SESSION OF 2022
SUPPLEMENTAL NOTE ON HOUSE SUBSTITUTE FOR
SENATE BILL NO. 347
As Amended by House Committee of the Whole
Brief*
House Sub. for SB 347, as amended, would enact the
Attracting Powerful Economic Expansion Act (Act). The Act
would establish new economic development incentives
targeted at specific industries to firms that agree to invest at
least $1.0 billion within the State of Kansas and at their
suppliers.
The bill would be in effect upon publication in the
Kansas Register.
The bill would prohibit the Secretary from entering into
any agreement with a qualified firm or supplier on and after
May 1, 2024 (Section 15).
Definitions (Section 1)
The bill would define terms used in the Act.
Qualified Firm
The bill would define a “qualified firm” as a for-profit
business establishment subject to state income, sales, or
property tax that is engaged in one or more of the following
industries as determined by the Secretary of Commerce
(Secretary):
● Advanced manufacturing;
● Aerospace;
____________________
*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
● Distribution, logistics, and transportation;
● Food and agriculture; or
● Professional and technical services.
The bill provides exceptions to the definition by stating
that a for-profit business establishment in any industry is
eligible as a qualified firm if it is seeking benefits to relocate
or establish its national corporate headquarters within the
state. However, the bill would exclude all business
establishments engaged in the following activities from the
definition of “qualified firm”:
● Mining;
● Swine Production;
● Ranching; or
● Gaming.
Qualified Supplier
The bill would define a “qualified supplier” as a supplier
of components, sub-assemblies, chemicals or other process-
related tangible goods located in Kansas and owned by one
of the following entities:
● An individual, any partnership, association, limited
liability corporation, or corporation domiciled in
Kansas; or
● Any business that operates in the state of Kansas
for the purpose of supplying a qualified firm.
Qualified Business Facility
The bill would define a “qualified business facility” as a
building or complex of buildings satisfying the following
requirements:
● The facility is for use by qualified firm in operation
of a revenue-producing enterprise; and
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● If the facility was acquired or leased by the
qualified firm or qualified supplier from another
person or persons, that said facility was not being
used in the operation of a revenue-producing
enterprise that is the same or similar to the
revenue-producing enterprise of the qualified firm.
The definition would exclude any facilities or portions of
facilities held by the qualified firm or qualified supplier and
leased to another person or persons and not being utilized by
the qualified firm or qualified supplier in the operation of a
revenue-producing enterprise.
Qualified Business Facility Employee
The bill would define a “qualified business facility
employee” as an individual employed full-time and scheduled
to work for an average minimum of 30 hours per week,
employed for at least three consecutive months on the last
day of the period covered by a Kansas Department of Labor
quarterly wage report and unemployment tax return.
Qualified Business Facility Investment or Qualified
Investment
The bill would define a “qualified business facility
investment” or “qualified investment” as the total value of the
real and tangible personal property of the qualified firm or
qualified supplier during a taxable year excluding inventory or
property held for sale to customers in the ordinary course of
business.
The value of the property would be defined to be the
property’s original cost if the property is owned by the
qualified firm or qualified supplier or eight times the net
annual rental rate if the property is leased by the qualified firm
less any rental rate the qualified firm or qualified supplier
receives from subrentals.
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Other Definitions
The bill would define various other terms, including
“commitment to invest,” “facility,” “headquarters,” “new
employee,” “total payroll cost,” and “training and education
eligible expense.”
Attracting Powerful Economic Expansion Program
(Section 2)
The bill would establish the Attracting Powerful
Economic Expansion (APEX) Program under the purview of
the Secretary for the purpose of attracting large capital
investments in new facilities and operations by businesses
engaged in specified industries, establishing new national
headquarters in Kansas, and encouraging the development of
Kansas-based supply chains.
APEX would provide tax incentives to qualified firms
who agree to invest at least $1 billion in the State of Kansas
within a five-year period and to no more than five of the
qualified firm’s qualified suppliers.
The Secretary would be permitted to enter into one
agreement each in calendar years 2022 and 2023. Prior to
offering any agreement for incentives under the Act, the
Secretary would be required to obtain approval from the State
Finance Council.
The bill would authorize the Secretary of Commerce or
the Secretary of Revenue to adopt rules and regulations for
implementation of the Act.
