SENATE BILL No. 493

      An Act enacting the Kansas Tax Reduction and Reform Act of 1998; amending K.S.A.
      79-201t, 79-201w, 79-201x, 79-213, 79-1541a, 79-1541b, 79-1542, 79-1564, 79-1565, 79-
      1569, 79-1570, 79-1571, 79-1572, 79-1574, 79-1575, 79-1576, 79-1579, 79-1580, 79-
      1587, 79-3235, 79-32,110, 79-32,119, 79-32,121, 79-3602, 79-3603, 79-3606, as amended
      by section 27 of 1998 Senate Bill No. 373, 79-3617, 79-3619, 79-3633, 79-3635 and
      79-4217 and K.S.A. 1997 Supp. 72-6431 and repealing the existing sections; also re-
      pealing K.S.A. 79-1537, 79-1537b, 79-1537c, 79-1537e, 79-1537f, 79-1538, 79-1538a,
      79-1539, 79-1540, 79-1541, 79-1542a, 79-1543, 79-1545, 79-1547, 79-1548, 79-1549, 79-
      1550, 79-1551, 79-1552, 79-1553, 79-1554, 79-1555, 79-1556, 79-1557, 79-1557a,
      79-1559, 79-1560, 79-1561, 79-1562, 79-1563, 79-1563a, 79-1566, 79-1567, 79-1567a,
      79-1568, 79-1573, 79-1584, 79-1584a, 79-1584b, 79-1584c, 79-1585 and 79-1586.

Be it enacted by the Legislature of the State of Kansas:

    New Section 1. (a) A tax is hereby imposed on the estate of every
resident decedent, and every nonresident decedent who died holding an
interest in property with a Kansas tax situs, whose estate is required by
federal law to file a return for federal state taxes. The amount of such tax
shall be equal to the amount of the maximum credit allowed by section
2011 of the internal revenue code against the tax that would otherwise
be imposed on the transfer of the estate of the decedent by section 2001
of the internal revenue code.

    (b) When the estate of a resident decedent shall consist of property
within and without the state, or in the case of the estate of a nonresident
decedent who died holding an interest in property with a Kansas tax situs,
the tax imposed under subsection (a) shall be the percentage thereof that
the gross estate for federal estate tax purposes less the value of all property
included therein having a tax situs which is not within the jurisdiction of
the state of Kansas, bears to the total gross estate for federal estate tax
purposes.

    Sec. 2. K.S.A. 79-1541a is hereby amended to read as follows: 79-
1541a. Whenever the amount of the tax imposed upon a generation-skip-
ping transfer by section 2601 of the internal revenue code is determined,
a tax, equal to the maximum amount of the credit allowed against such
tax by section 2604 of the internal revenue code, is hereby imposed upon
the taxable estate of the decedent as of the date of such determination.
The tax imposed under the provisions of this act shall be chargeable
against the interests of each beneficiary in proportion to the share re-
ceived by each beneficiary under such transfer.

    Sec. 3. K.S.A. 79-1541b is hereby amended to read as follows: 79-
1541b. When the property transferred subject to the tax imposed by
K.S.A. 79-1541a shall consist of both property within and property with-
out the state, the tax imposed shall be the percentage that the Kansas
assets of the generation-skipping trust or generation-skipping trust equiv-
alent bears to the total assets of the generation-skipping trust or gener-
ation-skipping trust equivalent.

    Sec. 4. K.S.A. 79-1542 is hereby amended to read as follows: 79-
1542. As used in this act unless the context otherwise requires:

    (a) Any term used in this act shall have the same meaning as when
used in a comparable context in the internal revenue code. Any reference
in this act to the ``internal revenue code'' shall mean the provisions of the
United States internal revenue code of 1986, as such code exists on De-
cember 31, 1992 1997. Any reference in this act to a specific provision of
the internal revenue code shall be to such provision as it exists on De-
cember 31, 1992 1997.

    (b) ``Deemed executor'' includes any person in actual or constructive
possession of any property of the decedent.

    (c) ``Director'' means the director of taxation.

    (d) ``Distributee'' means a beneficiary, legatee, devisee, heir, next of
kin, grantee, donee, vendee, joint tenant or any other successor in inter-
est, whether outright or in trust.

    (e) ``Distributive share'' or ``distributive shares'' means the share or
shares of the distributive estate passing to a distributee or distributees.

    (f) (d) ``Domicile'' refers to that place where a person resides, has an
intention to remain and to which they intend to return following any
absence.

    (g) (e) ``Estate'' and ``property'' shall mean the real, personal and
mixed property or interest therein of the testator, intestate, grantor, bar-
gainor, vendor or donor which shall pass or be transferred to legatees,
devisees, heirs, next of kin, grantees, donees, vendees, or successors and
shall include all personal property within or without the state.

    (h) (f) ``Executor'' and ``administrator'' mean the duly appointed,
qualified and acting executor or administrator of the decedent in this
state.

    (i) (g) ``Nonresident decedent'' means a decedent who was not a res-
ident decedent at the time of death.

    (j) (h) ``Personal representative'' means the executor, administrator
or deemed executor of the decedent.

    (k) (i) ``Resident decedent'' means a decedent who was domiciled in
this state at the time of death.

    (l) (j) ``Secretary'' means the secretary of revenue, or the secretary's
designee.

    (m) (k) ``Tax'' includes tax, penalty and interest, unless the context of
a particular section otherwise requires.

    (n) (l) ``Transfer'' shall include the passing of property or any interest
therein in possession or enjoyment, present or future, by inheritance,
descent, devise, succession, bequest, grant, deed, bargain, sale, gift or
appointment in the manner herein prescribed.

    Sec. 5. K.S.A. 79-1564 is hereby amended to read as follows: 79-
1564. (a) Except as hereinafter provided, the executor or administrator
of the estate of every decedent whose death gives rise to a tax liability
under the provisions of this act, within nine months following the death
of the decedent, shall make and The personal representative of every
estate subject to the tax imposed by section 1 who is required by federal
law to file a return for federal estate taxes shall file in the office of the
director a return on forms prepared and furnished by the secretary to-
gether with a copy of the federal estate tax return on or before the date
the federal estate tax return is required to be filed.

    (b) In those estates in which no executor or administrator has been
appointed, the deemed executor shall make and file such return. In the
event there is more than one deemed executor, all deemed executors
shall be jointly responsible for completing and filing one return reporting
all of the assets of the estate except as hereinafter provided.

    (c) If, after exercising due diligence, the personal representative mak-
ing and filing such return is unable to make a complete return as to any
part of the gross estate of the decedent, such personal representative shall
make and file a return reporting all information as to the estate assets,
including a description thereof and the name of any person holding a
legal or beneficial interest in the assets to the best of such personal rep-
resentative's knowledge.

    (d) (b) The taxes imposed under the provisions of this act shall be
paid at the expiration of nine months after the death of the decedent.
Such taxes shall be payable from the assets of the estate or proceeds
therefrom, in order, so far as practicable, that each distributive share of
the estate shall bear a just and equitable proportion of such taxes unless
otherwise directed by the will of the decedent or trust agreement by the
personal representative to the director at the expiration of nine months
after the death of the decedent.

    (1) The executor or administrator of the estate of every decedent who
is required to file a return shall pay to the director all taxes imposed under
this act. In the event the tax imposed against the shares of the decedent's
estate exceeds the value of the assets or the proceeds therefrom which
were in the custody or control of the executor or administrator, the ex-
ecutor or administrator shall pay the tax imposed to the extent of the
value of the amount or the proceeds therefrom within such executor's or
administrator's custody or control and the balance of the taxes may be
stayed upon application to and approval by the director. Such application
shall be made at the time the return is filed upon forms prescribed by
the secretary. Upon approval of such application payment of the taxes
shall be stayed for a period not to exceed one year and the executor or
administrator shall have a right to proceed against the individual distri-
butee or distributees receiving such taxable shares and may perfect a lien
therefor under the provisions of K.S.A. 79-1569, and amendments
thereto.

    (2) Except as hereinafter provided, the deemed executor or deemed
executors of the estate of every decedent who are required to file a return
shall pay to the director all of the taxes imposed by this act. To the extent
that all deemed executors do not join in the filing of the return, the
deemed executors who jointly file shall pay only that portion of the taxes
representing the aggregate tax liability imposed upon the distributive
shares of those so filing.

    (3) Where an asset not within the custody or control of a personal
representative gives rise to a tax liability and such personal representative
is required to pay such tax or has voluntarily paid such tax from the assets
within such personal representative's custody or control, the personal rep-
resentative shall have a right to proceed against the individual distributee
receiving such share and may perfect a lien therefor under the provisions
of K.S.A. 79-1569, and amendments thereto. For the purpose of this
paragraph: (1) With respect to the tax liability caused without consider-
ation of K.S.A. 79-1539 or 79-1540, and amendments thereto, the per-
sonal representative shall be entitled to recover from the distributee the
amount by which the total tax liability of the decedent's estate resulting
from such assets outside the control of the personal representative and
received by the distributee exceeds the total tax liability which would have
been payable if the value of such property had not been included in the
decedent's gross estate; and (2) with respect to any additional tax liability
resulting from the application of K.S.A. 79-1539 or 79-1540, and amend-
ments thereto, the personal representative shall be entitled to recover
from the distributee that portion of the total tax liability caused by such
application equal to the ratio that the value of such assets outside the
control of the personal representative received by the distributee bears
to the total value of such assets outside the control of the personal rep-
resentative.

    (4) Whenever the personal representative is required to pay the taxes
imposed upon an asset not within the personal representative's custody
or control and pays the taxes imposed thereon from assets or proceeds
therefrom of the estate within the personal representative's custody or
control and thereafter fails to collect the taxes attributable to the distrib-
utive shares of the decedent's estate which were not within the personal
representative's custody or control, the personal representative shall be
entitled to a refund of the taxes attributable to such shares which were
paid from assets or proceeds therefrom within the personal representa-
tive's custody or control upon application to the director. The application
for refund shall be filed on forms prescribed by the secretary within the
time allowed for refunds pursuant to K.S.A. 79-1574, and amendments
thereto. Upon being satisfied that the personal representative has exer-
cised due diligence in attempting to recover the taxes attributable to the
distributive shares of the decedent's estate which were not within such
personal representative's custody or control, the director shall refund the
same.

    (5) The director shall issue a receipt acknowledging payment of such
taxes whenever the taxes as shown to be due on the return or any addi-
tional taxes assessed by the director have been paid by a personal rep-
resentative and (A) such executor or administrator has requested a cash
receipt in order to be subrogated to the state's right to proceed in col-
lecting the tax against a distributee; or (B) such executor or administrator
has received a stay of payment from the director. Such a receipt shall be
issued only under circumstances described in clauses (A) or (B) of this
subsection and shall not constitute evidence that a final determination of
taxes pursuant to K.S.A. 79-1571, and amendments thereto, has been
made.

    (e) (c) If the taxes contemplated by this act are not paid when due,
interest at the rate prescribed by K.S.A. 79-2968(b), and amendments
thereto, shall be charged and collected commencing at the time the same
become payable. When the filing of the return is delayed beyond nine
months after the death of the decedent and the director finds that such
delay was due to the inability of the personal representative to determine
the distributive shares of an estate or the proper recipients thereof, or to
litigation, interest shall commence at the time the return is filed.

    (f) At the election of the personal representative, the taxes imposed
by this act may be determined by the director. Such election shall be
made by filing a return disclosing all information necessary for the de-
termination of the taxes imposed by this act. Upon receipt of all necessary
information, the director shall determine the taxes due and owing and
shall notify the personal representative of the tax liability by registered or
certified mail. Notwithstanding any election made pursuant to this sec-
tion, the taxes shall be due and payable at the same time and in the same
manner as if the taxes had been determined by the personal represen-
tative. If the election pursuant to this subsection is made before the ex-
piration of the nine-month period after the death of the decedent, interest
shall be charged and collected commencing 10 days after notice of the
tax liability has been received by the personal representative, or at the
expiration of the nine-month period after the decedent's death, whichever
is later. If the election pursuant to this subsection is not timely made and
the director shall find that the delay was not due to the circumstances set
forth in subsection (e), interest shall be charged and collected commenc-
ing at the expiration of the nine-month period after the decedent's death.

    Sec. 6. K.S.A. 79-1565 is hereby amended to read as follows: 79-
1565. The personal representative of any decedent, the shares of whose
estate are is not taxable under the provisions of this the Kansas estate tax
act, may obtain a determination of the director that no tax liability exists
thereon by filing an affidavit with the director stating that such shares of
the decedent's estate are is not taxable. Any such affidavit shall be in such
form as prescribed by the secretary to show the condition of the estate
and the shares thereof to the extent that the director may make such
determination. Upon being satisfied of the information contained in such
affidavit, the director shall issue a certificate that the shares of the de-
cedent's estate are is not taxable under the provisions of this act to the
person making such affidavit, and when the estate is involved in pro-
ceedings before a district court, to the judge of such court for recording
in full in the journal of such court. Release of the lien imposed by K.S.A.
79-1569, and amendments thereto, may be provided by filing notice of
release in the office of the register of deeds in any county where any such
real property included in the gross estate is located or, when the estate
is involved in proceedings before a district court, with the court. Any such
notice of release shall be in such form as prescribed by the secretary and
may include use of or reference to the certificate issued by the director
or may be included as part of that certificate.

    Sec. 7. K.S.A. 79-1569 is hereby amended to read as follows: 79-
1569. (a) Subject to the provisions of subsection (b), Property of which a
decedent died seized or possessed, subject to the taxes imposed by this
act, in whatever form of investment it may happen to be shall be charged
with a lien for all taxes, penalty and interest thereon which are or may
become due on such property; but the lien shall not affect any property
after it has been sold or disposed of for value by the executors or admin-
istrators in accordance with law, and no consent to transfer issued by the
director shall be required to release such lien, but in all such cases a lien
shall attach to the proceeds realized from any such sale or other dispo-
sition for all taxes and interest thereon which are or may be due on such
property. That portion of the decedent's property which is used for the
payment of charges against the estate and expenses of its administration,
allowed by any court having jurisdiction thereof, shall be divested of such
lien. The lien on any property subject to the inheritance tax act by virtue
of the provisions of this subsection shall be divested after 10 years from
the date of the decedent's death.

