[As Amended by House Committee of the Whole]
         

         
As Amended by House Committee
         

         
[As Amended by Senate Committee of the Whole]
         

         
As Amended by Senate Committee
         

          Session of 1998
                   
SENATE BILL No. 500
         
By Senators Emert and Becker, Bleeker, Bond, Brownlee, Clark, Corbin,
                Donovan, Hardenburger, Harrington, Huelskamp, Jordan, Kerr,
                Langworthy, Lawrence, Morris, Oleen, Prager, Pugh, Ranson, Salis-
                bury, Salmans, Schraad, Steffes, Tyson, Umbarger and Vidricksen
               
1-23
          19             AN ACT enacting the Kansas Tax Reduction and Reform Act of 1998;
20             amending K.S.A. 79-201t, 79-201w, 79-201x, 79-213, 79-1541a, 79-
21             1541b, 79-1542, 79-1564, 79-1569, 79-1570, 79-1571, 79-1572, 79-
22             1574, 79-1575, 79-1576, 79-1579, 79-1580, 79-1587, 79-3235, 79-
23             32,110, 79-32,117, 79-32,117h, 79-32,119, 79-32,121, 79-3603,
24             79-3606, 79-3617, [79-3619,] 79-3633, 79-3635 and 79-4217 and
25             K.S.A. 1997 Supp. 72-6431 and repealing the existing sections; also
26             repealing K.S.A. 79-1537, 79-1537b, 79-1537c, 79-1537e, 79-1537f,
27             79-1538, 79-1538a, 79-1539, 79-1540, 79-1541, 79-1542a, 79-1543, 79-
28             1545, 79-1547, 79-1548, 79-1549, 79-1550, 79-1551, 79-1552, 79-1553,
29             79-1554, 79-1555, 79-1556, 79-1557, 79-1557a, 79-1559, 79-1560,
30             79-1561, 79-1562, 79-1563, 79-1563a, 79-1565, 79-1566, 79-1567,
31             79-1567a, 79-1568, 79-1573, 79-1584, 79-1584a, 79-1584b, 79-1584c,
32             79-1585 and 79-1586, 79-1586 and 79-32,117 [79-32,117i].
33            
34       Be it enacted by the Legislature of the State of Kansas:
35           New Section 1. (a) A tax is hereby imposed on the estate of every
36       resident decedent, and every nonresident decedent who died holding an
37       interest in property with a Kansas tax situs, whose estate is required by
38       federal law to file a return for federal state taxes. The amount of such tax
39       shall be equal to the amount of the maximum credit allowed by section
40       2011 of the internal revenue code against the tax that would otherwise
41       be imposed on the transfer of the estate of the decedent by section 2001
42       of the internal revenue code.
43           (b) When the estate of a resident decedent shall consist of property

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  1       within and without the state, or in the case of the estate of a nonresident
  2       decedent who died holding an interest in property with a Kansas tax situs,
  3       the tax imposed under subsection (a) shall be the percentage thereof that
  4       the gross estate for federal estate tax purposes less the value of all property
  5       included therein having a tax situs which is not within the jurisdiction of
  6       the state of Kansas, bears to the total gross estate for federal estate tax
  7       purposes.
  8           Sec. 2. K.S.A. 79-1541a is hereby amended to read as follows: 79-
  9       1541a. Whenever the amount of the tax imposed upon a generation-skip-
10       ping transfer by section 2601 of the internal revenue code is determined,
11       a tax, equal to the maximum amount of the credit allowed against such
12       tax by section 2604 of the internal revenue code, is hereby imposed upon
13       the taxable estate of the decedent as of the date of such determination.
14       The tax imposed under the provisions of this act shall be chargeable
15       against the interests of each beneficiary in proportion to the share re-
16       ceived by each beneficiary under such transfer.
17           Sec. 3. K.S.A. 79-1541b is hereby amended to read as follows: 79-
18       1541b. When the property transferred subject to the tax imposed by
19       K.S.A. 79-1541a shall consist of both property within and property with-
20       out the state, the tax imposed shall be the percentage that the Kansas
21       assets of the generation-skipping trust or generation-skipping trust equiv-
22       alent bears to the total assets of the generation-skipping trust or gener-
23       ation-skipping trust equivalent.
24           Sec. 4. K.S.A. 79-1542 is hereby amended to read as follows: 79-
25       1542. As used in this act unless the context otherwise requires:
26           (a) Any term used in this act shall have the same meaning as when
27       used in a comparable context in the internal revenue code. Any reference
28       in this act to the ``internal revenue code'' shall mean the provisions of the
29       United States internal revenue code of 1986, as such code exists on De-
30       cember 31, 1992 1997. Any reference in this act to a specific provision of
31       the internal revenue code shall be to such provision as it exists on De-
32       cember 31, 1992 1997.
33           (b) ``Deemed executor'' includes any person in actual or constructive
34       possession of any property of the decedent.
35           (c) ``Director'' means the director of taxation.
36           (d) ``Distributee'' means a beneficiary, legatee, devisee, heir, next of
37       kin, grantee, donee, vendee, joint tenant or any other successor in inter-
38       est, whether outright or in trust.
39           (e) ``Distributive share'' or ``distributive shares'' means the share or
40       shares of the distributive estate passing to a distributee or distributees.
41           (f) (d) ``Domicile'' refers to that place where a person resides, has an
42       intention to remain and to which they intend to return following any
43       absence.

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  1           (g) (e) ``Estate'' and ``property'' shall mean the real, personal and
  2       mixed property or interest therein of the testator, intestate, grantor, bar-
  3       gainor, vendor or donor which shall pass or be transferred to legatees,
  4       devisees, heirs, next of kin, grantees, donees, vendees, or successors and
  5       shall include all personal property within or without the state.
  6           (h) (f) ``Executor'' and ``administrator'' mean the duly appointed,
  7       qualified and acting executor or administrator of the decedent in this
  8       state.
  9           (i) (g) ``Nonresident decedent'' means a decedent who was not a res-
10       ident decedent at the time of death.
11           (j) (h) ``Personal representative'' means the executor, administrator
12       or deemed executor of the decedent.
13           (k) (i) ``Resident decedent'' means a decedent who was domiciled in
14       this state at the time of death.
15           (l) (j) ``Secretary'' means the secretary of revenue, or the secretary's
16       designee.
17           (m) (k) ``Tax'' includes tax, penalty and interest, unless the context of
18       a particular section otherwise requires.
19           (n) (l) ``Transfer'' shall include the passing of property or any interest
20       therein in possession or enjoyment, present or future, by inheritance,
21       descent, devise, succession, bequest, grant, deed, bargain, sale, gift or
22       appointment in the manner herein prescribed.
23           Sec. 5. K.S.A. 79-1564 is hereby amended to read as follows: 79-
24       1564. (a) Except as hereinafter provided, the executor or administrator
25       of the estate of every decedent whose death gives rise to a tax liability
26       under the provisions of this act, within nine months following the death
27       of the decedent, shall make and The personal representative of every
28       estate subject to the tax imposed by section 1 who is required by federal
29       law to file a return for federal estate taxes shall file in the office of the
30       director a return on forms prepared and furnished by the secretary to-
31       gether with a copy of the federal estate tax return on or before the date
32       the federal estate tax return is required to be filed.
33           (b) In those estates in which no executor or administrator has been
34       appointed, the deemed executor shall make and file such return. In the
35       event there is more than one deemed executor, all deemed executors
36       shall be jointly responsible for completing and filing one return reporting
37       all of the assets of the estate except as hereinafter provided.
38           (c) If, after exercising due diligence, the personal representative mak-
39       ing and filing such return is unable to make a complete return as to any
40       part of the gross estate of the decedent, such personal representative shall
41       make and file a return reporting all information as to the estate assets,
42       including a description thereof and the name of any person holding a
43       legal or beneficial interest in the assets to the best of such personal rep-

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  1       resentative's knowledge.
  2           (d) (b) The taxes imposed under the provisions of this act shall be
  3       paid at the expiration of nine months after the death of the decedent.
  4       Such taxes shall be payable from the assets of the estate or proceeds
  5       therefrom, in order, so far as practicable, that each distributive share of
  6       the estate shall bear a just and equitable proportion of such taxes unless
  7       otherwise directed by the will of the decedent or trust agreement by the
  8       personal representative to the director not later than the date of the filing
  9       of the return.
10           (1) The executor or administrator of the estate of every decedent who
11       is required to file a return shall pay to the director all taxes imposed under
12       this act. In the event the tax imposed against the shares of the decedent's
13       estate exceeds the value of the assets or the proceeds therefrom which
14       were in the custody or control of the executor or administrator, the ex-
15       ecutor or administrator shall pay the tax imposed to the extent of the
16       value of the amount or the proceeds therefrom within such executor's or
17       administrator's custody or control and the balance of the taxes may be
18       stayed upon application to and approval by the director. Such application
19       shall be made at the time the return is filed upon forms prescribed by
20       the secretary. Upon approval of such application payment of the taxes
21       shall be stayed for a period not to exceed one year and the executor or
22       administrator shall have a right to proceed against the individual distri-
23       butee or distributees receiving such taxable shares and may perfect a lien
24       therefor under the provisions of K.S.A. 79-1569, and amendments
25       thereto.
26           (2) Except as hereinafter provided, the deemed executor or deemed
27       executors of the estate of every decedent who are required to file a return
28       shall pay to the director all of the taxes imposed by this act. To the extent
29       that all deemed executors do not join in the filing of the return, the
30       deemed executors who jointly file shall pay only that portion of the taxes
31       representing the aggregate tax liability imposed upon the distributive
32       shares of those so filing.
33           (3) Where an asset not within the custody or control of a personal
34       representative gives rise to a tax liability and such personal representative
35       is required to pay such tax or has voluntarily paid such tax from the assets
36       within such personal representative's custody or control, the personal rep-
37       resentative shall have a right to proceed against the individual distributee
38       receiving such share and may perfect a lien therefor under the provisions
39       of K.S.A. 79-1569, and amendments thereto. For the purpose of this
40       paragraph: (1) With respect to the tax liability caused without consider-
41       ation of K.S.A. 79-1539 or 79-1540, and amendments thereto, the per-
42       sonal representative shall be entitled to recover from the distributee the
43       amount by which the total tax liability of the decedent's estate resulting

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  1       from such assets outside the control of the personal representative and
  2       received by the distributee exceeds the total tax liability which would have
  3       been payable if the value of such property had not been included in the
  4       decedent's gross estate; and (2) with respect to any additional tax liability
  5       resulting from the application of K.S.A. 79-1539 or 79-1540, and amend-
  6       ments thereto, the personal representative shall be entitled to recover
  7       from the distributee that portion of the total tax liability caused by such
  8       application equal to the ratio that the value of such assets outside the
  9       control of the personal representative received by the distributee bears
10       to the total value of such assets outside the control of the personal rep-
11       resentative.
12           (4) Whenever the personal representative is required to pay the taxes
13       imposed upon an asset not within the personal representative's custody
14       or control and pays the taxes imposed thereon from assets or proceeds
15       therefrom of the estate within the personal representative's custody or
16       control and thereafter fails to collect the taxes attributable to the distrib-
17       utive shares of the decedent's estate which were not within the personal
18       representative's custody or control, the personal representative shall be
19       entitled to a refund of the taxes attributable to such shares which were
20       paid from assets or proceeds therefrom within the personal representa-
21       tive's custody or control upon application to the director. The application
22       for refund shall be filed on forms prescribed by the secretary within the
23       time allowed for refunds pursuant to K.S.A. 79-1574, and amendments
24       thereto. Upon being satisfied that the personal representative has exer-
25       cised due diligence in attempting to recover the taxes attributable to the
26       distributive shares of the decedent's estate which were not within such
27       personal representative's custody or control, the director shall refund the
28       same.
29           (5) The director shall issue a receipt acknowledging payment of such
30       taxes whenever the taxes as shown to be due on the return or any addi-
31       tional taxes assessed by the director have been paid by a personal rep-
32       resentative and (A) such executor or administrator has requested a cash
33       receipt in order to be subrogated to the state's right to proceed in col-
34       lecting the tax against a distributee; or (B) such executor or administrator
35       has received a stay of payment from the director. Such a receipt shall be
36       issued only under circumstances described in clauses (A) or (B) of this
37       subsection and shall not constitute evidence that a final determination of
38       taxes pursuant to K.S.A. 79-1571, and amendments thereto, has been
39       made.
40           (e) (c) If the taxes contemplated by this act are not paid when due,
41       interest at the rate prescribed by K.S.A. 79-2968(b), and amendments
42       thereto, shall be charged and collected commencing at the time the same
43       become payable. When the filing of the return is delayed beyond nine

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  1       months after the death of the decedent and the director finds that such
  2       delay was due to the inability of the personal representative to determine
  3       the distributive shares of an estate or the proper recipients thereof, or to
  4       litigation, interest shall commence at the time the return is filed.
  5           (f) At the election of the personal representative, the taxes imposed
  6       by this act may be determined by the director. Such election shall be
  7       made by filing a return disclosing all information necessary for the de-
  8       termination of the taxes imposed by this act. Upon receipt of all necessary
  9       information, the director shall determine the taxes due and owing and
10       shall notify the personal representative of the tax liability by registered or
11       certified mail. Notwithstanding any election made pursuant to this sec-
12       tion, the taxes shall be due and payable at the same time and in the same
13       manner as if the taxes had been determined by the personal represen-
14       tative. If the election pursuant to this subsection is made before the ex-
15       piration of the nine-month period after the death of the decedent, interest
16       shall be charged and collected commencing 10 days after notice of the
17       tax liability has been received by the personal representative, or at the
18       expiration of the nine-month period after the decedent's death, whichever
19       is later. If the election pursuant to this subsection is not timely made and
20       the director shall find that the delay was not due to the circumstances set
21       forth in subsection (e), interest shall be charged and collected commenc-
22       ing at the expiration of the nine-month period after the decedent's death.
23           Sec. 6. K.S.A. 79-1569 is hereby amended to read as follows: 79-
24       1569. (a) Subject to the provisions of subsection (b), Property of which a
25       decedent died seized or possessed, subject to the taxes imposed by this
26       act, in whatever form of investment it may happen to be shall be charged
27       with a lien for all taxes, penalty and interest thereon which are or may
28       become due on such property; but the lien shall not affect any property
29       after it has been sold or disposed of for value by the executors or admin-
30       istrators in accordance with law, and no consent to transfer issued by the
31       director shall be required to release such lien, but in all such cases a lien
32       shall attach to the proceeds realized from any such sale or other dispo-
33       sition for all taxes and interest thereon which are or may be due on such
34       property. That portion of the decedent's property which is used for the
35       payment of charges against the estate and expenses of its administration,
36       allowed by any court having jurisdiction thereof, shall be divested of such
37       lien. The lien on any property subject to the inheritance tax act by virtue
38       of the provisions of this subsection shall be divested after 10 years from
39       the date of the decedent's death.
40           (b) If the taxes imposed under this act are not paid when due, the
41       spouse, transferee, surviving tenant, person in possession of the property
42       by reason of the exercise, nonexercise, or release of a power of appoint-
43       ment, or beneficiary, who receives, or has on the date of the decedent's

