SESSION OF 2021
SUPPLEMENTAL NOTE ON SENATE BILL NO. 15
As Amended by Senate Committee of the Whole

Brief*
SB 15, as amended, would enact law to establish the
Kansas Economic Recovery Loan Deposit Program
(Program); would amend law governing linked deposit
programs and related investment procedures; would amend
field-of-membership requirements placed on state-chartered
credit unions to increase the permissible geographic area for
a credit union’s field of membership; and would permit
national banking associations, state banks, trust companies,
and savings and loan associations, for all taxable years
commencing after December 31, 2022, to deduct from net
income the net interest income received from qualified
agricultural real estate loans and the net interest income
received from single family residence loans to the extent such
interest is included in the Kansas taxable income of a
corporation.
The bill would also make technical changes.

Kansas Economic Recovery Loan Deposit Program (New
Sections 1-7; Section 9)

Program Citation; Definitions (New Sections 1-2)
The bill would designate sections 1 through 7 of the bill
as the Kansas Economic Recovery Loan Deposit Program
and would further provide the Program shall be part of and
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
supplemental to Article 42, Chapter 75 of the Kansas
Statutes Annotated.
Definitions (New Section 2)
The bill would define terms including the following:
● “Economic recovery loan deposit” would mean an
investment account placed by the Director of
Investments under the provisions of Article 42,
Chapter 75 of the Kansas Statutes Annotated with
an eligible lending institution for the purpose of
carrying out the intent of the Program;
● “Economic recovery loan deposit loan” or “loan”
would mean a loan made by an eligible lending
institution to an eligible borrower from the eligible
lending institution’s economic recovery loan deposit
as part of the Program;
● “Economic recovery loan deposit program” or
“program” would mean a state-administered
program in which eligible lenders are charged less
than the market rate of interest and eligible
borrowers receive a reduction in interest charged
on a loan in the amount of the deposit;
● “Eligible borrower” would mean any individual or
entity operating a business primarily for
commercial or agricultural purposes with no more
than 200 full-time employees maintaining offices or
operating facilities and transacting business in the
state of Kansas and is not an individual obtaining a
loan primarily for personal, family, or household
purposes; and
● “Eligible lending institution” would mean a financial
institution that is:

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 ○ A bank, as defined in KSA 75-4201, that
agrees to participate in the Program and is
eligible to be a depository of state funds;
○ A credit union, as defined in the State Credit
Union Code, that agrees to participate in the
Program and provides securities acceptable
to the Pooled Money Investment Board
(PMIB) pursuant to Article 42, Chapter 75 of
the Kansas Statutes Annotated; or
○ An institution of the Farm Credit System
organized under the federal Farm Credit Act
of 1971, as amended, having at least one
branch in the state of Kansas that agrees to
participate in the Program and provides
securities acceptable to the PMIB pursuant to
Article 42, Chapter 75.
The bill would also define the terms “director of
investments” and “economic recovery loan deposit loan
package.”

Program Administration and Purpose (New Section 3)
The bill would authorize the State Treasurer to
administer the Program and states the Program shall be for
the purpose of providing incentives for the making of
business loans. The bill would further specify the total
aggregate amount of loans made under the Program must
not exceed $60.0 million of unencumbered funds pursuant to
Article 42 of Chapter 75 of the Kansas Statutes Annotated.
Rules and Regulations
The bill would require the State Treasurer to adopt all
rules and regulations necessary to enact and administer the
provisions of the Program. Such rules and regulations must
be adopted no later than February 1, 2022.

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Annual Report; Legislative Review
The bill would require the State Treasurer to submit an
annual report to the Legislature and the Governor identifying
the eligible lending institutions participating in the Program
and the eligible borrowers who have received an economic
recovery loan deposit loan. The bill also would require the
annual report to provide the aggregate amount of moneys
loaned and the amount of moneys still available for loan, if
any. The report would be due on or before January 1, 2023,
and each January 1 thereafter. The bill would require the
Legislature perform a review of the Program as part of the
State Treasurer’s annual report on or after January 1, 2024.