    (b) If the taxes imposed under this act are not paid when due, the
spouse, transferee, surviving tenant, person in possession of the property
by reason of the exercise, nonexercise, or release of a power of appoint-
ment, or beneficiary, who receives, or has on the date of the decedent's
death, property included in the gross estate under K.S.A. 79-1548 through
79-1553 and 79-1555 through 79-1557, and amendments thereto, to the
extent of the value of such property at the time of the decedent's death
shall be personally liable for such tax. Any part of such property trans-
ferred by, or transferred by a transferee of, such spouse, transferee, trus-
tee, surviving tenant, person in possession, or beneficiary to a purchaser
or holder of a security interest shall be divested of the lien provided for
in subsection (a) and a similar lien shall then attach to all the property of
such spouse, transferee, trustee, surviving tenant, person in possession,
beneficiary or transferee of any such person, except any part transferred
to a purchaser or a holder of a security interest.

    (c) Upon issuance of a receipt for taxes paid pursuant to subsection
(d)(5) of K.S.A. 79-1564 and amendments thereto to a personal repre-
sentative who has paid the taxes imposed by this act or an approved
application for stay filed pursuant to subsection (d)(1) of K.S.A. 79-1564
and amendments thereto, the personal representative shall be subrogated
to the right to proceed against any real or personal property in which a
distributee has an interest which the state might have had. The issuance
of a receipt for taxes paid by the director after payment of the taxes or
approved application for stay shall be deemed an assignment by the state
to the personal representative of the right to proceed against the real and
personal property in which a distributee has an interest and shall be con-
clusive evidence thereof. A right to proceed shall arise and a lien shall be
perfected to aid the personal representative in the right to proceed against
property of a distributee only if the personal representative files a notice
of lien with the register of deeds. The lien shall be effective only against
property of a distributee located in the county where the notice of lien is
filed. Such notice of lien may be filed in any county wherein any real or
personal property in which the distributee has an interest is located. The
notice of lien shall be made on forms prescribed by the secretary. Upon
satisfaction of the lien, a release shall be issued by such personal repre-
sentative on forms prescribed by the secretary.

    (d) If the personal representative has requested and received a re-
fund of taxes paid pursuant to subsection (d)(4) of K.S.A. 79-1564, and
amendments thereto, or whenever the personal representative fails to
collect the tax pursuant to subsection (d)(4) of K.S.A. 79-1564, and
amendments thereto, or is not required to pay the tax imposed by this
act or the taxes imposed by this act are not paid at the expiration of nine
months after the death of the decedent,

    (b) If the personal representative fails to timely pay the tax imposed
by section 1, the director shall enforce the director's lien by the issuance
of a warrant under the director's hand and official seal, directed to the
sheriff of any county of the state, commanding such sheriff to levy upon
and sell the real and personal property of the distributee estate found
within the sheriff's county for the payment of the amount thereof, with
the added interest and the cost of executing the warrant, and to return
such warrant to the director and pay to the director the money collected
by virtue thereof not more than 60 days from the date of the warrant.
The sheriff shall within five days after the receipt of the warrant, file with
the clerk of the district court of the sheriff's county a copy thereof, and
thereupon the clerk shall enter in the appearance docket in appropriate
columns, the name of the distributee estate named in the warrant, the
amount of the tax or portion thereof and interest for which the warrant
is issued and the date such copy is filed. The amount of such warrant so
docketed shall thereupon become a lien upon the title to, and interest in,
the real property of the distributee estate against whom it is issued in the
same manner, as a judgment duly docketed in the office of such clerk.
The sheriff shall proceed in the same manner and with like effect as
prescribed by law with respect to executions issued against property upon
judgments of a court of record, and shall be entitled to the same fees for
the sheriff's services to be collected in the same manner.

    The court in which the warrant is docketed shall have jurisdiction over
all subsequent proceedings as fully as though a judgment had been ren-
dered in the court. In the discretion of the director, a warrant of like
terms, force and effect may be issued and directed to any officer or em-
ployee of the director, and in the execution thereof such officer or em-
ployee shall have all the powers conferred by laws upon sheriffs, and the
subsequent proceedings thereunder shall be the same as provided where
the warrant is issued directly to the sheriff. The distributee estate shall
have the right to redeem the real estate within a period of 18 months
from the date of such sale. If a warrant be returned, unsatisfied in full,
the director shall have the same remedies to enforce the claim for taxes
as if the state of Kansas had recovered judgment against the distributee
for the amount of the tax. No law exempting any goods and chattels, land
and tenements from forced sale under execution shall apply to a levy and
sale under any such warrants or upon any execution issued upon any
judgment rendered in any action for inheritance taxes. The director shall
have the right at any time after the warrant has been returned unsatisfied
or satisfied only in part, to issue alias warrants until the full amount of
the tax is collected.

    Sec. 8. K.S.A. 79-1570 is hereby amended to read as follows: 79-
1570. No final account of a personal representative shall be allowed by
the district court unless such account shows, and the judge of such court
finds, that all taxes imposed by the provisions of this act upon any property
or interest therein belonging to the estate to be settled by such account
and already payable have been paid, and that all taxes which may become
due on such estate have been paid or settled as hereinbefore provided,
or that the payment thereof to the state is secured by bond.

    Sec. 9. K.S.A. 79-1571 is hereby amended to read as follows: 79-
1571. (a) As soon as practicable after the return is filed and the taxes paid,
the director shall issue a closing letter. Such closing letter shall be issued
upon the director being satisfied that there has been a final determination
of all taxes due and that all such taxes have been paid. The director shall
issue such closing letter to the personal representative, and when the
estate is involved in probate proceedings before a district court, a copy
of such closing letter shall be forwarded to the judge of such court for
recording in full in the journal of such court.

    (b) In the event that all deemed executors do not join in the filing of
a return, or in the event the personal representative is unable to make a
complete return as to any part of the gross estate of the decedent, upon
the director being satisfied that a final determination of the taxes due on
that portion of the estate reported has been made and all taxes due
thereon have been paid, the director shall issue a closing letter as to that
portion of the gross estate which has actually been reported.

    (c) The closing letter shall be applicable only to assets reported in the
return filed with the director. To the extent the gross assets of the de-
cedent were reported, the issuance of a closing letter shall be conclusive
evidence that all taxes have been determined and paid and shall release
any lien which attached to the decedent's property and that of any
deemed executor or distributee unless such lien has been subrogated,
assigned and perfected pursuant to K.S.A. 79-1569, and amendments
thereto. The closing letter may contain a legal description of the real
property so reported.

    (d) Release of the lien imposed by K.S.A. 79-1569, and amendments
thereto, may be provided by filing notice of release in the office of the
register of deeds in any county where any such real property included in
the gross estate is located or, when the estate is involved in proceedings
before the district court, with the court. Any such notice of release shall
be in such form as prescribed by the secretary and may include use of or
reference to the closing letter issued by the director or may be included
as part of that closing letter.

    Sec. 10. K.S.A. 79-1572 is hereby amended to read as follows: 79-
1572. (a) Assets belonging to the estate of a deceased nonresident, other
than intangible assets of a decedent who at the time of death resided in
the United States but outside this state, shall not be delivered or trans-
ferred to a foreign personal representative of such decedent without serv-
ing notice upon the director of taxation of the time and place of such
intended delivery or transfer at least seven days before the time of such
delivery or transfer. The director or the director's representative may
examine such assets prior to the time of such delivery or transfer. Failure
to serve such notice or to allow such examination or the making of a
delivery or transfer of such assets against the objection of the director
shall render the person, association, or corporation making the delivery
or transfer liable for the payment of the tax and interest due upon such
assets, in an action brought by the department of revenue in the name
of the state.

    (b) A foreign or Kansas person, corporation, partnership or other as-
sociation of persons may release or transfer intangible assets of a nonres-
ident decedent upon receipt of a sworn affidavit from the personal rep-
resentative of the decedent's estate, stating that the decedent was not a
resident of the state of Kansas at the time of the decedent's death but
that such decedent was a resident of another state in the United States.

    Sec. 11. K.S.A. 79-1574 is hereby amended to read as follows: 79-
1574. (a) Except as otherwise provided in this section, the amount of any
tax imposed by this act shall be assessed within three years after the return
or affidavit was filed, whether or not such return was filed on or after the
date prescribed, or the tax as shown to be due on such return was paid,
whichever is the later date, and no proceedings in court for the collection
of such taxes shall be begun after the expiration of such period. Where
the assessment of any inheritance tax imposed under this act has been
made within the period of limitation properly applicable thereto, such tax
may be collected by distraint or by a proceeding in court, but only if
begun within one year after the period of limitation as provided in this
act. The foregoing provisions of this section shall not apply in those cases
where the time for the payment of the tax has been extended pursuant
to K.S.A. 79-1544 or 79-1567, and amendments thereto. In those cases
where the director has retained jurisdiction over the estate pursuant to
K.S.A. 79-1544, and amendments thereto, assessment of taxes or pro-
ceedings to collect taxes must be made or commenced within three years
after notice of the death of the life tenant. In those cases where a bond
has been given guaranteeing the payment of the tax pursuant to K.S.A.
79-1567, and amendments thereto, assessment of taxes or proceedings
for collection of the tax must be made or commenced within three years
after the date of the expiration of the last bond so given.

    (b) For the purposes of this section, a return of tax required under
this act filed before the last day prescribed by law shall be deemed to be
filed on such last day and any tax shown to be due on such return and
paid before the last day prescribed by law shall be deemed to be paid on
such last day.

    (c) In the case of a false or fraudulent return or affidavit with intent
to evade tax or in the case of failure to file a return, the tax may be
assessed, or a proceeding in court for collection of such tax may be begun
at any time. If the personal representative omits from the gross estate
items includable in such gross estate as exceed 25% of the gross estate
stated in the return or affidavit, the tax may be assessed or a proceeding
in court for collection of such tax may be begun at any time within six
years after the return or affidavit was filed. In determining the items
omitted from the gross estate, there shall not be taken into account any
item which is omitted from the gross estate if such item is disclosed in
the return or affidavit, or in a statement attached to the return or affidavit,
in a manner adequate to apprise the director of the nature and amount
of such item.

    (d) No refund or credit shall be allowed by the director after three
years from the date the return was filed, or one year after an assessment
is made, whichever is the later date, unless before the expiration of such
period a claim therefor is filed by the personal representative.

    (e) In case a personal representative has made claim for a refund,
such personal representative shall have the right to commence a suit for
the recovery of the same at the expiration of six months after the filing
of the claim for refund, if no action has been taken by the director.

    (f) Any personal representative of an estate of a decedent who has
been notified of any adjustment by the internal revenue service shall
notify the director within 90 days of the date such adjustment is agreed
to or becomes final between the estate and the internal revenue service.
Such adjustments shall be reported by filing an amended return and a
copy of the revenue agent's report detailing such adjustments, along with
any other statements or documents as may be necessary to explain and
support the adjustments.:

    (1) Notwithstanding the provisions of subsections (a) or (d), addi-
tional tax may be assessed and proceedings in court for collection of such
taxes may be commenced and any refund or credit may be allowed by
the director of taxation within 180 days following receipt of any such
report of adjustments by the Kansas department of revenue. No assess-
ment shall be made nor shall any refund or credit be allowed under the
provisions of this paragraph except to the extent the same is attributable
to changes in the estate due to adjustments indicated by such report.

    (2) In the event of failure to comply with the provisions of this sub-
section, the statute of limitations shall be tolled.

    Sec. 12. K.S.A. 79-1575 is hereby amended to read as follows: 79-
1575. As soon as practicable after the return or affidavit is filed, the di-
rector shall make an examination thereof and shall issue final determi-
nations of tax liability hereunder in the manner prescribed by K.S.A.
79-3226, and amendments thereto. If the tax found due is less than the
amount paid, the excess paid shall be refunded to the personal represen-
tative who paid the tax, except that no refund of $25 or less shall be made.
If the tax found due shall be greater than the amount previously paid, or
if a claim for a refund is denied, notice shall be mailed to the person
filing the return by registered or certified mail. An order finding addi-
tional tax shall be accompanied by a notice and demand for payment. The
tax shall be paid within 30 days thereafter, together with interest on the
additional tax from the date the tax was due unless an appeal is taken in
the manner provided by K.S.A. 74-2438, and amendments thereto. No
additional tax shall be assessed for less than $25.

    Sec. 13. K.S.A. 79-1576 is hereby amended to read as follows: 79-
1576. Subject to the right of any personal representative to apply for
review as provided for in this act, the director shall hear and determine
all questions relative to such tax. The attorney for the director, at the
request of the director, shall represent the state in any court proceedings
brought to review any action of the director. If any district court shall
find that any such tax remains due and that proper proceedings have not
been taken before the director for abatement thereof, it shall order the
personal representative to pay the same, with interest, and costs, and no
question regarding the validity of such tax shall be heard in such court.
If it appears that there are no goods or assets of the estate in the personal
representative's hands, the court may assess the amount of the tax against
the personal representative, as if for the personal representative's own
debt, and may enforce compliance with such order; but the personal
representatives shall be personally liable only for such taxes as shall be
payable while they continue in such offices or have custody or control of
decedent's property. In the cases where the tax is due and payable by and
collectible from the distributee, all actions shall be prosecuted by the
attorney for the director in the name of the state, and such actions may
be brought in the same courts as other actions for money.

