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AN ACT relating to taxation; enacting the tax relief act of 1997; amending
  K.S.A. 1996 Supp. 72-6431, 79-1537, 79-32,110, 79-3603 and 79-3620
  and repealing the existing sections; also repealing K.S.A. 1996 Supp.
  72-6431a.
Be it enacted by the Legislature of the State of Kansas:
  New Section 1.  (a) For all taxable years commencing after Decem-
ber 31, 1996, there shall be allowed as a credit against the tax liability of
a resident individual imposed under the Kansas income tax act an amount
equal to 50% of the amount of the credit allowed against such taxpayer's
federal income tax liability pursuant to section 23 of the federal internal
revenue code for the taxable year in which such credit was claimed against
the taxpayer's federal income tax liability.
  (b)  The credit allowed by subsection (a) shall not exceed the amount
of the tax imposed by K.S.A. 79-32,110, and amendments thereto, re-
duced by the sum of any other credits allowable pursuant to law.
  New Sec. 2.  For all taxable years commencing after December 31,
1996, there shall be allowed as a credit against the tax liability of a taxpayer
imposed under the Kansas income tax act, an amount equal to 10% of
the property tax actually paid during an income taxable year upon com-
mercial and industrial machinery and equipment classified for property
taxation purposes pursuant to section 1 of article 11 of the Kansas con-
stitution in subclass (5) of (6) of class 2. If the amount of such tax credit
exceeds the taxpayer's income tax liability for the taxable year, the amount
thereof which exceeds such tax liability shall be refunded to the taxpayer.
  Sec. 3.  K.S.A. 1996 Supp. 79-32,110 is hereby amended to read as
follows: 79-32,110. (a) Resident Individuals. Except as otherwise provided
by subsection (a) of K.S.A. 79-3220, and amendments thereto, a tax is
hereby imposed upon the Kansas taxable income of every resident indi-
vidual, which tax shall be computed in accordance with the following tax
schedules:
  (1)  Married individuals filing joint returns.
If the taxable income is:                                     The tax is:
Not over $30,000                            3.5% of Kansas taxable income
Over $30,000 but not over $60,000    $1,050 plus 6.25% of excess over $30,000
Over $60,000                         $2,925 plus 6.45% of excess over $60,000
  (2)  All other individuals.
(A)  For tax year 1997:
If the taxable income is:                                     The tax is:
Not over $20,000                       4.4% 4.1% of Kansas taxable income
Over $20,000 but not over $30,000    $880 $820 plus 7.5% of excess over $20,000
Over $30,000                         $1,630 $1,570 plus 7.75% of excess over
     $30,000
(B)  For tax years 1998 and 1999:
If the taxable income is:                                     The tax is:
Not over $15,000                            3.5% of Kansas taxable income
Over $15,000 but not over $30,000    $525 plus 6.75% of excess over $15,000
Over $30,000                         $1,537.50 plus 7.75% of excess over
     $30,000
(C)  For tax year 2000, and all tax years thereafter:
If the taxable income is:                                     The tax is:
Not over $15,000                            3.5% of Kansas taxable income
Over $15,000 but not over $30,000    $525 plus 6.25% of excess over $15,000
Over $30,000                         $1,462.50 plus 6.45% of excess over
     $30,000
  (b)  Nonresident Individuals. A tax is hereby imposed upon the Kansas
taxable income of every nonresident individual, which tax shall be an
amount equal to the tax computed under subsection (a) as if the nonres-
ident were a resident multiplied by the ratio of modified Kansas source
income to Kansas adjusted gross income.
  (c)  Corporations. A tax is hereby imposed upon the Kansas taxable
income of every corporation doing business within this state or deriving
income from sources within this state. Such tax shall consist of a normal
tax and a surtax and shall be computed as follows:
  (1)  The normal tax shall be in an amount equal to 4% of the Kansas
taxable income of such corporation; and
  (2)  the surtax shall be in an amount equal to 3.35% of the Kansas
taxable income of such corporation in excess of $50,000.
