Session of 1999
HOUSE BILL No. 2412
By Representative Helgerson
9 AN ACT relating to taxation; concerning certain subchapter S corpora-
10 tions; amending K.S.A. 79-1109 and 79-32,113 and K.S.A. 1998 Supp.
11 79-32,117 and repealing the existing sections.
13 Be it enacted by the Legislature of the State of Kansas:
14 Section 1. K.S.A. 79-1109 is hereby amended to read as follows: 79-
15 1109. As used in this act "net income" shall mean the Kansas taxable
16 income of corporations as defined in K.S.A. 79-32,138, and amendments
determined without regard to the provisions of K.S.A. 79-32,139,
and amendments thereto, and the provisions of paragraph (xiv) of sub-
section (c) of K.S.A. 79-32,117, and amendments thereto, plus income
20 received from obligations or securities of the United States or any au-
21 thority, commission or instrumentality of the United States and its pos-
22 sessions to the extent not included in Kansas taxable income of a corpo-
23 ration and income received from obligations of this state or a political
24 subdivision thereof which is exempt from income tax under the laws of
25 this state; less dividends received from stock issued by Kansas Venture
26 Capital, Inc. to the extent such dividends are included in the Kansas
27 taxable income of a corporation, interest paid on time deposits or bor-
28 rowed money and dividends paid on withdrawable shares of savings and
29 loan associations to the extent not deducted in arriving at Kansas taxable
30 income of a corporation. "Net income" shall not include income of cor-
31 porations having an election in effect under subchapter S of the internal
32 revenue code.
33 Savings and loan associations shall be allowed as a deduction from net
34 income, as hereinbefore defined, a reserve established for the sole pur-
35 pose of meeting or absorbing losses, in the amount of 5% of such net
36 income determined without benefit of such deduction, but no further
37 deduction shall be allowed for losses when actually sustained and charged
38 against such reserve, unless such reserve shall have been fully absorbed
39 thereby; or, in the alternative, a reasonable addition to a reserve for losses
40 based on past experience, under such rules and regulations as the sec-
41 retary of revenue may prescribe.
42 Sec. 2. K.S.A. 79-32,113 is hereby amended to read as follows: 79-
43 32,113. (a) A person or organization exempt from federal income taxation
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1 under the provisions of the federal internal revenue code shall also be
2 exempt from the tax imposed by this act in each year in which such person
3 or organization satisfies the requirements of the federal internal revenue
4 code for exemption from federal income taxation. If the exemption ap-
5 plicable to any person or organization under the provisions of the federal
6 internal revenue code is limited or qualified in any manner, the exemption
7 from taxes imposed by this article shall be limited or qualified in a similar
9 (b) Notwithstanding the provisions of subsection (a) of this section,
10 the unrelated business taxable income, as computed under the provisions
11 of the federal internal revenue code, of any person or organization oth-
12 erwise exempt from the tax imposed by this act and subject to the tax
13 imposed on unrelated business income by the federal internal revenue
14 code shall be subject to the tax which would have been imposed by this
15 act but for the provisions of subsection (a) of this section.
16 (c) In addition to the persons or organizations exempt from federal
17 income taxation under the provision of the federal internal revenue code,
18 there shall also be exempt from the tax imposed by this act, insurance
19 companies, banks, except banks having an election in effect under sub-
20 chapter S of the internal revenue code, trust companies, savings and loan
21 associations, credit unions and any other organizations, entities or persons
22 specifically exempt from Kansas income taxation under the laws of the
23 state of Kansas.
24 Sec. 3. K.S.A. 1998 Supp. 79-32,117 is hereby amended to read as
25 follows: 79-32,117. (a) The Kansas adjusted gross income of an individual
26 means such individual's federal adjusted gross income for the taxable year,
27 with the modifications specified in this section.