    Sec. 14. K.S.A. 79-1579 is hereby amended to read as follows: 79-
1579. A refund clearing fund, designated inheritance estate tax abatement
refund, not to exceed $50,000 shall be set apart and maintained by the
director of taxation from inheritance estate tax collections and held by the
state treasurer for the prompt payment of all abatements and refunds. If
the director of taxation finds that a claim for refund duly filed by a per-
sonal representative pursuant to K.S.A. 79-1564(d)(4), 79-1574(d) or
79-1575, and amendments thereto, should be allowed, or if a court upon
a final judgment shall find that the inheritance estate tax, penalty or in-
terest paid by a personal representative is in excess of the amount legally
due, then the director of taxation shall issue the director's vouchers to
the director of accounts and reports for the refund to the personal rep-
resentative of such tax, penalty or interest together with interest provided
for hereinafter. Upon receipt of such voucher properly executed and en-
dorsed, the director of accounts and reports shall issue the director's
warrants to the state treasurer for the payment to the personal represen-
tative out of the inheritance estate tax abatement refund fund. The di-
rector of taxation shall file a duplicate of such voucher and also a state-
ment which shall set forth the reasons why such abatement or refund was
allowed. Upon the allowance of an abatement or refund of any tax or
interest paid, interest shall be allowed and paid on the amount of such
abatement or refund at the rate of 12% per annum from the date such
tax, penalty or interest was paid to the date the refund or abatement of
inheritance estate taxes is made. No refunds in an amount of less than
$25 shall be made.

    Sec. 15. K.S.A. 79-1580 is hereby amended to read as follows: 79-
1580. (a) The director of taxation shall fix and charge an amount pursuant
to K.S.A. 45-218 and 45-219, and amendments thereto for furnishing
certified copies of returns or affidavits.

    (b) All fees collected hereunder shall be remitted to the state trea-
surer at least monthly. Upon receipt of each such remittance, the state
treasurer shall deposit the entire amount thereof in the state treasury and
the same shall be credited to the state general fund.

    Sec. 16. K.S.A. 79-1587 is hereby amended to read as follows: 79-
1587. (a) All reports and returns required under the provisions of the
Kansas inheritance estate tax act shall be preserved for three years and
thereafter until the director of taxation orders them to be destroyed.

    (b) Except in accordance with proper judicial order, or as provided
in subsection (c) of this section, subsection (g) of K.S.A. 17-7511, and
amendments thereto, or 46-1106, and amendments thereto, it shall be
unlawful for the director of taxation, or any deputy, agent, clerk or other
officer, employee or former employee of the department of revenue or
any other state officer or employee or former state officer or employee
to divulge, or to make known in any way, the value of any estate or any
particulars set forth or disclosed in any report, return, federal return or
federal return information required under the provisions of the Kansas
inheritance estate tax act; and it shall be unlawful for the director of
taxation, any deputy, agent, clerk or other officer or employee of the
department of revenue engaged in the administration of the Kansas in-
heritance estate tax act to engage in the business or profession of tax
accounting or to accept employment, with or without consideration, from
any person, firm or corporation for the purpose, directly or indirectly, of
preparing tax returns or reports required by the laws of the state of Kan-
sas, by any other state or by the United States government, or to accept
any employment for the purpose of advising, preparing material or data,
or the auditing of books or records to be used in an effort to defeat or
cancel any tax or part thereof that has been assessed by the state of Kan-
sas, any other state or by the United States government.

    (c) Nothing herein shall be construed to prohibit the publication of
statistics, so classified as to prevent the identification of particular reports
or returns and the items thereof, or the inspection of returns by the
attorney general or other legal representatives of the state. Nothing in
this section shall prohibit the post auditor from access to all inheritance
estate tax reports or returns in accordance with and subject to the pro-
visions of subsection (g) of K.S.A. 46-1106, and amendments thereto.
Nothing in this section shall be construed to prohibit the disclosure of
the taxpayer's name, social security number, last known address and total
tax liability, including penalty and interest, from inheritance estate tax
returns to a debt collection agency contracting with the secretary of rev-
enue pursuant to K.S.A. 75-5140 to 75-5143, inclusive, and amendments
thereto. Any person receiving any information under the provisions of this
subsection shall be subject to the confidentiality provisions of subsection
(b) of this section and to the penalty provisions of subsection (d) of this
section.

    (d) Any violation of subsections (b) or (c) of this section shall be a
class B misdemeanor; and if the offender be an officer or employee of
the state, such officer or employee shall be dismissed from office.

    (e) Notwithstanding the provisions of this section, the secretary of
revenue may permit the commissioner of internal revenue of the United
States, or the proper official of any state imposing an inheritance or estate
tax, or the authorized representative of either, to inspect the inheritance
estate tax returns made under the provisions of the Kansas inheritance
estate tax act and the secretary of revenue may make available or furnish
to the taxing officials of any other state or the commissioner of internal
revenue of the United States or other taxing officials of the federal gov-
ernment, or their authorized representatives, information contained in
inheritance tax reports or returns or any audit thereof or the report of
any investigation made with respect thereto, filed pursuant to the Kansas
inheritance estate tax act, as the secretary may consider proper, but such
information shall not be used for any other purpose than that of the
administration of tax laws of such state, the state of Kansas or of the
United States.

    (f) Notwithstanding the provisions of this section, the inheritance es-
tate tax return filed with respect to the estate of a decedent shall, upon
written request, be open to inspection by or disclosure to: (1) The ad-
ministrator, executor or trustee of such decedent's estate,; and (2) any
heir at law, next of kin or beneficiary under the will of such decedent or
a donee or distributee of the decedent's property, but only if the secretary
of revenue finds that such heir at law, next of kin, beneficiary, donee or
distributee has a material interest which will be affected by information
contained therein.

    New Sec. 17. Sections 1 through 18 of this act and the provisions of
article 15 of chapter 79 of the Kansas Statutes Annotated not repealed
by this act shall be known and may be cited as the Kansas estate tax act.

    New Sec. 18. The provisions of sections 1 through 18 of this act shall
be applicable to the estates of all decedents dying after June 30, 1998.
The provisions of article 15 of chapter 79 of the Kansas Statutes Anno-
tated in effect immediately before the effective date of this act shall be
applicable to the estates of all decedents dying before July 1, 1998.

    Sec. 19. K.S.A. 79-32,110 is hereby amended to read as follows:
79-32,110. (a) Resident Individuals. Except as otherwise provided by sub-
section (a) of K.S.A. 79-3220, and amendments thereto, a tax is hereby
imposed upon the Kansas taxable income of every resident individual,
which tax shall be computed in accordance with the following tax sched-
ules:

    (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		4.1% of Kansas taxable income
Over $20,000 but not over $30,000		$820 plus 7.5% of excess over $20,000
Over $30,000		$1,570 plus 7.75% of excess over $30,000

  (B) For tax year 1998, 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 6.75% of excess over $15,000
Over $30,000		$1,537.50 plus 7.75% of excess over $30,000

  (C) For tax year 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 6.25% of excess over *$15,000
Over $30,000		$1,462.50 plus 7.45% of excess over $30,000

  (D) 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. 20. K.S.A. 79-32,119 is hereby amended to read as follows:
79-32,119. The Kansas standard deduction of an individual, including a
husband and wife who are either both residents or who file a joint return
as if both were residents, shall be equal to the sum of the standard de-
duction amount allowed pursuant to this section, and the additional stan-
dard deduction amount allowed pursuant to this section for each such
deduction allowable to such individual or to such husband and wife under
the federal internal revenue code as in effect for tax year 1988. For tax
year 1998, and all tax years thereafter, the standard deduction amount
shall be as follows: Single individual filing status, $3,000; married filing
status, $6,000; and head of household filing status, $4,500. For tax year
1998, and all tax years thereafter, the additional standard deduction
amount shall be as follows: Single individual and head of household filing
status, $850; and married filing status, $700. For purposes of the fore-
going, the federal standard deduction allowable to a husband and wife
filing separate Kansas income tax returns shall be determined on the basis
that separate federal returns were filed, and the federal standard deduc-
tion of a husband and wife filing a joint Kansas income tax return shall
be determined on the basis that a joint federal income tax return was
filed.

    Sec. 21. K.S.A. 79-32,121 is hereby amended to read as follows:
79-32,121. (a) An individual shall be allowed a Kansas exemption of
$1,950 for tax year 1988, and $2,000 for each tax year thereafter $2,250
for tax year 1998, and all tax years thereafter, and tax years thereafter for
each exemption for which such individual is entitled to a deduction for
the taxable year for federal income tax purposes. In addition to the ex-
emptions authorized in the foregoing provision, an individual filing a fed-
eral income tax return under the status of head of household, as the same
is defined by 26 U.S.C. 2(b), shall be allowed an additional Kansas ex-
emption of $1,950 for tax year 1988, and $2,000 for each tax year there-
after $2,250 for tax year 1998.

    (b) For tax year 1987, there shall be allowed as a credit against the
tax liability of a resident individual imposed under the Kansas income tax
act who except for the operation of the provisions of K.S.A. 79-32,121
resulting from amendments to the federal internal revenue code would
have been allowed an additional exemption for blindness or age or both
pursuant to such section in tax year 1987, an amount equal to $60 for
each such exemption. The total amount of such credits shall not exceed
the amount of tax imposed by K.S.A. 79-32,110, and amendments thereto,
reduced by the sum of any other credits allowable pursuant to law.

    New Sec. 22. (a) 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 10% for tax year 1998, and all tax years thereafter, of
the amount of the earned income credit allowed against such taxpayer's
federal income tax liability pursuant to section 32 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) If the amount of the credit allowed by subsection (a) exceeds the
taxpayer's income tax liability imposed under the Kansas income tax act,
such excess amount shall be refunded to the taxpayer.

    (c) The provisions of this section shall be applicable to all taxable
years commencing after December 31, 1997.

    New Sec. 23. For all taxable years commencing after December 31,
1997, there shall be allowed as a credit against the tax liability of a taxpayer
imposed under the Kansas income tax act, the premiums tax upon insur-
ance companies imposed pursuant to K.S.A. 40-252, and amendments
thereto, and the privilege tax as measured by net income of financial
institutions imposed pursuant to article 11 of chapter 79 of the Kansas
Statutes Annotated, an amount equal to 15% of the property tax levied
for property tax year 1998, and all such years thereafter, actually and
timely paid during an income or privilege taxable year upon commercial
and industrial machinery and equipment classified for property taxation
purposes pursuant to section 1 of article 11 of the Kansas constitution in
subclass (5) or (6) of class 2 and machinery and equipment classified for
such purposes in subclass (2) 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.
If the taxpayer is a corporation having an election in effect under sub-
chapter S of the federal internal revenue code, a partnership or a limited
liability company, the credit provided by this section shall be claimed by
the shareholders of such corporation, the partners of such partnership or
the members of such limited liability company in the same manner as
such shareholders, partners or members account for their proportionate
shares of the income or loss of the corporation, partnership or limited
liability company.

    Sec. 24. K.S.A. 79-201w is hereby amended to read as follows: 79-
201w. The following described property, to the extent specified by this
section, shall be exempt from all property or ad valorem taxes levied under
the laws of the state of Kansas:

    (a) Any item of machinery, equipment, materials and supplies which,
except for the operation of the provisions of this section, would be re-
quired to be listed for the purpose of taxation pursuant to K.S.A. 79-306,
and amendments thereto, and which is actually and regularly used exclu-
sively for business purposes or to be used in the conduct of the owner's
business, or in the conduct of activities by an entity not subject to Kansas
income taxation pursuant to K.S.A. 79-32,113, and amendments thereto,
whose original retail cost when new is $250 or less.

    (b) The provisions of this section shall apply to all taxable years com-
mencing after December 31, 1995.

    Sec. 25. K.S.A. 1997 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
July 1, 1997, pursuant to K.S.A. 12-1771, and amendments thereto, pay-
ing 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) The tax required under subsection (a) shall be levied at a rate of
27 20 mills in the 1997-98 school year and in the 1998-99 school year and
in the 1999-2000 school year.

    (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. 26. K.S.A. 79-201x is hereby amended to read as follows: 79-
201x. For taxable years 1997 and 1998 and 1999, the following described
property, to the extent herein specified, shall be and is hereby exempt
from the property tax levied pursuant to the provisions of K.S.A. 1997
Supp. 72-6431, and amendments thereto: Property used for residential
purposes to the extent of $20,000 of its appraised valuation.

    Sec. 27. K.S.A. 79-201t is hereby amended to read as follows: 79-
201t. The following described property, to the extent herein specified,
shall be and is hereby exempt from all property or ad valorem taxes levied
under the laws of the state of Kansas:

    (a) All oil leases, other than royalty interests therein, the average daily
production from which is two three barrels or less per producing well, or
three five barrels or less per producing well which has a completion depth
of 2,000 feet or more.

    (b) The provisions of this section shall apply to all taxable years com-
mencing after December 31, 1991 1997.

    Sec. 28. K.S.A. 79-4217 is hereby amended to read as follows: 79-
4217. (a) There is hereby imposed an excise tax upon the severance and
production of coal, oil or gas from the earth or water in this state for sale,
transport, storage, profit or commercial use, subject to the following pro-
visions of this section. Such tax shall be borne ratably by all persons within
the term ``producer'' as such term is defined in K.S.A. 79-4216, and
amendments thereto, in proportion to their respective beneficial interest
in the coal, oil or gas severed. Such tax shall be applied equally to all
portions of the gross value of each barrel of oil severed and subject to
such tax and to the gross value of the gas severed and subject to such tax.
The rate of such tax shall be 8% of the gross value of all oil or gas severed
from the earth or water in this state and subject to the tax imposed under
this act. The rate of such tax with respect to coal shall be $1 per ton. For
the purposes of the tax imposed hereunder the amount of oil or gas pro-
duced shall be measured or determined: (1) In the case of oil, by tank
tables compiled to show 100% of the full capacity of tanks without de-
duction for overage or losses in handling; allowance for any reasonable
and bona fide deduction for basic sediment and water, and for correction
of temperature to 60 degrees Fahrenheit will be allowed; and if the
amount of oil severed has been measured or determined by tank tables
compiled to show less than 100% of the full capacity of tanks, such amount
shall be raised to a basis of 100% for the purpose of the tax imposed by
this act; and (2) in the case of gas, by meter readings showing 100% of
the full volume expressed in cubic feet at a standard base and flowing
temperature of 60 degrees Fahrenheit, and at the absolute pressure at
which the gas is sold and purchased; correction to be made for pressure
according to Boyle's law, and used for specific gravity according to the
gravity at which the gas is sold and purchased, or if not so specified,
according to the test made by the balance method.