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  1       death, property included in the gross estate under K.S.A. 79-1548 through
  2       79-1553 and 79-1555 through 79-1557, and amendments thereto, to the
  3       extent of the value of such property at the time of the decedent's death
  4       shall be personally liable for such tax. Any part of such property trans-
  5       ferred by, or transferred by a transferee of, such spouse, transferee, trus-
  6       tee, surviving tenant, person in possession, or beneficiary to a purchaser
  7       or holder of a security interest shall be divested of the lien provided for
  8       in subsection (a) and a similar lien shall then attach to all the property of
  9       such spouse, transferee, trustee, surviving tenant, person in possession,
10       beneficiary or transferee of any such person, except any part transferred
11       to a purchaser or a holder of a security interest.
12           (c) Upon issuance of a receipt for taxes paid pursuant to subsection
13       (d)(5) of K.S.A. 79-1564 and amendments thereto to a personal repre-
14       sentative who has paid the taxes imposed by this act or an approved
15       application for stay filed pursuant to subsection (d)(1) of K.S.A. 79-1564
16       and amendments thereto, the personal representative shall be subrogated
17       to the right to proceed against any real or personal property in which a
18       distributee has an interest which the state might have had. The issuance
19       of a receipt for taxes paid by the director after payment of the taxes or
20       approved application for stay shall be deemed an assignment by the state
21       to the personal representative of the right to proceed against the real and
22       personal property in which a distributee has an interest and shall be con-
23       clusive evidence thereof. A right to proceed shall arise and a lien shall be
24       perfected to aid the personal representative in the right to proceed against
25       property of a distributee only if the personal representative files a notice
26       of lien with the register of deeds. The lien shall be effective only against
27       property of a distributee located in the county where the notice of lien is
28       filed. Such notice of lien may be filed in any county wherein any real or
29       personal property in which the distributee has an interest is located. The
30       notice of lien shall be made on forms prescribed by the secretary. Upon
31       satisfaction of the lien, a release shall be issued by such personal repre-
32       sentative on forms prescribed by the secretary.
33           (d) If the personal representative has requested and received a re-
34       fund of taxes paid pursuant to subsection (d)(4) of K.S.A. 79-1564, and
35       amendments thereto, or whenever the personal representative fails to
36       collect the tax pursuant to subsection (d)(4) of K.S.A. 79-1564, and
37       amendments thereto, or is not required to pay the tax imposed by this
38       act or the taxes imposed by this act are not paid at the expiration of nine
39       months after the death of the decedent,
40           (b) If the personal representative fails to timely pay the tax imposed
41       by section 1, the director shall enforce the director's lien by the issuance
42       of a warrant under the director's hand and official seal, directed to the
43       sheriff of any county of the state, commanding such sheriff to levy upon

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  1       and sell the real and personal property of the distributee estate found
  2       within the sheriff's county for the payment of the amount thereof, with
  3       the added interest and the cost of executing the warrant, and to return
  4       such warrant to the director and pay to the director the money collected
  5       by virtue thereof not more than 60 days from the date of the warrant.
  6       The sheriff shall within five days after the receipt of the warrant, file with
  7       the clerk of the district court of the sheriff's county a copy thereof, and
  8       thereupon the clerk shall enter in the appearance docket in appropriate
  9       columns, the name of the distributee estate named in the warrant, the
10       amount of the tax or portion thereof and interest for which the warrant
11       is issued and the date such copy is filed. The amount of such warrant so
12       docketed shall thereupon become a lien upon the title to, and interest in,
13       the real property of the distributee estate against whom it is issued in the
14       same manner, as a judgment duly docketed in the office of such clerk.
15       The sheriff shall proceed in the same manner and with like effect as
16       prescribed by law with respect to executions issued against property upon
17       judgments of a court of record, and shall be entitled to the same fees for
18       the sheriff's services to be collected in the same manner.
19           The court in which the warrant is docketed shall have jurisdiction over
20       all subsequent proceedings as fully as though a judgment had been ren-
21       dered in the court. In the discretion of the director, a warrant of like
22       terms, force and effect may be issued and directed to any officer or em-
23       ployee of the director, and in the execution thereof such officer or em-
24       ployee shall have all the powers conferred by laws upon sheriffs, and the
25       subsequent proceedings thereunder shall be the same as provided where
26       the warrant is issued directly to the sheriff. The distributee estate shall
27       have the right to redeem the real estate within a period of 18 months
28       from the date of such sale. If a warrant be returned, unsatisfied in full,
29       the director shall have the same remedies to enforce the claim for taxes
30       as if the state of Kansas had recovered judgment against the distributee
31       for the amount of the tax. No law exempting any goods and chattels, land
32       and tenements from forced sale under execution shall apply to a levy and
33       sale under any such warrants or upon any execution issued upon any
34       judgment rendered in any action for inheritance taxes. The director shall
35       have the right at any time after the warrant has been returned unsatisfied
36       or satisfied only in part, to issue alias warrants until the full amount of
37       the tax is collected.
38           Sec. 7. K.S.A. 79-1570 is hereby amended to read as follows: 79-
39       1570. No final account of a personal representative shall be allowed by
40       the district court unless such account shows, and the judge of such court
41       finds, that all taxes imposed by the provisions of this act upon any property
42       or interest therein belonging to the estate to be settled by such account
43       and already payable have been paid, and that all taxes which may become

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  1       due on such estate have been paid or settled as hereinbefore provided,
  2       or that the payment thereof to the state is secured by bond.
  3           Sec. 8. K.S.A. 79-1571 is hereby amended to read as follows: 79-
  4       1571. (a) As soon as practicable after the return is filed and the taxes paid,
  5       the director shall issue a closing letter. Such closing letter shall be issued
  6       upon the director being satisfied that there has been a final determination
  7       of all taxes due and that all such taxes have been paid. The director shall
  8       issue such closing letter to the personal representative, and when the
  9       estate is involved in probate proceedings before a district court, a copy
10       of such closing letter shall be forwarded to the judge of such court for
11       recording in full in the journal of such court.
12           (b) In the event that all deemed executors do not join in the filing of
13       a return, or in the event the personal representative is unable to make a
14       complete return as to any part of the gross estate of the decedent, upon
15       the director being satisfied that a final determination of the taxes due on
16       that portion of the estate reported has been made and all taxes due
17       thereon have been paid, the director shall issue a closing letter as to that
18       portion of the gross estate which has actually been reported.
19           (c) The closing letter shall be applicable only to assets reported in the
20       return filed with the director. To the extent the gross assets of the de-
21       cedent were reported, the issuance of a closing letter shall be conclusive
22       evidence that all taxes have been determined and paid and shall release
23       any lien which attached to the decedent's property and that of any
24       deemed executor or distributee unless such lien has been subrogated,
25       assigned and perfected pursuant to K.S.A. 79-1569, and amendments
26       thereto. The closing letter may contain a legal description of the real
27       property so reported.
28           (d) Release of the lien imposed by K.S.A. 79-1569, and amendments
29       thereto, may be provided by filing notice of release in the office of the
30       register of deeds in any county where any such real property included in
31       the gross estate is located or, when the estate is involved in proceedings
32       before the district court, with the court. Any such notice of release shall
33       be in such form as prescribed by the secretary and may include use of or
34       reference to the closing letter issued by the director or may be included
35       as part of that closing letter.
36           Sec. 9. K.S.A. 79-1572 is hereby amended to read as follows: 79-
37       1572. (a) Assets belonging to the estate of a deceased nonresident, other
38       than intangible assets of a decedent who at the time of death resided in
39       the United States but outside this state, shall not be delivered or trans-
40       ferred to a foreign personal representative of such decedent without serv-
41       ing notice upon the director of taxation of the time and place of such
42       intended delivery or transfer at least seven days before the time of such
43       delivery or transfer. The director or the director's representative may

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  1       examine such assets prior to the time of such delivery or transfer. Failure
  2       to serve such notice or to allow such examination or the making of a
  3       delivery or transfer of such assets against the objection of the director
  4       shall render the person, association, or corporation making the delivery
  5       or transfer liable for the payment of the tax and interest due upon such
  6       assets, in an action brought by the department of revenue in the name
  7       of the state.
  8           (b) A foreign or Kansas person, corporation, partnership or other as-
  9       sociation of persons may release or transfer intangible assets of a nonres-
10       ident decedent upon receipt of a sworn affidavit from the personal rep-
11       resentative of the decedent's estate, stating that the decedent was not a
12       resident of the state of Kansas at the time of the decedent's death but
13       that such decedent was a resident of another state in the United States.
14           Sec. 10. K.S.A. 79-1574 is hereby amended to read as follows: 79-
15       1574. (a) Except as otherwise provided in this section, the amount of any
16       tax imposed by this act shall be assessed within three years after the return
17       or affidavit was filed, whether or not such return was filed on or after the
18       date prescribed, or the tax as shown to be due on such return was paid,
19       whichever is the later date, and no proceedings in court for the collection
20       of such taxes shall be begun after the expiration of such period. Where
21       the assessment of any inheritance tax imposed under this act has been
22       made within the period of limitation properly applicable thereto, such tax
23       may be collected by distraint or by a proceeding in court, but only if
24       begun within one year after the period of limitation as provided in this
25       act. The foregoing provisions of this section shall not apply in those cases
26       where the time for the payment of the tax has been extended pursuant
27       to K.S.A. 79-1544 or 79-1567, and amendments thereto. In those cases
28       where the director has retained jurisdiction over the estate pursuant to
29       K.S.A. 79-1544, and amendments thereto, assessment of taxes or pro-
30       ceedings to collect taxes must be made or commenced within three years
31       after notice of the death of the life tenant. In those cases where a bond
32       has been given guaranteeing the payment of the tax pursuant to K.S.A.
33       79-1567, and amendments thereto, assessment of taxes or proceedings
34       for collection of the tax must be made or commenced within three years
35       after the date of the expiration of the last bond so given.
36           (b) For the purposes of this section, a return of tax required under
37       this act filed before the last day prescribed by law shall be deemed to be
38       filed on such last day and any tax shown to be due on such return and
39       paid before the last day prescribed by law shall be deemed to be paid on
40       such last day.
41           (c) In the case of a false or fraudulent return or affidavit with intent
42       to evade tax or in the case of failure to file a return, the tax may be
43       assessed, or a proceeding in court for collection of such tax may be begun

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  1       at any time. If the personal representative omits from the gross estate
  2       items includable in such gross estate as exceed 25% of the gross estate
  3       stated in the return or affidavit, the tax may be assessed or a proceeding
  4       in court for collection of such tax may be begun at any time within six
  5       years after the return or affidavit was filed. In determining the items
  6       omitted from the gross estate, there shall not be taken into account any
  7       item which is omitted from the gross estate if such item is disclosed in
  8       the return or affidavit, or in a statement attached to the return or affidavit,
  9       in a manner adequate to apprise the director of the nature and amount
10       of such item.
11           (d) No refund or credit shall be allowed by the director after three
12       years from the date the return was filed, or one year after an assessment
13       is made, whichever is the later date, unless before the expiration of such
14       period a claim therefor is filed by the personal representative.
15           (e) In case a personal representative has made claim for a refund,
16       such personal representative shall have the right to commence a suit for
17       the recovery of the same at the expiration of six months after the filing
18       of the claim for refund, if no action has been taken by the director.
19           (f) Any personal representative of an estate of a decedent who has
20       been notified of any adjustment by the internal revenue service shall
21       notify the director within 90 days of the date such adjustment is agreed
22       to or becomes final between the estate and the internal revenue service.
23       Such adjustments shall be reported by filing an amended return and a
24       copy of the revenue agent's report detailing such adjustments, along with
25       any other statements or documents as may be necessary to explain and
26       support the adjustments.:
27           (1) Notwithstanding the provisions of subsections (a) or (d), addi-
28       tional tax may be assessed and proceedings in court for collection of such
29       taxes may be commenced and any refund or credit may be allowed by
30       the director of taxation within 180 days following receipt of any such
31       report of adjustments by the Kansas department of revenue. No assess-
32       ment shall be made nor shall any refund or credit be allowed under the
33       provisions of this paragraph except to the extent the same is attributable
34       to changes in the estate due to adjustments indicated by such report.
35           (2) In the event of failure to comply with the provisions of this sub-
36       section, the statute of limitations shall be tolled.
37           Sec. 11. K.S.A. 79-1575 is hereby amended to read as follows: 79-
38       1575. As soon as practicable after the return or affidavit is filed, the di-
39       rector shall make an examination thereof and shall issue final determi-
40       nations of tax liability hereunder in the manner prescribed by K.S.A.
41       79-3226, and amendments thereto. If the tax found due is less than the
42       amount paid, the excess paid shall be refunded to the personal represen-
43       tative who paid the tax, except that no refund of $25 or less shall be made.

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  1       If the tax found due shall be greater than the amount previously paid, or
  2       if a claim for a refund is denied, notice shall be mailed to the person
  3       filing the return by registered or certified mail. An order finding addi-
  4       tional tax shall be accompanied by a notice and demand for payment. The
  5       tax shall be paid within 30 days thereafter, together with interest on the
  6       additional tax from the date the tax was due unless an appeal is taken in
  7       the manner provided by K.S.A. 74-2438, and amendments thereto. No
  8       additional tax shall be assessed for less than $25.
  9           Sec. 12. K.S.A. 79-1576 is hereby amended to read as follows: 79-
10       1576. Subject to the right of any personal representative to apply for
11       review as provided for in this act, the director shall hear and determine
12       all questions relative to such tax. The attorney for the director, at the
13       request of the director, shall represent the state in any court proceedings
14       brought to review any action of the director. If any district court shall
15       find that any such tax remains due and that proper proceedings have not
16       been taken before the director for abatement thereof, it shall order the
17       personal representative to pay the same, with interest, and costs, and no
18       question regarding the validity of such tax shall be heard in such court.
19       If it appears that there are no goods or assets of the estate in the personal
20       representative's hands, the court may assess the amount of the tax against
21       the personal representative, as if for the personal representative's own
22       debt, and may enforce compliance with such order; but the personal
23       representatives shall be personally liable only for such taxes as shall be
24       payable while they continue in such offices or have custody or control of
25       decedent's property. In the cases where the tax is due and payable by and
26       collectible from the distributee, all actions shall be prosecuted by the
27       attorney for the director in the name of the state, and such actions may
28       be brought in the same courts as other actions for money.
29           Sec. 13. K.S.A. 79-1579 is hereby amended to read as follows: 79-
30       1579. A refund clearing fund, designated inheritance estate tax abatement
31       refund, not to exceed $50,000 shall be set apart and maintained by the
32       director of taxation from inheritance estate tax collections and held by the
33       state treasurer for the prompt payment of all abatements and refunds. If
34       the director of taxation finds that a claim for refund duly filed by a per-
35       sonal representative pursuant to K.S.A. 79-1564(d)(4), 79-1574(d) or
36       79-1575, and amendments thereto, should be allowed, or if a court upon
37       a final judgment shall find that the inheritance estate tax, penalty or in-
38       terest paid by a personal representative is in excess of the amount legally
39       due, then the director of taxation shall issue the director's vouchers to
40       the director of accounts and reports for the refund to the personal rep-
41       resentative of such tax, penalty or interest together with interest provided
42       for hereinafter. Upon receipt of such voucher properly executed and en-
43       dorsed, the director of accounts and reports shall issue the director's