  (d)  Fiduciaries. A tax is hereby imposed upon the Kansas taxable
income of estates and trusts at the rates provided in paragraph (2) of
subsection (a) hereof.
  Sec. 4.  On and after January 1, 1998, K.S.A. 1996 Supp. 79-1537 is
hereby amended to read as follows: 79-1537. (a) A tax is hereby imposed
on the privilege of succeeding to the ownership of any property, corporeal
or incorporeal, and any interest therein within the jurisdiction of this
state.
  (b)  Distributees of estates shall be classified as follows:
  (1)  Class A shall consist of the lineal ancestors, lineal descendants,
step-parents, step-children, adopted children, lineal descendants of any
adopted child or step-child, the spouse or surviving spouse of a son or
daughter, or the spouse or surviving spouse of an adopted child or step-
child of the decedent. In the case of an adopted child or step-child, a
spouse or surviving spouse of an adopted child or step-child or the lineal
descendant of an adopted child or step-child of the decedent, such person
shall file with the department of revenue an affidavit setting forth the
relationship of such person to the decedent. Such affidavit shall be suf-
ficient proof of the adoptive or step-child relationship in question, and
the department, or any officer or employee thereof, shall not require any
additional proof of such relationship. As used in this paragraph, ``step-
child'' means a child of a spouse or former spouse of the decedent.
  (2)  Class B shall consist of the brothers and sisters of the decedent.
  (3)  Class C shall consist of relatives of all degrees of consanguinity,
except those included in classes A and B, and shall also include strangers
in the blood of the decedent.
  Notwithstanding the foregoing provisions of this subsection, with re-
spect to qualified terminable interest property includable in the dece-
dent's estate under K.S.A. 79-1557a, and amendments thereto, the rela-
tionship of the distributees of such property shall be determined by their
relationship to the individual whose estate made an election with respect
to such property pursuant to subsection (b)(3) of K.S.A. 79-1537b, and
amendments thereto.
  (c) (1)  From the value of the shares of the distributable estate, as
ascertained under the provisions of this act and succeeded to by the sev-
eral distributees, deductions shall be allowed as follows:  (A) To each
member of class A, $30,000 $100,000; and (B) to each member of class
B, $5,000 $25,000.
  (2)  The tax herein provided for shall be charged upon the value of
the shares of the distributable estate after deduction of the amounts
herein provided, except that when one or more of the shares of the dis-
tributable estate shall consist of property within and property without the
state, only such percentage of the deductions above-named shall be al-
lowed in the percentage that the Kansas share bears to the total shares
of the distributee.
  (d)  The tax herein imposed shall be an amount equal to a percentage
of the value of the shares of the distributable estate of the decedent
succeeded to by the distributees thereof, reduced by any deductions au-
thorized pursuant to subsection (c):
  (1)  Upon the value of shares succeeded to by members of class A
reduced by such deductions, the following rates of tax are hereby im-
posed: On the first $25,000, or fraction thereof, 1%; on the second
$25,000, or fraction thereof, 2%; on the next $50,000, or fraction thereof,
3%; on the next $400,000, or fraction thereof, 4%; on all over $500,000,
5%;
  (2)  upon the value of shares succeeded to by members of class B
reduced by such deductions, the following rates of tax are hereby im-
posed: On the first $25,000, or fraction thereof, 3%; on the second
$25,000, or fraction thereof, 5%; on the next $50,000, or fraction thereof,
 71/2%; on the next $400,000, or fraction thereof, 10%; on all over
 $500,000, 121/2%; and
  (3)  upon the value of shares succeeded to by members of class C, the
following rates of taxes are hereby imposed: On any amount up to
$100,000, 10%; on any amount in excess of $100,000 and up to $200,000,
12%; on all sums in excess of $200,000, 15%.