    (b) The following shall be exempt from the tax imposed under this
section:

    (1) The severance and production of gas which is: (A) Injected into
the earth for the purpose of lifting oil, recycling or repressuring; (B) used
for fuel in connection with the operation and development for, or pro-
duction of, oil or gas in the lease or production unit where severed; (C)
lawfully vented or flared; (D) severed from a well having an average daily
production during a calendar month having a gross value of not more
than $81 $87 per day, which well has not been significantly curtailed by
reason of mechanical failure or other disruption of production; in the
event that the production of gas from more than one well is gauged by a
common meter, eligibility for exemption hereunder shall be determined
by computing the gross value of the average daily combined production
from all such wells and dividing the same by the number of wells gauged
by such meter; (E) inadvertently lost on the lease or production unit by
reason of leaks, blowouts or other accidental losses; (F) used or consumed
for domestic or agricultural purposes on the lease or production unit from
which it is severed; or (G) placed in underground storage for recovery at
a later date and which was either originally severed outside of the state
of Kansas, or as to which the tax levied pursuant to this act has been paid;

    (2) the severance and production of oil which is: (A) From a lease or
production unit whose average daily production is two five barrels or less
per producing well, which well or wells have not been significantly cur-
tailed by reason of mechanical failure or other disruption of production;
(B) from a lease or production unit, the producing well or wells upon
which have a completion depth of 2,000 feet or more, and whose average
daily production is three six barrels or less per producing well or, if the
price of oil as determined pursuant to subsection (d) is $30 $16 or less,
whose average daily production is four seven barrels or less per producing
well, or, if the price of oil as determined pursuant to subsection (d) is $24
$15 or less, whose average daily production is five eight barrels or less
per producing well, or, if the price of oil as determined pursuant to sub-
section (d) is $16 $14 or less, whose average daily production is six nine
barrels or less per producing well, or, if the price of oil as determined
pursuant to subsection (d) is $10 $13 or less, whose average daily pro-
duction is seven 10 barrels or less per producing well, which well or wells
have not been significantly curtailed by reason of mechanical failure or
other disruption of production; (C) from a lease or production unit, whose
production results from a tertiary recovery process. ``Tertiary recovery
process'' means the process or processes described in subparagraphs (1)
through (9) of 10 C.F.R. 212.78(c) as in effect on June 1, 1979; (D) from
a lease or production unit, the producing well or wells upon which have
a completion depth of less than 2,000 feet and whose average daily pro-
duction resulting from a water flood process, is three six barrels or less
per producing well, which well or wells have not been significantly cur-
tailed by reason of mechanical failure or other disruption of production;
(E) from a lease or production unit, the producing well or wells upon
which have a completion depth of 2,000 feet or more, and whose average
daily production resulting from a water flood process, is four seven barrels
or less per producing well or, if the price of oil as determined pursuant
to subsection (d) is $30 $16 or less, whose average daily production is five
eight barrels or less per producing well, or, if the price of oil as deter-
mined pursuant to subsection (d) is $24 $15 or less, whose average daily
production is six nine barrels or less per producing well, or, if the price
of oil as determined pursuant to subsection (d) is $16 $14 or less, whose
average daily production is seven 10 barrels or less per producing well,
or, if the price of oil as determined pursuant to subsection (d) is $10 or
less, whose average daily production is eight barrels or less per producing
well, which well or wells have not been significantly curtailed by reason
of mechanical failure or other disruption of production; (F) test, frac or
swab oil which is sold or exchanged for value; or (G) inadvertently lost
on the lease or production unit by reason of leaks or other accidental
means;

    (3) (A) any taxpayer applying for an exemption pursuant to subsec-
tion (b)(2)(A) and (B) shall make application annually to the director of
taxation therefor. Exemptions granted pursuant to subsection (b)(2)(A)
and (B) shall be valid for a period of one year following the date of cer-
tification thereof by the director of taxation; (B) any taxpayer applying for
an exemption pursuant to subsection (b)(2)(D) or (E) shall make appli-
cation annually to the director of taxation therefor. Such application shall
be accompanied by proof of the approval of an application for the utili-
zation of a water flood process therefor by the corporation commission
pursuant to rules and regulations adopted under the authority of K.S.A.
55-152 and amendments thereto and proof that the oil produced there-
from is kept in a separate tank battery and that separate books and records
are maintained therefor. Such exemption shall be valid for a period of
one year following the date of certification thereof by the director of
taxation; and (C) notwithstanding the provisions of paragraph (A) or (B),
any exemption in effect on the effective date of this act affected by the
amendments to subsection (b)(2) by this act shall be redetermined in ac-
cordance with such amendments. Any such exemption, and any new ex-
emption established by such amendments and applied for after the effec-
tive date of this shall be valid for a period commencing with May 1, 1998,
and ending on April 30, 1999.

    (4) the severance and production of gas or oil from any pool from
which oil or gas was first produced on or after April 1, 1983, as determined
by the state corporation commission and certified to the director of tax-
ation, and continuing for a period of 24 months from the month in which
oil or gas was first produced from such pool as evidenced by an affidavit
of completion of a well, filed with the state corporation commission and
certified to the director of taxation. Exemptions granted for production
from any well pursuant to this paragraph shall be valid for a period of 24
months following the month in which oil or gas was first produced from
such pool. The term ``pool'' means an underground accumulation of oil
or gas in a single and separate natural reservoir characterized by a single
pressure system so that production from one part of the pool affects the
reservoir pressure throughout its extent;

    (5) the severance and production of oil or gas from a three-year in-
active well, as determined by the state corporation commission and cer-
tified to the director of taxation, for a period of 10 years after the date of
receipt of such certification. As used in this paragraph, ``three-year in-
active well'' means any well that has not produced oil or gas in more than
one month in the three years prior to the date of application to the state
corporation commission for certification as a three-year inactive well. An
application for certification as a three-year inactive well shall be in such
form and contain such information as required by the state corporation
commission, and shall be made prior to July 1, 1996. The commission
may revoke a certification if information indicates that a certified well was
not a three-year inactive well or if other lease production is credited to
the certified well. Upon notice to the operator that the certification for a
well has been revoked, the exemption shall not be applied to the pro-
duction from that well from the date of revocation; and

    (6) (A) The incremental severance and production of oil or gas which
results from a production enhancement project begun on or after July 1,
1998, shall be exempt for a period of seven years from the startup date of
such project. As used in this paragraph (6):

    (1) ``Incremental severance and production'' means the amount of oil
or natural gas which is produced as the result of a production enhance-
ment project which is in excess of the base production of oil or natural
gas, and is determined by subtracting the base production from the total
monthly production after the production enhancement projects is com-
pleted.

    (2) ``Base production'' means the average monthly amount of pro-
duction for the twelve-month period immediately prior to the production
enhancement project beginning date, minus the monthly rate of produc-
tion decline for the well or project for each month beginning 180 days
prior to the project beginning date. The monthly rate of production de-
cline shall be equal to the average extrapolated monthly decline rate for
the well or project for the twelve-month period immediately prior to the
production enhancement project beginning date. Such monthly rate of
production decline shall be continued as the decline that would have oc-
curred except for the enhancement project. The calculation of the base
production amount shall be evidenced by an affidavit and supporting
documentation filed by the applying taxpayer with the state corporation
commission.

    (3) ``Workover'' means any downhole operation in an existing oil or
gas well that is designed to sustain, restore or increase the production
rate or ultimate recovery of oil or gas, including but not limited to aci-
dizing, reperforation, fracture treatment, sand/paraffin/scale removal or
other wellbore cleanouts, casing repair, squeeze cementing, initial instal-
lation, or enhancement of artificial lifts including plunger lifts, rods,
pumps, submersible pumps and coiled tubing velocity strings, downsizing
existing tubing to reduce well loading, downhole commingling, bacteria
treatments, polymer treatments, upgrading the size of pumping unit
equipment, setting bridge plugs to isolate water production zones, or any
combination of the aforementioned operations; ``workover'' shall not mean
the routine maintenance, routine repair, or like for-like replacement of
downhole equipment such as rods, pumps, tubing packers or other me-
chanical device.

    (4) ``Production enhancement project'' means performing or causing
to be performed the following:

    (i) Workover;

    (ii) recompletion to a different producing zone in the same well bore,
except recompletions in formations and zones subject to a state corpora-
tion commission proration order;

    (iii) secondary recovery projects;

    (iv) addition of mechanical devices to dewater a gas or oil well;

    (v) replacement or enhancement of surface equipment;

    (vi) installation or enhancement of compression equipment, line loop-
ing or other techniques or equipment which increases production from a
well or a group of wells in a project;

    (vii) new discoveries of oil or gas which are discovered as a result of
the use of new technology, including, but not limited to, three dimensional
seismic studies.

    (B) The state corporation commission shall adopt rules and regula-
tions necessary to efficiently and properly administer the provisions of
this paragraph (6) including rules and regulations for the qualification of
production enhancement projects, the procedures for determining the
monthly rate of production decline, criteria for determining the share of
incremental production attributable to each well when a production en-
hancement project includes a group of wells, criteria for determining the
start up date for any project for which an exemption is claimed, and
determining new qualifying technologies for the purposes of paragraph
(6)(A)(4)(vii).

    (C) Any taxpayer applying for an exemption pursuant to this para-
graph (6) shall make application to the director of taxation. Such appli-
cation shall be accompanied by a state corporation commission certifi-
cation that the production for which an exemption is sought results from
a qualified production enhancement project and certification of the base
production for the enhanced wells or group of wells, and the rate of decline
to be applied to that base production. The secretary of revenue shall pro-
vide credit for any taxes paid between the project startup date and the
certification of qualifications by the commission.

    (D) The exemptions provided for in this paragraph (6) shall not apply
for 12 months beginning July 1 of the year subsequent to any calendar
year during which: (1) In the case of oil, the secretary of revenue deter-
mines that the weighted average price of Kansas oil at the wellhead has
exceeded $20.00 per barrel; or (2) in the case of natural gas the secretary
of revenue determines that the weighted average price of Kansas gas at
the wellhead has exceeded $2.50 per Mcf.

    (E) The provisions of this paragraph (6) shall not affect any other
exemption allowable pursuant to this section; and

    (6) (7) for the calendar year 1988, and any year thereafter, the sev-
erance or production of the first 350,000 tons of coal from any mine as
certified by the state geological survey.

    (c) No exemption shall be granted pursuant to subsection (b)(3) or
(4) to any person who does not have a valid operator's license issued by
the state corporation commission, and no refund of tax shall be made to
any taxpayer attributable to any production in a period when such tax-
payer did not hold a valid operator's license issued by the state corporation
commission.

    (d) On April 15, 1988, and on April 15 of each year thereafter, the
secretary of revenue shall determine from statistics compiled and pro-
vided by the United States department of energy, the average price per
barrel paid by the first purchaser of crude oil in this state for the six-
month period ending on December 31 of the preceding year. Such price
shall be used for the purpose of determining exemptions allowed by sub-
section (b)(2)(B) or (E) for the twelve-month period commencing on May
1 of such year and ending on April 30 of the next succeeding year.

    Sec. 29. K.S.A. 79-3602 is hereby amended to read as follows: 79-
3602. (a) ``Persons'' means any individual, firm, copartnership, joint ad-
venture, association, corporation, estate or trust, receiver or trustee, or
any group or combination acting as a unit, and the plural as well as the
singular number; and shall specifically mean any city or other political
subdivision of the state of Kansas engaging in a business or providing a
service specifically taxable under the provisions of this act.

    (b) ``Director'' means the state director of taxation.

    (c) ``Sale'' or ``sales'' means the exchange of tangible personal prop-
erty, as well as the sale thereof for money, and every transaction, condi-
tional or otherwise, for a consideration, constituting a sale, including the
sale or furnishing of electrical energy, gas, water, services or entertain-
ment taxable under the terms of this act and including, except as provided
in the following provision, the sale of the use of tangible personal property
by way of a lease, license to use or the rental thereof regardless of the
method by which the title, possession or right to use the tangible personal
property is transferred. The term ``sale'' or ``sales'' shall not mean the sale
of the use of any tangible personal property used as a dwelling by way of
a lease or rental thereof for a term of more than 28 consecutive days.

    (d) ``Retailer'' means a person regularly engaged in the business of
selling tangible personal property at retail or furnishing electrical energy,
gas, water, services or entertainment, and selling only to the user or con-
sumer and not for resale.

    (e) ``Retail sale'' or ``sale at retail'' means all sales made within the
state of tangible personal property or electrical energy, gas, water, services
or entertainment for use or consumption and not for resale.

    (f) ``Tangible personal property'' means corporeal personal property.
Such term shall include any computer software program which is not a
custom computer software program, as described by subsection (s) of
K.S.A. 79-3603, and amendments thereto.

    (g) ``Selling price'' means the total cost to the consumer exclusive of
discounts allowed and credited, but including freight and transportation
charges from retailer to consumer.

    (h) ``Gross receipts'' means the total selling price or the amount re-
ceived as defined in this act, in money, credits, property or other consid-
eration valued in money from sales at retail within this state; and em-
braced within the provisions of this act. The taxpayer, may take credit in
the report of gross receipts for: (1) An amount equal to the selling price
of property returned by the purchaser when the full sale price thereof,
including the tax collected, is refunded in cash or by credit; (2) an amount
equal to the allowance given for the trade-in of property.

    (i) ``Taxpayer'' means any person obligated to account to the director
for taxes collected under the terms of this act.