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13

  1       warrants to the state treasurer for the payment to the personal represen-
  2       tative out of the inheritance estate tax abatement refund fund. The di-
  3       rector of taxation shall file a duplicate of such voucher and also a state-
  4       ment which shall set forth the reasons why such abatement or refund was
  5       allowed. Upon the allowance of an abatement or refund of any tax or
  6       interest paid, interest shall be allowed and paid on the amount of such
  7       abatement or refund at the rate of 12% per annum from the date such
  8       tax, penalty or interest was paid to the date the refund or abatement of
  9       inheritance estate taxes is made. No refunds in an amount of less than
10       $25 shall be made.
11           Sec. 14. K.S.A. 79-1580 is hereby amended to read as follows: 79-
12       1580. (a) The director of taxation shall fix and charge an amount pursuant
13       to K.S.A. 45-218 and 45-219, and amendments thereto for furnishing
14       certified copies of returns or affidavits.
15           (b) All fees collected hereunder shall be remitted to the state trea-
16       surer at least monthly. Upon receipt of each such remittance, the state
17       treasurer shall deposit the entire amount thereof in the state treasury and
18       the same shall be credited to the state general fund.
19           Sec. 15. K.S.A. 79-1587 is hereby amended to read as follows: 79-
20       1587. (a) All reports and returns required under the provisions of the
21       Kansas inheritance estate tax act shall be preserved for three years and
22       thereafter until the director of taxation orders them to be destroyed.
23           (b) Except in accordance with proper judicial order, or as provided
24       in subsection (c) of this section, subsection (g) of K.S.A. 17-7511, and
25       amendments thereto, or 46-1106, and amendments thereto, it shall be
26       unlawful for the director of taxation, or any deputy, agent, clerk or other
27       officer, employee or former employee of the department of revenue or
28       any other state officer or employee or former state officer or employee
29       to divulge, or to make known in any way, the value of any estate or any
30       particulars set forth or disclosed in any report, return, federal return or
31       federal return information required under the provisions of the Kansas
32       inheritance estate tax act; and it shall be unlawful for the director of
33       taxation, any deputy, agent, clerk or other officer or employee of the
34       department of revenue engaged in the administration of the Kansas in-
35       heritance estate tax act to engage in the business or profession of tax
36       accounting or to accept employment, with or without consideration, from
37       any person, firm or corporation for the purpose, directly or indirectly, of
38       preparing tax returns or reports required by the laws of the state of Kan-
39       sas, by any other state or by the United States government, or to accept
40       any employment for the purpose of advising, preparing material or data,
41       or the auditing of books or records to be used in an effort to defeat or
42       cancel any tax or part thereof that has been assessed by the state of Kan-
43       sas, any other state or by the United States government.

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14

  1           (c) Nothing herein shall be construed to prohibit the publication of
  2       statistics, so classified as to prevent the identification of particular reports
  3       or returns and the items thereof, or the inspection of returns by the
  4       attorney general or other legal representatives of the state. Nothing in
  5       this section shall prohibit the post auditor from access to all inheritance
  6       estate tax reports or returns in accordance with and subject to the pro-
  7       visions of subsection (g) of K.S.A. 46-1106, and amendments thereto.
  8       Nothing in this section shall be construed to prohibit the disclosure of
  9       the taxpayer's name, social security number, last known address and total
10       tax liability, including penalty and interest, from inheritance estate tax
11       returns to a debt collection agency contracting with the secretary of rev-
12       enue pursuant to K.S.A. 75-5140 to 75-5143, inclusive, and amendments
13       thereto. Any person receiving any information under the provisions of this
14       subsection shall be subject to the confidentiality provisions of subsection
15       (b) of this section and to the penalty provisions of subsection (d) of this
16       section.
17           (d) Any violation of subsections (b) or (c) of this section shall be a
18       class B misdemeanor; and if the offender be an officer or employee of
19       the state, such officer or employee shall be dismissed from office.
20           (e) Notwithstanding the provisions of this section, the secretary of
21       revenue may permit the commissioner of internal revenue of the United
22       States, or the proper official of any state imposing an inheritance or estate
23       tax, or the authorized representative of either, to inspect the inheritance
24       estate tax returns made under the provisions of the Kansas inheritance
25       estate tax act and the secretary of revenue may make available or furnish
26       to the taxing officials of any other state or the commissioner of internal
27       revenue of the United States or other taxing officials of the federal gov-
28       ernment, or their authorized representatives, information contained in
29       inheritance tax reports or returns or any audit thereof or the report of
30       any investigation made with respect thereto, filed pursuant to the Kansas
31       inheritance estate tax act, as the secretary may consider proper, but such
32       information shall not be used for any other purpose than that of the
33       administration of tax laws of such state, the state of Kansas or of the
34       United States.
35           (f) Notwithstanding the provisions of this section, the inheritance es-
36       tate tax return filed with respect to the estate of a decedent shall, upon
37       written request, be open to inspection by or disclosure to: (1) The ad-
38       ministrator, executor or trustee of such decedent's estate,; and (2) any
39       heir at law, next of kin or beneficiary under the will of such decedent or
40       a donee or distributee of the decedent's property, but only if the secretary
41       of revenue finds that such heir at law, next of kin, beneficiary, donee or
42       distributee has a material interest which will be affected by information
43       contained therein.

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15

  1           New Sec. 16. Sections 1 through 17 of this act and the provisions of
  2       article 15 of chapter 79 of the Kansas Statutes Annotated not repealed
  3       by this act shall be known and may be cited as the Kansas estate tax act.
  4           New Sec. 17. The provisions of sections 1 through 17 of this act shall
  5       be applicable to the estates of all decedents dying after June 30, 1998.
  6       The provisions of article 15 of chapter 79 of the Kansas Statutes Anno-
  7       tated in effect immediately before the effective date of this act shall be
  8       applicable to the estates of all decedents dying before July 1, 1998.
  9           Sec. 18. K.S.A. 79-32,110 is hereby amended to read as follows:
10       79-32,110. (a) Resident Individuals. Except as otherwise provided by sub-
11       section (a) of K.S.A. 79-3220, and amendments thereto, a tax is hereby
12       imposed upon the Kansas taxable income of every resident individual,
13       which tax shall be computed in accordance with the following tax sched-
14       ules:
15           (1) Married individuals filing joint returns.
16       If the taxable income is: The tax is:
17       Not over $30,000 3.5% of Kansas taxable income
18       Over $30,000 but not over $60,000 $1,050 plus 6.25% of excess over $30,000
19       Over $60,000 $2,925 plus 6.45% of excess over $60,000
20           (2) All other individuals.
21        (A) For tax year 1997:
22       If the taxable income is: The tax is:
23       Not over $20,000 4.1% of Kansas taxable income
24       Over $20,000 but not over $30,000 $820 plus 7.5% of excess over $20,000
25       Over $30,000 $1,570 plus 7.75% of excess over $30,000
26        (B) For tax year 1998, and all tax years thereafter:
27       If the taxable income is: The tax is:
28       Not over $15,000 3.5% of Kansas taxable income
29       Over $15,000 but not over $30,000 $525 plus 6.75% of excess over $15,000
30       Over $30,000 $1,537.50 plus 7.75% of excess over $30,000
31        (C) For tax year 1999:
32       If the taxable income is: The tax is:
33       Not over $15,000 3.5% of Kansas taxable income
34       Over $15,000 but not over $30,000 $525 plus 6.25% of excess over $15,000
35       Over $30,000 $1,462.50 plus 7.45% of excess over $30,000
36        (D) For tax year 2000, and all tax years thereafter:
37       If the taxable income is: The tax is:
38       Not over $15,000 3.5% of Kansas taxable income
39       Over $15,000 but not over $30,000 $525 plus 6.25% of excess over $15,000
40       Over $30,000 $1,462.50 plus 6.45% of excess over $30,000
41           (b) Nonresident Individuals. A tax is hereby imposed upon the Kansas
42       taxable income of every nonresident individual, which tax shall be an
43       amount equal to the tax computed under subsection (a) as if the nonres-

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  1       ident were a resident multiplied by the ratio of modified Kansas source
  2       income to Kansas adjusted gross income.
  3           (c) Corporations. A tax is hereby imposed upon the Kansas taxable
  4       income of every corporation doing business within this state or deriving
  5       income from sources within this state. Such tax shall consist of a normal
  6       tax and a surtax and shall be computed as follows:
  7           (1) The normal tax shall be in an amount equal to 4% of the Kansas
  8       taxable income of such corporation; and
  9           (2) the surtax shall be in an amount equal to 3.35% of the Kansas
10       taxable income of such corporation in excess of $50,000.
11           (d) Fiduciaries. A tax is hereby imposed upon the Kansas taxable
12       income of estates and trusts at the rates provided in paragraph (2) of
13       subsection (a) hereof.
14           Sec. 19. K.S.A. 79-32,117 is hereby amended to read as fol-
15       lows: 79-32,117. (a) The Kansas adjusted gross income of an indi-
16       vidual means such individual's federal adjusted gross income for
17       the taxable year, with the modifications specified in this section.
18           (b) There shall be added to federal adjusted gross income:
19           (i) Interest income less any related expenses directly incurred
20       in the purchase of state or political subdivision obligations, to the
21       extent that the same is not included in federal adjusted gross in-
22       come, on obligations of any state or political subdivision thereof,
23       but to the extent that interest income on obligations of this state
24       or a political subdivision thereof issued prior to January 1, 1988,
25       is specifically exempt from income tax under the laws of this state
26       authorizing the issuance of such obligations, it shall be excluded
27       from computation of Kansas adjusted gross income whether or not
28       included in federal adjusted gross income. Interest income on ob-
29       ligations of this state or a political subdivision thereof issued after
30       December 31, 1987, shall be excluded from computation of Kansas
31       adjusted gross income whether or not included in federal adjusted
32       gross income.
33           (ii) Taxes on or measured by income or fees or payments in
34       lieu of income taxes imposed by this state or any other taxing ju-
35       risdiction to the extent deductible in determining federal adjusted
36       gross income and not credited against federal income tax. This
37       paragraph shall not apply to taxes imposed under the provisions
38       of K.S.A. 79-1107 or 79-1108, and amendments thereto, for privi-
39       lege tax year 1995, and all such years thereafter.
40           (iii) The federal net operating loss deduction.
41           (iv) Federal income tax refunds received by the taxpayer if the
42       deduction of the taxes being refunded resulted in a tax benefit for
43       Kansas income tax purposes during a prior taxable year. Such re-

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17

  1       funds shall be included in income in the year actually received
  2       regardless of the method of accounting used by the taxpayer. For
  3       purposes hereof, a tax benefit shall be deemed to have resulted if
  4       the amount of the tax had been deducted in determining income
  5       subject to a Kansas income tax for a prior year regardless of the
  6       rate of taxation applied in such prior year to the Kansas taxable
  7       income, but only that portion of the refund shall be included as
  8       bears the same proportion to the total refund received as the fed-
  9       eral taxes deducted in the year to which such refund is attributable
10       bears to the total federal income taxes paid for such year. For
11       purposes of the foregoing sentence, federal taxes shall be consid-
12       ered to have been deducted only to the extent such deduction does
13       not reduce Kansas taxable income below zero.
14           (v) The amount of any depreciation deduction or business ex-
15       pense deduction claimed on the taxpayer's federal income tax re-
16       turn for any capital expenditure in making any building or facility
17       accessible to the handicapped, for which expenditure the taxpayer
18       claimed the credit allowed by K.S.A. 79-32,177, and amendments
19       thereto.
20           (vi) Any amount of designated employee contributions picked
21       up by an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919
22       and 74-4965, and amendments to such sections.
23           (vii) The amount of any charitable contribution made to the
24       extent the same is claimed as the basis for the credit allowed pur-
25       suant to K.S.A. 79-32,196, and amendments thereto.
26           (viii) The amount of any ad valorem taxes and assessments paid and
27       the amount of any costs incurred for habitat management or construction
28       and maintenance of improvements on real property, claimed for deduction
29       in determining federal adjusted gross income, to the extent the same is
30       claimed as the basis for any credit allowed pursuant to K.S.A. 79-32,203
31       and amendments thereto.
32           (c) There shall be subtracted from federal adjusted gross in-
33       come:
34           (i) Interest or dividend income on obligations or securities of
35       any authority, commission or instrumentality of the United States
36       and its possessions less any related expenses directly incurred in
37       the purchase of such obligations or securities, to the extent in-
38       cluded in federal adjusted gross income but exempt from state
39       income taxes under the laws of the United States.
40           (ii) Any amounts received which are included in federal ad-
41       justed gross income but which are specifically exempt from Kansas
42       income taxation under the laws of the state of Kansas.
43           (iii) The portion of any gain or loss from the sale or other dis-

SB 500--Am. by HCW

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  1       position of property having a higher adjusted basis for Kansas in-
  2       come tax purposes than for federal income tax purposes on the
  3       date such property was sold or disposed of in a transaction in which
  4       gain or loss was recognized for purposes of federal income tax that
  5       does not exceed such difference in basis, but if a gain is considered
  6       a long-term capital gain for federal income tax purposes, the mod-
  7       ification shall be limited to that portion of such gain which is in-
  8       cluded in federal adjusted gross income.
  9           (iv) The amount necessary to prevent the taxation under this
10       act of any annuity or other amount of income or gain which was
11       properly included in income or gain and was taxed under the laws
12       of this state for a taxable year prior to the effective date of this act,
13       as amended, to the taxpayer, or to a decedent by reason of whose
14       death the taxpayer acquired the right to receive the income or
15       gain, or to a trust or estate from which the taxpayer received the
16       income or gain.
17           (v) The amount of any refund or credit for overpayment of
18       taxes on or measured by income or fees or payments in lieu of
19       income taxes imposed by this state, or any taxing jurisdiction, to
20       the extent included in gross income for federal income tax pur-
21       poses.
22           (vi) Accumulation distributions received by a taxpayer as a ben-
23       eficiary of a trust to the extent that the same are included in federal
24       adjusted gross income.
25           (vii) Amounts received as annuities under the federal civil serv-
26       ice retirement system from the civil service retirement and disa-
27       bility fund and other amounts received as retirement benefits in
28       whatever form which were earned for being employed by the fed-
29       eral government or for service in the armed forces of the United
30       States.
31           (viii) Amounts received by retired railroad employees as a sup-
32       plemental annuity under the provisions of 45 U.S.C. 228b (a) and
33       228c (a)(1) et seq.
34           (ix) Amounts received by retired employees of a city and by
35       retired employees of any board of such city as retirement allow-
36       ances pursuant to K.S.A. 13-14,106, and amendments thereto, or
37       pursuant to any charter ordinance exempting a city from the pro-
38       visions of K.S.A. 13-14,106, and amendments thereto.
39           (x) For taxable years beginning after December 31, 1976, the
40       amount of the federal tentative jobs tax credit disallowance under
41       the provisions of 26 U.S.C. 280 C. For taxable years ending after
42       December 31, 1978, the amount of the targeted jobs tax credit and
43       work incentive credit disallowances under 26 U.S.C. 280 C.

