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 Proffitt, Director Laura Kelly, Governor
January 31, 2022
The Honorable Sean Tarwater, Chairperson
House Committee on Commerce, Labor and Economic Development
Statehouse, Room 346-S
Topeka, Kansas 66612
Dear Representative Tarwater:
SUBJECT: Fiscal Note for HB 2497 by House Committee on Commerce, Labor and
Economic Development
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2497 is
respectfully submitted to your committee.
HB 2497 would enact the Attracting Powerful Economic Expansion (APEX) Act. The bill
includes tax and other incentives for projects in specified industries or for a national corporate
headquarters with specified capital investment requirements of at least $1.0 billion completed
within five years. The Act would be administered by the Department of Commerce. The qualified
firm would be a for-profit business that is engaged in one or more of the following industries:
advanced manufacturing; aerospace; distribution, logistics, and transportation; food and
agriculture; or professional and technical services. The qualified firm cannot be engaged in
mining; swine production; ranching; or gaming. A qualified firm is allowed to select up to five
qualified suppliers, with approval of the Secretary of Commerce, that are located in Kansas that
would provide at least $10.0 million in supplies to the qualified firm to receive incentives detailed
below. The Act lists the eligible incentives for the qualified firm and qualified supplier that could
be approved by the Secretary of Commerce:
1. Investment tax credit of up to 15.0 percent of the qualified investment with the percentage
amount determined by the Secretary of Commerce from guidelines outlined in the Act.
The Secretary would also determine the amount of the tax credit that would be refundable
from 50.0 percent to 100.0 percent from guidelines outlined in the Act. The tax credit
would be claimed in three equal installments over the next three years after the year the
qualified investment is made. Any non-refundable portion of the tax credit that is not
claimed within three years would be forfeited. The bill would create the Attracting
Powerful Economic Expansion Payroll Incentive Fund to be administered by the Secretary
of Commerce.
The Honorable Sean Tarwater, Chairperson
Page 2—HB 2497
2. Beginning on July 1, 2022, up to 50.0 percent reimbursement of any eligible employee
training and education expense for new employees with the percentage amount determined
by the Secretary of Commerce from guidelines outlined in the Act. The training program
would be capped at $5.0 million per fiscal year and would be allowed for the first five years
of the project. The bill would create the Attracting Powerful Economic Expansion New
Employee Training and Education Fund to be administered by the Secretary of Commerce.
3. Real property tax exemption of 50.0 percent for qualified business facilities that are
manufacturing facilities or headquarters located in a foreign trade zone beginning in tax
year 2022. The length of time of the property tax exemption would be determined by the
Secretary of Commerce from guidelines outlined in the Act.
4. Sales tax exemption for the construction, reconstruction, enlarging, or remodeling of
qualified business facility that would begin on the effective date of the Act and last until
the qualified business facility is put into service. The sales tax exemption would also be
extended for any contractor to perform duties related to the project. The bill includes
reporting requirements for contractors and penalties for the use of the sales tax exemption
that is determined to not be part of this project which would be punishable as a
misdemeanor.
Qualified firms could retain up to 10.0 percent of total payroll costs paid to its qualified
business facility employees beginning in tax year 2022 for up to ten years with the amounts
determined by the Secretary of Commerce from guidelines outlined in the Act. Beginning in tax
year 2022, qualified suppliers would be eligible to retain up to 65.0 percent of qualified supplier’s
Kansas payroll withholding taxes for up to ten years with the amounts determined by the Secretary
of Commerce from guidelines outlined in the Act.
The qualified firm and qualified supplier would be subject to claw back provisions if
certain terms of the incentive agreement are violated. The qualified firm may be required to enter
into a completion bond paid to the State of Kansas if the facility has not been constructed to the
degree specified in the agreement. The qualified firm or qualified supplier that is approved by the
Secretary of Commerce for these incentives would be prohibited from participating in the
Promoting Employment Across Kansas Program, the High Performance Incentive Program, the
Kansas Industrial Training Program, or Kansas Retraining Programs. Certain confidential
financial information or trade secrets would not be disclosed to the public and would be an
exception to the Open Records Act; however, this information can be requested by Legislative
Division of Post Audit. This confidentiality provision would expire on July 1, 2027, unless
renewed by the Legislature. As a condition of receiving these incentives, the qualified firm and
any qualified supplier would be required to agree to cooperate with any audit undertaken by the
Secretary of Revenue. The Secretary of Commerce would be required to conduct an annual review
of the qualified firm and any qualified supplier and certify to the Secretary of Revenue that each
are qualified to continue to receive incentives. The Secretary of Commerce and the Secretary of
Revenue would have the power to write rules and regulations to implement the Act.
