Session of 2000
By Committee on Energy and Natural Resources

  9             AN  ACT authorizing certain refund payments for natural gas producers;
10             providing revenue therefor.
12       Be it enacted by the Legislature of the State of Kansas:
13             Section  1. As used in this act;
14             (a) "Director" means the director of taxation of the Kansas depart-
15       ment of revenue;
16             (b) "operator" means the person primarily responsible for the man-
17       agement and operation of a natural gas pipeline; and
18             (c) "natural gas" shall have the meaning ascribed thereto by subsec-
19       tion (b) of K.S.A. 55-1201, and amendments thereto.
20             Sec.  2. (a) For the privilege of transporting natural gas from, within
21       and through this state by pipeline, and for the purpose of raising revenue
22       for payment of principal and interest due upon revenue bonds issued
23       pursuant to this act, there is imposed a tax at the rate of $.01 per million
24       cubic feet of natural gas so transmitted. Such tax shall not apply to the
25       local distribution of natural gas or to the production and gathering of
26       natural gas. Such tax shall be paid and remitted by the operator of the
27       pipeline on or before the last day of each month and remitted to the
28       director of taxation. Such remittance shall be accompanied by a return
29       made upon forms devised and furnished by the director.
30             (b) The director may grant a reasonable extension of time for filing
31       any return and remittance of taxes due under this act upon good cause
32       shown therefor. Interest shall be charged at the rate prescribed by sub-
33       section (a) of K.S.A. 79-2968, and amendments thereto, for the period of
34       such extension for the remittance of taxes.
35             Sec.  3. When requested by the director, all transporters of natural
36       gas out of, within or across the state of Kansas shall be required to furnish
37       the director such information relative to the transportation of such gas as
38       the director may require. The director shall have authority to inspect bills
39       of lading, waybills, meter or other charts, documents, books and records
40       as may relate to the transportation of natural gas in the hands of each
41       transporter herein referred to. The director shall further be empowered
42       to demand the production of such bills of lading, waybills, charts, docu-
43       ments, books and records relating to the transportation of natural gas at


  1       any point in the state of Kansas which may be designated, except that in
  2       the case of common carriers using bills of lading or waybills prescribed
  3       or approved by the interstate commerce commission, such common car-
  4       rier shall only be required to keep the usual records at offices in the state
  5       where such records are usually kept.
  6             Sec.  4. (a) If any taxes imposed under this act and determined and
  7       assessed by the director are unpaid: (1) Not due to negligence or to in-
  8       tentional disregard of this act or rules and regulations promulgated by
  9       the secretary, interest on such taxes shall be added at the rate per month
10       prescribed by subsection (a) of K.S.A. 79-2968, and amendments thereto,
11       from the date the tax was due until paid; (2) due to negligence or to
12       intentional disregard of this act or rules and regulations promulgated by
13       the secretary, but without intent to defraud, a penalty of 10% of the
14       amount of such taxes shall be added, together with interest at the rate
15       per month prescribed by subsection (a) of K.S.A. 79-2968, and amend-
16       ments thereto, from the date the tax was due until paid; and (3) due to
17       fraud with intent to evade the tax imposed by this act, there shall be added
18       thereto a penalty of 50% of the amount of such tax, together with interest
19       at the rate per month prescribed by subsection (a) of K.S.A. 79-2968, and
20       amendments thereto, from the date the tax was due until paid.
21             (b) If any person fails or refuses to make any return, when required
22       to do so under the provisions of this act, such person shall be subject to
23       a penalty of $25 per day for each return which such person fails or refuses
24       to file.
25             (c) Whenever, in the judgment of the director, the failure of any
26       person to comply with the provisions of subsection (a)(1), (a)(2), and (b)
27       of this section, was due to reasonable cause, the director may, in the
28       exercise of discretion, waive or reduce any of the penalties upon making
29       a record of the reason therefor.
30             (d) In addition to all other penalties herein provided, any person who
31       fails to make a return, or to pay any tax herein provided, or who makes a
32       false or fraudulent return, or fails to keep any books or records prescribed
33       by this act, or who willfully violates any rules and regulations promulgated
34       by the secretary for the enforcement and administration of this act, or
35       who aids and abets another in attempting to evade the payment of any
36       tax imposed by this act, or who violates any other provisions of this act,
37       shall, upon conviction thereof, be guilty of a class C misdemeanor.
38             (e) The director of taxation shall examine all returns filed under the
39       provision of this act, and shall issue notices and final determinations of
40       tax liability hereunder in the manner prescribed by K.S.A. 79-3226, and
41       amendments thereto, relating to income taxes.
42             Sec.  5. Every operator shall make and keep a complete and accurate
43       record in the form required by the director showing the gross quantity