    (j) ``Isolated or occasional sale'' means the nonrecurring sale of tan-
gible personal property, or services taxable hereunder by a person not
engaged at the time of such sale in the business of selling such property
or services. Any religious organization which makes a nonrecurring sale
of tangible personal property acquired for the purpose of resale shall be
deemed to be not engaged at the time of such sale in the business of
selling such property. Such term shall include: (1) Any sale by a bank,
savings and loan institution, credit union or any finance company licensed
under the provisions of the Kansas uniform consumer credit code of tan-
gible personal property which has been repossessed by any such entity;
and (2) any sale of tangible personal property made by an auctioneer or
agent on behalf of not more than two principals or households if such
sale is nonrecurring and any such principal or household is not engaged
at the time of such sale in the business of selling tangible personal prop-
erty.

    (k) ``Service'' means those services described in and taxed under the
provisions of K.S.A. 79-3603 and amendments thereto.

    (l) ``Ingredient or component part'' means tangible personal property
which is necessary or essential to, and which is actually used in and be-
comes an integral and material part of tangible personal property or serv-
ices produced, manufactured or compounded for sale by the producer,
manufacturer or compounder in its regular course of business. The fol-
lowing items of tangible personal property are hereby declared to be
ingredients or component parts, but the listing of such property shall not
be deemed to be exclusive nor shall such listing be construed to be a
restriction upon, or an indication of, the type or types of property to be
included within the definition of ``ingredient or component part'' as
herein set forth:

    (1) Containers, labels and shipping cases used in the distribution of
property produced, manufactured or compounded for sale which are not
to be returned to the producer, manufacturer or compounder for reuse.

    (2) Containers, labels, shipping cases, paper bags, drinking straws,
paper plates, paper cups, twine and wrapping paper used in the distri-
bution and sale of property taxable under the provisions of this act by
wholesalers and retailers and which is not to be returned to such whole-
saler or retailer for reuse.

    (3) Seeds and seedlings for the production of plants and plant prod-
ucts produced for resale.

    (4) Paper and ink used in the publication of newspapers.

    (5) Fertilizer used in the production of plants and plant products
produced for resale.

    (6) Feed for animals, fowl and aquatic plants and animals, the primary
purpose of which is use in agriculture or aquaculture, as defined in K.S.A.
47-1901, and amendments thereto, the production of food for human
consumption, the production of animal, dairy, poultry or aquatic plant
and animal products, fiber, fur, or the production of offspring for use for
any such purpose or purposes.

    (m) ``Property which is consumed'' means tangible personal property
which is essential or necessary to and which is used in the actual process
of and immediately consumed or dissipated in (1) the production, man-
ufacture, processing, mining, drilling, refining or compounding of tangi-
ble personal property, (2) the providing of services or (3) the irrigation
of crops, for sale in the regular course of business, and which is not
reusable for such purpose. The following items of tangible personal prop-
erty are hereby declared to be ``consumed'' but the listing of such prop-
erty shall not be deemed to be exclusive nor shall such listing be construed
to be a restriction upon or an indication of, the type or types of property
to be included within the definition of ``property which is consumed'' as
herein set forth:

    (A) Insecticides, herbicides, germicides, pesticides, fungicides, fu-
migants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals
for use in commercial or agricultural production, processing or storage of
fruit, vegetables, feeds, seeds, grains, animals or animal products whether
fed, injected, applied, combined with or otherwise used; and

    (B) electricity, gas and water.

    (n) ``Political subdivision'' means any municipality, agency or subdi-
vision of the state which is, or shall hereafter be, authorized to levy taxes
upon tangible property within the state or which certifies a levy to a
municipality, agency or subdivision of the state which is, or shall hereafter
be, authorized to levy taxes upon tangible property within the state. Such
term also shall include any public building commission, housing, airport,
port, metropolitan transit or similar authority established pursuant to law.

    (o) ``Municipal corporation'' means any city incorporated under the
laws of Kansas.

    (p) ``Quasi-municipal corporation'' means any county, township,
school district, drainage district or any other governmental subdivision in
the state of Kansas having authority to receive or hold moneys or funds.

    (q) ``Nonprofit blood bank'' means any nonprofit place, organization,
institution or establishment that is operated wholly or in part for the
purpose of obtaining, storing, processing, preparing for transfusing, fur-
nishing, donating or distributing human blood or parts or fractions of
single blood units or products derived from single blood units, whether
or not any remuneration is paid therefor, or whether such procedures are
done for direct therapeutic use or for storage for future use of such prod-
ucts.

    (r) ``Contractor, subcontractor or repairman'' means a person who
agrees to furnish and install tangible personal property or install tangible
personal property at a specified price. A person who maintains an inven-
tory of tangible personal property which enables such person to furnish
and install the tangible personal property or install the tangible personal
property shall not be deemed a contractor, subcontractor or repairman
but shall be deemed a retailer.

    (s) ``Educational institution'' means any nonprofit school, college and
university that offers education at a level above the twelfth grade, and
conducts regular classes and courses of study required for accreditation
by, or membership in, the North Central Association of Colleges and
Schools, the state board of education, or that otherwise qualify as an
``educational institution,'' as defined by K.S.A. 74-50,103, and amend-
ments thereto. Such phrase shall include: (1) A group of educational in-
stitutions that operates exclusively for an educational purpose; (2) non-
profit endowment associations and foundations organized and operated
exclusively to receive, hold, invest and administer moneys and property
as a permanent fund for the support and sole benefit of an educational
institution; (3) nonprofit trusts, foundations and other entities organized
and operated principally to hold and own receipts from intercollegiate
sporting events and to disburse such receipts, as well as grants and gifts,
in the interest of collegiate and intercollegiate athletic programs for the
support and sole benefit of an educational institution; and (4) nonprofit
trusts, foundations and other entities organized and operated for the pri-
mary purpose of encouraging, fostering and conducting scholarly inves-
tigations and industrial and other types of research for the support and
sole benefit of an educational institution.

    Sec. 30. K.S.A. 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% 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, or by accommo-
dation brokers, as defined by K.S.A. 12-1692, 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, by any organization
exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-
201, and amendments thereto, or by 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 admission 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, but such tax shall not be levied and collected upon the
gross receipts received from: (1) Dues charged by any organization ex-
empt from property taxation pursuant to paragraphs Eighth and Ninth
of K.S.A. 79-201, and amendments thereto,; and (2) sales of member-
ships in a nonprofit organization which is exempt from federal income
taxation pursuant to section 501 (c)(3) of the federal internal revenue code
of 1986, and whose purpose is to support the operation of a nonprofit zoo;

    (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, the original construction, reconstruction, restoration, remodeling,
renovation, repair or replacement of a residence or the construction, re-
construction, 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, except with regard to a residence, shall not
include replacement, remodeling, restoration, renovation or reconstruc-
tion 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; and

    (4) ``residence'' shall mean only those enclosures within which indi-
viduals customarily live;

    (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.

    Sec. 31. K.S.A. 79-3606, as amended by section 27 of 1998 Senate
Bill No. 373, is hereby amended to read as follows: 79-3606. The following
shall be exempt from the tax imposed by this act:

    (a) All sales of motor-vehicle fuel or other articles upon which a sales
or excise tax has been paid, not subject to refund, under the laws of this
state except cigarettes as defined by K.S.A. 79-3301 and amendments
thereto, cereal malt beverages and malt products as defined by K.S.A. 79-
3817 and amendments thereto, including wort, liquid malt, malt syrup
and malt extract, which is not subject to taxation under the provisions of
K.S.A. 79-41a02 and amendments thereto, and motor vehicles as defined
by K.S.A. 79-1017 taxed pursuant to K.S.A. 79-5117, and amendments
thereto, tires taxed pursuant to K.S.A. 1997 Supp. 65-3424d, and amend-
ments thereto, and drycleaning and laundry services taxed pursuant to
K.S.A. 1997 Supp. 65-34,150, and amendments thereto;

    (b) all sales of tangible personal property or service, including the
renting and leasing of tangible personal property, purchased directly by
the state of Kansas, a political subdivision thereof, other than a school or
educational institution, or purchased by a public or private nonprofit hos-
pital or public hospital authority or nonprofit blood, tissue or organ bank
and used exclusively for state, political subdivision, hospital or public hos-
pital authority or nonprofit blood, tissue or organ bank purposes, except
when: (1) Such state, hospital or public hospital authority is engaged or
proposes to engage in any business specifically taxable under the provi-
sions of this act and such items of tangible personal property or service
are used or proposed to be used in such business, or (2) such political
subdivision is engaged or proposes to engage in the business of furnishing
gas, water, electricity or heat to others and such items of personal prop-
erty or service are used or proposed to be used in such business;

    (c) all sales of tangible personal property or services, including the
renting and leasing of tangible personal property, purchased directly by
a public or private elementary or secondary school or public or private
nonprofit educational institution and used primarily by such school or
institution for nonsectarian programs and activities provided or sponsored
by such school or institution or in the erection, repair or enlargement of
buildings to be used for such purposes. The exemption herein provided
shall not apply to erection, construction, repair, enlargement or equip-
ment of buildings used primarily for human habitation;

    (d) all sales of tangible personal property or services purchased by a
contractor for the purpose of constructing, equipping, reconstructing,
maintaining, repairing, enlarging, furnishing or remodeling facilities for
any public or private nonprofit hospital or public hospital authority, public
or private elementary or secondary school or a public or private nonprofit
educational institution, which would be exempt from taxation under the
provisions of this act if purchased directly by such hospital or public hos-
pital authority, school or educational institution; and all sales of tangible
personal property or services purchased by a contractor for the purpose
of constructing, equipping, reconstructing, maintaining, repairing, en-
larging, furnishing or remodeling facilities for any political subdivision of
the state, the total cost of which is paid from funds of such political
subdivision and which would be exempt from taxation under the provi-
sions of this act if purchased directly by such political subdivision. Nothing
in this subsection or in the provisions of K.S.A. 12-3418 and amendments
thereto, shall be deemed to exempt the purchase of any construction
machinery, equipment or tools used in the constructing, equipping, re-
constructing, maintaining, repairing, enlarging, furnishing or remodeling
facilities for any political subdivision of the state. As used in this subsec-
tion, K.S.A. 12-3418 and 79-3640, and amendments thereto, ``funds of a
political subdivision'' shall mean general tax revenues, the proceeds of
any bonds and gifts or grants-in-aid. Gifts shall not mean funds used for
the purpose of constructing, equipping, reconstructing, repairing, enlarg-
ing, furnishing or remodeling facilities which are to be leased to the do-
nor. When any political subdivision of the state, public or private non-
profit hospital or public hospital authority, public or private elementary
or secondary school or public or private nonprofit educational institution
shall contract for the purpose of constructing, equipping, reconstructing,
maintaining, repairing, enlarging, furnishing or remodeling facilities, it
shall obtain from the state and furnish to the contractor an exemption
certificate for the project involved, and the contractor may purchase ma-
terials for incorporation in such project. The contractor shall furnish the
number of such certificate to all suppliers from whom such purchases are
made, and such suppliers shall execute invoices covering the same bearing
the number of such certificate. Upon completion of the project the con-
tractor shall furnish to the political subdivision, hospital or public hospital
authority, school or educational institution concerned a sworn statement,
on a form to be provided by the director of taxation, that all purchases so
made were entitled to exemption under this subsection. As an alternative
to the foregoing procedure, any such contracting entity may apply to the
secretary of revenue for agent status for the sole purpose of issuing and
furnishing project exemption certificates to contractors pursuant to rules
and regulations adopted by the secretary establishing conditions and stan-
dards for the granting and maintaining of such status. All invoices shall
be held by the contractor for a period of five years and shall be subject
to audit by the director of taxation. If any materials purchased under such
a certificate are found not to have been incorporated in the building or
other project or not to have been returned for credit or the sales or
compensating tax otherwise imposed upon such materials which will not
be so incorporated in the building or other project reported and paid by
such contractor to the director of taxation not later than the 20th day of
the month following the close of the month in which it shall be deter-
mined that such materials will not be used for the purpose for which such
certificate was issued, the political subdivision, hospital or public hospital
authority, school or educational institution concerned shall be liable for
tax on all materials purchased for the project, and upon payment thereof
it may recover the same from the contractor together with reasonable
attorney fees. Any contractor or any agent, employee or subcontractor
thereof, who shall use or otherwise dispose of any materials purchased
under such a certificate for any purpose other than that for which such a
certificate is issued without the payment of the sales or compensating tax
otherwise imposed upon such materials, shall be guilty of a misdemeanor
and, upon conviction therefor, shall be subject to the penalties provided
for in subsection (g) of K.S.A. 79-3615, and amendments thereto;

    (e) all sales of tangible personal property or services purchased by a
contractor for the erection, repair or enlargement of buildings or other
projects for the government of the United States, its agencies or instru-
mentalities, which would be exempt from taxation if purchased directly
by the government of the United States, its agencies or instrumentalities.
When the government of the United States, its agencies or instrumen-
talities shall contract for the erection, repair, or enlargement of any build-
ing or other project, it shall obtain from the state and furnish to the
contractor an exemption certificate for the project involved, and the con-
tractor may purchase materials for incorporation in such project. The
contractor shall furnish the number of such certificates to all suppliers
from whom such purchases are made, and such suppliers shall execute
invoices covering the same bearing the number of such certificate. Upon
completion of the project the contractor shall furnish to the government
of the United States, its agencies or instrumentalities concerned a sworn
statement, on a form to be provided by the director of taxation, that all
purchases so made were entitled to exemption under this subsection. As
an alternative to the foregoing procedure, any such contracting entity may
apply to the secretary of revenue for agent status for the sole purpose of
issuing and furnishing project exemption certificates to contractors pur-
suant to rules and regulations adopted by the secretary establishing con-
ditions and standards for the granting and maintaining of such status. All
invoices shall be held by the contractor for a period of five years and shall
be subject to audit by the director of taxation. Any contractor or any agent,
employee or subcontractor thereof, who shall use or otherwise dispose of
any materials purchased under such a certificate for any purpose other
than that for which such a certificate is issued without the payment of
the sales or compensating tax otherwise imposed upon such materials,
shall be guilty of a misdemeanor and, upon conviction therefor, shall be
subject to the penalties provided for in subsection (g) of K.S.A. 79-3615
and amendments thereto;