On January 31 of each year, the Secretary of Commerce would be required to submit a
report to the Governor, the Senate Committee on Assessment and Taxation, Senate Committee on
The Honorable Sean Tarwater, Chairperson
Page 3—HB 2497
Commerce, House Committee on Taxation, and House Committee on Commerce, Labor and
Economic Development based on information received from each qualified firm or qualified
supplier receiving benefits under the Act. The report would be required to include the names of
the qualified firms or qualified suppliers; the types of qualified firms or qualified suppliers utilizing
the Act; the location of the such companies and the location, description, and economic and
industry impact of the companies’ business operations in Kansas; the number of new employees
hired; the wages paid for the new employees; the annual and cumulative amounts of investments
made; the annual amount of each benefit provided under this Act; the estimated net state fiscal
impact, including the direct and indirect new state taxes derived from the new employees hired;
and an estimate of the multiplier effect on the Kansas economy of the benefits received under this
act.
HB 2497 has the potential to reduce State General Fund revenues in FY 2023 and in future
fiscal years, while increasing capital investment, creating high paying jobs, and establishing new
and ancillary industry development in Kansas. However, without knowledge of a specific
incentive agreement, a precise fiscal effect of HB 2497, including ancillary benefits, is not possible
to formulate. The bill would allow the Secretary of Commerce discretion, within the parameters
of the legislation, to negotiate with a qualified firm with a new incentive package with different
ranges of incentives amounts that in some cases are refundable or non-refundable. In addition,
some of the incentives could be spread out over multiple years, which could spread the fiscal effect
over those years.
The Department of Commerce indicates that Kansas is a finalist for a megaproject that
would bring $4.0 billion in new private investment to the state, create 4,000 permanent jobs with
an average wage of $50,000 (which is above the county median average wage) and add nearly
6,000 more jobs during the construction phase. The Department also indicates that the project will
require suppliers to relocate with this company which are expected to hire thousands of additional
workers. The Department of Commerce indicates that bill would require $90,633 from the State
General Fund in FY 2023 to implement the bill. The bill would require the Department hire 1.00
new FTE position to manage the new Attracting Powerful Economic Expansion Program.
The Department of Revenue indicates that it would require a total $141,598 from the State
General Fund in FY 2023 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.
The Department of Revenue estimates that the 50.0 percent property tax abatement
component of the bill has the potential to forgo property tax revenues for certain property located
in a foreign trade zone. The Department of Revenue does not have data on the assessed valuation
of the specific property that would receive this 50.0 percent abatement or how often a new
abatement would occur to make a precise estimate of the amount of forgone property tax revenue.
The bill would forgo the amount of property tax revenues that would be collected for the two
The Honorable Sean Tarwater, Chairperson
Page 4—HB 2497
building funds, the Educational Building Fund and the State Institutions Building Fund. Forgone
property tax revenue would also have an effect on state expenditures for aid to school districts. To
the extent that forgone property tax revenue would not be available from the state’s uniform mill
levy to fund expenditures for school districts. Local governments that levy a property tax would
also forgo revenues; however, the amount of forgone property tax revenues cannot be estimated.
The Kansas Department of Transportation indicates that the bill has the potential to forgo
state revenues to the State Highway Fund by allowing for a new sales tax exemption. State
Highway Fund revenues are used to fund projects funded under the comprehensive transportation
plan.
The League of Kansas Municipalities and the Kansas Association of Counties indicate that
the bill has the potential to forgo local property tax revenues and local sales tax revenues related
to a major economic development project located in a foreign trade zone. However, they do not
have a basis on which to estimate the amount of forgone local sales tax revenue or property taxes
that would be abated to make a precise estimate of the fiscal effect on local governments. Any
fiscal effect associated with HB 2497 is not reflected in The FY 2023 Governor’s Budget Report.
Sincerely,
Adam Proffitt
Director of the Budget
cc: Lynn Robinson, Department of Revenue
Brendan Yorkey, Department of Transportation
Wendi Stark, League of Municipalities
Jay Hall, Association of Counties
Sherry Rentfro, Department of Commerce
Statutes affected: As introduced: 79-3606