Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 larry.campbell@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Larry L. Campbell, Director Laura Kelly, Governor

March 21, 2019
REVISED

The Honorable Julia Lynn, Chairperson
Senate Committee on Commerce
Statehouse, Room 445-S
Topeka, Kansas 66612
Dear Senator Lynn:
SUBJECT: Revised Fiscal Note for SB 26 by Senate Committee on Commerce
In accordance with KSA 75-3715a, the following revised fiscal note concerning SB 26 is
respectfully submitted to your committee.
SB 26 would create a new non-refundable income tax credit equal to 15.0 percent of the amount
of expenditures for goods and services purchased from a qualified vendor beginning in tax year 2019
through tax year 2023. The bill defines “qualified vendor” as a nonprofit entity that provides
employment to individuals who are blind or severely disabled or is declared to be a certified business by
the Department of Administration. A certified business is required to do most of its business primarily
in Kansas or substantially all of its production in Kansas; employ at least 30.0 percent of its employees
who are individuals with disabilities and reside in Kansas; offer to contribute at least 75.0 percent of the
premium cost for individual health insurance coverage for each employee; and does not employ
individuals under a certificate issued by the United States Secretary of Labor. The bill would allow a
taxpayer to claim up to $500,000 in tax credits per qualified vendor in each tax year and the maximum
amount of tax credits would be capped at $5.0 million for all tax years that the income tax credit remains
in effect. Any unused tax credits would be allowed to be carried forward for up to four tax years.
The Secretary of Commerce would be responsible to certify qualified vendors and to certify the
amount of goods and services purchased by a taxpayer from qualified vendors on an annual basis. The
Department of Commerce would have the authority to write rules and regulations to implement the bill.
The bill would require the Secretary of the Department of Revenue to report to the House Committee on
Taxation and the Senate Committee on Assessment and Taxation on or before February 1, 2021, 2022,
and 2023, concerning the implementation and effectiveness of the new income tax credit.
Estimated State Fiscal Effect
FY 2019 FY 2019 FY 2020 FY 2020
SGF All Funds SGF All Funds
Revenue -- -- ($1,700,000) ($1,700,000)
Expenditure -- -- $646,834 $646,834
FTE Pos. -- -- -- 0.50
The Honorable Julia Lynn, Chairperson
Page 2—SB 26

The Department of Revenue does not have data on how many taxpayers would purchase goods
and services from a qualified vendor, including from certified businesses, to provide an accurate estimate
of the fiscal effect of SB 26. The Department indicates that the State of Kansas spends approximately
$11.0 million per year on goods and services from qualified vendors under the State Use Program. The
State Use Program requires state agencies and school districts to purchase goods and services from the
State Use Catalog, which includes products and services manufactured and offered by blind and severely
disabled Kansans. The Department indicates that if taxpayers make approximately $11.3 million in
purchases from qualified vendors, then approximately $1.7 million in tax credits would be earned, which
has the potential to reduce State General Fund revenues by that same amount each year beginning in FY
2020 through FY 2022.
The Department of Revenue indicates that it would require $604,709 from the State General Fund
in FY 2020 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 and outside
contract programmer services. However, 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 estimate may be required. Since the original fiscal note was issued, the Department of
Revenue lowered its estimate on administrative costs needed to implement the bill.
The Department of Commerce indicates that it would require $42,125 from the State General
Fund in FY 2020 for administrative costs to implement this new program. This estimate includes the
salaries and wages and operating costs for a new 0.50 FTE position. This new program would require
the Department to verify the amount of goods and services purchased by a taxpayer from qualified
vendors on an annual basis and to certify qualified vendors. Currently the Office of Procurement and
Contracts in the Department of Administration determines the qualified vendors. The bill could have a
fiscal effect for the Department of Administration, if the Office of Procurement and Contracts is asked
to assist the Department of Commerce by providing data regarding qualified vendors. Any fiscal effect
associated with SB 26 is not reflected in The FY 2020 Governor’s Budget Report.

Sincerely,

Larry L. Campbell
Director of the Budget


cc: Colleen Becker, Department of Administration
Lynn Robinson, Department of Revenue
Sherry Rentfro, Commerce