Program Loan Package Requirements and Loan
Information (New Section 4)
The bill would authorize the State Treasurer to
disseminate information and to provide economic recovery
loan deposit loan packages (loan packages) to the eligible
lending institutions.
Eligible Borrowers, Applications, Loan Limitations
The bill would provide the following requirements and
other criteria for participation in the Program:
● The loan package must be completed by the
eligible borrower before being forwarded to the
lending institution for consideration;
● An eligible lending institution that agrees to receive
an economic recovery loan deposit must accept
and review applications for loans from eligible
borrowers;
● The lending institution must apply all usual lending
standards to determine the credit worthiness of
eligible borrowers;
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 ● No single economic recovery loan deposit loan can
exceed $250,000;
● Only one economic recovery loan deposit loan can
be made and be outstanding at any one time to
any eligible borrower; and
● No loan may be amortized for a period of more
than ten years.
Certification and Loan Approval
The bill would require an eligible borrower to certify on
the loan application that the reduced rate loan will be used
exclusively for the expenses involved in operating the
borrower’s business in Kansas. The eligible lending institution
would be permitted to approve or reject a loan package
based on the institution’s evaluation of the eligible borrowers
included in the package, the amount of the individual loan in
the package, and other appropriate considerations. The
eligible lending institution would be required to forward to the
State Treasurer an approved loan package in the prescribed
form and manner. The bill would require the package to
include a certification by the applicant that such applicant is
an eligible borrower.

Evaluation of the Economic Recovery Loan Deposit Loan
Package; Interest and Market Rates; Loan Agreement
(New Section 5)
The bill would permit the State Treasurer to either
accept or reject the loan package based on the State
Treasurer’s evaluation of whether the loan meets the
Program requirements. The bill would further provide, if
sufficient funds are not available for a loan deposit, then the
applications may be considered in the order received when
funds are once again available, subject to a review by the
lending institution.

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 Upon acceptance of a loan package, the State Treasurer
would be required to certify to the Director of Investments
(Director) the required amount for the package and the
Director would be required to place an economic recovery
loan deposit in the amount certified with the eligible lending
institution at an interest rate that is 2.0 percent below the
market rate provided in KSA 75-4237 (a floating rate). The bill
would require such rate to be recalculated on the first
business day of January each year using the market rate then
in effect. The bill would further specify the minimum interest
rate (or floor) would be 0.25 percent if the market rate is
below 2.25 percent. When necessary, the bill would permit
the State Treasurer to request the Director place an economic
recovery loan deposit with the eligible lending institution prior
to acceptance of a loan package.
An eligible lending institution would be required to enter
into an economic recovery loan deposit agreement with the
State Treasurer. Such agreement would include requirements
necessary to implement the purposes of the Program. The bill
would specify requirements must include an agreement by
the eligible lending institution to lend an amount equal to the
loan deposit to eligible borrowers at an interest rate that is not
more than 3.0 percent greater than the interest rate made
available to the lending institution (effectively capping the
interest rate spread at 3.0 percent). The borrower’s rate must
be recalculated on an annual basis. The bill would provide the
loan agreement would also include provisions for the loan
deposit to be placed for a time not to exceed a period of ten
years and that is considered appropriate in coordination with
the underlying loan. The bill also would require the agreement
to include provisions for the reduction of the loan deposit in
an amount equal to any payment of loan principal by the
eligible borrower.


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Funding of the Loan by the Lending Institution (New
Section 6)
The bill would require, upon placement of a loan deposit
with an eligible lending institution, the institution to fund the
loan to each approved eligible borrower listed in the loan
package in accordance with the agreement between the
institution and the State Treasurer. The bill would require the
loan to be at the rate established in the agreement and
established pursuant to requirements of this bill.

Liability for Default or Delay in Payments (New Section 7)
The bill would state the State and the State Treasurer
shall not be liable to any eligible lending institution in any
manner for payment of the principal or interest on any
economic recovery loan deposit loan to an eligible borrower.
The bill would also state any delay in payments or default on
the part of the eligible borrower does not in any manner affect
the economic recovery loan deposit agreement between the
eligible lending institution and the State Treasurer.

Amendments to Linked Deposit Loan Program Law
(Section 9)
The bill would amend law governing the investment of
state moneys, which also includes previously authorized
linked deposit programs, to add those loan deposits made
under the Program and applicable interest rates established
by the bill.