  1       of natural gas transported, and such other information which may be
  2       required. Such records shall at all times during business hours of the day
  3       be available for and subject to inspection by the director, or the director's
  4       duly authorized agents and employees, for a period of three years from
  5       the last day of the calendar year to which the records pertain. Such re-
  6       cords shall be preserved during the entire period during which they are
  7       subject to inspection by the director, unless the director in writing pre-
  8       viously authorized their disposal.
  9             The amount of taxes imposed by this act is to be assessed within three
10       years after the return is filed. In the case of a false or fraudulent return
11       with intent to evade tax, the tax may be assessed or a proceeding in court
12       for collection of such tax may be begun at any time, within two years from
13       the discovery of such fraud. The provisions of K.S.A. 79-3226, and amend-
14       ments thereto, relating to procedures for contesting a proposed assess-
15       ment of additional tax or the denial of a refund shall apply as if set forth
16       in this section. No refund shall be allowed by the director after three
17       years from the date the return was filed, or one year after the assessment
18       is made, whichever is the later date unless before the expiration of such
19       period a claim therefor is filed by the taxpayer. No suit or action to recover
20       on any claim for refund shall be commenced until after the expiration of
21       six months from the date of filing a claim therefor with the director.
22             Before the expiration of time prescribed in this section for the assess-
23       ment of additional tax or the filing of a claim for refund, the director is
24       hereby authorized to enter into an agreement in writing with the taxpayer
25       consenting to the extension of the periods of limitations for the assess-
26       ment of tax or for the filing of a claim for refund, at any time prior to the
27       expiration of the periods of limitations. The periods so agreed upon may
28       be extended by subsequent agreements in writing made before the ex-
29       piration of the periods previously agreed upon. In consideration of such
30       agreement or agreements, interest due in excess of 48 months on any
31       additional tax shall be waived.
32             Sec.  6. (a) All revenue collected or received by the director from the
33       tax imposed by this act shall be remitted daily to the state treasurer. Upon
34       receipt of each such remittance, the state treasurer shall deposit the entire
35       amount thereof in the state treasury. The state treasurer shall first credit
36       such amount thereof as the director shall order to the mineral production
37       tax refund fund created under subsection (b) of this section. The state
38       treasurer shall credit the remainder of such amounts to the natural gas
39       producer ad valorem tax refund and bond retirement fund. All moneys
40       so credited shall be used exclusively to pay the principal and interest on
41       revenue bonds issued pursuant to this act.
42             (b) A refund fund designated as "natural gas pipeline privilege tax
43       refund fund" not to exceed $50,000 is hereby created for the prompt