    (f) tangible personal property purchased by a railroad or public utility
for consumption or movement directly and immediately in interstate
commerce;

    (g) sales of aircraft including remanufactured and modified aircraft,
sales of aircraft repair, modification and replacement parts and sales of
services employed in the remanufacture, modification and repair of air-
craft sold to persons using directly or through an authorized agent such
aircraft and aircraft repair, modification and replacement parts as certified
or licensed carriers of persons or property in interstate or foreign com-
merce under authority of the laws of the United States or any foreign
government or sold to any foreign government or agency or instrumen-
tality of such foreign government and all sales of aircraft, aircraft parts,
replacement parts and services employed in the remanufacture, modifi-
cation and repair of aircraft for use outside of the United States;

    (h) all rentals of nonsectarian textbooks by public or private elemen-
tary or secondary schools;

    (i) the lease or rental of all films, records, tapes, or any type of sound
or picture transcriptions used by motion picture exhibitors;

    (j) meals served without charge or food used in the preparation of
such meals to employees of any restaurant, eating house, dining car, hotel,
drugstore or other place where meals or drinks are regularly sold to the
public if such employees' duties are related to the furnishing or sale of
such meals or drinks;

    (k) any motor vehicle, semitrailer or pole trailer, as such terms are
defined by K.S.A. 8-126 and amendments thereto, or aircraft sold and
delivered in this state to a bona fide resident of another state, which motor
vehicle, semitrailer, pole trailer or aircraft is not to be registered or based
in this state and which vehicle, semitrailer, pole trailer or aircraft will not
remain in this state more than 10 days;

    (l) all isolated or occasional sales of tangible personal property, serv-
ices, substances or things, except isolated or occasional sale of motor
vehicles specifically taxed under the provisions of subsection (o) of K.S.A.
79-3603 and amendments thereto;

    (m) all sales of tangible personal property which become an ingre-
dient or component part of tangible personal property or services pro-
duced, manufactured or compounded for ultimate sale at retail within or
without the state of Kansas; and any such producer, manufacturer or
compounder may obtain from the director of taxation and furnish to the
supplier an exemption certificate number for tangible personal property
for use as an ingredient or component part of the property or services
produced, manufactured or compounded;

    (n) all sales of tangible personal property which is consumed in the
production, manufacture, processing, mining, drilling, refining or com-
pounding of tangible personal property, the treating of by-products or
wastes derived from any such production process, the providing of serv-
ices or the irrigation of crops for ultimate sale at retail within or without
the state of Kansas; and any purchaser of such property may obtain from
the director of taxation and furnish to the supplier an exemption certifi-
cate number for tangible personal property for consumption in such pro-
duction, manufacture, processing, mining, drilling, refining, compound-
ing, treating, irrigation and in providing such services;

    (o) all sales of animals, fowl and aquatic plants and animals, the pri-
mary purpose of which is use in agriculture or aquaculture, as defined in
K.S.A. 47-1901, and amendments thereto, the production of food for
human consumption, the production of animal, dairy, poultry or aquatic
plant and animal products, fiber or fur, or the production of offspring for
use for any such purpose or purposes;

    (p) all sales of drugs, as defined by K.S.A. 65-1626 and amendments
thereto, dispensed pursuant to a prescription order, as defined by K.S.A.
65-1626 and amendments thereto, by a licensed practitioner;

    (q) all sales of insulin dispensed by a person licensed by the state
board of pharmacy to a person for treatment of diabetes at the direction
of a person licensed to practice medicine by the board of healing arts;

    (r) all sales of prosthetic and orthopedic appliances prescribed in
writing by a person licensed to practice the healing arts, dentistry or
optometry. For the purposes of this subsection, the term prosthetic and
orthopedic appliances means any apparatus, instrument, device, or equip-
ment used to replace or substitute for any missing part of the body; used
to alleviate the malfunction of any part of the body; or used to assist any
disabled person in leading a normal life by facilitating such person's mo-
bility; such term shall include accessories attached or to be attached to
motor vehicles, but such term shall not include motor vehicles or personal
property which when installed becomes a fixture to real property;

    (s) all sales of tangible personal property or services purchased di-
rectly by a groundwater management district organized or operating un-
der the authority of K.S.A. 82a-1020 et seq. and amendments thereto,
which property or services are used in the operation or maintenance of
the district;

    (t) all sales of farm machinery and equipment or aquaculture ma-
chinery and equipment, repair and replacement parts therefor and serv-
ices performed in the repair and maintenance of such machinery and
equipment. For the purposes of this subsection the term ``farm machinery
and equipment or aquaculture machinery and equipment'' shall include
machinery and equipment used in the operation of Christmas tree farm-
ing but shall not include any passenger vehicle, truck, truck tractor, trailer,
semitrailer or pole trailer, other than a farm trailer, as such terms are
defined by K.S.A. 8-126 and amendments thereto. Each purchaser of
farm machinery and equipment or aquaculture machinery and equipment
exempted herein must certify in writing on the copy of the invoice or
sales ticket to be retained by the seller that the farm machinery and
equipment or aquaculture machinery and equipment purchased will be
used only in farming, ranching or aquaculture production. Farming or
ranching shall include the operation of a feedlot and farm and ranch work
for hire and the operation of a nursery;

    (u) all leases or rentals of tangible personal property used as a dwell-
ing if such tangible personal property is leased or rented for a period of
more than 28 consecutive days;

    (v) all sales of food products to any contractor for use in preparing
meals for delivery to homebound elderly persons over 60 years of age and
to homebound disabled persons or to be served at a group-sitting at a
location outside of the home to otherwise homebound elderly persons
over 60 years of age and to otherwise homebound disabled persons, as
all or part of any food service project funded in whole or in part by
government or as part of a private nonprofit food service project available
to all such elderly or disabled persons residing within an area of service
designated by the private nonprofit organization, and all sales of food
products for use in preparing meals for consumption by indigent or home-
less individuals whether or not such meals are consumed at a place des-
ignated for such purpose;

    (w) all sales of natural gas, electricity, heat and water delivered
through mains, lines or pipes: (1) To residential premises for noncom-
mercial use by the occupant of such premises; (2) for agricultural use and
also, for such use, all sales of propane gas; (3) for use in the severing of
oil; and (4) to any property which is exempt from property taxation pur-
suant to K.S.A. 79-201b Second through Sixth. As used in this paragraph,
``severing'' shall have the meaning ascribed thereto by subsection (k) of
K.S.A. 79-4216, and amendments thereto;

    (x) all sales of propane gas, LP-gas, coal, wood and other fuel sources
for the production of heat or lighting for noncommercial use of an oc-
cupant of residential premises;

    (y) all sales of materials and services used in the repairing, servicing,
altering, maintaining, manufacturing, remanufacturing, or modification of
railroad rolling stock for use in interstate or foreign commerce under
authority of the laws of the United States;

    (z) all sales of tangible personal property and services purchased di-
rectly by a port authority or by a contractor therefor as provided by the
provisions of K.S.A. 12-3418 and amendments thereto;

    (aa) all sales of materials and services applied to equipment which is
transported into the state from without the state for repair, service, al-
teration, maintenance, remanufacture or modification and which is sub-
sequently transported outside the state for use in the transmission of
liquids or natural gas by means of pipeline in interstate or foreign com-
merce under authority of the laws of the United States;

    (bb) all sales of used mobile homes or manufactured homes. As used
in this subsection: (1) ``Mobile homes'' and ``manufactured homes'' shall
have the meanings ascribed thereto by K.S.A. 58-4202 and amendments
thereto; and (2) ``sales of used mobile homes or manufactured homes''
means sales other than the original retail sale thereof;

    (cc) all sales of tangible personal property or services purchased for
the purpose of and in conjunction with constructing, reconstructing, en-
larging or remodeling a business or retail business which meets the
requirements established in K.S.A. 74-50,115 and amendments thereto,
and the sale and installation of machinery and equipment purchased for
installation at any such business or retail business. When a person shall
contract for the construction, reconstruction, enlargement or remodeling
of any such business or retail business, such person shall obtain from the
state and furnish to the contractor an exemption certificate for the project
involved, and the contractor may purchase materials, machinery and
equipment for incorporation in such project. The contractor shall furnish
the number of such certificates to all suppliers from whom such purchases
are made, and such suppliers shall execute invoices covering the same
bearing the number of such certificate. Upon completion of the project
the contractor shall furnish to the owner of the business or retail business
a sworn statement, on a form to be provided by the director of taxation,
that all purchases so made were entitled to exemption under this subsec-
tion. All invoices shall be held by the contractor for a period of five years
and shall be subject to audit by the director of taxation. Any contractor
or any agent, employee or subcontractor thereof, who shall use or oth-
erwise dispose of any materials, machinery or equipment purchased un-
der such a certificate for any purpose other than that for which such a
certificate is issued without the payment of the sales or compensating tax
otherwise imposed thereon, shall be guilty of a misdemeanor and, upon
conviction therefor, shall be subject to the penalties provided for in sub-
section (g) of K.S.A. 79-3615 and amendments thereto. As used in this
subsection, ``business'' and ``retail business'' have the meanings respec-
tively ascribed thereto by K.S.A. 74-50,114 and amendments thereto;

    (dd) all sales of tangible personal property purchased with food
stamps issued by the United States department of agriculture;

    (ee) all sales of lottery tickets and shares made as part of a lottery
operated by the state of Kansas;

    (ff) on and after July 1, 1988, all sales of new mobile homes or man-
ufactured homes to the extent of 40% of the gross receipts, determined
without regard to any trade-in allowance, received from such sale. As used
in this subsection, ``mobile homes'' and ``manufactured homes'' shall have
the meanings ascribed thereto by K.S.A. 58-4202 and amendments
thereto;

    (gg) all sales of tangible personal property purchased in accordance
with vouchers issued pursuant to the federal special supplemental food
program for women, infants and children;

    (hh) all sales of medical supplies and equipment purchased directly
by a nonprofit skilled nursing home or nonprofit intermediate nursing
care home, as defined by K.S.A. 39-923, and amendments thereto, for
the purpose of providing medical services to residents thereof. This ex-
emption shall not apply to tangible personal property customarily used
for human habitation purposes;

    (ii) all sales of tangible personal property purchased directly by a non-
profit organization for nonsectarian comprehensive multidiscipline youth
development programs and activities provided or sponsored by such or-
ganization, and all sales of tangible personal property by or on behalf of
any such organization. This exemption shall not apply to tangible personal
property customarily used for human habitation purposes;

    (jj) all sales of tangible personal property or services, including the
renting and leasing of tangible personal property, purchased directly on
behalf of a community-based mental retardation facility or mental health
center organized pursuant to K.S.A. 19-4001 et seq., and amendments
thereto, and licensed in accordance with the provisions of K.S.A. 75-
3307b and amendments thereto. This exemption shall not apply to tan-
gible personal property customarily used for human habitation purposes;

    (kk) on and after January 1, 1989, all sales of machinery and equip-
ment used directly and primarily for the purposes of manufacturing, as-
sembling, processing, finishing, storing, warehousing or distributing ar-
ticles of tangible personal property in this state intended for resale by a
manufacturing or processing plant or facility or a storage, warehousing or
distribution facility:

    (1) For purposes of this subsection, machinery and equipment shall
be deemed to be used directly and primarily in the manufacture, assem-
blage, processing, finishing, storing, warehousing or distributing of tan-
gible personal property where such machinery and equipment is used
during a manufacturing, assembling, processing or finishing, storing,
warehousing or distributing operation:

    (A) To effect a direct and immediate physical change upon the tangible
personal property;

    (B) to guide or measure a direct and immediate physical change upon
such property where such function is an integral and essential part of
tuning, verifying or aligning the component parts of such property;

    (C) to test or measure such property where such function is an in-
tegral part of the production flow or function;

    (D) to transport, convey or handle such property during the manu-
facturing, processing, storing, warehousing or distribution operation at
the plant or facility; or

    (E) to place such property in the container, package or wrapping in
which such property is normally sold or transported.

    (2) For Notwithstanding the manner in which machinery and equip-
ment is treated by a taxpayer for federal income tax purposes, for purposes
of this subsection ``machinery and equipment used directly and primarily''
shall include, but not be limited to:

    (A) Mechanical machines or major components thereof contributing
to a manufacturing, assembling or finishing process;

    (B) molds and dies that determine the physical characteristics of the
finished product or its packaging material;

    (C) testing equipment to determine the quality of the finished prod-
uct;

    (D) computers and related peripheral equipment that directly control
or measure the manufacturing process or which are utilized for engi-
neering of the finished product; and

    (E) computers and related peripheral equipment utilized for research
and development and product design.

