Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                          Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                      adam.c.proffitt@ks.gov
Topeka, KS 66612                                Division of the Budget                              http://budget.kansas.gov
Adam Proffitt, Director                                                                            Laura Kelly, Governor


                                                  February 14, 2023


          The Honorable Adam Smith, Chairperson
          House Committee on Taxation
          300 SW 10th Avenue, Room 346-S
          Topeka, Kansas 66612
          Dear Representative Smith:
                    SUBJECT:      Fiscal Note for HB 2319 by House Committee on Taxation
                  In accordance with KSA 75-3715a, the following fiscal note concerning HB 2319 is
          respectfully submitted to your committee.
                  HB 2319 would provide a property tax exemption for business property that operates in
          competition with property owned or operated by a governmental entity. The business would be
          required to apply to the county appraiser for the property tax exemption by March 1st of the year
          that the property tax exemption is sought. If the county appraiser determines that the business did
          not qualify for the property tax exemption, the business would be allowed to appeal that decision
          to the Director of Taxation at the Department of Revenue. If the Director of Taxation determines
          that the business does not qualify for the property tax exemption, the business would be allowed
          to appeal to the court of jurisdiction where the property is located. The property tax exemption
          would take effect beginning in tax year 2024.
                  Passage of HB 2319 would decrease property tax revenues by creating a new property tax
          exemption. The state would receive less property tax revenues to the two state building funds, the
          Educational Building Fund and the State Institutions Building Fund. The bill would also decrease
          the amount of property tax revenues that school districts would receive through the state’s uniform
          mill levy. To the extent that less property tax revenue would be available from the state’s uniform
          mill levy to fund expenditures for school districts, the state would be required to provide more
          state aid from the State General Fund through the school finance formula. The bill would also
          decrease revenues to any local government that levies a property tax. However, the Department
          of Revenue does not have data on the property that would receive a property tax exemption under
          the provisions of the bill; therefore, a precise estimate of the reduction in property tax revenues
          and its effect on local and state revenues cannot be estimated. The bill would have no fiscal effect
          on the operations of the Department of Revenue.
The Honorable Adam Smith, Chairperson
Page 2—HB 2319

         The League of Kansas Municipalities and the Kansas Association of Counties indicate that
the bill has the potential to decrease local property tax revenues that are used in part to finance
local governments. The League estimates that more than 20.0 percent of its property tax revenue
is tied to businesses that could qualify for this exemption including businesses that provide services
like housing, meeting spaces, transit, recreation programs and facilities, aquatics, golf courses, and
office supplies. The League is unable to determine how many businesses would qualify for the
property tax exemption but indicates it could result in the loss of millions of dollars to cities. The
Association indicates the bill has the potential to shift property tax burden to residential property
taxpayers or other businesses not receiving this property tax exemption.
        The bill has the potential for increasing litigation in the courts because the bill allows
businesses the ability to appeal the property tax exemption decisions of the Director of Taxation
to the court of jurisdiction where the property is located. In such cases, the Office of Judicial
Administration indicates that there would be a fiscal effect on the operations of the court system.
However, it is not possible to estimate the number of additional court cases that would arise or
how complex and time-consuming they would be. Therefore, a fiscal effect cannot be estimated.
In any case, the fiscal effect would most likely be accommodated within the existing schedule of
court cases and would not require additional resources. Any fiscal effect associated with HB 2319
is not reflected in The FY 2024 Governor’s Budget Report.


                                                      Sincerely,

                                                      Adam Proffitt
                                                      Director of the Budget

cc: Lynn Robinson, Department of Revenue
    Craig Neuenswander, Department of Education
    Wendi Stark, League of Kansas Municipalities
    Jay Hall, Kansas Association of Counties
    Vicki Jacobsen, Judiciary