Bill
HB 2318
The bill automatically lowers Kansas income and financial institution tax rates each year if inflation-adjusted SGF tax receipts exceed a base, with floors and a Budget Stabilizati
Status & procedural posture
- Introduced Jan 31, 2025 by the House Committee on Taxation (requested by Kansas Chamber of Commerce).
- Amended in committee and in the Committee of the Whole; House passed as amended (roll calls and committee actions documented). Referred to Committee on Assessment and Taxation for further consideration.
- Fiscal note issued Mar 3, 2025 by the Division of the Budget.
Purpose / intent
- Establish an automatic, annual procedure to reduce Kansas income and privilege (financial institutions) tax rates whenever State General Fund (SGF) receipts from income and privilege taxes exceed an inflation‑adjusted FY2024 base — subject to a Budget Stabilization Fund safeguard. The intent is to return sustained, inflation‑adjusted revenue growth to taxpayers via rate cuts.
Key provisions — how it works
- Base and inflation adjustment: FY2024 SGF income & privilege tax receipts are the base ($10,003,833,599). The base is inflated each year by the ratio of the prior fiscal year’s 12‑month CPI average to the FY2024 12‑month CPI average.
- Annual test and certification: By August 15 each year (starting 2025) the Director of the Budget, with Legislative Research, determines whether prior fiscal year adjusted SGF collections exceed the inflation‑adjusted base. If so, the Director certifies the excess to the Secretary of Revenue.
- Rate reduction calculation: Upon certification, the Secretary must calculate and publish tax‑rate reductions (rounded down to the nearest 0.01 percentage point) designed to reduce expected receipts by approximately the certified excess. Changes take effect in the next tax year.
- Order and floors:
- Individual income tax rates are reduced first, proportionally, until the lower bracket reaches a floor (as amended, 4.5%). Thereafter only the upper bracket is reduced until it reaches the same floor (4.5%).
- Once individual rates hit their floor, corresponding reductions begin for corporate surtax and financial institutions’ normal tax rates until combined rates reach specified floors (as amended: corporations combined = 4.5%; banks combined = 2.82%; trust companies & savings & loans combined = 2.90%).
- Brackets/thresholds: Income tax brackets and taxable income thresholds are adjusted to reflect rate changes.
- Permanence and one‑way rule: Any reduction remains in effect until further reduced by the same procedure; lower collections do not automatically trigger rate increases.
- Budget Stabilization Fund condition: The certification and reductions do not occur in years when the balance in the Budget Stabilization Fund is less than 20% of the prior fiscal year’s SGF tax receipts.
Who is affected
- Kansas individual taxpayers (resident and nonresident allocations), corporations, banks, trust companies, and savings & loan associations.
- State General Fund revenues (potentially reduced in future years).
- Department of Revenue (administration/IT changes) and Department of Administration (debt‑setoff program impacts).
Fiscal impact / implementation
- Division of the Budget: No likely trigger for 2025; future SGF reductions are possible but indeterminate. Any resulting revenue loss is not reflected in the FY2026 Governor’s Budget Report.
- Department of Revenue: Estimated one‑time implementation / automated system modification cost of $4,000 in FY2026; additional contracting costs possible if combined workload exceeds in‑house capacity.
- Department of Administration: Higher refund amounts could increase debt‑setoff collections; net impact not estimated.
Notes and legislative history
- The bill was amended multiple times; the Committee of the Whole amendments set the current base, CPI method, the 20% budget‑stabilization condition, and the numeric rate floors referenced above. Proponent testimony emphasized competitiveness; opponents raised concerns about fiscal stability and shifting burden to other taxes.
Compiled from official sources — confirm details with the bill’s official record.
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