Kansas Response to Bonus Depreciation

STT, 5/29/02:

Kansas policymakers assembling the final package of tax increases (SB 39) opted during the final 24 hours of the 2002 session to not approve a much-discussed provision that would have decoupled state income tax provisions from federal law so as to not conform to that part of the new federal law allowing bonus depreciation on certain property acquired between September 11, 2001, and September 11, 2004. The Kansas Department of Revenue had indicated that the current state income tax law conformity to the bonus depreciation provisions is expected to reduce receipts by at least $25 million in fiscal 2003.

The Kansas Chamber of Commerce and Industry and key members of the state's business community lobbied the joint House-Senate conference committee negotiating around the clock on the final tax bill to not sign a conference committee report containing a decoupling provision. A spokesperson for Gov. Bill Graves (R) had previously indicated that Graves did not necessarily oppose decoupling given the magnitude of the state's fiscal woes.

Tax conferees instead inserted a provision that will double the corporation franchise taxes and fees (which was also supported by Graves) and will increase revenues by about $18 million in fiscal 2003. The entirety of SB 39, which also includes sales and cigarette tax increases, will increase fiscal 2003 receipts by an estimated $252 million.