Session of 1998
By Senator Steineger
            9             AN ACT authorizing certain cities to impose an earnings tax; prescribing
10             procedures therefor and duties and authorities for the state depart-
11             ment of revenue; amending K.S.A. 12-140 and repealing the existing
12             section.
14       Be it enacted by the Legislature of the State of Kansas:
15           New Section 1. (a) Any class A city is hereby empowered and au-
16       thorized in accordance with the provisions of this act to levy a tax upon
17       the earnings of: (1) All individuals employed within that city; (2) all res-
18       idents of that city who are employed outside that city; and (3) all busi-
19       nesses and corporations operating within that city.
20           (b) The rate of any earnings tax shall be .25% of earnings, or any
21       multiple of .25%, up to and including a maximum of 2% of earnings.
22           (c) Revenue derived from the earnings tax authorized by this act shall
23       be pledged solely for the purpose of reducing the tax levy of the class A
24       city upon taxable tangible property located within such city by an amount
25       equivalent to the amount of such revenue, and maintaining such reduc-
26       tion for each taxable year for which such earnings tax is levied.
27           New Sec. 2. (a) No class A city shall levy an earnings tax until the
28       governing body of such city shall first submit such proposition to and
29       receive the approval of a majority of the electors of the city voting thereon
30       at the general election of November 3, 1998. Any class A city proposing
31       to adopt an earnings tax shall adopt an ordinance giving notice of its
32       intention to submit such proposition for approval by the electors in the
33       manner required by K.S.A. 25-105, and amendments thereto. The notice
34       shall state the time of the election, the rate of the tax, and the purposes
35       for which the proceeds will be expended in accordance with subsection
36       (c) of section 1. Every election held under this act shall be conducted by
37       the county election officer.
38           (b) If a majority of the electors voting thereon at such election shall
39       approve the levying of such tax, the governing body of that class A city
40       shall provide by ordinance for the levy of the tax. Any repeal of such tax,
41       or any reduction or increase in the rate thereof, within the limits of this
42       act, shall be accomplished in the manner provided for in this act for the
43       adoption and approval of such tax, except that, the governing body of a

SB 492


  1       class A city shall be required to submit such question upon submission
  2       of a petition signed by electors of such city equal in number to not less
  3       than 10% of the electors of such city. If a majority of the electors voting
  4       thereon at such election fail to approve the proposition, it may be resub-
  5       mitted under the conditions and in the manner provided in this act for
  6       submission of the original proposition.
  7           (c) Any ordinance which has been adopted to give notice of the in-
  8       tention of the governing body of the class A city to submit the proposition
  9       of levying an earnings tax to the electors of the city shall contain provisions
10       pledging the use of the revenue to be received from such tax if the same
11       is approved by the voters in accordance with the provisions of subsection
12       (c) of section 1. Such description shall be consistent with that contained
13       in the notice of election required by subsection (a) of this section.
14           New Sec. 3. As used in this act, the term ``earnings'' shall mean the
15       following:
16           (a) As applied to individuals, ``earnings'' mean any and all amounts
17       paid to individuals in the form of wages, salaries, commissions, fees or
18       other forms of compensation compensating such individual for labor or
19       services rendered. As applied to individuals, a person shall be considered
20       employed within such city if such person's primary place of business is
21       located within such city.
22           (b) As applied to businesses and corporations, ``earnings'' mean fed-
23       eral taxable income, as defined by the federal internal revenue code, as
24       defined by K.S.A. 79-32,109, and amendments thereto, derived from the
25       operations of such businesses or corporations located within such city.
26       The allocation of income provisions of K.S.A. 79-32,141, and amendments
27       thereto, and the allocation and apportionment provisions of the uniform
28       division of income for tax purposes act, insofar as the same may be made
29       applicable, shall apply to a city earnings tax levied in accordance with this
30       act.
31           New Sec. 4. Any person or organization exempt from the payment
32       of the state income tax pursuant to K.S.A. 79-32,113, and amendments
33       thereto, shall be exempt from the payment of an earnings tax levied pur-
34       suant to this act.
35           New Sec. 5. The amount of earnings tax paid to another city with an
36       earnings tax by a resident individual shall be allowed as a credit against
37       the earnings tax of the class A city of their residence.
38           New Sec. 6. (a) Any class A city levying an earnings tax as provided
39       in this act shall utilize the services of the state department of revenue to
40       administer, enforce and collect such tax. Any ordinance authorizing the
41       levy of a city earnings tax shall incorporate by reference the provisions of
42       article 32 of chapter 79 of the Kansas Statutes Annotated, and amend-
43       ments thereto, providing the procedure for the collection and adminis-

SB 492


  1       tration of income taxes, insofar as the provisions of such law may be made
  2       applicable to a city earnings tax. The department of revenue is hereby
  3       authorized to adopt such rules and regulations as may be necessary to
  4       provide for the withholding by employers of any local earnings tax and
  5       may require any employer in the state of Kansas to furnish any infor-
  6       mation necessary for the administration, enforcement and collection of
  7       such tax.
  8           (b) Upon the receipt of a certified copy of an ordinance authorizing
  9       the levy of a city earnings tax, the secretary of revenue shall cause all
10       necessary forms to be prepared and such taxes to be collected at the same
11       time and in the manner provided for the collection of the state income
12       tax and privilege tax. The secretary of revenue is hereby authorized to
13       administer and collect the earnings tax of such city and to adopt such
14       rules and regulations as may be necessary for the efficient and effective
15       administration and enforcement thereof. The secretary shall credit all
16       moneys received therefrom to a city earnings tax fund, which fund is
17       hereby established in the state treasury. The secretary of revenue shall
18       transfer from the city earnings tax fund to the city earnings tax refund
19       fund, which fund is hereby created, an amount deemed sufficient by the
20       secretary to pay any refunds due from any tax levied under the provisions
21       of this section. All local earnings tax revenue collected from such city
22       pursuant to this act shall be remitted at least quarterly by the state treas-
23       urer, on instruction from the secretary of revenue, to the treasurer of
24       such city.
25           New Sec. 7. (a) Notwithstanding any other provision of law to the
26       contrary, for the period of time commencing on January 1, 1998, and
27       ending on December 31, 2001, the governing body of any consolidated
28       city-county is hereby prohibited from: (1) Issuing any general obligation
29       bonds; (2) subject to the provisions of section 1, increasing the aggre-
30       gate amount of revenue produced from the levy of property tax over such
31       amount produced for the 1997 taxable year; and (3) increasing the rate
32       of any fee, charge or other exaction in effect on January 1, 1998.
33           (b) The provisions of this section shall only be in force and effect in
34       the event the tax authorized to be imposed by this act is in full force and
35       effect.
36           New Sec. 8. The following classes of cities are hereby established for
37       the purpose of imposing limitations and prohibitions upon the levying of
38       an earnings tax by cities as authorized and provided by article 12, section
39       5, of the constitution of the state of Kansas;
40           Class A cities. Any consolidated city-county established pursuant to
41       K.S.A. 1997 Supp. 12-340, and amendments thereto; and
42           Class B cities. All other cities.
43           Sec. 9. K.S.A. 12-140 is hereby amended to read as follows: 12-140.

SB 492


  1       Except as otherwise specifically authorized by K.S.A. 12-1,101 to 12-
  2       1,109, and amendments thereto, and sections 1 through 6, no city shall
  3       have power to levy and collect taxes on incomes from whatever source
  4       derived.
  5           Sec. 10. K.S.A. 12-140 is hereby repealed.
  6           Sec. 11. This act shall take effect and be in force from and after its
  7       publication in the statute book.