Parker Republican Sen. Caryn Tyson, facing, confers with Senate President Ty Masterson, head turned, on the Senate floor during debate on a package of legislation last week at the Capitol. (Tim Carpenter/Kansas Reflector)
TOPEKA — The Senate’s tax committee approved extraordinary legislation holding cities, counties and the state of Kansas responsible for issuing 100% property tax rebates to for-profit businesses construed to be in competition with government entities for delivery of products or services.
“Any government entity — city, municipal or state — that is competing against a private industry shall be responsible for that rebate in their taxing district. That could be big with the state,” said Sen. Caryn Tyson, a Parker Republican and chairwoman of the Senate Assessment and Taxation Committee.
The education and child-care sectors would be exempted, but targets of the legislation would include the snack bar at the Capitol because it conducted transactions hypothetically drawing commerce away from restaurants in Topeka. Objections also were raised about presence of a cafe in the Topeka-Shawnee County Public Library, but Tyson assured Senate colleagues the library would be exempted despite the facility receiving more than $16 million annually in property tax revenue.
The intent of the rebate amendment narrowly adopted by the tax committee would be to deter government from engaging in activities some legislators believe ought to be the exclusive domain of the private sector in Kansas.
“This is a business owned by government,” said Sen. Larry Alley, the Winfield Republican who offered the property tax amendment.
Senate President Ty Masterson, R-Andover, told Tyson not to pass House Bill 2313 out of committee without the amendment on property tax rebates for businesses.
“I have been asked not to pass this bill as is, by the Senate president, and I will respect that wish,” Tyson said. “Some may consider this the cart before the horse.”
The core of the bill featured a property tax exemption on vehicles owned by current members of the Kansas National Guard.
In an attempt to avoid defeat of House Bill 2313 when the House and Senate reconvened May 3, the 20-mill property tax levy relied upon to fund K-12 schools was inserted into the bill. Making state aid for public education part of the legislation is viewed as leverage against a potential veto by Gov. Laura Kelly.
Republican and Democratic members of the Senate tax committee indicated they weren’t clear about financial ramifications nor working details of the property tax rebate. It was unsettled as to how the rebate would apply to the state’s array of companies or the process that would be used to process paybacks.
No cost estimate of rebates from cities, counties and the state government was revealed during the committee’s deliberations. No testimony was taken to possibly answer questions.
“I’m a little bit worried about the scope and scale,” said Sen. Ethan Corson, a Johnson County Democrat. “Maybe we could request some information that might help us better process the different elements.”
Sen. Molly Baumgardner, R-Louisburg, said lawmakers’ earlier discussions about property tax rebates were designed to help businesses ordered by government to close during the COVID-19 pandemic. The amendment outlining rebates from government entities offering services or goods for a fee isn’t connected to the pandemic, she said.
“What are we talking about?” Baumgardner said. “Does anyone know the scope of this amendment?”
“We do,” Tyson said.
“Can that be shared?” said Baumgardner, who didn’t get an answer.
Under the unprecedented amendment, commercial businesses claiming to compete with government would be eligible for property tax rebates starting in 2023. A business would be eligible if current on all tax obligations and if the exemption-seeking business existed before the government service or good was available. Child care facilities, at Baumgardner’s urging, wouldn’t be eligible for rebates.
It appeared state universities, community colleges, technical colleges and K-12 public school districts also would be exempt from rebate obligations. The committee considered, but dropped the idea of setting an eligibility distance between the government entity and company seeking reimbursement for property taxes.
There has been interest among House and Senate leadership during the 2021 session to providing a property tax exemption for owners of for-profit fitness centers due to the presence of not-for-profit YMCAs and YWCAs, but this proposal goes beyond that idea pressed by owners of Genesis Fitness Clubs.
Sen. Tom Holland, D-Baldwin City, recommended the bill be amended to include a one-year sunset so the Legislature would be compelled to re-evaluate the property tax rebate in 2024.
“This is significant policy here. We really do not know the breadth and scope of what this means,” Holland said.
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