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  1           (xi) For taxable years beginning after December 31, 1986, div-
  2       idend income on stock issued by Kansas Venture Capital, Inc.
  3           (xii) For taxable years beginning after December 31, 1989,
  4       amounts received by retired employees of a board of public utili-
  5       ties as pension and retirement benefits pursuant to K.S.A. 13-1246,
  6       13-1246a and 13-1249 and amendments thereto.
  7           (xiii) For taxable years beginning after December 31, 1993, the
  8       amount of income earned on contributions deposited to an indi-
  9       vidual development account under K.S.A. 79-32,117h, and amend-
10       ments thereto.
11           (xiv) For all taxable years commencing after December 31,
12       1996, that portion of any income of a bank organized under the
13       laws of this state or any other state, a national banking association
14       organized under the laws of the United States, an association or-
15       ganized under the savings and loan code of this state or any other
16       state, or a federal savings association organized under the laws of
17       the United States, for which an election as an S corporation under
18       subchapter S of the federal internal revenue code is in effect,
19       which accrues to the taxpayer who is a stockholder of such cor-
20       poration and which is not distributed to the stockholders as divi-
21       dends of the corporation.
22           (xv) For all taxable years commencing after December 31, 1997, the
23       amount, not to exceed $2,000, of contributions to an education savings
24       account pursuant to section 3 [21].
25           (d) There shall be added to or subtracted from federal adjusted
26       gross income the taxpayer's share, as beneficiary of an estate or
27       trust, of the Kansas fiduciary adjustment determined under K.S.A.
28       79-32,135, and amendments thereto.
29           (e) The amount of modifications required to be made under
30       this section by a partner which relates to items of income, gain,
31       loss, deduction or credit of a partnership shall be determined un-
32       der K.S.A. 79-32,131, and amendments thereto, to the extent that
33       such items affect federal adjusted gross income of the partner.
34           Sec. 20. K.S.A. 79-32,117h is hereby amended to read as fol-
35       lows: 79-32,117h. (a) This section may be cited as the individual
36       development account act.
37           (b) For the purposes of this section:
38           (1) ``Account holder'' means the individual on whose behalf the
39       individual development account is established.
40           (2) ``Dependent child'' means any person under the age of 21
41       years or any person who is legally entitled or subject to a court
42       order for the provision of proper and necessary subsistence and
43       education, and who is not emancipated, married or a member of

SB 500--Am. by HCW

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  1       the armed forces of the United States.
  2           (3) ``Individual development account'' means a custodial ac-
  3       count established or organized to pay for K-12 education expenses
  4       of the account holder.
  5           (4) ``Custodian'' means a chartered state bank or trust com-
  6       pany authorized to act as a fiduciary, a national banking associa-
  7       tion or savings and loan association authorized to act as a fiduciary,
  8       or an insurance company and shall include any other qualified fi-
  9       nancial custodian as defined by rules and regulations adopted by
10       the secretary of revenue.
11           (c) (1) For taxable years beginning after December 31, 1993,
12       a resident of this state shall be allowed to deposit contributions to
13       an individual development account. Except as provided in subsec-
14       tion (c)(8), the amount of deposit for the first taxable year subse-
15       quent to the effective date of this act shall not exceed:
16           (A) $2,000 for the account holder; or
17           (B) $2,000 for the account holder and $1,000 for each depend-
18       ent child of the account holder.
19           (2) The maximum allowable amount of deposit for subsequent
20       years shall be increased annually by a percentage equal to the
21       previous year's increase in the consumer price index as published
22       annually as soon after December 31 each year as possible by the
23       secretary of state in the Kansas register. As used in this paragraph
24       (2), ``consumer price index'' means the twelve-month average of
25       the consumer price index for all urban consumers United States
26       city average which is published by the United States department
27       of labor.
28           (3) Income earned on an individual development account shall
29       be exempt from state income taxation under the Kansas income
30       tax act.
31           (4) Upon agreement between an employer and employee, an
32       employer may contribute to the employee's individual develop-
33       ment account, subject to the restrictions in subsection (6)(A).
34           (5) The individual development account shall be established as
35       a custodial account and be placed with a custodian.
36           (6) Individual development account funds may be withdrawn
37       by the account holder at any time for any purpose, subject to the
38       following restrictions and penalties:
39           (A) There shall be a distribution penalty for withdrawal of in-
40       dividual development account funds by the account holder; such
41       penalty shall be 25% of the amount of interest earned as of the
42       date of withdrawal on the account and shall be remitted by the
43       custodian to the state and disposed of in the same manner as other

SB 500--Am. by HCW

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  1       penalties imposed under the Kansas income tax act; and, upon such
  2       withdrawal, the interest earned during the tax year in which with-
  3       drawal occurs shall be subject to state income taxation; and
  4           (B) withdrawals shall be permitted without penalty for the pur-
  5       poses for which the individual development account was created.
  6           (7) Upon the death of the account holder, the account princi-
  7       pal, as well as any interest accumulated thereon, shall be distrib-
  8       uted to the decedent's estate and taxed as part of the estate.
  9           (8) There shall be no limit on the amount of earned income of
10       a dependent child, who is a recipient of aid to families with de-
11       pendent children, deposited in an individual development account
12       of such dependent child that was created or organized to pay for
13       educational expenses of such dependent child.
14           New Sec. 21. (a) This section may be cited as the education
15       savings account act.
16           (b) For the purposes of this section:
17           (1) ``Account holder'' means the individual on whose behalf the
18       education savings account is established.
19           (2) ``Dependent child'' means any person under the age of 21
20       years or any person who is legally entitled or subject to a court
21       order for the provision of proper and necessary subsistence and
22       education, and who is not emancipated, married or a member of
23       the armed forces of the United States.
24           (3) ``Education savings account'' means a custodial account es-
25       tablished or organized to pay for post secondary education ex-
26       penses of the account holder.
27           (4) ``Custodian'' means a chartered state bank or trust com-
28       pany authorized to act as a fiduciary, a national banking associa-
29       tion or savings and loan association authorized to act as a fiduciary,
30       or an insurance company and shall include any other qualified fi-
31       nancial custodian as defined by rules and regulations adopted by
32       the secretary of revenue.
33           (c) For taxable years beginning after December 31, 1997, a
34       resident of this state shall be allowed to deposit contributions to
35       an education savings account. Except as provided in subsection
36       (c)(8), the amount of deposit for the first taxable year subsequent
37       to the effective date of this act shall not exceed:
38           (1) $2,000 for the account holder; or
39           (2) $2,000 for the account holder and $1,000 for each depend-
40       ent child of the account holder.
41           (3) Income earned on an education savings account shall be
42       exempt from state income taxation under the Kansas income tax
43       act.

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  1           (4) Upon agreement between an employer and employee, an
  2       employer may contribute to the employee's education savings ac-
  3       count, subject to the restrictions in subsection (6)(A).
  4           (5) The education savings account shall be established as a cus-
  5       todial account and be placed with a custodian.
  6           (6) Education savings account funds may be withdrawn by the
  7       account holder at any time for any purpose, subject to the follow-
  8       ing restrictions and penalties:
  9           (A) There shall be a distribution penalty for withdrawal of ed-
10       ucation savings account funds by the account holder; such penalty
11       shall be 25% of the amount of interest earned as of the date of
12       withdrawal on the account and shall be remitted by the custodian
13       to the state and disposed of in the same manner as other penalties
14       imposed under the Kansas income tax act; and, upon such with-
15       drawal, the interest earned during the tax year in which with-
16       drawal occurs shall be subject to state income taxation; and
17           (B) withdrawals shall be permitted without penalty for the pur-
18       poses for which the education savings account was created.
19           (7) Upon the death of the account holder, the account princi-
20       pal, as well as any interest accumulated thereon, shall be distrib-
21       uted to the decedent's estate and taxed as part of the estate.
22           (8) There shall be no limit on the amount of earned income of
23       a dependent child, who is a recipient of aid to families with de-
24       pendent children, deposited in an educations savings account of
25       such dependent child that was created or organized to pay for
26       educational expenses of such dependent child.
27           Sec. 22. K.S.A. 79-32,119 is hereby amended to read as fol-
28       lows: 79-32,119. The Kansas standard deduction of an individual,
29       including a husband and wife who are either both residents or who
30       file a joint return as if both were residents, shall be equal to the
31       sum of the standard deduction amount allowed pursuant to this sec-
32       tion, and the additional standard deduction amount allowed pursuant
33       to this section for each such deduction allowable to such individual or
34       to such husband and wife under the federal internal revenue code
35       as in effect for tax year 1988. For tax year 1998, the standard deduction
36       amount shall be as follows: Single individual filing status, $3,200; married
37       filing status, $5,600; and head of household filing status, $4,800. For tax
38       year 1998 and all tax years thereafter, the additional standard deduction
39       amount shall be as follows: Single individual and head of household filing
40       status, $850; and married filing status, $700. In the case of tax year 1999,
41       and all tax years thereafter, the standard deduction and the additional
42       standard deduction amounts allowable shall be increased by the product
43       of the amount allowed for the next preceding tax year multiplied by the

SB 500--Am. by HCW

23

  1       cost-of-living adjustment determined under section 1 (f)(3) of the federal
  2       internal revenue code for the calendar year in which the taxable year
  3       commences. For purposes of the foregoing, the federal standard
  4       deduction allowable to a husband and wife filing separate Kansas
  5       income tax returns shall be determined on the basis that separate
  6       federal returns were filed, and the federal standard deduction of
  7       a husband and wife filing a joint Kansas income tax return shall be
  8       determined on the basis that a joint federal income tax return was
  9       filed.
10           Sec. 19 23. K.S.A. 79-32,121 is hereby amended to read as follows:
11       79-32,121. (a) An individual shall be allowed a Kansas exemption of
12       $1,950 for tax year 1988, and $2,000 for each tax year thereafter $2,350
13       for tax year 1998, and tax years thereafter for each exemption for which
14       such individual is entitled to a deduction for the taxable year for federal
15       income tax purposes. In addition to the exemptions authorized in the
16       foregoing provision, an individual filing a federal income tax return under
17       the status of head of household, as the same is defined by 26 U.S.C. 2(b),
18       shall be allowed an additional Kansas exemption of $1,950 for tax year
19       1988, and $2,000 for each tax year thereafter $2,350 for tax year 1998,
20       and all tax years thereafter. In the case of tax year 1999, and all tax
21       years thereafter, the exemption amount allowable shall be in-
22       creased by the product of the amount allowed for the next pre-
23       ceding tax year multiplied by the cost-of-living adjustment deter-
24       mined under section 1(f)(3) of the federal internal revenue code
25       for the calendar year in which the taxable year commences.
26           (b) For tax year 1987, there shall be allowed as a credit against the
27       tax liability of a resident individual imposed under the Kansas income tax
28       act who except for the operation of the provisions of K.S.A. 79-32,121
29       resulting from amendments to the federal internal revenue code would
30       have been allowed an additional exemption for blindness or age or both
31       pursuant to such section in tax year 1987, an amount equal to $60 for
32       each such exemption. The total amount of such credits shall not exceed
33       the amount of tax imposed by K.S.A. 79-32,110, and amendments thereto,
34       reduced by the sum of any other credits allowable pursuant to law.
35        New Sec. 24. (a) There shall be allowed as a credit against the
36       tax liability of a resident individual imposed under the Kansas in-
37       come tax act an amount equal to 10% for tax year 1998, and all tax
38       years thereafter, of the amount of the earned income credit al-
39       lowed against such taxpayer's federal income tax liability pursuant
40       to section 32 of the federal internal revenue code for the taxable
41       year in which such credit was claimed against the taxpayer's fed-
42       eral income tax liability.
43           (b) If the amount of the credit allowed by subsection (a) ex-

SB 500--Am. by HCW

24

  1       ceeds the taxpayer's income tax liability imposed under the Kansas
  2       income tax act, such excess amount shall be refunded to the tax-
  3       payer.
  4           (c) The provisions of this section shall be applicable to all tax-
  5       able years commencing after December 31, 1997.
  6           New Sec. 20 25. For all taxable years commencing after December
  7       31, 1997, there shall be allowed as a credit against the tax liability of a
  8       taxpayer imposed under the Kansas income tax act, the premiums tax
  9       upon insurance companies imposed pursuant to K.S.A. 40-252, and
10       amendments thereto, and the privilege tax as measured by net income of
11       financial institutions imposed pursuant to article 11 of chapter 79 of the
12       Kansas Statutes Annotated, an amount equal to 15% of the property tax
13       actually levied for property tax year 1998, and all such years there-
14       after, actually and timely paid during an income or privilege taxable
15       year upon commercial and industrial machinery and equipment classified
16       for property taxation purposes pursuant to section 1 of article 11 of the
17       Kansas constitution in subclass (5) or (6) of class 2 and machinery and
18       equipment classified for such purposes in subclass (2) of class 2. If the
19       amount of such tax credit exceeds the taxpayer's income tax liability for
20       the taxable year, the amount thereof which exceeds such tax liability shall
21       be refunded to the taxpayer. If the taxpayer is a corporation having
22       an election in effect under subchapter S of the federal internal rev-
23       enue code, a partnership or a limited liability company, the credit
24       provided by this section shall be claimed by the shareholders of
25       such corporation, the partners of such partnership or the members
26       of such limited liability company in the same manner as such share-
27       holders, partners or members account for their proportionate
28       shares of the income or loss of the corporation, partnership or lim-
29       ited liability company.
30           Sec. 26. K.S.A. 79-201w is hereby amended to read as follows:
31       79-201w. The following described property, to the extent specified
32       by this section, shall be exempt from all property or ad valorem
33       taxes levied under the laws of the state of Kansas:
34           (a) Any item of machinery, equipment, materials and supplies
35       which, except for the operation of the provisions of this section,
36       would be required to be listed for the purpose of taxation pursuant
37       to K.S.A. 79-306, and amendments thereto, and which is actually
38       and regularly used exclusively for business purposes or to be used in the
39       conduct of the owner's business, or in the conduct of activities by an
40       entity not subject to Kansas income taxation pursuant to K.S.A. 79-
41       32,113, and amendments thereto, whose original retail cost when
42       new is $250 $1,000 or less.
43           (b) The provisions of this section shall apply to all taxable years

SB 500--Am. by HCW

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  1       commencing after December 31, 1995 1997.
  2           Sec. 21 27. K.S.A. 1997 Supp. 72-6431 is hereby amended to read
  3       as follows: 72-6431. (a) The board of each district shall levy an ad valorem
  4       tax upon the taxable tangible property of the district in the school years
  5       specified in subsection (b) for the purpose of:
  6           (1) Financing that portion of the district's general fund budget which
  7       is not financed from any other source provided by law;
  8           (2) paying a portion of the costs of operating and maintaining public
  9       schools in partial fulfillment of the constitutional obligation of the legis-
10       lature to finance the educational interests of the state; and
11           (3) with respect to any redevelopment district established prior to
12       July 1, 1997, pursuant to K.S.A. 12-1771, and amendments thereto, pay-
13       ing a portion of the principal and interest on bonds issued by cities under
14       authority of K.S.A. 12-1774, and amendments thereto, for the financing
15       of redevelopment projects upon property located within the district.
16           (b) The tax required under subsection (a) shall be levied at a rate of
17       27 23 mills in the 1997-98 school year and in the 1998-99 school year and
18       in the 1999-2000 school year.
19           (c) The proceeds from the tax levied by a district under authority of
20       this section, except the proceeds of such tax levied for the purpose of
21       paying a portion of the principal and interest on bonds issued by cities
22       under authority of K.S.A. 12-1774, and amendments thereto, for the fi-
23       nancing of redevelopment projects upon property located within the dis-
24       trict, shall be deposited in the general fund of the district.
25           (d) On June 1 of each year, the amount, if any, by which a district's
26       local effort exceeds the amount of the district's state financial aid, as
27       determined by the state board, shall be remitted to the state treasurer.
28       Upon receipt of any such remittance, the state treasurer shall deposit the
29       same in the state treasury to the credit of the state school district finance
30       fund.
31           (e) No district shall proceed under K.S.A. 79-1964, 79-1964a or 79-
32       1964b, and amendments to such sections.
33           Sec. 22 28. K.S.A. 79-201x is hereby amended to read as follows: 79-
34       201x. For taxable years 1997 and 1998 and 1999, the following described
35       For all taxable years commencing after December 31, 1997, prop-
36       erty, to the extent herein specified, shall be and is hereby exempt from
37       the property tax levied pursuant to the provisions of K.S.A. 1997 Supp.
38       72-6431, and amendments thereto: Property used for residential purposes
39       to the extent of $20,000 of its appraised valuation.
40           Sec. 23 29. K.S.A. 79-201t is hereby amended to read as follows: 79-
41       201t. The following described property, to the extent herein specified,
42       shall be and is hereby exempt from all property or ad valorem taxes levied
43       under the laws of the state of Kansas:

SB 500--Am. by HCW

26

  1           (a) All oil leases, other than royalty interests therein, the average daily
  2       production from which is two three barrels or less per producing well, or
  3       three five barrels or less per producing well which has a completion depth
  4       of 2,000 feet or more.
  5           (b) The provisions of this section shall apply to all taxable years com-
  6       mencing after December 31, 1991 1997.
  7           Sec. 24 30. K.S.A. 79-4217 is hereby amended to read as follows: 79-
  8       4217. (a) There is hereby imposed an excise tax upon the severance and
  9       production of coal, oil or gas from the earth or water in this state for sale,
10       transport, storage, profit or commercial use, subject to the following pro-
11       visions of this section. Such tax shall be borne ratably by all persons within
12       the term ``producer'' as such term is defined in K.S.A. 79-4216, and
13       amendments thereto, in proportion to their respective beneficial interest
14       in the coal, oil or gas severed. Such tax shall be applied equally to all
15       portions of the gross value of each barrel of oil severed and subject to
16       such tax and to the gross value of the gas severed and subject to such tax.
17       The rate of such tax shall be 8% of the gross value of all oil or gas severed
18       from the earth or water in this state and subject to the tax imposed under
19       this act. The rate of such tax with respect to coal shall be $1 per ton. For
20       the purposes of the tax imposed hereunder the amount of oil or gas pro-
21       duced shall be measured or determined: (1) In the case of oil, by tank
22       tables compiled to show 100% of the full capacity of tanks without de-
23       duction for overage or losses in handling; allowance for any reasonable
24       and bona fide deduction for basic sediment and water, and for correction
25       of temperature to 60 degrees Fahrenheit will be allowed; and if the
26       amount of oil severed has been measured or determined by tank tables
27       compiled to show less than 100% of the full capacity of tanks, such amount
28       shall be raised to a basis of 100% for the purpose of the tax imposed by
29       this act; and (2) in the case of gas, by meter readings showing 100% of
30       the full volume expressed in cubic feet at a standard base and flowing
31       temperature of 60 degrees Fahrenheit, and at the absolute pressure at
32       which the gas is sold and purchased; correction to be made for pressure
33       according to Boyle's law, and used for specific gravity according to the
34       gravity at which the gas is sold and purchased, or if not so specified,
35       according to the test made by the balance method.
36           (b) The following shall be exempt from the tax imposed under this
37       section:
38           (1) The severance and production of gas which is: (A) Injected into
39       the earth for the purpose of lifting oil, recycling or repressuring; (B) used
40       for fuel in connection with the operation and development for, or pro-
41       duction of, oil or gas in the lease or production unit where severed; (C)
42       lawfully vented or flared; (D) severed from a well having an average daily
43       production during a calendar month having a gross value of not more

SB 500--Am. by HCW

27

  1       than $81 $87 per day, which well has not been significantly curtailed by
  2       reason of mechanical failure or other disruption of production; in the
  3       event that the production of gas from more than one well is gauged by a
  4       common meter, eligibility for exemption hereunder shall be determined
  5       by computing the gross value of the average daily combined production
  6       from all such wells and dividing the same by the number of wells gauged
  7       by such meter; (E) inadvertently lost on the lease or production unit by
  8       reason of leaks, blowouts or other accidental losses; (F) used or consumed
  9       for domestic or agricultural purposes on the lease or production unit from
10       which it is severed; or (G) placed in underground storage for recovery at
11       a later date and which was either originally severed outside of the state
12       of Kansas, or as to which the tax levied pursuant to this act has been paid;
13           (2) the severance and production of oil which is: (A) From a lease or
14       production unit whose average daily production is two five barrels or less
15       per producing well, which well or wells have not been significantly cur-
16       tailed by reason of mechanical failure or other disruption of production;
17       (B) from a lease or production unit, the producing well or wells upon
18       which have a completion depth of 2,000 feet or more, and whose average
19       daily production is three six barrels or less per producing well or, if the
20       price of oil as determined pursuant to subsection (d) is $30 $16 or less,
21       whose average daily production is four seven barrels or less per producing
22       well, or, if the price of oil as determined pursuant to subsection (d) is $24
23       $15 or less, whose average daily production is five eight barrels or less
24       per producing well, or, if the price of oil as determined pursuant to sub-
25       section (d) is $16 $14 or less, whose average daily production is six nine
26       barrels or less per producing well, or, if the price of oil as determined
27       pursuant to subsection (d) is $10 $13 or less, whose average daily pro-
28       duction is seven 10 barrels or less per producing well, which well or wells
29       have not been significantly curtailed by reason of mechanical failure or
30       other disruption of production; (C) from a lease or production unit, whose
31       production results from a tertiary recovery process. ``Tertiary recovery
32       process'' means the process or processes described in subparagraphs (1)
33       through (9) of 10 C.F.R. 212.78(c) as in effect on June 1, 1979; (D) from
34       a lease or production unit, the producing well or wells upon which have
35       a completion depth of less than 2,000 feet and whose average daily pro-
36       duction resulting from a water flood process, is three six barrels or less
37       per producing well, which well or wells have not been significantly cur-
38       tailed by reason of mechanical failure or other disruption of production;
39       (E) from a lease or production unit, the producing well or wells upon
40       which have a completion depth of 2,000 feet or more, and whose average
41       daily production resulting from a water flood process, is four seven barrels
42       or less per producing well or, if the price of oil as determined pursuant
43       to subsection (d) is $30 $16 or less, whose average daily production is five

SB 500--Am. by HCW

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  1       eight barrels or less per producing well, or, if the price of oil as deter-
  2       mined pursuant to subsection (d) is $24 $15 or less, whose average daily
  3       production is six nine barrels or less per producing well, or, if the price
  4       of oil as determined pursuant to subsection (d) is $16 $14 or less, whose
  5       average daily production is seven 10 barrels or less per producing well,
  6       or, if the price of oil as determined pursuant to subsection (d) is $10 or
  7       less, whose average daily production is eight barrels or less per producing
  8       well, which well or wells have not been significantly curtailed by reason
  9       of mechanical failure or other disruption of production; (F) test, frac or
10       swab oil which is sold or exchanged for value; or (G) inadvertently lost
11       on the lease or production unit by reason of leaks or other accidental
12       means;
13           (3) (A) any taxpayer applying for an exemption pursuant to subsec-
14       tion (b)(2)(A) and (B) shall make application annually to the director of
15       taxation therefor. Exemptions granted pursuant to subsection (b)(2)(A)
16       and (B) shall be valid for a period of one year following the date of cer-
17       tification thereof by the director of taxation; (B) any taxpayer applying for
18       an exemption pursuant to subsection (b)(2)(D) or (E) shall make appli-
19       cation annually to the director of taxation therefor. Such application shall
20       be accompanied by proof of the approval of an application for the utili-
21       zation of a water flood process therefor by the corporation commission
22       pursuant to rules and regulations adopted under the authority of K.S.A.
23       55-152 and amendments thereto and proof that the oil produced there-
24       from is kept in a separate tank battery and that separate books and records
25       are maintained therefor. Such exemption shall be valid for a period of
26       one year following the date of certification thereof by the director of
27       taxation; and (C) notwithstanding the provisions of paragraph (A) or (B),
28       any exemption in effect on the effective date of this act affected by the
29       amendments to subsection (b)(2) by this act shall be redetermined in ac-
30       cordance with such amendments. Any such exemption, and any new ex-
31       emption established by such amendments and applied for after the effec-
32       tive date of this shall be valid for a period commencing with May 1, 1998,
33       and ending on April 30, 1999.
34           (4) the severance and production of gas or oil from any pool from
35       which oil or gas was first produced on or after April 1, 1983, as determined
36       by the state corporation commission and certified to the director of tax-
37       ation, and continuing for a period of 24 months from the month in which
38       oil or gas was first produced from such pool as evidenced by an affidavit
39       of completion of a well, filed with the state corporation commission and
40       certified to the director of taxation. Exemptions granted for production
41       from any well pursuant to this paragraph shall be valid for a period of 24
42       months following the month in which oil or gas was first produced from
43       such pool. The term ``pool'' means an underground accumulation of oil

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29

  1       or gas in a single and separate natural reservoir characterized by a single
  2       pressure system so that production from one part of the pool affects the
  3       reservoir pressure throughout its extent;
  4           (5) the severance and production of oil or gas from a three-year in-
  5       active well, as determined by the state corporation commission and cer-
  6       tified to the director of taxation, for a period of 10 years after the date of
  7       receipt of such certification. As used in this paragraph, ``three-year in-
  8       active well'' means any well that has not produced oil or gas in more than
  9       one month in the three years prior to the date of application to the state
10       corporation commission for certification as a three-year inactive well. An
11       application for certification as a three-year inactive well shall be in such
12       form and contain such information as required by the state corporation
13       commission, and shall be made prior to July 1, 1996. The commission
14       may revoke a certification if information indicates that a certified well was
15       not a three-year inactive well or if other lease production is credited to
16       the certified well. Upon notice to the operator that the certification for a
17       well has been revoked, the exemption shall not be applied to the pro-
18       duction from that well from the date of revocation; and
19           (6) for the calendar year 1988, and any year thereafter, the severance
20       or production of the first 350,000 tons of coal from any mine as certified
21       by the state geological survey.
22           (c) No exemption shall be granted pursuant to subsection (b)(3) or
23       (4) to any person who does not have a valid operator's license issued by
24       the state corporation commission, and no refund of tax shall be made to
25       any taxpayer attributable to any production in a period when such tax-
26       payer did not hold a valid operator's license issued by the state corporation
27       commission.
28           (d) On April 15, 1988, and on April 15 of each year thereafter, the
29       secretary of revenue shall determine from statistics compiled and pro-
30       vided by the United States department of energy, the average price per
31       barrel paid by the first purchaser of crude oil in this state for the six-
32       month period ending on December 31 of the preceding year. Such price
33       shall be used for the purpose of determining exemptions allowed by sub-
34       section (b)(2)(B) or (E) for the twelve-month period commencing on May
35       1 of such year and ending on April 30 of the next succeeding year.
36           Sec. 25 31. K.S.A. 79-3603 is hereby amended to read as follows: 79-
37       3603. For the privilege of engaging in the business of selling tangible
38       personal property at retail in this state or rendering or furnishing any of
39       the services taxable under this act, there is hereby levied and there shall
40       be collected and paid a tax at the rate of 4.9% [upon]:
41           (a) The gross receipts received from the sale of tangible personal
42       property at retail within this state;
43           (b) (1) the gross receipts from intrastate telephone or telegraph serv-

SB 500--Am. by HCW

30

  1       ices and (2) the gross receipts received from the sale of interstate tele-
  2       phone or telegraph services, which (A) originate within this state and
  3       terminate outside the state and are billed to a customer's telephone num-
  4       ber or account in this state; or (B) originate outside this state and ter-
  5       minate within this state and are billed to a customer's telephone number
  6       or account in this state except that the sale of interstate telephone or
  7       telegraph service does not include: (A) Any interstate incoming or out-
  8       going wide area telephone service or wide area transmission type service
  9       which entitles the subscriber to make or receive an unlimited number of
10       communications to or from persons having telephone service in a speci-
11       fied area which is outside the state in which the station provided this
12       service is located; (B) any interstate private communications service to
13       the persons contracting for the receipt of that service that entitles the
14       purchaser to exclusive or priority use of a communications channel or
15       group of channels between exchanges; (C) any value-added nonvoice
16       service in which computer processing applications are used to act on the
17       form, content, code or protocol of the information to be transmitted; (D)
18       any telecommunication service to a provider of telecommunication serv-
19       ices which will be used to render telecommunications services, including
20       carrier access services; or (E) any service or transaction defined in this
21       section among entities classified as members of an affiliated group as
22       provided by federal law (U.S.C. Section 1504);
23           (c) the gross receipts from the sale or furnishing of gas, water, elec-
24       tricity and heat, which sale is not otherwise exempt from taxation under
25       the provisions of this act, and whether furnished by municipally or pri-
26       vately owned utilities;
27           (d) the gross receipts from the sale of meals or drinks furnished at
28       any private club, drinking establishment, catered event, restaurant, eating
29       house, dining car, hotel, drugstore or other place where meals or drinks
30       are regularly sold to the public;
31           (e) the gross receipts from the sale of admissions to any place pro-
32       viding amusement, entertainment or recreation services including admis-
33       sions to state, county, district and local fairs, but such tax shall not be
34       levied and collected upon the gross receipts received from sales of ad-
35       missions to any cultural and historical event which occurs triennially;
36           (f) the gross receipts from the operation of any coin-operated device
37       dispensing or providing tangible personal property, amusement or other
38       services except laundry services, whether automatic or manually operated;
39           (g) the gross receipts from the service of renting of rooms by hotels,
40       as defined by K.S.A. 36-501 and amendments thereto, or by accommo-
41       dation brokers, as defined by K.S.A. 12-1692, and amendments thereto;
42           (h) the gross receipts from the service of renting or leasing of tangible
43       personal property except such tax shall not apply to the renting or leasing

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31

  1       of machinery, equipment or other personal property owned by a city and
  2       purchased from the proceeds of industrial revenue bonds issued prior to
  3       July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
  4       12-1749, and amendments thereto, and any city or lessee renting or leas-
  5       ing such machinery, equipment or other personal property purchased
  6       with the proceeds of such bonds who shall have paid a tax under the
  7       provisions of this section upon sales made prior to July 1, 1973, shall be
  8       entitled to a refund from the sales tax refund fund of all taxes paid
  9       thereon;
10           (i) the gross receipts from the rendering of dry cleaning, pressing,
11       dyeing and laundry services except laundry services rendered through a
12       coin-operated device whether automatic or manually operated;
13           (j) the gross receipts from the rendering of the services of washing
14       and washing and waxing of vehicles;
15           (k) the gross receipts from cable, community antennae and other sub-
16       scriber radio and television services;
17           (l) the gross receipts received from the sales of tangible personal
18       property to all contractors, subcontractors or repairmen of materials and
19       supplies for use by them in erecting structures for others, or building on,
20       or otherwise improving, altering, or repairing real or personal property
21       of others;
22           (m) the gross receipts received from fees and charges by public and
23       private clubs, drinking establishments, organizations and businesses for
24       participation in sports, games and other recreational activities, but such
25       tax shall not be levied and collected upon the gross receipts received from:
26       (1) Fees and charges by any political subdivision, by any organization
27       exempt from property taxation pursuant to paragraph Ninth of
28       K.S.A. 79-201, and amendments thereto, or by any youth recreation
29       organization exclusively providing services to persons 18 years of age or
30       younger which is exempt from federal income taxation pursuant to section
31       501(c)(3) of the federal internal revenue code of 1986, for participation
32       in sports, games and other recreational activities; and (2) entry fees and
33       charges for participation in a special event or tournament sanctioned by
34       a national sporting association to which spectators are charged an admis-
35       sion which is taxable pursuant to subsection (e);
36           (n) the gross receipts received from dues charged by public and pri-
37       vate clubs, drinking establishments, organizations and businesses, pay-
38       ment of which entitles a member to the use of facilities for recreation or
39       entertainment, but such tax shall not be levied and collected upon
40       the gross receipts received from: (1) Dues charged by any organ-
41       ization exempt from property taxation pursuant to paragraph [par-
42       agraphs Eighth and] Ninth of K.S.A. 79-201, and amendments
43       thereto,; and (2) sales of memberships in a nonprofit organization