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Qualified Firms (Section 2)
Requirements
To receive incentives under the APEX Program, the bill
would require a business to meet the definition of a qualified
firm and fulfill the following requirements:
● Submit an application to the Secretary, in the form
of and with the information required by the
Secretary;
● If requested by the Secretary, submit a certificate of
intent to invest which, if required by the Secretary,
must contain a date investment would commence;
● Commit to a qualified business investment of at
least $1 billion in a qualified business facility to be
completed within five years;
● Complete the project and commence commercial
operations within five years;
● Enter into a binding agreement with the Secretary
that includes the commitments required by the bill;
● Obtain and submit a bond to the Secretary in the
amount required to cover primary construction of
the building or buildings for the qualified business
facility if the qualifying firm or qualifying business
facility does not meet the minimum investment
grade rating determined by the Secretary; and
● Commit to repayment of any benefit or benefits
received connected to or associated with a term or
condition of the agreement that has been
breached, as determined by the Secretary, and the
forfeiture of any such earned benefits and the
suspension or cessation of future benefits for as
long as the breach is not corrected. The Secretary
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would be required to report any material breach to
the State Finance Council within 14 days of
becoming aware of the breach.
Incentives
The qualified firm meeting the above requirements
would be eligible for the following incentives, as approved by
the Secretary:
● Investment tax credits;
● Reimbursement of a percentage of total payroll;
● Reimbursement of a percentage of eligible
employee training and education expenses;
● Reimbursement of a percentage of relocation
incentives and expenses provided by a qualified
firm to incentivize employees to relocate to
Kansas; and
● Sales tax exemption for construction costs of the
qualified business facilities.
The bill would state that a qualified firm’s confidential
financial information, trade secrets, or other information that
would put the firm at a disadvantage in the marketplace, or
would significantly interfere with the purposes of the Act as
determined by the Secretary, shall not be subject to
disclosure but shall be made available upon request to the
Legislative Division of Post Audit. These exclusions from the
provisions of the Kansas Open Records Act would expire on
July 1, 2027, unless reviewed and re-enacted by the
Legislature.
In addition to any other repayment provisions under the
Act, the bill would require any qualified firm that receives
incentives under the Act to repay a percentage of benefits
received under the Act if it relocates outside of the state in the
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11th through 15th years following the year the qualified firm
entered into the agreement with the Secretary. The
percentage repayments would be:
● 100 percent if the relocation occurs in the 11th year;
● 80 percent if the relocation occurs in the 12th year;
● 60 percent if the relocation occurs in the 13th year;
● 40 percent if the relocation occurs in the 14th year;
and
● 20 percent if the relocation occurs in the 15th year.
The repayment requirement would be waived if the
qualified firm sells the qualified business facility to another
business and the operations of the qualified business facility
are substantially continued in Kansas.
Qualified Suppliers (Section 2)
Requirements
The bill would allow a qualified firm to select up to five
eligible, qualified suppliers that meet the following
requirements to be eligible to receive incentives for up to five
successive years under the Act:
● Submit an application to the Secretary in the form
and manner designated by the Secretary, and
including all information requested by the
Secretary;
● Submit a certificate of intent to invest in a qualified
business facility which includes when investment
will begin;
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● Make more than $10 million of sales to the
qualified firm within the taxable year for which
benefits are being sought, unless this requirement
is waived by the Secretary due to “exceptional
circumstances”; and
● Provide information to the Secretary such as, but
not limited to:
○ Evidence establishing sales of more than $10
million to the qualified firm;
○ Date when operations at the qualified
business facility began; and
○ Sales to the qualified business facility by the
qualified supplier.
The selection of qualified suppliers would not be
permitted to change unless a qualified supplier breaches the
terms of an agreement pursuant to the Act and is disqualified
by the Secretary. If the Secretary approves the application,
the bill would require the qualified supplier to enter into a
binding agreement with the Secretary establishing the terms
and conditions of the agreement. The agreement would be
required to, at a minimum, contain the requirements and
conditions of the Act and require the qualified supplier to
provide the Secretary with evidence showing the amount of
sales made to the qualified firm each year. The bill would
require the agreement be entered into before any benefits
under the Act are provided to the qualified supplier.