  1       payment of all tax refunds. The natural gas pipeline privilege tax refund
  2       fund shall be in such amount, within the limit set by this section, as the
  3       director shall determine is necessary to meet current refunding require-
  4       ments under this act.
  5             Sec.  7. The secretary of revenue is hereby authorized to administer
  6       this act and to adopt such rules and regulations as may be necessary to
  7       administer and enforce the provisions of this act.
  8             Sec.  8. (a) The Kansas development finance authority is hereby au-
  9       thorized to issue and sell revenue bonds for the purpose of granting re-
10       funds to Kansas natural gas producers, including working and royalty in-
11       terest owners, to resolve claims by natural gas pipelines as their
12       representatives in accordance with orders of the federal energy regulatory
13       commission. The revenue bonds may be issued from time to time and
14       sold in amounts which the authority deems necessary for such purposes.
15             (b) Prior to the issuance of the revenue bonds, the authority shall
16       adopt a resolution or resolutions which resolution or resolutions, unless
17       otherwise provided therein, shall take effect immediately and:
18             (1) Determine an interest rate or rates to be paid on the principal of
19       the revenue bonds not in excess of the maximum rate of interest pre-
20       scribed by K.S.A. 10-1009, and amendments thereto;
21             (2) determine that the revenue bonds will be term or serial bonds or
22       any combination thereof maturing not later than 40 years from the date
23       of issuance;
24             (3) register the revenue bonds with the state treasurer.
25             (c) Prior to the issuance of the revenue bonds, the authority may
26       covenant or contract with respect to any and all matters consistent with
27       the authority granted herein necessary and convenient in the determi-
28       nation of the authority to sell the revenue bonds and obtain the most
29       favorable interest rate thereon, including, but not limited to, maturities,
30       priority of liens, number of issuances, special funds for security, redemp-
31       tion privileges, investments of the proceeds of the revenue bonds and any
32       other funds pledged to the payment thereof or held as security therefor,
33       security agreements, trust indentures, paying agencies, registration pro-
34       visions and conversion privileges.
35             Sec.  9. (a) Revenue bonds issued hereunder, including refunding
36       revenue bonds authorized hereunder, shall not constitute an indebted-
37       ness of the state of Kansas, nor shall they constitute indebtedness within
38       the meaning of any constitutional or statutory provision limiting the in-
39       curring of indebtedness.
40             (b) All contracts, agreements and covenants contained in the reso-
41       lution authorizing the issuance of revenue bonds shall be binding in all
42       respects upon the Kansas development finance authority, its officials,
43       agents, employees and successors. Such agreements, contracts and cov-


  1       enants shall be enforceable by appropriate legal action brought pursuant
  2       to the terms of the resolution authorizing the issuance of revenue bonds.
  3             Sec.  10. The Kansas water office may issue revenue bonds for the
  4       purpose of refunding revenue bonds issued hereunder pursuant to the
  5       terms and authority of K.S.A. 10-116a, and amendments thereto.
  6             Sec.  11. The revenue bonds issued hereunder and any refunding rev-
  7       enue bonds authorized to be issued hereunder and the income derived
  8       therefrom are and shall be exempt from all state, county and municipal
  9       taxation in the state of Kansas, except Kansas estate taxes.
10             Sec.  12. Revenue bonds issued hereunder shall be proper and legal
11       investment securities for any investment funds of the state of Kansas or
12       any department, agency or institution thereof, or any county, municipal
13       or other public corporation or political subdivision created pursuant to
14       the laws of the state of Kansas. Banks, trust companies and insurance
15       companies, organized under the laws of the state of Kansas, and the Kan-
16       sas public employees retirement system may legally and properly pur-
17       chase the revenue bonds issued hereunder, and they are hereby deemed
18       and approved as collateral security for the deposit of any and all funds
19       and for the investment of all trust funds under the jurisdiction of the laws
20       of the state of Kansas.
21             Sec.  13. The proceeds derived from the sale of revenue bonds issued
22       pursuant to this act shall be deposited in the state treasury and the entire
23       amount thereof shall be credited to the natural gas producer ad valorem
24       tax refund and bond retirement fund. Such proceeds shall be utilized
25       exclusively to pay refunds to qualifying natural gas producers to resolve
26       claims by natural gas pipelines in accordance with orders issued by the
27       federal energy regulatory commission.
28             Sec.  14. Each claim for refund shall be verified and submitted to the
29       director upon forms devised and furnished by the director and shall be
30       accompanied by any additional documentation required by the director
31       which is necessary to determine eligibility for refund. The director shall
32       review each claim and shall allow payment to each eligible claimant. All
33       refunds shall be paid from the natural gas producer ad valorem tax refund
34       and bond retirement fund upon warrants of the director of accounts and
35       reports pursuant to vouchers approved by the director.
36             Sec.  15. There is hereby created in the state treasury the natural gas
37       producer ad valorem tax refund and bond retirement fund. Such fund
38       shall consist of revenue and proceeds derived from the tax imposed by
39       section 2, and amendments thereto and the issuance and sale of bonds
40       pursuant to section 8, and amendments thereto. Expenditures from such
41       fund shall be made only in accordance with direction from the Kansas
42       development finance authority or the director of taxation as the case
43       requires.


  1        Sec.  16. This act shall take effect and be in force from and after its
  2       publication in the statute book.