28 (b) There shall be added to federal adjusted gross income:
29 (i) Interest income less any related expenses directly incurred in the
30 purchase of state or political subdivision obligations, to the extent that
31 the same is not included in federal adjusted gross income, on obligations
32 of any state or political subdivision thereof, but to the extent that interest
33 income on obligations of this state or a political subdivision thereof issued
34 prior to January 1, 1988, is specifically exempt from income tax under the
35 laws of this state authorizing the issuance of such obligations, it shall be
36 excluded from computation of Kansas adjusted gross income whether or
37 not included in federal adjusted gross income. Interest income on obli-
38 gations of this state or a political subdivision thereof issued after Decem-
39 ber 31, 1987, shall be excluded from computation of Kansas adjusted
40 gross income whether or not included in federal adjusted gross income.
41 (ii) Taxes on or measured by income or fees or payments in lieu of
42 income taxes imposed by this state or any other taxing jurisdiction to the
43 extent deductible in determining federal adjusted gross income and not
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1 credited against federal income tax. This paragraph shall not apply to taxes
2 imposed under the provisions of K.S.A. 79-1107 or 79-1108, and amend-
3 ments thereto, for privilege tax year 1995, and all such years thereafter.
4 (iii) The federal net operating loss deduction.
5 (iv) Federal income tax refunds received by the taxpayer if the de-
6 duction of the taxes being refunded resulted in a tax benefit for Kansas
7 income tax purposes during a prior taxable year. Such refunds shall be
8 included in income in the year actually received regardless of the method
9 of accounting used by the taxpayer. For purposes hereof, a tax benefit
10 shall be deemed to have resulted if the amount of the tax had been de-
11 ducted in determining income subject to a Kansas income tax for a prior
12 year regardless of the rate of taxation applied in such prior year to the
13 Kansas taxable income, but only that portion of the refund shall be in-
14 cluded as bears the same proportion to the total refund received as the
15 federal taxes deducted in the year to which such refund is attributable
16 bears to the total federal income taxes paid for such year. For purposes
17 of the foregoing sentence, federal taxes shall be considered to have been
18 deducted only to the extent such deduction does not reduce Kansas tax-
19 able income below zero.
20 (v) The amount of any depreciation deduction or business expense
21 deduction claimed on the taxpayer's federal income tax return for any
22 capital expenditure in making any building or facility accessible to the
23 handicapped, for which expenditure the taxpayer claimed the credit al-
24 lowed by K.S.A. 79-32,177, and amendments thereto.
25 (vi) Any amount of designated employee contributions picked up by
26 an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965,
27 and amendments to such sections.
28 (vii) The amount of any charitable contribution made to the extent
29 the same is claimed as the basis for the credit allowed pursuant to K.S.A.
30 79-32,196, and amendments thereto.
31 (viii) The amount of any costs incurred for improvements to a swine
32 facility, claimed for deduction in determining federal adjusted gross in-
33 come, to the extent the same is claimed as the basis for any credit allowed
34 pursuant to K.S.A. 1998 Supp. 79-32,204 and amendments thereto.
35 (ix) The amount of any ad valorem taxes and assessments paid and
36 the amount of any costs incurred for habitat management or construction
37 and maintenance of improvements on real property, claimed for deduc-
38 tion in determining federal adjusted gross income, to the extent the same
39 is claimed as the basis for any credit allowed pursuant to K.S.A. 79-32,203
40 and amendments thereto.
41 (c) There shall be subtracted from federal adjusted gross income:
42 (i) Interest or dividend income on obligations or securities of any
43 authority, commission or instrumentality of the United States and its pos-
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1 sessions less any related expenses directly incurred in the purchase of
2 such obligations or securities, to the extent included in federal adjusted
3 gross income but exempt from state income taxes under the laws of the
4 United States.
5 (ii) Any amounts received which are included in federal adjusted
6 gross income but which are specifically exempt from Kansas income tax-
7 ation under the laws of the state of Kansas.
