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 27, 2019
REVISED

The Honorable Steven Johnson, Chairperson
House Committee on Taxation
Statehouse, Room 185-N
Topeka, Kansas 66612
Dear Representative Johnson:
SUBJECT: Revised Fiscal Note for HB 2232 by House Committee on Taxation
In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2232
is respectfully submitted to your committee.
HB 2232 would modify the net operating loss deduction for Kansas income tax purposes.
The bill would allow a Kansas net operating loss to be carried back three years if a net operating
loss was incurred from the sale at a loss of a historic hotel that was improved using funds borrowed
on both the historic hotel and farmland, and previously, the farmland was sold at a gain to pay off
the mortgage of the historic hotel. The bill requires that the historic hotel be located in a
community with less than 2,500 citizens and be within 20 miles of the farmland. The bill would
be retroactive to tax year 2006 and would allow a taxpayer to file an amended return for the three
prior years.
The Department of Revenue indicates HB 2232 would allow a single taxpayer to claim a
refund for Kansas income taxes paid on the capital gains of farmland sold in a year prior to 2006,
to help offset the capital loss that occurred from the sale of a historic hotel that occurred in tax year
2006. The loss incurred by this taxpayer is a “capital loss.” The Internal Revenue Service allows
this type of capital loss to be claimed in the year it occurs. If it was a net operating loss, the IRS
would allow a carry back and a carry forward of the loss. For Kansas income tax purposes, net
operating losses for individual income taxpayers were repealed effective in tax year 2013. Prior
to tax year 2013, net operating losses were allowed to be carried forward, but could not be carried
back to any prior tax year. This bill would create a retroactive exception to those rules for one
individual income taxpayer. The Department of Revenue indicates the bill would decrease state
revenues to the State General Fund; however, without a waiver of confidentiality from the taxpayer
as to such information, the Department cannot provide the specific amount of revenue loss.
The Honorable Steven Johnson, Chairperson
Page 2—HB 2232

The Department of Revenue indicates that it would require a total $204,481 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. 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.
Since the original fiscal note was issued, the Department of Revenue lowered its estimate on
administrative costs needed to implement the bill. Any fiscal effect associated with HB 2232 is
not reflected in The FY 2020 Governor’s Budget Report.


Sincerely,

Larry L. Campbell
Director of the Budget


cc: Lynn Robinson, Department of Revenue


Statutes affected:
As introduced: 79-32