to believe that an audit of a
particular taxpayer, either at a particular time or on a particular
schedule, would be of interest to a number of party states or their
subdivisions, it may offer to make the audit or audits, the offer to be
contingent on sufficient participation therein as determined by the
commission.
(6) Information obtained by any audit pursuant to this article
shall be confidential and available only for tax purposes to party
states, their subdivisions or the United States. Availability of
information shall be in accordance with the laws of the states or
subdivisions on whose account the commission performs the audit,
and only through the appropriate agencies or officers of such states or
subdivisions. Nothing in this article shall be construed to require any
taxpayer to keep records for any period not otherwise required by law.
(7) Other arrangements made or authorized pursuant to law for
cooperative audit by or on behalf of the party states or any of their
subdivisions are not superseded or invalidated by this article.
(8) In no event shall the commission make any charge against a
taxpayer for an audit.
(9) As used in this article, "tax," in addition to the meaning
ascribed to it in article II, means any tax or license fee imposed in
whole or in part for revenue purposes.
ARTICLE IX.—Arbitration
(1) Whenever the commission finds a need for settling disputes
concerning apportionments and allocations by arbitration, it may
adopt a regulation placing this article in effect, notwithstanding the
provisions of article VII.
(2) The commission shall select and maintain an arbitration panel
composed of officers and employees of state and local governments
and private persons who shall be knowledgeable and experienced in
matters of tax law and administration.
(3) Whenever a taxpayer who has elected to employ article IV , or
whenever the laws of the party state or subdivision thereof are
substantially identical with the relevant provisions of article IV , the
taxpayer, by written notice to the commission and to each party state
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or subdivision thereof that would be affected, may secure arbitration
of an apportionment or allocation, if he is dissatisfied with the final
administrative determination of the tax agency of the state or
subdivision with respect thereto on the ground that it would subject
him to double or multiple taxation by two or more party states or
subdivisions thereof. Each party state and subdivision thereof hereby
consents to the arbitration as provided herein, and agrees to be bound
thereby.
(4) The arbitration board shall be composed of one person
selected by the taxpayer, one by the agency or agencies involved, and
one member of the commission's arbitration panel. If the agencies
involved are unable to agree on the person to be selected by them,
such person shall be selected by lot from the total membership of the
arbitration panel. The two persons selected for the board in the
manner provided by the foregoing provisions of this paragraph shall
jointly select the third member of the board. If they are unable to
agree on the selection, the third member shall be selected by lot from
among the total membership of the arbitration panel. No member of a
board selected by lot shall be qualified to serve if he is an officer or
employee or is otherwise affiliated with any party to the arbitration
proceeding. Residence within the jurisdiction of a party to the
arbitration proceeding shall not constitute affiliation within the
meaning of this paragraph.
(5) The board may sit in any state or subdivision party to the
proceeding, in the state of the taxpayer's incorporation, residence or
domicile, in any state where the taxpayer does business, or in any
place that it finds most appropriate for gaining access to evidence
relevant to the matter before it.
(6) The board shall give due notice of the times and places of its
hearings. The parties shall be entitled to be heard, to present evidence,
and to examine and cross-examine witnesses. The board shall act by
majority vote.
(7) The board shall have power to administer oaths, take
testimony, subpoena and require the attendance of witnesses and the
production of accounts, books, papers, records, and other documents,
and issue commissions to take testimony. Subpoenas may be signed by
any member of the board. In case of failure to obey a subpoena, and
upon application by the board, any judge of a court of competent
jurisdiction of the state in which the board is sitting or in which the
person to whom the subpoena is directed may be found may make an
order requiring compliance with the subpoena, and the court may
punish failure to obey the order as a contempt. The provisions of this
paragraph apply only in states that have adopted this article.
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(8) Unless the parties otherwise agree the expenses and other
costs of the arbitration shall be assessed and allocated among the
parties by the board in such manner as it may determine. The
commission shall fix a schedule of compensation for members of
arbitration boards and of other allowable expenses and costs. No
officer or employee of a state or local government who serves as a
member of a board shall be entitled to compensation therefor unless
he is required on account of his service to forego the regular
compensation attaching to his public employment, but any such board
member shall be entitled to expenses.
(9) The board shall determine the disputed apportionment or
allocation and any matters necessary thereto. The determinations of
the board shall be final for purposes of making the apportionment or
allocation, but for no other purpose.
(10) The board shall file with the commission and with each tax
agency represented in the proceeding: The determination of the
board; the board's written statement of its reasons therefor; the
record of the board's proceedings; and any other documents required
by the arbitration rules of the commission to be filed.
(11) The commission shall publish the determinations of boards
together with the statements of the reasons therefor.
(12) The commission shall adopt and publish rules of procedure
and practice and shall file a copy of such rules and of any amendment
thereto with the appropriate agency or officer in each of the party
states.
(13) Nothing contained herein shall prevent at any time a written
compromise of any matter or matters in dispute, if otherwise lawful,
by the parties to the arbitration proceeding.
ARTICLE X.—Entry Into Force and Withdrawal
(1) This compact shall enter into force when enacted into law by
any seven states. Thereafter, this compact shall become effective as to
any other state upon its enactment thereof. The commission shall
arrange for notification of all party states whenever there is a new
enactment of the compact.
(2) Any party state may withdraw from this compact by enacting
a statute repealing the same. No withdrawal shall affect any liability
already incurred by or chargeable to a party state prior to the time of
such withdrawal.
(3) No proceeding commenced before an arbitration board prior
to the withdrawal of a state and to which the withdrawing state or any
subdivision thereof is a party shall be discontinued or terminated by
the withdrawal, nor shall the board thereby lose jurisdiction over any
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of the parties to the proceeding necessary to make a binding
determination therein.
ARTICLE XI.—Effect on Other Laws and Jurisdiction
Nothing in this compact shall be construed to:
(a) Affect the power of any state or subdivision thereof to fix rates
of taxation, except that a party state shall be obligated to implement
article III (2) of this compact.
(b) Apply to any tax or fixed fee imposed for the registration of a
motor vehicle or any tax on motor fuel, other than a sales tax:
Provided, That the definition of "tax" in article VIII (9) may apply for
the purposes of that article and the commission's powers of study and
recommendation pursuant to article VI (3) may apply.
(c) Withdraw or limit the jurisdiction of any state or local court
or administrative officer or body with respect to any person,
corporation or other entity or subject matter, except to the extent that
such jurisdiction is expressly conferred by or pursuant to this compact
upon another agency or body.
(d) Supersede or limit the jurisdiction of any court of the United
States.
ARTICLE XII.—Construction and Severability
This compact shall be liberally construed so as to effectuate the
purposes thereof. The provisions of this compact shall be severable
and if any phrase, clause, sentence or provision of this compact is
declared to be contrary to the constitution of any state or of the United
States or the applicability thereof to any government, agency, person
or circumstance is held invalid, the validity of the remainder of this
compact and the applicability thereof to any government, agency,
person or circumstance shall not be affected thereby. If this compact
shall be held contrary to the constitution of any state participating
therein, the compact shall remain in full force and effect as to the
remaining party states and in full force and effect as to the state
affected as to all severable matters.}
Sec. 8. {9.} K.S.A. 79-1129, 79-3271, 79-3279 and , 79-3287 {and
79-4301} and K.S.A. 2024 Supp. 79-32,110 and 79-32,113 are hereby
repealed.
Sec. 9. {10.} This act shall take effect and be in force from and after
its publication in the statute book.
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