House panel reviews eliminating some seldom-used Kansas income tax credits

Kansas House panel reviews tax credit reform

TOPEKA, Kan. — A Kansas House committee considered a proposal Tuesday that would eliminate some seldom-used income tax credits and improve efficiency within the Department of Revenue.

The panel heard from Revenue Secretary Joan Wagnon about several programs designed to encourage investment in Kansas. Wagnon said some aren’t being used and are cluttering tax forms and record keeping.

“There is activity that we don’t know is out there until it comes in on tax form,” Wagnon told the House Taxation Committee. “And that’s what’s wrong with our system.”

Legislators have been reviewing all Kansas tax sources, looking at tax rates, credits, exemptions and reductions to determine how much revenue is or could be available to the state. Kansas is facing a budget shortfall of as much as $416 million for the fiscal year beginning July 1.

The committee heard that one program aimed at helping low-income residents purchase homes, get an education or start a business is being used more than initially thought.

Administrators of individual development account tax credits say they are seeing interest from investors and participants in the program, but the credits take time to be reported to the state. The accounts allow Kansans to match their personal savings toward a housing, business or education with funds raised through the sale of tax credits to investors.

John Scott, president of the Interfaith Housing Services Inc. which administers the program in Hutchinson, said the IDA program is budgeted to receive $500,000 worth of 50 percent tax credits each year. For example, if someone invests $100,000 in the program, they receive a $50,000 tax credit.

He said that if the program has to be changed, reducing the amount to $250,000 would be acceptable and still allow it to receive matching grants from other sources.

“We feel this is a win-win compromise. It helps you cut the budget without losing outside revenue, and it does not force us to close the program and possibly cause loss of jobs,” Scott said.

Wagnon also suggested that a tax credit aimed at attracting venture capital for new businesses could be revised so the money is tracked better while still encouraging economic development. The credit has been used since 2005, generating some $119 million in out-of-state investments and creating or saving some 383 jobs.

The committee took no action on the proposal but directed Wagnon to work with representatives from Interfaith and economic development agencies to refine the tax credit provisions.

One measure was endorsed that would establish a commission to review the entire Kansas tax system.

The Committee on Simplified State Tax Structure would meet five times in 2010 and five in 2011 to review the tax structure and recommend changes that would lower rates and broaden the tax base. The proposal now goes to the full House for debate.

Tax credits is HB 2621; Tax study is 2463.

On the Net:

Kansas Legislature: www.kslegislature.org

Kansas Department of Revenue: www.ksrevenue.org