    (3) ``Machinery and equipment used directly and primarily'' shall not
include:

    (A) Hand tools;

    (B) machinery, equipment and tools used in maintaining and repair-
ing any type of machinery and equipment;

    (C) transportation equipment not used in the manufacturing, assem-
bling, processing, furnishing, storing, warehousing or distributing process
at the plant or facility;

    (D) office machines and equipment including computers and related
peripheral equipment not directly and primarily used in controlling or
measuring the manufacturing process;

    (E) furniture and buildings; and

    (F) machinery and equipment used in administrative, accounting,
sales or other such activities of the business;

    (ll) all sales of educational materials purchased for distribution to the
public at no charge by a nonprofit corporation organized for the purpose
of encouraging, fostering and conducting programs for the improvement
of public health;

    (mm) all sales of seeds and tree seedlings; fertilizers, insecticides,
herbicides, germicides, pesticides and fungicides; and services, purchased
and used for the purpose of producing plants in order to prevent soil
erosion on land devoted to agricultural use;

    (nn) except as otherwise provided in this act, all sales of services ren-
dered by an advertising agency or licensed broadcast station or any mem-
ber, agent or employee thereof;

    (oo) all sales of tangible personal property purchased by a community
action group or agency for the exclusive purpose of repairing or weath-
erizing housing occupied by low income individuals;

    (pp) all sales of drill bits and explosives actually utilized in the explo-
ration and production of oil or gas;

    (qq) all sales of tangible personal property and services purchased by
a nonprofit museum or historical society or any combination thereof, in-
cluding a nonprofit organization which is organized for the purpose of
stimulating public interest in the exploration of space by providing edu-
cational information, exhibits and experiences, which is exempt from fed-
eral income taxation pursuant to section 501(c)(3) of the federal internal
revenue code of 1986;

    (rr) all sales of tangible personal property which will admit the pur-
chaser thereof to any annual event sponsored by a nonprofit organization
which is exempt from federal income taxation pursuant to section
501(c)(3) of the federal internal revenue code of 1986;

    (ss) all sales of tangible personal property and services purchased by
a public broadcasting station licensed by the federal communications
commission as a noncommercial educational television or radio station;

    (tt) all sales of tangible personal property and services purchased by
or on behalf of a not-for-profit corporation which is exempt from federal
income taxation pursuant to section 501(c)(3) of the federal internal rev-
enue code of 1986, for the sole purpose of constructing a Kansas Korean
War memorial;

    (uu) all sales of tangible personal property and services purchased by
or on behalf of any rural volunteer fire-fighting organization for use ex-
clusively in the performance of its duties and functions;

    (vv) all sales of tangible personal property purchased by any of the
following organizations which are exempt from federal income taxation
pursuant to section 501 (c)(3) of the federal internal revenue code of
1986, for the following purposes, and all sales of any such property by or
on behalf of any such organization for any such purpose:

    (1) The American Heart Association, Kansas Affiliate, Inc. for the
purposes of providing education, training, certification in emergency car-
diac care, research and other related services to reduce disability and
death from cardiovascular diseases and stroke;

    (2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose of
advocacy for persons with mental illness and to education, research and
support for their families;

    (3) the Kansas Mental Illness Awareness Council for the purposes of
advocacy for persons who are mentally ill and to education, research and
support for them and their families;

    (4) the American Diabetes Association Kansas Affiliate, Inc. for the
purpose of eliminating diabetes through medical research, public edu-
cation focusing on disease prevention and education, patient education
including information on coping with diabetes, and professional education
and training;

    (5) the American Lung Association of Kansas, Inc. for the purpose of
eliminating all lung diseases through medical research, public education
including information on coping with lung diseases, professional educa-
tion and training related to lung disease and other related services to
reduce the incidence of disability and death due to lung disease;

    (6) the Kansas chapters of the Alzheimer's Disease and Related Dis-
orders Association, Inc. for the purpose of providing assistance and sup-
port to persons in Kansas with Alzheimer's disease, and their families and
caregivers; and

    (ww) all sales of tangible personal property purchased by the Habitat
for Humanity for the exclusive use of being incorporated within a housing
project constructed by such organization.

    (xx) all sales of tangible personal property and services purchased by
a nonprofit zoo which is exempt from federal income taxation pursuant
to section 501 (c)(3) of the federal internal revenue code of 1986, or on
behalf of such zoo by an entity itself exempt from federal income taxation
pursuant to section 50 (c)(3) of the federal internal revenue code of 1986
contracted with to operate such zoo and all sales of tangible personal
property or services purchased by a contractor for the purpose of con-
structing, equipping, reconstructing, maintaining, repairing, enlarging,
furnishing or remodeling facilities for any nonprofit zoo which would be
exempt from taxation under the provisions of this section if purchased
directly by such nonprofit zoo or the entity operating such zoo. Nothing
in this subsection shall be deemed to exempt the purchase of any construc-
tion machinery, equipment or tools used in the constructing, equipping,
reconstructing, maintaining, repairing, enlarging, furnishing or remod-
eling facilities for any nonprofit zoo. When any nonprofit zoo shall con-
tract for the purpose of constructing, equipping, reconstructing, main-
taining, repairing, enlarging, furnishing or remodeling facilities, it shall
obtain from the state and furnish to the contractor an exemption certifi-
cate for the project involved, and the contractor may purchase materials
for incorporation in such project. The contractor shall furnish the number
of such certificate to all suppliers from whom such purchases are made,
and such suppliers shall execute invoices covering the same bearing the
number of such certificate. Upon completion of the project the contractor
shall furnish to the nonprofit zoo concerned a sworn statement, on a form
to be provided by the director of taxation, that all purchases so made were
entitled to exemption under this subsection. All invoices shall be held by
the contractor for a period of five years and shall be subject to audit by
the director of taxation. If any materials purchased under such a certifi-
cate are found not to have been incorporated in the building or other
project or not to have been returned for credit or the sales or compensating
tax otherwise imposed upon such materials which will not be so incor-
porated in the building or other project reported and paid by such con-
tractor to the director of taxation not later than the 20th day of the month
following the close of the month in which it shall be determined that such
materials will not be used for the purpose for which such certificate was
issued, the nonprofit zoo concerned shall be liable for tax on all materials
purchased for the project, and upon payment thereof it may recover the
same from the contractor together with reasonable attorney fees. Any
contractor or any agent, employee or subcontractor thereof, who shall use
or otherwise dispose of any materials purchased under such a certificate
for any purpose other than that for which such a certificate is issued
without the payment of the sales or compensating tax otherwise imposed
upon such materials, shall be guilty of a misdemeanor and, upon convic-
tion therefor, shall be subject to the penalties provided for in subsection
(g) of K.S.A. 79-3615, and amendments thereto;

    (yy) all sales of tangible personal property and services purchased by
a parent-teacher association or organization, and all sales of tangible per-
sonal property by or on behalf of such association or organization;

    (zz) all sales of machinery and equipment purchased by over-the-air,
free access radio or television station which is used directly and primarily
for the purpose of producing a broadcast signal or is such that the failure
of the machinery or equipment to operate would cause broadcasting to
cease. For purposes of this subsection, machinery and equipment shall
include, but not be limited to, that required by rules and regulations of
the federal communications commission, and all sales of electricity which
are essential or necessary for the purpose of producing a broadcast signal
or is such that the failure of the electricity would cause broadcasting to
cease;

    (aaa) all sales of tangible personal property and services purchased
by a religious organization which is exempt from federal income taxation
pursuant to section 501 (c)(3) of the federal internal revenue code, and
used exclusively for religious purposes; and

    (bbb) all sales of food for human consumption by an organization
which is exempt from federal income taxation pursuant to section 501
(c)(3) of the federal internal revenue code of 1986, pursuant to a food
distribution program which offers such food at a price below cost in
exchange for the performance of community service by the purchaser
thereof.

    Sec. 32. K.S.A. 79-3633 is hereby amended to read as follows: 79-
3633. As used in K.S.A. 79-3620 and 79-3632 to 79-3639 and amendments
thereto, unless the context clearly indicates otherwise:

    (a) ``Income'' means the sum of adjusted gross income determined
under the Kansas income tax act, maintenance, support money, cash pub-
lic assistance and relief (not including relief granted under this act or
refunds granted under the provisions of article 45 of chapter 79 of the
Kansas Statutes Annotated), the gross amount of any pension or annuity
(including all monetary retirement benefits from whatever source de-
rived, including but not limited to railroad retirement benefits, all pay-
ments received under the federal social security act and veterans disability
pensions), all dividends and interest from whatever source derived not
included in adjusted gross income, workmen's compensation and the
gross amount of ``loss of time'' insurance. It does not include gifts from
nongovernmental sources or surplus food or other relief in kind supplied
by a governmental agency.

    (b) ``Household'' means a claimant, a claimant and spouse or a claim-
ant and one or more individuals not related as husband and wife and all
other persons for whom a personal exemption is claimed who together
occupy a common residence.

    (c) ``Household income'' means all income received by all persons of
a household in a calendar year while members of such household.

    (d) ``Claimant'' means a person who has filed a claim for a refund or
credit under the provisions of this act and was, during the entire calendar
year preceding the year in which the claim was filed for relief under this
act, domiciled in this state, was a member of a household having a house-
hold, had income of not more than $13,000 $25,000 in the calendar year
for which a claim is filed and was: (1) A person having a disability; (2) a
person other than a person included under (1), who has attained 55 years
of age in the calendar year for which a claim is filed or (3) a person other
than a person included under (1) or (2) having one or more dependent
children under 18 years of age residing at the person's homestead during
the calendar year for which a claim is filed.

    (e) (d) ``Head of household'' means the person filing a claim under
the provisions of this act.

    (f) (e) ``Disability'' means (1) inability to engage in any substantial
gainful activity by reason of any medically determinable physical or men-
tal impairment which can be expected to result in death or has lasted or
can be expected to last for a continuous period of not less than 12 months,
and an individual shall be determined to be under a disability only if the
physical or mental impairment or impairments are of such severity that
the individual is not only unable to do the individual's previous work but
cannot, considering age, education and work experience, engage in any
other kind of substantial gainful work which exists in the national econ-
omy, regardless of whether such work exists in the immediate area in
which the individual lives or whether a specific job vacancy exists for the
individual, or whether the individual would be hired if application was
made for work. For purposes of the preceding sentence (with respect to
any individual), ``work which exists in the national economy'' means work
which exists in significant numbers either in the region where the indi-
vidual lives or in several regions of the country; for purposes of this sub-
section, a ``physical or mental impairment'' is an impairment that results
from anatomical, physiological or psychological abnormalities which are
demonstrable by medically acceptable clinical and laboratory diagnostic
techniques; or

    (2) blindness and inability by reason of blindness to engage in sub-
stantial gainful activity requiring skills or abilities comparable to those of
any gainful activity in which the individual has previously engaged with
some regularity and over a substantial period of time.

    (g) (f) ``Blindness'' means central visual acuity of 20/200 or less in the
better eye with the use of a correcting lens. An eye which is accompanied
by a limitation in the fields of vision such that the widest diameter of the
visual field subtends an angle no greater than 20 degrees shall be consid-
ered for the purpose of this paragraph as having a central visual acuity of
20/200 or less.

    Sec. 33. K.S.A. 79-3635 is hereby amended to read as follows: 79-
3635. (a) (1) A claimant shall be entitled to a refund of retailers' sales
taxes paid upon food during the calendar year 1997 1998 and each year
thereafter in the amount hereinafter provided. For households having a
household income of less than $5,000, a refund in the amount of $40 shall
be allowed for the head of household and a refund of $30 shall be allowed
for each additional member of the household. For households having a
household income of at least $5,000 but less than $10,000, a refund in
the amount of $30 shall be allowed for the head of household and a refund
of $25 shall be allowed for each additional member of the household. For
households having a household income of at least $10,000 but not more
than $13,000, a refund in the amount of $20 shall be allowed for the head
of household and a refund of $15 shall be allowed for each additional
member of the household. There shall be allowed for each member of a
household of a claimant having income of $12,500 or less, an amount equal
to $60. There shall be allowed for each member of a household of a claim-
ant having income of more than $12,500 but not more than $25,000, an
amount equal to $30. All such claims shall be paid from the sales tax
refund fund upon warrants of the director of accounts and reports pur-
suant to vouchers approved by the director of taxation or by a person or
persons designated by the director.

    (2) As an alternative to the procedure described by paragraph 1, for
all taxable years commencing after December 31, 1997, 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 $60 or $30, as the
case requires, for each member of a household. If the amount of such tax
credit exceeds the claimant's income tax liability for such taxable year,
such excess amount shall be refunded to the claimant.

    (b) A head of household shall make application for refunds for all
members of the same household upon a common form provided for the
making of joint claims. All claims paid to members of the same household
shall be paid as a joint claim by means of a single warrant.

    (c) No claim for a refund of taxes under the provisions of K.S.A.
79-3632 et seq. shall be paid or allowed unless such claim is actually filed
with and in the possession of the department of revenue on or before
April 15 of the year next succeeding the year in which such taxes were
paid. The director of taxation may: (1) Extend the time for filing any claim
under the provisions of this act when good cause exists therefor; or (2)
accept a claim filed after the deadline for filing in the case of sickness,
absence or disability of the claimant if such claim has been filed within
four years of such deadline.

    Sec. 34. K.S.A. 79-3235 is hereby amended to read as follows: 79-
3235. If any tax imposed by this act or any portion of such tax is not paid
within 60 days after it becomes due, the secretary or the secretary's des-
ignee shall issue a warrant under the secretary's or the secretary's des-
ignee's hand and official seal, directed to the sheriff of any county of the
state, commanding the sheriff to levy upon and sell the real and personal
property of the taxpayer found within the sheriff's county for the payment
of the amount thereof, with the added penalties, interest and the cost of
executing the warrant and to return the warrant to the secretary or the
secretary's designee and pay to the secretary or the secretary's designee
the money collected by virtue of it not more than 60 days from the date
of the warrant. The sheriff, within five days after the receipt of the war-
rant, shall file with the clerk of the district court of the county a copy
thereof, and thereupon the clerk shall either enter in the appearance
docket the name of the taxpayer mentioned in the warrant, the amount
of the tax or portion of it, interest and penalties for which the warrant is
issued and the date such copy is filed and note the taxpayer's name in the
general index. No fee shall be charged for either entry. The amount of
such warrant so docketed shall thereupon become a lien upon the title
to and interest in the real property of the taxpayer against whom it is
issued. The sheriff shall proceed in the same manner and with the same
effect as prescribed by law with respect to executions issued against prop-
erty upon judgments of a court of record and shall be entitled to the same
fees for services to be collected in the same manner.