No benefits will be provided to the qualified supplier until
the qualified firm has commenced operation at the qualified
business facility. Should the qualified business facility fail to
commence operations then all benefits to the qualified
supplier would be forfeit.
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Incentives
Qualified suppliers would be eligible for the following
incentives:
● Investment tax credit;
● Partial retention of employee withholding tax;
● Reimbursement of a percentage of eligible
employee training and education expenses;
● Partial real property tax exemption for qualified
business facilities; and
● Sales tax exemption for construction materials
used in the qualified business facility.
The bill would require qualified suppliers to meet the
individual requirements of each incentive in order to receive
benefits. Furthermore, the bill would state that qualified
suppliers that meet the requirements of the investment tax
credit shall be required to commit to repay all benefits
received under the Act should the qualified supplier fail to
meet the requirements of the Act, rules and regulations, or
terms and conditions of the agreement entered into with the
Secretary.
Qualified Firms and Qualified Suppliers (Section 2)
Conditions
The bill would disqualify a qualified firm or qualified
supplier approved by the Secretary of Commerce from
participating in the following programs:
● Promoting Employment Across Kansas (PEAK)
Program;
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● High Performance Incentive Program (HPIP);
● Kansas Industrial Training (KIT) Program;
● Kansas Industrial Retraining (KIR) Program;or
● Any other economic development program or fund
administered by the Secretary of Commerce.
The qualified firm or supplier would also be required to
cooperate with any audit undertaken by the Secretary of
Revenue and to provide to the Secretary of Commerce the
following information:
● Information required for publication in the
Economic Development Incentive Program
Database as prescribed by law;
● Information reasonably required for the Secretary’s
report on the APEX Program to the Governor and
specified committees of the Legislature;
● Information required by the Secretary of
Commerce for the Secretary’s annual review or by
the Secretary of Revenue that pertain to the
qualified firm’s eligibility for benefits; and
● Reasonable access by the Secretary or
Department of Commerce staff to the qualified
business facility during business hours.
The bill would require the Secretary of Commerce to
conduct an annual review of the activities of qualified firms
and qualified suppliers to ensure compliance with the
provisions of the Act, rules and regulations adopted by the
Secretary, and the agreement entered into by the qualified
business. Upon review, the bill would direct the Secretary of
Commerce to certify to the Secretary of Revenue that the
qualified firm is eligible for benefits.
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The Secretary of Revenue would be tasked, in
consultation with the Secretary of Commerce, to develop a
form to be completed annually by qualified firms and qualified
suppliers that receive benefits.
Investment Tax Credit (Section 3)
The bill would authorize eligibility for both qualified firms
and qualified suppliers to receive investment tax credits.
Incentive
Beginning in tax year 2022, a qualified firm or supplier
that makes a qualified business investment in a qualified
business facility and meets all requirements in the Act would
be allowed a credit for such investment against that entity’s
income tax, premium tax, privilege fees, or privilege tax.
The bill would specify the credit shall be earned each
taxable year based upon the amount of the qualified
investment made within the taxable year. For qualified firms,
the credit would be up to 15.0 percent of the qualified
investment within the taxable year, as determined by the
Secretary of Commerce, and would be divided into 10 equal
installments to be claimed in 10 successive tax years. The bill
would permit the State Finance Council to approve
installments or portions of installments to be in advance of the
10 successive years. Such approval would require an
affirmative vote of the Governor and a majority of the
legislative members of the State Finance Council. For
qualified suppliers, the credit would be 5.0 percent for the first
$50 million in qualified investment and an additional 1.0
percent for each additional $10 million in qualified investment,
up to a maximum of $100 million.
The bill would provide that the Secretary of Commerce
would be required to set forth the percentage of the tax credit
that may be refundable to the qualified firm or qualified
supplier in an agreement entered into between the Secretary
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and the qualified firm or qualified supplier. The base
percentage that would be refundable would be 50 percent.
The Secretary would be permitted to provide additional
percentage to be refundable up to 100 percent, depending on
the qualified firm meeting specified goals set forth in the
agreement between the Secretary and the qualified firm. The
installment portion of the tax credit that is not refunded would
be permitted to be carried forward up to ten years.
The bill would require the Se