SB 500--Am. by HCW

32

  1       which is exempt from federal income taxation pursuant to section
  2       501 (c)(3) of the federal internal revenue code of 1986, and whose
  3       purpose is to support the operation of a nonprofit zoo;
  4           (o) the gross receipts received from the isolated or occasional sale of
  5       motor vehicles or trailers but not including: (1) The transfer of motor
  6       vehicles or trailers by a person to a corporation solely in exchange for
  7       stock securities in such corporation; or (2) the transfer of motor vehicles
  8       or trailers by one corporation to another when all of the assets of such
  9       corporation are transferred to such other corporation; or (3) the sale of
10       motor vehicles or trailers which are subject to taxation pursuant to the
11       provisions of K.S.A. 79-5101 et seq., and amendments thereto, by an
12       immediate family member to another immediate family member. For the
13       purposes of clause (3), immediate family member means lineal ascendants
14       or descendants, and their spouses. In determining the base for computing
15       the tax on such isolated or occasional sale, the fair market value of any
16       motor vehicle or trailer traded in by the purchaser to the seller may be
17       deducted from the selling price;
18           (p) the gross receipts received for the service of installing or applying
19       tangible personal property which when installed or applied is not being
20       held for sale in the regular course of business, and whether or not such
21       tangible personal property when installed or applied remains tangible
22       personal property or becomes a part of real estate, except that no tax shall
23       be imposed upon the service of installing or applying tangible personal
24       property in connection with the original construction of a building or
25       facility, the original construction, reconstruction, restoration, remodeling,
26       renovation, repair or replacement of a residence or the construction, re-
27       construction, restoration, replacement or repair of a bridge or highway.
28           For the purposes of this subsection:
29           (1) ``Original construction'' shall mean the first or initial construction
30       of a new building or facility. The term ``original construction'' shall include
31       the addition of an entire room or floor to any existing building or facility,
32       the completion of any unfinished portion of any existing building or fa-
33       cility and the restoration, reconstruction or replacement of a building or
34       facility damaged or destroyed by fire, flood, tornado, lightning, explosion
35       or earthquake, but such term, except with regard to a residence shall not
36       include replacement, remodeling, restoration, renovation or reconstruc-
37       tion under any other circumstances;
38           (2) ``building'' shall mean only those enclosures within which individ-
39       uals customarily live or are employed, or which are customarily used to
40       house machinery, equipment or other property, and including the land
41       improvements immediately surrounding such building; and
42           (3) ``facility'' shall mean a mill, plant, refinery, oil or gas well, water
43       well, feedlot or any conveyance, transmission or distribution line of any

SB 500--Am. by HCW

33

  1       cooperative, nonprofit, membership corporation organized under or sub-
  2       ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
  3       or of any municipal or quasi-municipal corporation, including the land
  4       improvements immediately surrounding such facility; and
  5           (4) ``residence'' shall mean only those enclosures within which indi-
  6       viduals customarily live;
  7           (q) the gross receipts received for the service of repairing, servicing,
  8       altering or maintaining tangible personal property, except computer soft-
  9       ware described in subsection (s), which when such services are rendered
10       is not being held for sale in the regular course of business, and whether
11       or not any tangible personal property is transferred in connection there-
12       with. The tax imposed by this subsection shall be applicable to the services
13       of repairing, servicing, altering or maintaining an item of tangible personal
14       property which has been and is fastened to, connected with or built into
15       real property;
16           (r) the gross receipts from fees or charges made under service or
17       maintenance agreement contracts for services, charges for the providing
18       of which are taxable under the provisions of subsection (p) or (q);
19           (s) the gross receipts received from the sale of computer software,
20       and the sale of the services of modifying, altering, updating or maintaining
21       computer software. As used in this subsection, ``computer software''
22       means information and directions loaded into a computer which dictate
23       different functions to be performed by the computer. Computer software
24       includes any canned or prewritten program which is held or existing for
25       general or repeated sale, even if the program was originally developed
26       for a single end user as custom computer software. The sale of computer
27       software or services does not include: (1) The initial sale of any custom
28       computer program which is originally developed for the exclusive use of
29       a single end user; or (2) those services rendered in the modification of
30       computer software when the modification is developed exclusively for a
31       single end user only to the extent of the modification and only to the
32       extent that the actual amount charged for the modification is separately
33       stated on invoices, statements and other billing documents provided to
34       the end user. The services of modification, alteration, updating and main-
35       tenance of computer software shall only include the modification, alter-
36       ation, updating and maintenance of computer software taxable under this
37       subsection whether or not the services are actually provided; and
38           (t) the gross receipts received for telephone answering services, in-
39       cluding mobile phone services, beeper services and other similar services.
40        Sec. 32. K.S.A. 79-3606 is hereby amended to read as follows:
41       79-3606. The following shall be exempt from the tax imposed by
42       this act:
43           (a) All sales of motor-vehicle fuel or other articles upon which

SB 500--Am. by HCW

34

  1       a sales or excise tax has been paid, not subject to refund, under
  2       the laws of this state except cigarettes as defined by K.S.A. 79-3301
  3       and amendments thereto, cereal malt beverages and malt products
  4       as defined by K.S.A. 79-3817 and amendments thereto, including
  5       wort, liquid malt, malt syrup and malt extract, which is not subject
  6       to taxation under the provisions of K.S.A. 79-41a02 and amend-
  7       ments thereto, and motor vehicles as defined by K.S.A. 79-1017
  8       and amendments thereto;
  9           (b) all sales of tangible personal property or service, including
10       the renting and leasing of tangible personal property, purchased
11       directly by the state of Kansas, a political subdivision thereof, other
12       than a school or educational institution, or purchased by a public
13       or private nonprofit hospital or nonprofit blood, tissue or organ
14       bank and used exclusively for state, political subdivision, hospital
15       or nonprofit blood, tissue or organ bank purposes, except when:
16       (1) Such state or hospital is engaged or proposes to engage in any
17       business specifically taxable under the provisions of this act and
18       such items of tangible personal property or service are used or
19       proposed to be used in such business, or (2) such political subdi-
20       vision is engaged or proposes to engage in the business of furnish-
21       ing gas, water, electricity or heat to others and such items of per-
22       sonal property or service are used or proposed to be used in such
23       business;
24           (c) all sales of tangible personal property or services, including
25       the renting and leasing of tangible personal property, purchased
26       directly by a public or private elementary or secondary school or
27       public or private nonprofit educational institution and used pri-
28       marily by such school or institution for nonsectarian programs and
29       activities provided or sponsored by such school or institution or in
30       the erection, repair or enlargement of buildings to be used for
31       such purposes. The exemption herein provided shall not apply to
32       erection, construction, repair, enlargement or equipment of build-
33       ings used primarily for human habitation;
34           (d) all sales of tangible personal property or services purchased
35       by a contractor for the purpose of constructing, equipping, recon-
36       structing, maintaining, repairing, enlarging, furnishing or remod-
37       eling facilities for any public or private nonprofit hospital, public
38       or private elementary or secondary school or a public or private
39       nonprofit educational institution, which would be exempt from tax-
40       ation under the provisions of this act if purchased directly by such
41       hospital, school or educational institution; and all sales of tangible
42       personal property or services purchased by a contractor for the
43       purpose of constructing, equipping, reconstructing, maintaining,

SB 500--Am. by HCW

35

  1       repairing, enlarging, furnishing or remodeling facilities for any
  2       political subdivision of the state, the total cost of which is paid from
  3       funds of such political subdivision and which would be exempt
  4       from taxation under the provisions of this act if purchased directly
  5       by such political subdivision. Nothing in this subsection or in the
  6       provisions of K.S.A. 12-3418 and amendments thereto, shall be
  7       deemed to exempt the purchase of any construction machinery,
  8       equipment or tools used in the constructing, equipping, recon-
  9       structing, maintaining, repairing, enlarging, furnishing or remod-
10       eling facilities for any political subdivision of the state. As used in
11       this subsection, K.S.A. 12-3418 and 79-3640, and amendments
12       thereto, ``funds of a political subdivision'' shall mean general tax
13       revenues, the proceeds of any bonds and gifts or grants-in-aid.
14       Gifts shall not mean funds used for the purpose of constructing,
15       equipping, reconstructing, repairing, enlarging, furnishing or re-
16       modeling facilities which are to be leased to the donor. When any
17       political subdivision of the state, public or private nonprofit hos-
18       pital, public or private elementary or secondary school or public
19       or private nonprofit educational institution shall contract for the
20       purpose of constructing, equipping, reconstructing, maintaining,
21       repairing, enlarging, furnishing or remodeling facilities, it shall
22       obtain from the state and furnish to the contractor an exemption
23       certificate for the project involved, and the contractor may pur-
24       chase materials for incorporation in such project. The contractor
25       shall furnish the number of such certificate to all suppliers from
26       whom such purchases are made, and such suppliers shall execute
27       invoices covering the same bearing the number of such certificate.
28       Upon completion of the project the contractor shall furnish to the
29       political subdivision, hospital, school or educational institution
30       concerned a sworn statement, on a form to be provided by the
31       director of taxation, that all purchases so made were entitled to
32       exemption under this subsection. As an alternative to the foregoing
33       procedure, any such contracting entity may apply to the secretary
34       of revenue for agent status for the sole purpose of issuing and
35       furnishing project exemption certificates to contractors pursuant
36       to rules and regulations adopted by the secretary establishing con-
37       ditions and standards for the granting and maintaining of such
38       status. All invoices shall be held by the contractor for a period of
39       five years and shall be subject to audit by the director of taxation.
40       If any materials purchased under such a certificate are found not
41       to have been incorporated in the building or other project or not
42       to have been returned for credit or the sales or compensating tax
43       otherwise imposed upon such materials which will not be so in-

SB 500--Am. by HCW

36

  1       corporated in the building or other project reported and paid by
  2       such contractor to the director of taxation not later than the 20th
  3       day of the month following the close of the month in which it shall
  4       be determined that such materials will not be used for the purpose
  5       for which such certificate was issued, the political subdivision, hos-
  6       pital, school or educational institution concerned shall be liable
  7       for tax on all materials purchased for the project, and upon pay-
  8       ment thereof it may recover the same from the contractor together
  9       with reasonable attorney fees. Any contractor or any agent, em-
10       ployee or subcontractor thereof, who shall use or otherwise dis-
11       pose of any materials purchased under such a certificate for any
12       purpose other than that for which such a certificate is issued with-
13       out the payment of the sales or compensating tax otherwise im-
14       posed upon such materials, shall be guilty of a misdemeanor and,
15       upon conviction therefor, shall be subject to the penalties provided
16       for in subsection (g) of K.S.A. 79-3615, and amendments thereto;
17           (e) all sales of tangible personal property or services purchased
18       by a contractor for the erection, repair or enlargement of buildings
19       or other projects for the government of the United States, its agen-
20       cies or instrumentalities, which would be exempt from taxation if
21       purchased directly by the government of the United States, its
22       agencies or instrumentalities. When the government of the United
23       States, its agencies or instrumentalities shall contract for the erec-
24       tion, repair, or enlargement of any building or other project, it
25       shall obtain from the state and furnish to the contractor an ex-
26       emption certificate for the project involved, and the contractor
27       may purchase materials for incorporation in such project. The con-
28       tractor shall furnish the number of such certificates to all suppliers
29       from whom such purchases are made, and such suppliers shall ex-
30       ecute invoices covering the same bearing the number of such cer-
31       tificate. Upon completion of the project the contractor shall fur-
32       nish to the government of the United States, its agencies or
33       instrumentalities concerned a sworn statement, on a form to be
34       provided by the director of taxation, that all purchases so made
35       were entitled to exemption under this subsection. As an alternative
36       to the foregoing procedure, any such contracting entity may apply
37       to the secretary of revenue for agent status for the sole purpose
38       of issuing and furnishing project exemption certificates to con-
39       tractors pursuant to rules and regulations adopted by the secretary
40       establishing conditions and standards for the granting and main-
41       taining of such status. All invoices shall be held by the contractor
42       for a period of five years and shall be subject to audit by the di-
43       rector of taxation. Any contractor or any agent, employee or sub-

SB 500--Am. by HCW

37

  1       contractor thereof, who shall use or otherwise dispose of any ma-
  2       terials purchased under such a certificate for any purpose other
  3       than that for which such a certificate is issued without the payment
  4       of the sales or compensating tax otherwise imposed upon such ma-
  5       terials, shall be guilty of a misdemeanor and, upon conviction
  6       therefor, shall be subject to the penalties provided for in subsec-
  7       tion (g) of K.S.A. 79-3615 and amendments thereto;
  8           (f) tangible personal property purchased by a railroad or pub-
  9       lic utility for consumption or movement directly and immediately
10       in interstate commerce;
11           (g) sales of aircraft including remanufactured and modified
12       aircraft, sales of aircraft repair, modification and replacement
13       parts and sales of services employed in the remanufacture, modi-
14       fication and repair of aircraft sold to persons using directly or
15       through an authorized agent such aircraft and aircraft repair, modi-
16       fication and replacement parts as certified or licensed carriers of
17       persons or property in interstate or foreign commerce under au-
18       thority of the laws of the United States or any foreign government
19       or sold to any foreign government or agency or instrumentality of
20       such foreign government and all sales of aircraft, aircraft parts,
21       replacement parts and services employed in the remanufacture,
22       modification and repair of aircraft for use outside of the United
23       States;
24           (h) all rentals of nonsectarian textbooks by public or private
25       elementary or secondary schools;
26           (i) the lease or rental of all films, records, tapes, or any type of
27       sound or picture transcriptions used by motion picture exhibitors;
28           (j) meals served without charge or food used in the preparation
29       of such meals to employees of any restaurant, eating house, dining
30       car, hotel, drugstore or other place where meals or drinks are reg-
31       ularly sold to the public if such employees' duties are related to
32       the furnishing or sale of such meals or drinks;
33           (k) any motor vehicle, semitrailer or pole trailer, as such terms
34       are defined by K.S.A. 8-126 and amendments thereto, or aircraft
35       sold and delivered in this state to a bona fide resident of another
36       state, which motor vehicle, semitrailer, pole trailer or aircraft is
37       not to be registered or based in this state and which vehicle, sem-
38       itrailer, pole trailer or aircraft will not remain in this state more
39       than 10 days;
40           (l) all isolated or occasional sales of tangible personal property,
41       services, substances or things, except isolated or occasional sale of
42       motor vehicles specifically taxed under the provisions of subsec-
43       tion (o) of K.S.A. 79-3603 and amendments thereto;

