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HB 2154

Imposing property tax on rental and leased vehicles and discontinuing the excise tax on the rental and lease of such vehicles.

2025-2026 Regular Session

Shifts Kansas short-term vehicle rental tax from a 3.5% excise to property tax starting July 1, 2025, broadening the tax base and potentially reducing county excise revenue.

Died in Committee
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Bill Summary · HB 2154

Summary — HB 2154 (2025 session, Kansas)

Purpose

HB 2154 would change the taxation of short-term motor vehicle rentals and certain leased vehicles by eliminating the current 3.5% excise tax on rentals/leases under 28 days and instead making those vehicles subject to property tax. The bill also makes related statutory changes to vehicle registration rules for rental fleets and clarifies exclusions for peer-to-peer vehicle sharing.

Key provisions

  • Discontinue the 3.5% excise tax currently imposed on motor vehicles rented or leased for fewer than 28 days.
  • Remove statutory references to that excise tax.
  • Require that motor vehicles currently exempt under the excise-tax regime instead be subject to property tax beginning July 1, 2025.
  • Amend vehicle registration rules for large rental fleets (K.S.A. 8-1,189): electronic registration for companies registering more than 250 taxable vehicles; issuance of permanent “rental fleet” plates; limited transferability; permit an additional fee up to $1 per registration for administrative costs.
  • Amend definitions and exclusions in the peer-to-peer vehicle sharing statute (K.S.A. 8-2802) to clarify that rental vehicles covered by the excise/property tax regime are excluded from the peer-to-peer sharing definitions.
  • Amend and repeal various statutes (listed below) to implement the above changes:
    • Amends K.S.A. 8-1,189, 8-2802, 79-5101, 79-5117 and K.S.A. 2024 Supp. 79-3606; repeals existing versions as necessary.

Fiscal impact (per Division of the Budget fiscal note)

  • Effective date for property taxation of the affected vehicles: July 1, 2025.
  • The change would broaden the property tax base and thereby increase property tax collections to the state’s Educational Building Fund and State Institutions Building Fund and to any local taxing jurisdictions that levy property tax.
  • The Department of Revenue cannot precisely estimate net revenue changes because it lacks complete valuation and in-state registration data for the rental/leased vehicles that would become taxable.
  • Relevant data points:
    • 15,056 motor vehicles currently registered in the state rental fleet system (Department of Revenue).
    • Local governments collected $6,571,670 from the excise tax in calendar year 2023.
  • Implementation cost: $26,990 from the State General Fund in FY 2026 for Department of Revenue programming to modify the motor vehicle registration system; additional contractor costs possible if combined workload exceeds available resources.
  • Local impact: Kansas Association of Counties expects a likely net reduction in county revenue because excise revenues (distributed to counties based on transaction location) would end while increased property tax yields may not fully offset the lost excise distributions. Cities could see an expanded property tax base.

Who is affected

  • Car rental and leasing companies (operators of short-term rental fleets).
  • Peer-to-peer vehicle sharing platforms and owners (statutory clarifications/exclusions).
  • State (Educational Building Fund, State Institutions Building Fund) and local taxing jurisdictions (counties/cities/school districts) that levy property tax.
  • Department of Revenue (administration, registration system changes).
  • Renters/users of short-term rental vehicles (possible pass-through of tax changes by providers).

Procedural status & timeline (selected)

  • Introduced: January 28, 2025 (Rep. Tony M. McCombie, primary sponsor).
  • Hearing: March 10, 2025 — House Committee on Taxation (Room 346-S).
  • Effective for property tax purposes: July 1, 2025 (bill provision).
  • Legislative actions indicate the bill passed the legislature (transmitted to governor April 30, 2025) but was vetoed by the Governor on May 6, 2025. Subsequent re-referrals and procedural steps are recorded (see legislative record).

Uncertainties / Notes

  • The Department of Revenue could not provide a precise net revenue estimate because it lacks detailed data on valuations and in-state registration rates for rental/leased vehicles that would become taxable.
  • The net fiscal impact on counties is uncertain and may vary by county; the loss of excise distributions could exceed property tax gains in some jurisdictions.
  • Implementation assumes system programming and administrative adjustments by the Department of Revenue; timing and additional costs depend on cumulative legislative workload.

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

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