8 (iii) The portion of any gain or loss from the sale or other disposition
9 of property having a higher adjusted basis for Kansas income tax purposes
10 than for federal income tax purposes on the date such property was sold
11 or disposed of in a transaction in which gain or loss was recognized for
12 purposes of federal income tax that does not exceed such difference in
13 basis, but if a gain is considered a long-term capital gain for federal in-
14 come tax purposes, the modification shall be limited to that portion of
15 such gain which is included in federal adjusted gross income.
16 (iv) The amount necessary to prevent the taxation under this act of
17 any annuity or other amount of income or gain which was properly in-
18 cluded in income or gain and was taxed under the laws of this state for a
19 taxable year prior to the effective date of this act, as amended, to the
20 taxpayer, or to a decedent by reason of whose death the taxpayer acquired
21 the right to receive the income or gain, or to a trust or estate from which
22 the taxpayer received the income or gain.
23 (v) The amount of any refund or credit for overpayment of taxes on
24 or measured by income or fees or payments in lieu of income taxes im-
25 posed by this state, or any taxing jurisdiction, to the extent included in
26 gross income for federal income tax purposes.
27 (vi) Accumulation distributions received by a taxpayer as a beneficiary
28 of a trust to the extent that the same are included in federal adjusted
29 gross income.
30 (vii) Amounts received as annuities under the federal civil service
31 retirement system from the civil service retirement and disability fund
32 and other amounts received as retirement benefits in whatever form
33 which were earned for being employed by the federal government or for
34 service in the armed forces of the United States.
35 (viii) Amounts received by retired railroad employees as a supple-
36 mental annuity under the provisions of 45 U.S.C. 228b (a) and 228c (a)(1)
37 et seq.
38 (ix) Amounts received by retired employees of a city and by retired
39 employees of any board of such city as retirement allowances pursuant to
40 K.S.A. 13-14,106, and amendments thereto, or pursuant to any charter
41 ordinance exempting a city from the provisions of K.S.A. 13-14,106, and
42 amendments thereto.
43 (x) For taxable years beginning after December 31, 1976, the amount
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1 of the federal tentative jobs tax credit disallowance under the provisions
2 of 26 U.S.C. 280 C. For taxable years ending after December 31, 1978,
3 the amount of the targeted jobs tax credit and work incentive credit dis-
4 allowances under 26 U.S.C. 280 C.
5 (xi) For taxable years beginning after December 31, 1986, dividend
6 income on stock issued by Kansas Venture Capital, Inc.
7 (xii) For taxable years beginning after December 31, 1989, amounts
8 received by retired employees of a board of public utilities as pension and
9 retirement benefits pursuant to K.S.A. 13-1246, 13-1246a and 13-1249
10 and amendments thereto.
11 (xiii) For taxable years beginning after December 31, 1993, the
12 amount of income earned on contributions deposited to an individual
13 development account under K.S.A. 79-32,117h, and amendments thereto.
(xiv) For all taxable years commencing after December 31, 1996, that
portion of any income of a bank organized under the laws of this state or
any other state, a national banking association organized under the laws
of the United States, an association organized under the savings and loan
code of this state or any other state, or a federal savings association or-
ganized under the laws of the United States, for which an election as an
S corporation under subchapter S of the federal internal revenue code is
in effect, which accrues to the taxpayer who is a stockholder of such
corporation and which is not distributed to the stockholders as dividends
of the corporation.
24 (d) There shall be added to or subtracted from federal adjusted gross
25 income the taxpayer's share, as beneficiary of an estate or trust, of the
26 Kansas fiduciary adjustment determined under K.S.A. 79-32,135, and
27 amendments thereto.
28 (e) The amount of modifications required to be made under this sec-
29 tion by a partner which relates to items of income, gain, loss, deduction
30 or credit of a partnership shall be determined under K.S.A. 79-32,131,
31 and amendments thereto, to the extent that such items affect federal
32 adjusted gross income of the partner.
33 Sec. 4. K.S.A. 79-1109 and 79-32,113 and K.S.A. 1998 Supp. 79-
34 32,117 are hereby repealed.
35 Sec. 5. This act shall take effect and be in force from and after its
36 publication in the statute book.