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HB 2385

Courts; Courts Reform Act of 2025; effective date.

2025 Regular Session Introduced by Kyle Hilbert

Authorizes cities or counties to levy up to 1% local earnings tax on nonresident workers, voted by residents, to fund infrastructure and reduce property tax reliance.

Second Reading referred to Rules
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Bill Summary · HB 2385

HB 2385 — Summary (earnings tax authority for cities and counties)

Status: Referred to House Committee on Taxation
Introduced: February 4, 2025
Primary purpose: Authorize Kansas cities and counties to place on the ballot — and, if approved by voters, levy — a local earnings tax on nonresident workers who perform work inside the city or county.

Main intent

Allow local governments to raise locally controlled revenue (capped) targeted to infrastructure or general county needs and to use at least a portion of that revenue to reduce reliance on ad valorem (property) taxes.

Key provisions

  • Authorization and scope

    • Cities/counties may levy an earnings tax on individuals who are NOT residents but who work or perform services within the taxing city or county.
    • Tax base: salaries, wages, commissions and other compensation earned for work done inside the jurisdiction. Certain deferred compensation contributions excluded.

  • Rate cap

    • Maximum rate of 1.0% per year.

  • Voter approval and periodic reauthorization

    • A local governing body must submit the proposition to voters; a majority vote of electors is required to impose the tax.
    • If adopted, the question must be resubmitted to voters every 10 years to decide whether to continue the tax.
    • A petition signed by at least 10% of electors can compel submission of repeal, reduction, or increase proposals.

  • Use of revenue / property tax relief

    • City-collected earnings tax revenues must be pledged for infrastructure purposes; at least 50% must be credited in the city budget to reduce revenue otherwise needed from the city's portion of property tax.
    • County-collected earnings tax revenues must be pledged for general county purposes; at least 50% must be credited to reduce property tax revenue needs.

  • Credits, exemptions and deductions

    • Individuals who are exempt from Kansas state income tax (K.S.A. 79-32,113) are exempt from the local earnings tax.
    • Credit allowed for earnings tax paid to another city or county (to avoid double taxation for commuters).
    • Cities/counties may, by ordinance/resolution, enact deductions/exemptions (including for spouses/dependents) and adopt formulas to apportion income when work occurs both inside and outside the taxing jurisdiction.

  • Employer collection, retention, and reporting

    • Cities/counties may require employers to withhold, collect and remit the local earnings tax; penalties may be imposed for noncompliance.
    • Employers may retain 1.5% of the total tax collected as a collection fee (city may change this fee by ordinance).
    • The State of Kansas and its political subdivisions, when acting as employers, may retain 3% of amounts collected if the local tax is less than 1%, or 1.5% if the local tax is 1%.
    • Cities may request an annual list of employees who reside within the city.

  • Administrative and legal

    • Election notices and procedures must follow K.S.A. 25-105; county election officers will conduct elections.
    • Includes severability clause.

Who is affected

  • Nonresident workers who perform work within adopting cities/counties (they would pay the local tax).
  • Local residents indirectly (potential property tax relief if local governments credit at least 50% of earnings tax revenue to reduce property tax revenue needs).
  • Employers in adopting jurisdictions (responsible for withholding, remitting, recordkeeping; entitled to collection fee).
  • State government as an employer (subject to specified retention percentages).
  • Cities and counties that choose to place the question on the ballot and, if approved, administer the tax.

Fiscal impact

  • Division of the Budget fiscal note (Feb 26, 2025): No fiscal effect on state tax revenues.
  • Local fiscal impact is uncertain and not estimated in the fiscal note — it depends on how many local governments put the question to voters and at what rate they set the tax (up to 1.0%). The League of Kansas Municipalities and Kansas Association of Counties note it would allow new local revenue for infrastructure and property tax relief.

Procedural/timeline notes

  • Requires local ballot approval (majority vote) before levy.
  • If adopted, the continuation of the tax must be approved by voters every 10 years.
  • Petition threshold for submitting changes is 10% of electors.

Other

  • The bill amends and repeals specified statutes (K.S.A. 12-140 and K.S.A. 2024 Supp. 19-101a references appear in the bill text).
  • Contains customary severability language.

If you’d like, I can: (a) extract the bill’s exact statutory amendments/section numbers, (b) produce a one-page fact sheet for local officials, or (c) draft sample ballot language consistent with the bill’s requirements.

Compiled from official sources — confirm details with the bill’s official record.

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