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  1           (m) all sales of tangible personal property which become an
  2       ingredient or component part of tangible personal property or
  3       services produced, manufactured or compounded for ultimate sale
  4       at retail within or without the state of Kansas; and any such pro-
  5       ducer, manufacturer or compounder may obtain from the director
  6       of taxation and furnish to the supplier an exemption certificate
  7       number for tangible personal property for use as an ingredient or
  8       component part of the property or services produced, manufac-
  9       tured or compounded;
10           (n) all sales of tangible personal property which is consumed
11       in the production, manufacture, processing, mining, drilling, re-
12       fining or compounding of tangible personal property, the treating
13       of by-products or wastes derived from any such production pro-
14       cess, the providing of services or the irrigation of crops for ulti-
15       mate sale at retail within or without the state of Kansas; and any
16       purchaser of such property may obtain from the director of taxa-
17       tion and furnish to the supplier an exemption certificate number
18       for tangible personal property for consumption in such produc-
19       tion, manufacture, processing, mining, drilling, refining, com-
20       pounding, treating, irrigation and in providing such services;
21           (o) all sales of animals, fowl and aquatic plants and animals, the
22       primary purpose of which is use in agriculture or aquaculture, as
23       defined in K.S.A. 47-1901, and amendments thereto, the produc-
24       tion of food for human consumption, the production of animal,
25       dairy, poultry or aquatic plant and animal products, fiber or fur,
26       or the production of offspring for use for any such purpose or
27       purposes;
28           (p) all sales of drugs, as defined by K.S.A. 65-1626 and amend-
29       ments thereto, dispensed pursuant to a prescription order, as de-
30       fined by K.S.A. 65-1626 and amendments thereto, by a licensed
31       practitioner;
32           (q) all sales of insulin dispensed by a person licensed by the
33       state board of pharmacy to a person for treatment of diabetes at
34       the direction of a person licensed to practice medicine by the
35       board of healing arts;
36           (r) all sales of prosthetic and orthopedic appliances prescribed
37       in writing by a person licensed to practice the healing arts, den-
38       tistry or optometry. For the purposes of this subsection, the term
39       prosthetic and orthopedic appliances means any apparatus, instru-
40       ment, device, or equipment used to replace or substitute for any
41       missing part of the body; used to alleviate the malfunction of any
42       part of the body; or used to assist any disabled person in leading
43       a normal life by facilitating such person's mobility; such term shall

SB 500--Am. by HCW

39

  1       include accessories attached or to be attached to motor vehicles,
  2       but such term shall not include motor vehicles or personal prop-
  3       erty which when installed becomes a fixture to real property;
  4           (s) all sales of tangible personal property or services purchased
  5       directly by a groundwater management district organized or op-
  6       erating under the authority of K.S.A. 82a-1020 et seq. and amend-
  7       ments thereto, which property or services are used in the opera-
  8       tion or maintenance of the district;
  9           (t) all sales of farm machinery and equipment or aquaculture
10       machinery and equipment, repair and replacement parts therefor
11       and services performed in the repair and maintenance of such ma-
12       chinery and equipment. For the purposes of this subsection the
13       term ``farm machinery and equipment or aquaculture machinery
14       and equipment'' shall include machinery and equipment used in
15       the operation of Christmas tree farming but shall not include any
16       passenger vehicle, truck, truck tractor, trailer, semitrailer or pole
17       trailer, other than a farm trailer, as such terms are defined by
18       K.S.A. 8-126 and amendments thereto. Each purchaser of farm
19       machinery and equipment or aquaculture machinery and equip-
20       ment exempted herein must certify in writing on the copy of the
21       invoice or sales ticket to be retained by the seller that the farm
22       machinery and equipment or aquaculture machinery and equip-
23       ment purchased will be used only in farming, ranching or aqua-
24       culture production. Farming or ranching shall include the opera-
25       tion of a feedlot and farm and ranch work for hire and the
26       operation of a nursery;
27           (u) all leases or rentals of tangible personal property used as a
28       dwelling if such tangible personal property is leased or rented for
29       a period of more than 28 consecutive days;
30           (v) all sales of food products to any contractor for use in pre-
31       paring meals for delivery to homebound elderly persons over 60
32       years of age and to homebound disabled persons or to be served
33       at a group-sitting at a location outside of the home to otherwise
34       homebound elderly persons over 60 years of age and to otherwise
35       homebound disabled persons, as all or part of any food service
36       project funded in whole or in part by government or as part of a
37       private nonprofit food service project available to all such elderly
38       or disabled persons residing within an area of service designated
39       by the private nonprofit organization, and all sales of food prod-
40       ucts for use in preparing meals for consumption by indigent or
41       homeless individuals whether or not such meals are consumed at
42       a place designated for such purpose;
43           (w) all sales of natural gas, electricity, heat and water delivered

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  1       through mains, lines or pipes: (1) To residential premises for non-
  2       commercial use by the occupant of such premises; (2) for agricul-
  3       tural use and also, for such use, all sales of propane gas; (3) for use
  4       in the severing of oil; and (4) to any property which is exempt from
  5       property taxation pursuant to K.S.A. 79-201b Second through Sixth.
  6       As used in this paragraph, ``severing'' shall have the meaning as-
  7       cribed thereto by subsection (k) of K.S.A. 79-4216, and amend-
  8       ments thereto;
  9           (x) all sales of propane gas, LP-gas, coal, wood and other fuel
10       sources for the production of heat or lighting for noncommercial
11       use of an occupant of residential premises;
12           (y) all sales of materials and services used in the repairing,
13       servicing, altering, maintaining, manufacturing, remanufacturing,
14       or modification of railroad rolling stock for use in interstate or
15       foreign commerce under authority of the laws of the United States;
16           (z) all sales of tangible personal property and services pur-
17       chased directly by a port authority or by a contractor therefor as
18       provided by the provisions of K.S.A. 12-3418 and amendments
19       thereto;
20           (aa) all sales of materials and services applied to equipment
21       which is transported into the state from without the state for re-
22       pair, service, alteration, maintenance, remanufacture or modifi-
23       cation and which is subsequently transported outside the state for
24       use in the transmission of liquids or natural gas by means of pipe-
25       line in interstate or foreign commerce under authority of the laws
26       of the United States;
27           (bb) all sales of used mobile homes or manufactured homes.
28       As used in this subsection: (1) ``Mobile homes'' and ``manufactured
29       homes'' shall have the meanings ascribed thereto by K.S.A. 58-
30       4202 and amendments thereto; and (2) ``sales of used mobile
31       homes or manufactured homes'' means sales other than the orig-
32       inal retail sale thereof;
33           (cc) all sales of tangible personal property or services pur-
34       chased for the purpose of and in conjunction with constructing,
35       reconstructing, enlarging or remodeling a business or retail busi-
36       ness which meets the requirements established in K.S.A. 74-50,115
37       and amendments thereto, and the sale and installation of machin-
38       ery and equipment purchased for installation at any such business
39       or retail business. When a person shall contract for the construc-
40       tion, reconstruction, enlargement or remodeling of any such busi-
41       ness or retail business, such person shall obtain from the state and
42       furnish to the contractor an exemption certificate for the project
43       involved, and the contractor may purchase materials, machinery

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41

  1       and equipment for incorporation in such project. The contractor
  2       shall furnish the number of such certificates to all suppliers from
  3       whom such purchases are made, and such suppliers shall execute
  4       invoices covering the same bearing the number of such certificate.
  5       Upon completion of the project the contractor shall furnish to the
  6       owner of the business or retail business a sworn statement, on a
  7       form to be provided by the director of taxation, that all purchases
  8       so made were entitled to exemption under this subsection. All in-
  9       voices shall be held by the contractor for a period of five years and
10       shall be subject to audit by the director of taxation. Any contractor
11       or any agent, employee or subcontractor thereof, who shall use or
12       otherwise dispose of any materials, machinery or equipment pur-
13       chased under such a certificate for any purpose other than that for
14       which such a certificate is issued without the payment of the sales
15       or compensating tax otherwise imposed thereon, shall be guilty of
16       a misdemeanor and, upon conviction therefor, shall be subject to
17       the penalties provided for in subsection (g) of K.S.A. 79-3615 and
18       amendments thereto. As used in this subsection, ``business'' and
19       ``retail business'' have the meanings respectively ascribed thereto
20       by K.S.A. 74-50,114 and amendments thereto;
21           (dd) all sales of tangible personal property purchased with
22       food stamps issued by the United States department of agriculture;
23           (ee) all sales of lottery tickets and shares made as part of a
24       lottery operated by the state of Kansas;
25           (ff) on and after July 1, 1988, all sales of new mobile homes or
26       manufactured homes to the extent of 40% of the gross receipts,
27       determined without regard to any trade-in allowance, received
28       from such sale. As used in this subsection, ``mobile homes'' and
29       ``manufactured homes'' shall have the meanings ascribed thereto
30       by K.S.A. 58-4202 and amendments thereto;
31           (gg) all sales of tangible personal property purchased in ac-
32       cordance with vouchers issued pursuant to the federal special sup-
33       plemental food program for women, infants and children;
34           (hh) all sales of medical supplies and equipment purchased di-
35       rectly by a nonprofit skilled nursing home or nonprofit interme-
36       diate nursing care home, as defined by K.S.A. 39-923, and amend-
37       ments thereto, for the purpose of providing medical services to
38       residents thereof. This exemption shall not apply to tangible per-
39       sonal property customarily used for human habitation purposes;
40           (ii) all sales of tangible personal property purchased directly
41       by a nonprofit organization for nonsectarian comprehensive mul-
42       tidiscipline youth development programs and activities provided
43       or sponsored by such organization, and all sales of tangible personal

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42

  1       property by or on behalf of any such organization. This exemption shall
  2       not apply to tangible personal property customarily used for hu-
  3       man habitation purposes;
  4           (jj) all sales of tangible personal property or services, including
  5       the renting and leasing of tangible personal property, purchased
  6       directly on behalf of a community-based mental retardation facility
  7       or mental health center organized pursuant to K.S.A. 19-4001 et
  8       seq., and amendments thereto, and licensed in accordance with the
  9       provisions of K.S.A. 75-3307b and amendments thereto. This ex-
10       emption shall not apply to tangible personal property customarily
11       used for human habitation purposes;
12           (kk) on and after January 1, 1989, all sales of machinery and
13       equipment used directly and primarily for the purposes of manu-
14       facturing, assembling, processing, finishing, storing, warehousing
15       or distributing articles of tangible personal property in this state
16       intended for resale by a manufacturing or processing plant or fa-
17       cility or a storage, warehousing or distribution facility:
18           (1) For purposes of this subsection, machinery and equipment
19       shall be deemed to be used directly and primarily in the manufac-
20       ture, assemblage, processing, finishing, storing, warehousing or
21       distributing of tangible personal property where such machinery
22       and equipment is used during a manufacturing, assembling, proc-
23       essing or finishing, storing, warehousing or distributing operation:
24           (A) To effect a direct and immediate physical change upon the
25       tangible personal property;
26           (B) to guide or measure a direct and immediate physical
27       change upon such property where such function is an integral and
28       essential part of tuning, verifying or aligning the component parts
29       of such property;
30           (C) to test or measure such property where such function is an
31       integral part of the production flow or function;
32           (D) to transport, convey or handle such property during the
33       manufacturing, processing, storing, warehousing or distribution
34       operation at the plant or facility; or
35           (E) to place such property in the container, package or wrap-
36       ping in which such property is normally sold or transported.
37           (2) For Notwithstanding the manner in which machinery and equip-
38       ment is treated by a taxpayer for federal income tax purposes, for pur-
39       poses of this subsection ``machinery and equipment used directly
40       and primarily'' shall include, but not be limited to:
41           (A) Mechanical machines or major components thereof con-
42       tributing to a manufacturing, assembling or finishing process;
43           (B) molds and dies that determine the physical characteristics

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43

  1       of the finished product or its packaging material;
  2           (C) testing equipment to determine the quality of the finished
  3       product;
  4           (D) computers and related peripheral equipment that directly
  5       control or measure the manufacturing process or which are util-
  6       ized for engineering of the finished product; and
  7           (E) computers and related peripheral equipment utilized for
  8       research and development and product design.
  9           (3) ``Machinery and equipment used directly and primarily''
10       shall not include:
11           (A) Hand tools;
12           (B) machinery, equipment and tools used in maintaining and
13       repairing any type of machinery and equipment;
14           (C) transportation equipment not used in the manufacturing,
15       assembling, processing, furnishing, storing, warehousing or dis-
16       tributing process at the plant or facility;
17           (D) office machines and equipment including computers and
18       related peripheral equipment not directly and primarily used in
19       controlling or measuring the manufacturing process;
20           (E) furniture and buildings; and
21           (F) machinery and equipment used in administrative, account-
22       ing, sales or other such activities of the business;
23           (ll) all sales of educational materials purchased for distribution
24       to the public at no charge by a nonprofit corporation organized
25       for the purpose of encouraging, fostering and conducting pro-
26       grams for the improvement of public health;
27           (mm) all sales of seeds and tree seedlings; fertilizers, insecti-
28       cides, herbicides, germicides, pesticides and fungicides; and serv-
29       ices, purchased and used for the purpose of producing plants in
30       order to prevent soil erosion on land devoted to agricultural use;
31           (nn) except as otherwise provided in this act, all sales of serv-
32       ices rendered by an advertising agency or licensed broadcast sta-
33       tion or any member, agent or employee thereof;
34           (oo) all sales of tangible personal property purchased by a com-
35       munity action group or agency for the exclusive purpose of re-
36       pairing or weatherizing housing occupied by low income individ-
37       uals;
38           (pp) all sales of drill bits and explosives actually utilized in the
39       exploration and production of oil or gas;
40           (qq) all sales of tangible personal property and services pur-
41       chased by a nonprofit museum or historical society or any combi-
42       nation thereof, including a nonprofit organization which is organ-
43       ized for the purpose of stimulating public interest in the

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44

  1       exploration of space by providing educational information, exhib-
  2       its and experiences, which is exempt from federal income taxation
  3       pursuant to section 501(c)(3) of the federal internal revenue code
  4       of 1986;
  5           (rr) all sales of tangible personal property which will admit the
  6       purchaser thereof to any annual event sponsored by a nonprofit
  7       organization which is exempt from federal income taxation pur-
  8       suant to section 501(c)(3) of the federal internal revenue code of
  9       1986;
10           (ss) all sales of tangible personal property and services pur-
11       chased by a public broadcasting station licensed by the federal
12       communications commission as a noncommercial educational tel-
13       evision or radio station;
14           (tt) all sales of tangible personal property and services pur-
15       chased by or on behalf of a not-for-profit corporation which is ex-
16       empt from federal income taxation pursuant to section 501(c)(3)
17       of the federal internal revenue code of 1986, for the sole purpose
18       of constructing a Kansas Korean War memorial;
19           (uu) all sales of tangible personal property and services pur-
20       chased by or on behalf of any rural volunteer fire-fighting organ-
21       ization for use exclusively in the performance of its duties and
22       functions;
23           (vv) all sales of tangible personal property purchased by any of
24       the following organizations which are exempt from federal income
25       taxation pursuant to section 501 (c)(3) of the federal internal rev-
26       enue code of 1986, for the following purposes, and all sales of any
27       such property by or on behalf of any such organization for any
28       such purpose:
29           (1) The American Heart Association, Kansas Affiliate, Inc. for
30       the purposes of providing education, training, certification in
31       emergency cardiac care, research and other related services to
32       reduce disability and death from cardiovascular diseases and
33       stroke;
34           (2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose
35       of advocacy for persons with mental illness and to education, re-
36       search and support for their families;
37           (3) the Kansas Mental Illness Awareness Council for the pur-
38       poses of advocacy for persons who are mentally ill and to educa-
39       tion, research and support for them and their families;
40           (4) the American Diabetes Association Kansas Affiliate, Inc. for
41       the purpose of eliminating diabetes through medical research,
42       public education focusing on disease prevention and education,
43       patient education including information on coping with diabetes,

