HB 2308 — Aviation and Innovative Manufacturing in Kansas Act (summary)
Status
- Introduced: January 31, 2025. Hearing scheduled March 4, 2025 (House Commerce, Labor & Economic Development). (Fiscal note dated March 4, 2025.)
- Administering agency: Kansas Department of Commerce.
Overview / Purpose
- Establishes the "Aviation and Innovative Manufacturing in Kansas Act" and a program to attract large aviation, electric/hydrogen vehicle, battery, sustainable aviation fuel, hydrogen production, component/subassembly and related R&D or corporate headquarters projects to Kansas by offering tax and other incentives tied to significant capital investment and job creation.
Eligibility (minimum thresholds)
- Qualified project types: NAICS subsector 336 and related industries (aircraft assembly, EV/hydrogen-powered vehicle manufacturing, battery production, SAF production, hydrogen for qualified activities, component/subassembly manufacturing, R&D).
- Minimum qualified business facility investment: $250 million completed within 5 years.
- Minimum new hires: 250 new employees within 5 years after commencement of commercial operations.
- Wage requirement: starting wages at least 100% of the county median wage where employees are employed.
- Employee retention: maintain required new employment for 10 years.
Key benefits offered to qualifying companies
- Investment tax credit: up to 10% of qualified investment in a tax year, spread equally over no fewer than 5 tax years (Secretary of Commerce has discretion on spread and percentage; credit is automatically 10% for projects in non‑metropolitan counties).
- Payroll withholding retention/refund: ability to retain or be refunded up to 100% of Kansas payroll withholding taxes for up to 10 years (Secretary has discretion on years and percentage); annual certification by Secretary of Commerce to Secretary of Revenue required.
- Training/education reimbursement: reimbursement for up to one year of eligible training/education per new employee (training must be in Kansas at community or technical colleges under agreement with the company). Limit: $5 million maximum per qualifying project. The bill creates a New Employee Training & Education Fund but does not appropriate its funding in the bill.
- Sales tax exemption: for construction, reconstruction, enlarging or remodeling of the qualified facility, and for certain machinery, equipment and contractors working on the project.
- "Kansas First" procurement benefit: up to $1 million per $20 million in procurement from independent Kansas companies per fiscal year; claimable once per fiscal year and up to three separate claims per qualified company. The bill authorizes a one-time transfer of $5 million from the State General Fund to the Kansas First Fund on July 1, 2025; Secretary may prorate payments if claims exceed available funds.
Conditions, limits and enforcement
- Clawback provisions: apply if investment or employment commitments fall below 90% of required amounts.
- Reporting and penalties: contractors must report use of sales tax exemption; misuse can be a misdemeanor. Secretary of Commerce must certify eligibility annually to Revenue for payroll retention/refunds.
- Annual reporting: Commerce must report detailed project-level data (company names, locations, investments, hires, wages, residency, benefits claimed, estimated net state fiscal impact and multiplier effects) to the Governor and relevant legislative committees.
Fiscal implications and risks (from fiscal note)
- The package creates potentially significant state tax expenditures (reduced income/privilege/premium tax revenue and sales tax revenue, and retained payroll withholding) tied to future projects; actual fiscal cost depends on Secretary discretion (percentages/durations) and whether qualifying projects are secured.
- The bill authorizes a $5 million transfer to the Kansas First Fund (July 1, 2025) but does not appropriate funding for the training reimbursement fund — funding would require separate budget action.
- Clawbacks and reporting intend to mitigate risk but discretion and multi‑year commitments create uncertain long‑term fiscal exposures.
Who is affected
- Primary: large manufacturers, aircraft/EV/hydrogen/battery producers and corporate headquarters that meet thresholds.
- Secondary: Kansas suppliers (potential procurement opportunities), community and technical colleges (training contracts), Kansas Department of Commerce, Department of Revenue, and the State General Fund/tax base.
Administrative/timeline notes
- Investment and hiring must be completed within five years of project start/commencement of commercial operations; employee retention requirement is ten years.
- Secretary of Commerce has significant administrative discretion to set benefit durations and percentages (with some automatic rules for non‑metro counties).
Preparedness note
- Because many benefit parameters are discretionary and the training fund requires separate appropriation, the actual incentive package and fiscal exposure will depend on administrative rules, agreements negotiated with each qualified company, and future budget decisions.