    The court in which the warrant is docketed shall have jurisdiction over
all subsequent proceedings as fully as though a judgment had been ren-
dered in the court. In the discretion of the secretary or the secretary's
designee a warrant of like terms, force and effect may be issued and
directed to any officer or employee of the secretary, and in the execution
thereof such officer or employee shall have all the powers conferred by
law upon sheriffs, and the subsequent proceedings thereunder shall be
the same as provided where the warrant is issued directly to the sheriff.
The taxpayer shall have the right to redeem the real estate within a period
of 18 months from the date of such sale. If a warrant is returned, unsa-
tisfied in full, the secretary or the secretary's designee shall have the same
remedies to enforce the claim for taxes as if the state of Kansas had
recovered judgment against the taxpayer for the amount of the tax. No
law exempting any goods and chattels, lands and tenements from forced
sale under execution shall apply to a levy and sale under any such warrant
or upon any execution issued upon any judgment rendered in any action
for income taxes. Except as provided further, the secretary or the secre-
tary's designee shall have the right at any time after a warrant has been
returned unsatisfied or satisfied only in part, to issue alias warrants until
the full amount of the tax is collected.

    If execution is not issued within 10 years from the date of the docketing
of any such warrant, or if 10 years shall have intervened between the date
of the last execution issued on such warrant, and the time of issuing an-
other writ of execution thereon, such warrant shall become dormant, and
shall cease to operate as a lien on the real estate of the delinquent taxpayer.
Such dormant warrant may be revived in like manner as dormant judg-
ment under the code of civil procedure.

    Sec. 35. K.S.A. 79-3617 is hereby amended to read as follows: 79-
3617. Whenever any taxpayer liable to pay any sales or compensating tax,
refuses or neglects to pay the tax, the amount, including any interest or
penalty, shall be collected in the following manner. The secretary of rev-
enue or the secretary's designee shall issue a warrant under the hand of
the secretary or the secretary's designee and official seal directed to the
sheriff of any county of the state commanding the sheriff to levy upon
and sell the real and personal property of the taxpayer found within the
sheriff's county to satisfy the tax, including penalty and interest, and the
cost of executing the warrant and to return such warrant to the secretary
or the secretary's designee and pay to the secretary or the secretary's
designee the money collected by virtue thereof not more than 90 days
from the date of the warrant. The sheriff shall, within five days, after the
receipt of the warrant file with the clerk of the district court of the county
a copy thereof, and thereupon the clerk shall either enter in the appear-
ance docket the name of the taxpayer mentioned in the warrant, the
amount of the tax or portion of it, interest and penalties for which the
warrant is issued and the date such copy is filed and note the taxpayer's
name in the general index. No fee shall be charged for either such entry.
The amount of such warrant so docketed shall thereupon become a lien
upon the title to, and interest in, the real property of the taxpayer against
whom it is issued. The sheriff shall proceed in the same manner and with
the same effect as prescribed by law with respect to executions issued
against property upon judgments of a court of record, and shall be entitled
to the same fees for services.

    The court in which the warrant is docketed shall have jurisdiction over
all subsequent proceedings as fully as though a judgment had been ren-
dered in the court. A warrant of similar terms, force and effect may be
issued by the secretary or the secretary's designee and directed to any
officer or employee of the secretary or the secretary's designee, and in
the execution thereof such officer or employee shall have all the powers
conferred by law upon sheriffs with respect to executions issued against
property upon judgments of a court of record and the subsequent pro-
ceedings thereunder shall be the same as provided where the warrant is
issued directly to the sheriff. The taxpayer shall have the right to redeem
the real estate within a period of 18 months from the date of such sale.
If a warrant is returned, unsatisfied in full, the secretary or the secretary's
designee shall have the same remedies to enforce the claim for taxes as
if the state of Kansas had recovered judgment against the taxpayer for
the amount of the tax. No law exempting any goods and chattels, land
and tenements from forced sale under execution shall apply to a levy and
sale under any of the warrants or upon any execution issued upon any
judgment rendered in any action for sales or compensating taxes. Except
as provided further, the secretary or the secretary's designee shall have
the right at any time after a warrant has been returned unsatisfied, or
satisfied only in part, to issue alias warrants until the full amount of the
tax is collected. No costs incurred by the sheriff or the clerk of the court
shall be charged to the secretary or the secretary's designee.

    If execution is not issued within 10 years from the date of the docketing
of any such warrant, or if 10 years shall have intervened between the date
of the last execution issued on such warrant, and the time of issuing an-
other writ of execution thereon, such warrant shall become dormant, and
shall cease to operate as a lien on the real estate of the delinquent taxpayer.
Such dormant warrant may be revived in like manner as dormant judg-
ments under the code of civil procedure.

    Sec. 36. K.S.A. 79-213 is hereby amended to read as follows: 79-213.
(a) Any property owner requesting an exemption from the payment of ad
valorem property taxes assessed, or to be assessed, against their property
shall be required to file an initial request for exemption, on forms ap-
proved by the board of tax appeals and provided by the county appraiser.

    (b) The initial exemption request shall identify the property for which
the exemption is requested and state, in detail, the legal and factual basis
for the exemption claimed.

    (c) The request for exemption shall be filed with the county appraiser
of the county where such property is principally located.

    (d) After a review of the exemption request, and after a preliminary
examination of the facts as alleged, the county appraiser shall recommend
that the exemption request either be granted or denied, and, if necessary,
that a hearing be held. If a denial is recommended, a statement of the
controlling facts and law relied upon shall be included on the form.

    (e) The county appraiser, after making such written recommenda-
tion, shall file the request for exemption and the recommendations of the
county appraiser with the board of tax appeals.

    (f) Upon receipt of the request for exemption, the board shall docket
the same and notify the applicant and the county appraiser of such fact.

    (g) After examination of the request for exemption, and the county
appraiser's recommendation related thereto, the board may fix a time and
place for hearing, and shall notify the applicant and the county appraiser
of the time and place so fixed. In any case where a party to such request
for exemption requests a hearing thereon, the same shall be granted.
Hearings shall be conducted in accordance with the provisions of the
Kansas administrative procedure act. In all instances where the board sets
a request for exemption for hearing, the county shall be represented by
its county attorney or county counselor.

    (h) In the event of a hearing, the same shall be originally set not later
than 90 days after the filing of the request for exemption with the board.

    (i) During the pendency of a request for exemption, no person, firm,
unincorporated association, company or corporation charged with real
estate or personal property taxes pursuant to K.S.A. 79-2004 and 79-
2004a, and amendments thereto, on the tax books in the hands of the
county treasurer shall be required to pay the tax from the date the request
is filed with the county appraiser until the expiration of 30 days after the
board issued its order thereon and the same becomes a final order. In
the event that taxes have been assessed against the subject property, no
interest shall accrue on any unpaid tax for the year or years in question
nor shall the unpaid tax be considered delinquent from the date the re-
quest is filed with the county appraiser until the expiration of 30 days
after the board issued its order thereon. In the event the board deter-
mines an application for exemption is without merit and filed in bad faith
to delay the due date of the tax, the tax shall be considered delinquent
as of the date the tax would have been due pursuant to K.S.A. 79-2004
and 79-2004a, and amendments thereto, and interest shall accrue as pre-
scribed therein.

    (j) In the event the board grants the initial request for exemption,
the same shall be effective beginning with the date of first exempt use
except that, with respect to property the construction of which com-
menced not to exceed 24 months prior to the date of first exempt use,
the same shall be effective beginning with the date of commencement of
construction.

    (k) In conjunction with its authority to grant exemptions, the board
shall have the authority to abate all unpaid taxes that have accrued from
and since the effective date of the exemption. In the event that taxes have
been paid during the period where the subject property has been deter-
mined to be exempt, the board shall have the authority to order a refund
of taxes for a period not to exceed three years.

    (l) The provisions of this section shall not apply to: (1) Farm machin-
ery and equipment exempted from ad valorem taxation by K.S.A. 79-201j,
and amendments thereto; (2) personal property exempted from ad valo-
rem taxation by K.S.A. 79-215, and amendments thereto; (3) wearing
apparel, household goods and personal effects exempted from ad valorem
taxation by K.S.A. 79-201c, and amendments thereto; (4) livestock; (5)
hay and silage exempted from ad valorem taxation by K.S.A. 79-201d, and
amendments thereto; (6) merchants' and manufacturers' inventories ex-
empted from ad valorem taxation by K.S.A. 79-201m and amendments
thereto; (7) grain exempted from ad valorem taxation by K.S.A. 79-201n,
and amendments thereto; (8) property exempted from ad valorem taxa-
tion by K.S.A. 79-201a Seventeenth and amendments thereto, including
all property previously acquired by the secretary of transportation or a
predecessor in interest, which is used in the administration, construction,
maintenance or operation of the state system of highways. The secretary
of transportation shall at the time of acquisition of property notify the
county appraiser in the county in which the property is located that the
acquisition occurred and provide a legal description of the property ac-
quired; (9) property exempted from ad valorem taxation by K.S.A. 79-
201a Ninth, and amendments thereto, including all property previously
acquired by the Kansas turnpike authority which is used in the adminis-
tration, construction, maintenance or operation of the Kansas turnpike.
The Kansas turnpike authority shall at the time of acquisition of property
notify the county appraiser in the county in which the property is located
that the acquisition occurred and provide a legal description of the prop-
erty acquired; (10) aquaculture machinery and equipment exempted from
ad valorem taxation by K.S.A. 79-201j, and amendments thereto. As used
in this section, ``aquaculture'' has the same meaning ascribed thereto by
K.S.A. 47-1901, and amendments thereto; (11) Christmas tree machinery
and equipment exempted from ad valorem taxation by K.S.A. 79-201j,
and amendments thereto; (12) property used exclusively by the state or
any municipality or political subdivision of the state for right-of-way pur-
poses. The state agency or the governing body of the municipality or
political subdivision shall at the time of acquisition of property for
right-of-way purposes notify the county appraiser in the county in which
the property is located that the acquisition occurred and provide a legal
description of the property acquired; (13) machinery, equipment, mate-
rials and supplies exempted from ad valorem taxation by K.S.A. 79-201w,
and amendments thereto; (14) vehicles owned by the state or by any
political or taxing subdivision thereof and used exclusively for govern-
mental purposes; and (15) property used for residential purposes which
is exempted pursuant to K.S.A. 79-201x from the property tax levied pur-
suant to K.S.A. 1997 Supp. 72-6431, and amendments thereto; (16) ve-
hicles which are owned by an organization having as one of its purposes
the assistance by the provision of transit services to the elderly and to
disabled persons and which are exempted pursuant to K.S.A. 79-201
Ninth; and (17) motor vehicles exempted from taxation by subsection (e)
of K.S.A. 79-5107, and amendments thereto.

    (m) The provisions of this section shall apply to property exempt pur-
suant to the provisions of section 13 of article 11 of the Kansas consti-
tution.

    (n) The provisions of subsection (j) and (k) as amended by this act
shall be applicable to all taxable years commencing after December 31,
1995.

    Sec. 37. K.S.A. 79-3619 is hereby amended to read as follows: 79-
3619. (a) For the purposes of more efficiently securing the payment,
collection and accounting for the taxes provided for under this act, agree-
ments between competing retailers or the adoption of appropriate rules
and regulations by organizations or associations of retailers to provide
uniform methods for adding and collecting the full amount of the tax
imposed by this act, or an amount equal as nearly as possible or practi-
cable to the average equivalent thereof, and which do not involve price-
fixing agreements otherwise unlawful, and which shall first have the ap-
proval of the director of taxation, are expressly authorized and shall be
held not to be in violation of any antitrust laws of this state. It shall be
the duty of the director of taxation to cooperate with such retailers, or-
ganizations, or associations in formulating such agreements, rules and
regulations. The secretary of revenue shall adopt rules and regulations
for adding and collecting such tax, or an amount equal as nearly as possible
or practicable to the average equivalent thereof, by providing different
methods applying uniformly to retailers within the same general classifi-
cation for the purpose of enabling such retailers to add and collect, as far
as practicable, the amount of such tax.

    (b) The secretary of revenue may adopt rules and regulations to pro-
vide for the issuance of permits to certain businesses which grant direct
payment authority that allows certain purchases to be made without the
payment of retailers' sales or use tax to the vendor or service provider
and requires the permit holder to self-accrue any state and local tax that
is due and pay such tax directly to the department of revenue. The sec-
retary shall be accorded broad discretion in establishing qualification
standards for direct pay authority, in entering into agreement with permit
holders that fix accounting and reporting requirements, in granting and
canceling the direct pay privilege, and in establishing other requirements
for administration of this section.

    Sec. 38. K.S.A. 79-201t, 79-201w, 79-201x, 79-213, 79-1537, 79-
1537b, 79-1537c, 79-1537e, 79-1537f, 79-1538, 79-1538a, 79-1539, 79-
1540, 79-1541, 79-1541a, 79-1541b, 79-1542, 79-1542a, 79-1543, 79-
1545, 79-1547, 79-1548, 79-1549, 79-1550, 79-1551, 79-1552, 79-1553,
79-1554, 79-1555, 79-1556, 79-1557, 79-1557a, 79-1559, 79-1560, 79-
1561, 79-1562, 79-1563, 79-1563a, 79-1564, 79-1565, 79-1566, 79-1567,
79-1567a, 79-1568, 79-1569, 79-1570, 79-1571, 79-1572, 79-1573, 79-
1574, 79-1575, 79-1576, 79-1579, 79-1580, 79-1584, 79-1584a, 79-1584b,
79-1584c, 79-1585, 79-1586, 79-1587, 79-3235, 79-32,110, 79-32,119, 79-
32,121, 79-3602, 79-3603, 79-3606, as amended by section 27 of 1998
Senate Bill No. 373, 79-3617, 79-3619, 79-3633, 79-3635 and 79-4217
and K.S.A. 1997 Supp. 72-6431 are hereby repealed.

    Sec. 39. This act shall take effect and be in force from and after its
publication in the statute book.

I hereby certifiy that the above Bill originated in the
Senate, and passed that body

__________________________________

Senate adopted
Conference Committe Report __________________________________

__________________________________

President of the Senate.

__________________________________

Secretary of the Senate.

Passed the House
as amended __________________________

House adopted
Conference Committee Report __________________________

__________________________________

Speaker of the House.

__________________________________

Chief Clerk of the House.

Approved __________________________

__________________________________

Governor.