  Sec. 5.  K.S.A. 1996 Supp. 79-3603 is hereby amended to read as
follows: 79-3603. For the privilege of engaging in the business of selling
tangible personal property at retail in this state or rendering or furnishing
any of the services taxable under this act, there is hereby levied and there
shall be collected and paid a tax at the rate of 4.9% unless otherwise
specifically provided, upon:
  (a)  The gross receipts received from the sale of tangible personal
property at retail within this state;
  (b) (1)  the gross receipts from intrastate telephone or telegraph serv-
ices and (2) the gross receipts received from the sale of interstate tele-
phone or telegraph services, which (A) originate within this state and
terminate outside the state and are billed to a customer's telephone num-
ber or account in this state; or (B) originate outside this state and ter-
minate within this state and are billed to a customer's telephone number
or account in this state except that the sale of interstate telephone or
telegraph service does not include: (A) Any interstate incoming or out-
going wide area telephone service or wide area transmission type service
which entitles the subscriber to make or receive an unlimited number of
communications to or from persons having telephone service in a speci-
fied area which is outside the state in which the station provided this
service is located; (B) any interstate private communications service to
the persons contracting for the receipt of that service that entitles the
purchaser to exclusive or priority use of a communications channel or
group of channels between exchanges; (C) any value-added nonvoice
service in which computer processing applications are used to act on the
form, content, code or protocol of the information to be transmitted; (D)
any telecommunication service to a provider of telecommunication serv-
ices which will be used to render telecommunications services, including
carrier access services; or (E) any service or transaction defined in this
section among entities classified as members of an affiliated group as
provided by federal law (U.S.C. Section 1504);
  (c)  the gross receipts from the sale or furnishing of gas, water, elec-
tricity and heat, which sale is not otherwise exempt from taxation under
the provisions of this act, and whether furnished by municipally or pri-
vately owned utilities;
  (d)  the gross receipts from the sale of meals or drinks furnished at
any private club, drinking establishment, catered event, restaurant, eating
house, dining car, hotel, drugstore or other place where meals or drinks
are regularly sold to the public;
  (e)  the gross receipts from the sale of admissions to any place pro-
viding amusement, entertainment or recreation services including admis-
sions to state, county, district and local fairs, but such tax shall not be
levied and collected upon the gross receipts received from sales of ad-
missions to any cultural and historical event which occurs triennially;
  (f)  the gross receipts from the operation of any coin-operated device
dispensing or providing tangible personal property, amusement or other
services except laundry services, whether automatic or manually operated;
  (g)  the gross receipts from the service of renting of rooms by hotels,
as defined by K.S.A. 36-501 and amendments thereto;
  (h)  the gross receipts from the service of renting or leasing of tangible
personal property except such tax shall not apply to the renting or leasing
of machinery, equipment or other personal property owned by a city and
purchased from the proceeds of industrial revenue bonds issued prior to
July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
12-1749, and amendments thereto, and any city or lessee renting or leas-
ing such machinery, equipment or other personal property purchased
with the proceeds of such bonds who shall have paid a tax under the
provisions of this section upon sales made prior to July 1, 1973, shall be
entitled to a refund from the sales tax refund fund of all taxes paid
thereon;
  (i)  the gross receipts from the rendering of dry cleaning, pressing,
dyeing and laundry services except laundry services rendered through a
coin-operated device whether automatic or manually operated;
  (j)  the gross receipts from the rendering of the services of washing
and washing and waxing of vehicles;
  (k)  the gross receipts from cable, community antennae and other sub-
scriber radio and television services;
  (l)  the gross receipts received from the sales of tangible personal
property to all contractors, subcontractors or repairmen of materials and
supplies for use by them in erecting structures for others, or building on,
or otherwise improving, altering, or repairing real or personal property
of others;
