Providing for the apportionment of business income by manufacturers of alcoholic liquor depending on whether the taxpayer is a qualifying Kansas investor or a general manufacturer.

Session of 2026
HOUSE BILL No. 2773
By Committee on Taxation
Requested by Eric Stafford on behalf of the Kansas Chamber of Commerce
2-11
AN ACT concerning taxation; relating to income tax; providing for the
apportionment of business income for manufacturers of alcoholic liquor
depending on whether the taxpayer is a qualifying Kansas investor or a
general manufacturer; amending K.S.A. 2025 Supp. 79-3279 and
repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 2025 Supp. 79-3279 is hereby amended to read as
follows: 79-3279. (a) 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) For tax years commencing before January 1, 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 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) 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) shall be made by
including a statement with the original tax return indicating that the
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HB 2773 2
taxpayer elects to apply the apportionment method under this subsection
(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) prior to expiration of the ten-year 10-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) paragraph , a qualifying
telecommunications company is a telecommunications company that is a
qualifying taxpayer under subsection (b)(2)(A).
(B) A qualifying telecommunications company shall make the
election under this paragraph in the same manner as provided under
subsection (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
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
such election 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 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 that
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
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HB 2773 3
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).
(D) For tax year 2002, the tax liability of an investment funds service
corporation that has elected to apportion its business income pursuant to
this paragraph (5) shall be increased by an amount equal to 50% of the
difference of the amount of such tax liability if determined pursuant to
subsection (b)(1) less the amount of such tax liability determined with
regard to this 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
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HB 2773 4
subsection (b)(5) this paragraph 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 the election 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) For purposes of this subsection, a qualifying taxpayer is any
taxpayer making an investment of $100,000,000 for construction in
Kansas of a new business facility identified under the North American
industry classification system (NAICS) subsectors of 31-33, as assigned
by the secretary of the department of labor, employing 100 or more new
employees at such facility after July 1, 2007, and prior to December 31,
2009, and meeting the following requirements for paying such employees
higher-than-average wages within the wage region for such facility:
(i) The taxpayer's new Kansas business facility with 500 or fewer
full-time equivalent employees will provide an average wage that is above
the average wage paid by all Kansas business facilities that share the same
assigned NAICS category used to develop wage thresholds and that have
reported 500 or fewer employees to the Kansas department of labor on the
quarterly wage reports;
(ii) the taxpayer's new Kansas business facility with 500 or fewer
full-time equivalent employees is the sole facility within its assigned
NAICS category that has reported wages for 500 or fewer employees to
the Kansas department of labor on the quarterly wage reports;
(iii) the taxpayer's new Kansas business facility with more than 500
full-time equivalent employees will provide an average wage that is above
the average wage paid by all Kansas business facilities that share the same
assigned NAICS category used to develop wage thresholds and that have
reported more than 500 employees to the Kansas department of labor on
the quarterly wage reports;
(iv) the taxpayer's new Kansas business facility with more than 500
full-time equivalent employees is the sole facility within its assigned
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HB 2773 5
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 , the taxpayer 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 the taxpayer's
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 5%
or more equity in the taxpayer, the average wage calculated for the
taxpayer's new Kansas business facility is greater than or equal to 1.5
times the aggregate state-wide average wage paid by industries covered by
the employment security law based on data maintained by the secretary of
labor.
(B) For the purposes of the wage requirements in paragraph (A), the
number of full-time equivalent employees shall be determined by dividing
the number of hours worked by part-time employees during the pertinent
measurement interval by an amount equal to the corresponding multiple of
a 40-hour work week and adding the quotient to the average number of
full-time employees.
(C) When the qualifying taxpayer is part of a unitary group, the
business income of the unitary group attributable to the qualifying
taxpayer shall be determined by multiplying the business income of the
unitary group by a fraction, the numerator of which is the property factor
plus the payroll factor plus the sales factor, and the denominator of which
is three. The property factor is a fraction, the numerator of which is the
average value of the qualifying taxpayer's real and tangible personal
property owned or rented and used during the tax period and the
denominator of which is the average value of the unitary group's real and
tangible personal property owned or rented and used during the tax period.
The payroll factor is a fraction, the numerator of which is the total amount
paid during the tax period by the qualifying taxpayer for compensation,
and the denominator of which is the total compensation paid by the unitary
group during the tax period. The sales factor is a fraction, the numerator of
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HB 2773 6
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), may extend any required performance date provided in this
subsection (b)(6) for a period not to exceed six months.
(c) For tax years commencing on or after January 1, 2027, all
business income shall be apportioned to this state by multiplying the
business income by the sales factor.
(d) Any taxpayer having previously made an election pursuant to
subsection (b)(2) shall be permitted to apportion income through the use of
the single sales factor.
(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 tax year 2025. The amount of the deduction shall equal the annual
deferred tax deduction amount set forth in paragraph (5).
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HB 2773 7
(5) The annual deferred tax deduction amount shall be calculated as
follows:
(A) The deferred tax impact determined in paragraph (4) shall be
divided by the income tax rate for corporations in effect for the tax year
pursuant to K.S.A. 79-32,110, and amendments thereto;
(B) the resulting amount shall be further divided by the Kansas
apportionment factor that was used by the taxpayer in the calculation of
the deferred tax assets and deferred tax liabilities as provided in this
subsection; and
(C) the result multiplied by 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, 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, 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
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HB 2773 8
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.
(f) (1) Notwithstanding any other provision of this section, for all tax
years commencing on or after January 1, 2027, any taxpayer classified as
a manufacturer of alcoholic liquor, as defined in K.S.A. 41-102, and
amendments thereto, shall apportion business income to this state as
follows:
(A) Qualifying Kansas investors shall apportion business income
using the single sales factor method if such taxpayer maintains both:
(i) An average value of real and tangible personal property owned or
rented that exceeds $5,000,000 and such property is used in this state
during the tax year; and
(ii) the total amount of compensation paid in this state during the tax
year exceeded $2,000,000; or
(B) general manufacturers, including all other manufacturers of
alcoholic liquor besides qualifying Kansas investors, shall apportion
business income using the three-factor formula provided in subsection (b)
(1).
(2) The secretary of revenue may adopt rules and regulations
necessary to administer the provisions of this subsection.
Sec. 2. K.S.A. 2025 Supp. 79-3279 is hereby repealed.
Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.
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