Field of Membership—Credit Unions (Section 8)
The bill would amend one of three criteria (occupation,
association, and geographic area) associated with defining
field of membership for state-chartered credit unions in the
State Credit Union Code (Code). Continuing law requires

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credit union members to be linked by one of three fields of
membership.
Under current law, a geographic area is permitted to
include a single political jurisdiction or multiple contiguous
political jurisdictions, until the aggregate total of the
population of the geographic area reaches 500,000. The law
further provides, however, if the headquarters of the credit
union is located within a metropolitan statistical area (MSA) of
more than one county, a different maximum population limit
would apply. That limit is determined by a formula:
● Multiply the population of the most populous MSA
within Kansas (i.e., the population of the Kansas
City MSA counties within Kansas) by the fraction
having 1.0 million as the numerator and 750,000 as
the denominator. [Note: Current population
numbers are those of the adjusted federal census
information presented to the Legislature by the
Secretary of State.]
The bill would permit a single political jurisdiction
(continuing law) but would modify other criteria to:
● Increase the permitted maximum for multiple
contiguous political jurisdictions for an aggregate of
the total population from 500,000 to 2.5 million, as
determined by official state population figures, or
any portion thereof, which are identical to the
decennial census data from the enumeration
conducted by the U.S. Census Bureau (language
attributable to the Census data is located in the
definition of “population data” in the current field of
membership requirements); and
● Remove language that separately applied to credit
unions with headquarters located within an MSA of
more than one county (allowed for a different
maximum population limit).

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 The bill would also modify a requirement that provides,
from and after July 1, 2008, no geographic area shall consist
of any congressional district or the entire state of Kansas to
instead state no geographic area shall consist of the entire
state of Kansas.
The bill would remove definitions within the Code for
“MSA,” “population data,” and “overt act.” Some of the
requirements within the definitions had been specific to
operations of credit unions, including branch locations,
construction of new buildings, and membership of occupation
or association groups on or before either February 1, 2008, or
June 30, 2008.

Kansas Financial Institutions Privilege Tax—Definitions
(Section 10)
The bill would permit a deduction from net income,
beginning in tax year 2023, for financial institutions subject to
the Kansas Financial Institutions Privilege Tax (privilege tax)
equal to the net interest income received from qualified
agricultural real estate and single family residence loans
attributable to Kansas to the extent such interest is included
in the Kansas taxable income. The bill would create
definitions for the terms “interest,” “qualified agricultural real
estate,” and “single family residence” and would also create a
calculation methodology for “net interest income received
from qualified agricultural real estate loans” and for “net
interest income from single family residence loans” as
follows:
● “Interest” would mean interest on indebtedness
attributed to Kansas and incurred in the ordinary
course of the active conduct of any business and
interest on indebtedness incurred that is secured
by a single family residence;
● “Qualified agricultural real estate loans” would
mean loans made on real property that is

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 substantially used for the production of one of more
agricultural products and that:
○ Have maturities of not less than 5 years and
not more than 40 years;
○ Are secured by a first lien interest in real
estate, except that the loans may be secured
by a second lien interest if the institution also
holds the first lien on the property; and
○ Have an outstanding loan balance when
made that is less than 85 percent of the
appraised value of the real estate, except that
a loan for which private mortgage insurance is
obtained may exceed 85 percent of the
appraised value of the real estate to the
extent the loan amount in excess of 85
percent is covered by such insurance;
● “Net interest income received from qualified
agricultural real estate loans attributed to Kansas”
would mean the product of the ratio of the interest
income earned on qualified agricultural real estate
loans over total interest income earned, in relation
to the net income of the national banking
association, state bank, trust company, or savings
and loan association without regard to this
deduction;
● “Net interest income received from single family
residence loans attributed to Kansas” would mean
the product of the ratio of the interest income
earned on single family residence loans over total
interest income earned, in relation to the net
income of the national banking association, state
bank, trust company, or savings and loan
association without regard to this deduction; and
● “Single family residence” would mean a residence
that is:
○ The principal residence of its occupant;
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 ○ Located in Kansas, in a rural area as defined
by the U.S. Department of Agriculture that is
not within an MSA and has a population