  (m)  the gross receipts received from fees and charges by public and
private clubs, drinking establishments, organizations and businesses for
participation in sports, games and other recreational activities, but such
tax shall not be levied and collected upon the gross receipts received from:
  (1) Fees and charges by any political subdivision, or any youth recreation
organization exclusively providing services to persons 18 years of age or
younger which is exempt from federal income taxation pursuant to section
501(c)(3) of the federal internal revenue code of 1986, for participation
in sports, games and other recreational activities; and (2) entry fees and
charges for participation in a special event or tournament sanctioned by
a national sporting association to which spectators are charged an admis-
sion which is taxable pursuant to subsection (e);
  (n)  the gross receipts received from dues charged by public and pri-
vate clubs, drinking establishments, organizations and businesses, pay-
ment of which entitles a member to the use of facilities for recreation or
entertainment;
  (o)  the gross receipts received from the isolated or occasional sale of
motor vehicles or trailers but not including: (1) The transfer of motor
vehicles or trailers by a person to a corporation solely in exchange for
stock securities in such corporation; or (2) the transfer of motor vehicles
or trailers by one corporation to another when all of the assets of such
corporation are transferred to such other corporation; or (3) the sale of
motor vehicles or trailers which are subject to taxation pursuant to the
provisions of K.S.A. 79-5101 et seq., and amendments thereto, by an
immediate family member to another immediate family member. For the
purposes of clause (3), immediate family member means lineal ascendants
or descendants, and their spouses. In determining the base for computing
the tax on such isolated or occasional sale, the fair market value of any
motor vehicle or trailer traded in by the purchaser to the seller may be
deducted from the selling price;
  (p)  the gross receipts received for the service of installing or applying
tangible personal property which when installed or applied is not being
held for sale in the regular course of business, and whether or not such
tangible personal property when installed or applied remains tangible
personal property or becomes a part of real estate, except that no tax shall
be imposed upon the service of installing or applying tangible personal
property in connection with the original construction of a building or
facility or the construction, reconstruction, restoration, replacement or
repair of a bridge or highway.
  For the purposes of this subsection:
  (1)  ``Original construction'' shall mean the first or initial construction
of a new building or facility. The term ``original construction'' shall include
the addition of an entire room or floor to any existing building or facility,
the completion of any unfinished portion of any existing building or fa-
cility and the restoration, reconstruction or replacement of a building or
facility damaged or destroyed by fire, flood, tornado, lightning, explosion
or earthquake, but such term shall not include replacement, remodeling,
restoration, renovation or reconstruction under any other circumstances;
  (2)  ``building'' shall mean only those enclosures within which individ-
uals customarily live or are employed, or which are customarily used to
house machinery, equipment or other property, and including the land
improvements immediately surrounding such building; and
  (3)  ``facility'' shall mean a mill, plant, refinery, oil or gas well, water
well, feedlot or any conveyance, transmission or distribution line of any
cooperative, nonprofit, membership corporation organized under or sub-
ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
or of any municipal or quasi-municipal corporation, including the land
improvements immediately surrounding such facility;
  (q)  the gross receipts received for the service of repairing, servicing,
altering or maintaining tangible personal property, except computer soft-
ware described in subsection (s), which when such services are rendered
is not being held for sale in the regular course of business, and whether
or not any tangible personal property is transferred in connection there-
with. The tax imposed by this subsection shall be applicable to the services
of repairing, servicing, altering or maintaining an item of tangible personal
property which has been and is fastened to, connected with or built into
real property;
  (r)  the gross receipts from fees or charges made under service or
maintenance agreement contracts for services, charges for the providing
of which are taxable under the provisions of subsection (p) or (q);
