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 C. Proffitt, Director Laura Kelly, Governor


February 14, 2024


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 2534 by Representative Proctor, et al.
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2534 is
respectfully submitted to your committee.
Calculations for Kansas income taxes are based on the Kansas adjusted gross income,
which is calculated by adding or subtracting certain types of income from the federal adjusted
gross income. HB 2534 would allow the amount received as compensation for serving in the
Armed Forces that does not exceed the compensation of a senior enlisted member of the United
States Department of Defense to be subtracted from income for Kansas income tax purposes
beginning in tax year 2025. The bill defines “serving in the Armed Forces” as a person who serves
as a uniformed member in the Army, Navy, Air Force, Coast Guard, Marine Corps, or Space Force
of the United States whether in active duty, reserve, or in a national guard.

Estimated State Fiscal Effect
FY 2024 FY 2025 FY 2026
Expenditures
State General Fund -- $85,015 --
Fee Fund(s) -- -- --
Federal Fund -- -- --
Total Expenditures -- $85,015 --
Revenues
State General Fund -- ($2,300,000) ($7,600,000
Fee Fund(s) -- -- --
Federal Fund -- -- --
Total Revenues -- ($2,300,000) ($7,600,000)
FTE Positions -- -- --
The Honorable Adam Smith, Chairperson
Page 2—HB 2534

The Department of Revenue estimates that HB 2534 would decrease State General Fund
revenues by reducing individual income tax collections by $2.3 million in FY 2025, and by $7.6
million in both FY 2026 and FY 2027. To formulate these estimates, the Department of Revenue
reviewed data from the Defense Manpower Data Center, which catalogs data for the Department
of Defense’s administrative needs. The Data Center’s most recent data indicates a total of 17,310
active duty, national guard, and reserve members in Kansas as of December 2023. Each branch
contains one senior enlisted member currently compensated at $10,294.80 a month, or $123,537.60
a year, which would be the cap on this subtraction modification. The average salaries for Kansas
are below this threshold at $42,251 a year for active duty and $20,471 a year for reserves and
national guard. These members are paid an estimated total taxable income of $239.0 million after
adjustments to federal and Kansas income. The fiscal note assumes an effective tax rate of 3.1
percent for this income. The individual income tax estimate for FY 2025 includes 30.0 percent of
tax year 2025 tax liability. The individual income tax estimate for FY 2026 includes 70.0 percent
of tax year 2025 tax liability and 30.0 percent of tax year 2026 tax liability.
The Department indicates that the bill would require $85,015 from the State General Fund
in FY 2025 to implement the bill and to modify the automated tax system. The required
programming for this bill by itself would be performed by existing staff of the Department of
Revenue. In addition, if the combined effect of implementing this bill and other enacted legislation
exceeds the Department’s programming resources, or if the time for implementing the changes is
too short, additional expenditures for outside contract programmer services beyond the
Department’s current budget may be required. Any fiscal effect associated with HB 2534 is not
reflected in The FY 2025 Governor’s Budget Report.


Sincerely,

Adam C. Proffitt
Director of the Budget


cc: Michael Neth, Office of the Adjutant General
Lynn Robinson, Department of Revenue


Statutes affected:
As introduced: 79-32