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HB 2036

Relating to estate tax; prescribing an effective date.

2025 Regular Session Introduced by Ed Diehl and 10 co-sponsors

Kansas adds a subtraction from state income tax for armed forces pay, capped to the DoD senior enlisted pay for the year, trimming tax bills for service members starting 2026.

In committee upon adjournment.
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Bill Summary · HB 2036

Summary — HB 2036 (Kansas): Income tax subtraction for armed forces compensation

Main purpose

HB 2036 creates a Kansas income tax subtraction for amounts an individual receives as compensation for serving in the U.S. armed forces. The intent is to exclude certain military pay from Kansas taxable income, reducing state income tax liability for qualifying service members.

Key provisions

  • Adds a subtraction modification to Kansas adjusted gross income (amending K.S.A. 2024 Supp. 79‑32,117).
  • Eligible pay: “Compensation” is defined broadly to include pay, bonuses, reimbursements, or other compensation for service in the armed forces.
  • Covered personnel: uniformed members of the Army, Air Force, Navy, Coast Guard, Marine Corps, or Space Force, including active duty, reserves, and National Guard members.
  • Dollar limit: the subtraction for each taxpayer is capped at the amount of compensation of a senior enlisted member of the armed forces as published by the U.S. Department of Defense for the applicable tax year. (This cap will therefore vary year‑to‑year based on DoD pay tables.)
  • Effective date: subtraction applies beginning with tax year 2026.

Who is affected

  • Kansas taxpayers who are current members of the uniformed services (active duty, reserves, or National Guard).
  • Employers and the Kansas Department of Revenue (administration and withholding adjustments).
  • State General Fund revenues (see fiscal impact below).

Fiscal and administrative impact

  • Revenue estimates (Kansas Department of Revenue):
    • FY 2026: reduction to the State General Fund of $2.3 million (partial year / withholding adjustments expected).
    • FY 2027: $7.6 million reduction.
    • FY 2028: $7.7 million reduction.
  • Estimation basis: DMDC (Defense Manpower Data Center) data showing ~17,310 Kansas service members (Dec 2023), with an estimated $239.0 million of taxable income and an assumed effective tax rate of 3.1% for tax year 2026.
  • Implementation cost: one‑time State General Fund cost of $72,080 in FY 2026 to modify the Department of Revenue’s automated tax systems; programming would be done by existing staff but could require contracted programmers if workloads or timing necessitate.
  • Timing note: because the subtraction is effective for tax year 2026, some taxpayers may adjust withholding beginning in FY 2026, producing part of the first‑year revenue effect earlier.

Procedural status (as provided)

  • Introduced: January 23, 2025.
  • Referred to: House Committee on Taxation.

Other notes and uncertainties

  • The subtraction is subject to the annual senior enlisted pay cap set by DoD; actual excluded amounts per taxpayer will depend on that cap and the taxpayer’s qualifying compensation.
  • Fiscal estimates depend on data and assumptions (active counts, taxable compensation, effective tax rate) and may change if actual taxpayer behavior, pay totals, or enrollment differ.
  • Administrative costs beyond the one‑time programming estimate could occur if multiple tax law changes strain Department of Revenue resources.

If you want, I can:
- Extract the specific statutory text change for insertion into K.S.A. 79‑32,117; or
- Provide a short one‑page bill brief suitable for legislators or a fact sheet for service members.

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

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