  (s)  the gross receipts received from the sale of computer software,
and the sale of the services of modifying, altering, updating or maintaining
computer software. As used in this subsection, ``computer software''
means information and directions loaded into a computer which dictate
different functions to be performed by the computer. Computer software
includes any canned or prewritten program which is held or existing for
general or repeated sale, even if the program was originally developed
for a single end user as custom computer software. The sale of computer
software or services does not include: (1) The initial sale of any custom
computer program which is originally developed for the exclusive use of
a single end user; or (2) those services rendered in the modification of
computer software when the modification is developed exclusively for a
single end user only to the extent of the modification and only to the
extent that the actual amount charged for the modification is separately
stated on invoices, statements and other billing documents provided to
the end user. The services of modification, alteration, updating and main-
tenance of computer software shall only include the modification, alter-
ation, updating and maintenance of computer software taxable under this
subsection whether or not the services are actually provided; and
  (t)  the gross receipts received for telephone answering services, in-
cluding mobile phone services, beeper services and other similar services.;
and
  (u)  the gross receipts received from sales of food for human con-
sumption which shall be taxed at the rate of 4.4% on and after June 1,
1997, but before June 1, 1998, 4.15% on and after June 1, 1998, but before
June 1, 1999, 3.4% on and after June 1, 1999, but before June 1, 2000,
2.9% on and after June 1, 2000, but before June 1, 2001, 2.4% on and
after June 1, 2001, but before June 1, 2002, 1.9% on and after June 1,
2002, but before June 1, 2003, 1.4% on and after June 1, 2003, but before
June 1, 2004, and .25% on and after June 1, 2004. As used in this sub-
section, ``food for human consumption'' means only that food which is
eligible for purchase with food stamps issued by the United States de-
partment of agriculture pursuant to regulations in effect on January 1,
1997, regardless of whether the retailer from which the food is purchased
is participating in the food stamp program. Such phrase shall not include:
  (1) Meals prepared for immediate consumption on or off the premises of
the retailer; or (2) food sold through vending machines.
  Sec. 6.  K.S.A. 1996 Supp. 72-6431 is hereby amended to read as
follows: 72-6431. (a) The board of each district shall levy an ad valorem
tax upon the taxable tangible property of the district in the school years
specified in subsection (b) for the purpose of:
  (1)  Financing that portion of the district's general fund budget which
is not financed from any other source provided by law;
  (2)  paying a portion of the costs of operating and maintaining public
schools in partial fulfillment of the constitutional obligation of the legis-
lature to finance the educational interests of the state; and
  (3)  with respect to any redevelopment district established prior to the
effective date of this act pursuant to K.S.A. 12-1771, and amendments
thereto, paying a portion of the principal and interest on bonds issued by
cities under authority of K.S.A. 12-1774, and amendments thereto, for
the financing of redevelopment projects upon property located within the
district.
  (b) (1)  Except as otherwise provided in paragraph (2), the tax re-
quired under subsection (a) shall be levied at a rate of 35 mills in the
1996-97 school year, 33 mills in the 1997-98 school year and not exceeding
31 mills in the 1998-99 school year 25 mills in the 1997-98 school year,
24 mills in the 1998-99 school year, not exceeding 23 mills in 1999-2000
school year, not exceeding 20 mills in the 2000-01 school year, not ex-
ceeding 14 mills in the 2001-02 school year, not exceeding 8 mills in the
2002-03 school year, and not exceeding 4 mills in the 2003-04 school year.
  (2)  The mill levy and the limits provided thereon prescribed by par-
agraph (1) shall be decreased or increased, as the case requires, by one
mill per $20,000,000 difference between the latest joint estimate of reve-
nue to the state general fund rendered in the appropriate fiscal year pur-
suant to K.S.A. 1996 Supp. 75-6701, and amendments thereto, and the
actual revenue to the state general fund as determined by the director of
the budget for such year. If any change in the mill levy is required by the
operation of the provisions of this paragraph, the director of the budget
shall notify each county clerk of the millage rate to be levied.
