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HB 2406

Damages; Damages Modernization Act of 2025; effective date.

2025 Regular Session Introduced by Kyle Hilbert

HB 2406 expands the property tax exemption for commercial/industrial machinery in Kansas to include equipment regardless of whether it arrived before or after June 30, 2006.

Second Reading referred to Rules
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Bill Summary · HB 2406

Summary — HB 2406 (Kansas, 2025)

Providing tax exemption eligibility for commercial and industrial machinery and equipment acquired or transported into Kansas on or before June 30, 2006

Purpose / intent

HB 2406 would expand an existing Kansas property tax exemption for commercial and industrial machinery and equipment by removing the statutory cutoff date of June 30, 2006. The stated legislative purpose (from the existing K.S.A. 79-223 language) is to encourage investment, business retention and expansion, and job creation by exempting qualifying machinery and equipment from property taxation.

Key provisions

  • Amends K.S.A. 79-223 to eliminate the June 30, 2006 date that currently restricts exemption eligibility to property purchased, leased, or transported into Kansas after that date.
  • As amended, the exemption would apply to qualifying commercial and industrial machinery and equipment regardless of whether it was acquired or transported into the state before or after June 30, 2006 (subject to the other requirements in the section).
  • Retains existing statutory definitions and limits in K.S.A. 79-223 for:
    • What qualifies as “commercial and industrial machinery and equipment” (property in subclass (5) of class 2),
    • Exclusions (for example, most renewable electric generation facilities are excluded),
    • Qualified purchase and qualified lease definitions,
    • Anti‑avoidance provisions and enforcement authority for the Secretary of Revenue.
  • The bill repeals the old version of K.S.A. 79-223 and replaces it with the revised text.

Fiscal impact (estimates from Kansas Division of the Budget / Dept. of Revenue)

  • The Department of Revenue estimates reduced property tax revenues to state school-related funds and local governments beginning with tax year 2026 (the bill’s effective date is July 1, 2025, but the 2025 valuation cycle will be complete).
  • Estimated decreases (state school-related funds) by fiscal year:
    • FY 2027: School district finance: ($9,890,000); Educational Building Fund (EBF): ($490,000); State Institutions Building Fund (SIBF): ($245,000). Total ≈ ($10,625,000).
    • FY 2028: School district finance: ($9,420,000); EBF: ($470,000); SIBF: ($235,000). Total ≈ ($10,125,000).
    • FY 2029: School district finance: ($8,970,000); EBF: ($450,000); SIBF: ($225,000). Total ≈ ($9,645,000).
  • Local governments that levy property tax would also see reduced property tax revenues; the Department did not provide a specific statewide local estimate.
  • The Division of the Budget notes the 20-mill statewide school levy reduction would require an offsetting State General Fund appropriation for State Foundation Aid to maintain Base Aid for Student Excellence (BASE). Without that appropriation, the Department of Education would need to prorate/reduce state aid to school districts in FY 2026.
  • The Department of Revenue indicates no material fiscal effect on its own administration.

Who is affected

  • Businesses that own commercial and industrial machinery and equipment in Kansas that were previously ineligible only because they were acquired or transported into the state on or before June 30, 2006 — these businesses could gain property tax exemption eligibility.
  • Local governments and school districts: potential reductions in property tax revenue used for local operations and capital projects.
  • State funds tied to school property tax collections (EBF, SIBF) and potentially the State General Fund if an appropriation is used to offset lost levy revenues.

Procedural / timeline notes

  • Introduced: February 4, 2025. Referred to the House Committee on Taxation (committee referral recorded March 12, 2025).
  • Department of Revenue assumes bill would take effect July 1, 2025, but valuation/certification timing means fiscal impacts begin with tax year 2026 (reflected in FY 2027 budget impacts in the fiscal note).

Sources

  • HB 2406 (Introduced text amending K.S.A. 79-223) and Fiscal Note from Kansas Division of the Budget / Department of Revenue (April 2, 2025).

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

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