  (c)  The proceeds from the tax levied by a district under authority of
this section, except the proceeds of such tax levied for the purpose of
paying a portion of the principal and interest on bonds issued by cities
under authority of K.S.A. 12-1774, and amendments thereto, for the fi-
nancing of redevelopment projects upon property located within the dis-
trict, shall be deposited in the general fund of the district.
  (d)  On June 1 of each year, the amount, if any, by which a district's
local effort exceeds the amount of the district's state financial aid, as
determined by the state board, shall be remitted to the state treasurer.
Upon receipt of any such remittance, the state treasurer shall deposit the
same in the state treasury to the credit of the state school district finance
fund.
  (e)  No district shall proceed under K.S.A. 79-1964, 79-1964a or 79-
1964b, and amendments to such sections.
  Sec. 7.  K.S.A. 1996 Supp. 79-3620 is hereby amended to read as
follows: 79-3620. (a) All revenue collected or received by the director of
taxation from the taxes imposed by this act shall be deposited daily with
the state treasurer. The state treasurer shall credit all revenue received
from this act, less amounts withheld as provided in subsection (b) and
amounts credited as provided in subsection (c) and (d), to the state gen-
eral fund.
  (b)  A refund fund, designated as ``sales tax refund fund'' not to exceed
$100,000 shall be set apart and maintained by the director from sales tax
collections and estimated tax collections and held by the state treasurer
for prompt payment of all sales tax refunds including refunds authorized
under the provisions of K.S.A. 79-3635, and amendments thereto. Such
fund shall be in such amount, within the limit set by this section, as the
director shall determine is necessary to meet current refunding require-
ments under this act. In the event such fund as established by this section
is, at any time, insufficient to provide for the payment of refunds due
claimants thereof, the director shall certify the amount of additional funds
required to the director of accounts and reports who shall promptly trans-
fer the required amount from the state general fund to the sales tax refund
fund, and notify the state treasurer, who shall make proper entry in the
records.
  (c) (1)  The state treasurer shall credit 5/98 of the revenue collected
or received from the tax imposed by K.S.A. 79-3603, and amendments
thereto, at the rate of 4.9%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.
  (2)  The state treasurer shall credit the following percentages of rev-
enue collected or received from the tax imposed by subsection (u) of K.S.A.
79-3603, and amendments thereto, during the following time periods and
deposited as provided in subsection (a), exclusive of amounts credited
pursuant to subsection (d) in the state highway fund:  5/88 from June 1,
1997, through May 31, 1998; 5/83 from June 1, 1998, through May 31,
1999; 5/68 from June 1, 1999, through May 31, 2000; 5/58 from June 1,
2000, through May 31, 2001; 5/48 from June 1, 2001, through May 31,
2002; 5/38 from June 1, 2002, through May 31, 2003; 5/28 from June 1,
2003, through May 31, 2004; and 100% from and after June 1, 2004.
  (d)  The state treasurer shall credit all revenue collected or received
from the tax imposed by K.S.A. 79-3603, and amendments thereto, as
certified by the director, from taxpayers doing business within that por-
tion of a redevelopment district occupied by a redevelopment project that
was determined by the secretary of commerce and housing to be of state-
wide as well as local importance and to meet the other criteria specified
in K.S.A. 12-1774(a)(1)(D), and amendments thereto, to the city bond
finance fund, which fund is hereby created. The provisions of this sub-
section shall expire when the total of all amounts credited hereunder and
under subsection (d) of K.S.A. 79-3710, and amendments thereto, is suf-
ficient to retire the bonds issued for the purpose of financing all or a
portion of the construction of such redevelopment project.
  Sec. 8.  On and after January 1, 1998, K.S.A. 1996 Supp. 79-1537 is
hereby repealed.
  Sec. 9.  K.S.A. 1996 Supp. 72-6431, 72-6431a, 79-32,110, 79-3603
and 79-3620 are hereby repealed.
  Sec. 10.  This act shall take effect and be in force from and after June
1, 1997, and its publication in the statute book.