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45

  1       and professional education and training;
  2           (5) the American Lung Association of Kansas, Inc. for the pur-
  3       pose of eliminating all lung diseases through medical research,
  4       public education including information on coping with lung dis-
  5       eases, professional education and training related to lung disease
  6       and other related services to reduce the incidence of disability and
  7       death due to lung disease;
  8           (6) the Kansas chapters of the Alzheimer's Disease and Related
  9       Disorders Association, Inc. for the purpose of providing assistance
10       and support to persons in Kansas with Alzheimer's disease, and
11       their families and caregivers; and
12           (ww) all sales of tangible personal property purchased by the
13       Habitat for Humanities Humanity for the exclusive use of being in-
14       corporated within a housing project constructed by such organi-
15       zation.;
16           (xx) all sales of tangible personal property and services purchased by
17       a nonprofit zoo which is exempt from federal income taxation pursuant
18       to section 501 (c)(3) of the federal internal revenue code of 1986, or on
19       behalf of such zoo by an entity itself exempt from federal income taxation
20       pursuant to section 50 (c)(3) of the federal internal revenue code of 1986
21       contracted with to operate such zoo and all sales of tangible personal
22       property or services purchased by a contractor for the purpose of con-
23       structing, equipping, reconstructing, maintaining, repairing, enlarging,
24       furnishing or remodeling facilities for any nonprofit zoo which would be
25       exempt from taxation under the provisions of this section if purchased
26       directly by such nonprofit zoo or the entity operating such zoo. Nothing
27       in this subsection shall be deemed to exempt the purchase of any construc-
28       tion machinery, equipment or tools used in the constructing, equipping,
29       reconstructing, maintaining, repairing, enlarging, furnishing or remod-
30       eling facilities for any nonprofit zoo. When any nonprofit zoo shall con-
31       tract for the purpose of constructing, equipping, reconstructing, main-
32       taining, repairing, enlarging, furnishing or remodeling facilities, it shall
33       obtain from the state and furnish to the contractor an exemption certifi-
34       cate for the project involved, and the contractor may purchase materials
35       for incorporation in such project. The contractor shall furnish the number
36       of such certificate to all suppliers from whom such purchases are made,
37       and such suppliers shall execute invoices covering the same bearing the
38       number of such certificate. Upon completion of the project the contractor
39       shall furnish to the nonprofit zoo concerned a sworn statement, on a form
40       to be provided by the director of taxation, that all purchases so made were
41       entitled to exemption under this subsection. All invoices shall be held by
42       the contractor for a period of five years and shall be subject to audit by
43       the director of taxation. If any materials purchased under such a certifi-

SB 500--Am. by HCW

46

  1       cate are found not to have been incorporated in the building or other
  2       project or not to have been returned for credit or the sales or compensating
  3       tax otherwise imposed upon such materials which will not be so incor-
  4       porated in the building or other project reported and paid by such con-
  5       tractor to the director of taxation not later than the 20th day of the month
  6       following the close of the month in which it shall be determined that such
  7       materials will not be used for the purpose for which such certificate was
  8       issued, the nonprofit zoo concerned shall be liable for tax on all materials
  9       purchased for for the project, and upon payment thereof it may recover
10       the same from the contractor together with reasonable attorney fees. Any
11       contractor or any agent, employee or subcontractor thereof, who shall use
12       or otherwise dispose of any materials purchased under such a certificate
13       for any purpose other than that for which such a certificate is issued
14       without the payment of the sales or compensating tax otherwise imposed
15       upon such materials, shall be guilty of a misdemeanor and, upon convic-
16       tion therefor, shall be subject to the penalties provided for in subsection
17       (g) of K.S.A. 79-3615, and amendments thereto;
18           (yy) all sales of tangible personal property and services purchased by
19       a parent-teacher association or organization, and all sales of tangible per-
20       sonal property by or on behalf of such association or organization;
21           (zz) all sales of machinery and equipment purchased by over-the-air,
22       free access radio or television station which is used directly and primarily
23       for the purpose of producing a broadcast signal or is such that the failure
24       of the machinery or equipment to operate would cause broadcasting to
25       cease. For purposes of this subsection, machinery and equipment shall
26       include, but not be limited to, that required by rules and regulations of
27       the federal communications commission, and all sales of electricity which
28       are essential or necessary for the purpose of producing a broadcast signal
29       or is such that the failure of the electricity would cause broadcasting to
30       cease;
31           (aaa) all sales of tangible personal property and services purchased
32       by a religious organization which is exempt from federal income taxation
33       pursuant to section 501 (c)(3) of the federal internal revenue code, and
34       used exclusively for religious purposes; and
35           (bbb) all sales of food for human consumption by an organization
36       which is exempt from federal income taxation pursuant to section 501
37       (c)(3) of the federal internal revenue code of 1986, pursuant to a food
38       distribution program which offers such food at a price below cost in
39       exchange for the performance of community service by the purchaser
40       thereof.
41           Sec. 33. K.S.A. 79-3633 is hereby amended to read as follows:
42       79-3633. As used in K.S.A. 79-3620 and 79-3632 to 79-3639 and
43       amendments thereto, unless the context clearly indicates other-

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47

  1       wise:
  2           (a) ``Income'' means the sum of adjusted gross income deter-
  3       mined under the Kansas income tax act, maintenance, support money,
  4       cash public assistance and relief (not including relief granted under this
  5       act or refunds granted under the provisions of article 45 of chapter 79 of
  6       the Kansas Statutes Annotated), the gross amount of any pension or an-
  7       nuity (including all monetary retirement benefits from whatever source
  8       derived, including but not limited to railroad retirement benefits, all pay-
  9       ments received under the federal social security act and veterans disability
10       pensions), all dividends and interest from whatever source derived not
11       included in adjusted gross income, workmen's compensation and the
12       gross amount of ``loss of time'' insurance. It does not include gifts from
13       nongovernmental sources or surplus food or other relief in kind supplied
14       by a governmental agency.
15           (b) ``Household'' means a claimant, a claimant and spouse or a
16       claimant and one or more individuals not related as husband and wife
17       and all other persons for whom a personal exemption is claimed who
18       together occupy a common residence.
19           (c) ``Household income'' means all income received by all persons of
20       a household in a calendar year while members of such household.
21           (d) ``Claimant'' means a person who has filed a claim for a re-
22       fund or credit under the provisions of this act and was, during the
23       entire calendar year preceding the year in which the claim was
24       filed for relief under this act, domiciled in this state, was a member
25       of a household having a household, had income of not more than
26       $13,000 $25,000 in the calendar year for which a claim is filed, except
27       that such income amount in the case of calendar year 1999, and all years
28       thereafter, shall be increased by the product of the amount allowed for
29       the next preceding tax year multiplied by the cost-of-living adjustment
30       determined under section 1 (f)(3) of the federal internal revenue code for
31       the calendar year in which the taxable year commences and was: (1) A
32       person having a disability; (2) a person other than a person in-
33       cluded under (1), who has attained 55 years of age in the calendar
34       year for which a claim is filed or (3) a person other than a person
35       included under (1) or (2) having one or more dependent children
36       under 18 years of age residing at the person's homestead during
37       the calendar year for which a claim is filed.
38           (e) (d) ``Head of household'' means the person filing a claim
39       under the provisions of this act.
40           (f) (e) ``Disability'' means (1) inability to engage in any substan-
41       tial gainful activity by reason of any medically determinable phys-
42       ical or mental impairment which can be expected to result in death
43       or has lasted or can be expected to last for a continuous period of

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48

  1       not less than 12 months, and an individual shall be determined to
  2       be under a disability only if the physical or mental impairment or
  3       impairments are of such severity that the individual is not only
  4       unable to do the individual's previous work but cannot, consider-
  5       ing age, education and work experience, engage in any other kind
  6       of substantial gainful work which exists in the national economy,
  7       regardless of whether such work exists in the immediate area in
  8       which the individual lives or whether a specific job vacancy exists
  9       for the individual, or whether the individual would be hired if ap-
10       plication was made for work. For purposes of the preceding sen-
11       tence (with respect to any individual), ``work which exists in the
12       national economy'' means work which exists in significant numbers
13       either in the region where the individual lives or in several regions
14       of the country; for purposes of this subsection, a ``physical or men-
15       tal impairment'' is an impairment that results from anatomical,
16       physiological or psychological abnormalities which are demonstra-
17       ble by medically acceptable clinical and laboratory diagnostic tech-
18       niques; or
19           (2) blindness and inability by reason of blindness to engage in
20       substantial gainful activity requiring skills or abilities comparable
21       to those of any gainful activity in which the individual has previ-
22       ously engaged with some regularity and over a substantial period
23       of time.
24           (g) ``Blindness'' means central visual acuity of 20/200 or less in
25       the better eye with the use of a correcting lens. An eye which is
26       accompanied by a limitation in the fields of vision such that the
27       widest diameter of the visual field subtends an angle no greater
28       than 20 degrees shall be considered for the purpose of this para-
29       graph as having a central visual acuity of 20/200 or less.
30           Sec. 34. K.S.A. 79-3635 is hereby amended to read as follows:
31       79-3635. (a) (1) A claimant shall be entitled to a refund of retailers'
32       sales taxes paid upon food during the calendar year 1997 1998 and
33       each year thereafter in the amount hereinafter provided. For
34       households having a household income of less than $5,000, a refund in
35       the amount of $40 shall be allowed for the head of household and a refund
36       of $30 shall be allowed for each additional member of the household. For
37       households having a household income of at least $5,000 but less than
38       $10,000, a refund in the amount of $30 shall be allowed for the head of
39       household and a refund of $25 shall be allowed for each additional mem-
40       ber of the household. For households having a household income of at
41       least $10,000 but not more than $13,000, a refund in the amount of $20
42       shall be allowed for the head of household and a refund of $15 shall be
43       allowed for each additional member of the household. There shall be

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49

  1       allowed for each member of a household an amount equal to $50. An
  2       additional $50 amount shall be allowed for any claimant who qualifies as
  3       a head of household pursuant to K.S.A. 79-32,121, and amendments
  4       thereto. All such claims shall be paid from the sales tax refund fund
  5       upon warrants of the director of accounts and reports pursuant to
  6       vouchers approved by the director of taxation or by a person or
  7       persons designated by the director.
  8           (2) As an alternative to the procedure described by paragraph 1, for
  9       all taxable years commencing after December 31, 1977, there shall be
10       allowed as a credit against the tax liability of a resident individual imposed
11       under the Kansas income tax act an amount equal to $50 for each member
12       of a household and, if the claimant qualifies as a head of household pur-
13       suant to K.S.A. 79-32,121, and amendments thereto, an additional $50
14       amount. If the amount of such tax credit exceeds the claimant's income
15       tax liability for such taxable year, such excess amount shall be refunded
16       to the claimant.
17           (b) A head of household shall make application for refunds for
18       all members of the same household upon a common form provided
19       for the making of joint claims. All claims paid to members of the
20       same household shall be paid as a joint claim by means of a single
21       warrant.
22           (c) No claim for a refund of taxes under the provisions of K.S.A.
23       79-3632 et seq. shall be paid or allowed unless such claim is actually
24       filed with and in the possession of the department of revenue on
25       or before April 15 of the year next succeeding the year in which
26       such taxes were paid. The director of taxation may: (1) Extend the
27       time for filing any claim under the provisions of this act when good
28       cause exists therefor; or (2) accept a claim filed after the deadline
29       for filing in the case of sickness, absence or disability of the claim-
30       ant if such claim has been filed within four years of such deadline.
31           New Sec. 35. (a) Any business firm which employs on a full-
32       time basis a person with a developmental disability or who is se-
33       riously and persistently mentally ill and who is engaged for a pe-
34       riod of eight months or more in the performance of duties in
35       connection with the operation of such firm, shall be allowed a
36       credit against the tax imposed by the Kansas income tax act, the
37       tax on net income of national banking associations, state banks,
38       trust companies or savings and loan associations imposed under
39       article 11 of chapter 79 of the Kansas Statutes Annotated, or the
40       premiums tax upon insurance companies imposed pursuant to
41       K.S.A. 40-252, and amendments thereto. The amount of the credit
42       allowed shall be $500 for each such person employed, except that
43       no more than $50,000 may be claimed for credit in any one taxable

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  1       year.
  2           (b) As used in this section:
  3           (1) ``Business firm'' means any business entity authorized to do
  4       business in the state of Kansas which is subject to the state income
  5       tax imposed by the provisions of the Kansas income tax act, any
  6       national banking association, state bank, trust company or savings
  7       and loan association paying an annual tax on its net income pur-
  8       suant to article 11 of chapter 79 of the Kansas Statutes Annotated,
  9       or any insurance company paying a premium tax pursuant to K.S.A.
10       40-252, and amendments thereto; and
11           (2) ``person with a developmental disability or who is seriously
12       and persistently mentally ill'' means any person who meets the
13       criteria established for mental retardation or developmental dis-
14       ability or serious and persistent mental illness by the division of
15       mental health and retardation services of the department of social
16       and rehabilitation services, and who is recommended for employ-
17       ment by a business firm, by a community mental health center or
18       facility for the mentally retarded established pursuant to K.S.A.
19       19-4001 et seq., or by any entity which any such center or facility
20       has contracted with to provide mental health services or services
21       for the mentally retarded, or both.
22           (c) The provisions of this section shall be applicable to all tax-
23       able years commencing after December 31, 1997.
24           Section 36. K.S.A. 79-3235 is hereby amended to read as fol-
25       lows: 79-3235. If any tax imposed by this act or any portion of such
26       tax is not paid within 60 days after it becomes due, the secretary
27       or the secretary's designee shall issue a warrant under the secre-
28       tary's or the secretary's designee's hand and official seal, directed
29       to the sheriff of any county of the state, commanding the sheriff
30       to levy upon and sell the real and personal property of the taxpayer
31       found within the sheriff's county for the payment of the amount
32       thereof, with the added penalties, interest and the cost of execut-
33       ing the warrant and to return the warrant to the secretary or the
34       secretary's designee and pay to the secretary or the secretary's
35       designee the money collected by virtue of it not more than 60 days
36       from the date of the warrant. The sheriff, within five days after the
37       receipt of the warrant, shall file with the clerk of the district court
38       of the county a copy thereof, and thereupon the clerk shall either
39       enter in the appearance docket the name of the taxpayer men-
40       tioned in the warrant, the amount of the tax or portion of it, inter-
41       est and penalties for which the warrant is issued and the date such
42       copy is filed and note the taxpayer's name in the general index. No
43       fee shall be charged for either entry. The amount of such warrant

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51

  1       so docketed shall thereupon become a lien upon the title to and
  2       interest in the real property of the taxpayer against whom it is
  3       issued. The sheriff shall proceed in the same manner and with the
  4       same effect as prescribed by law with respect to executions issued
  5       against property upon judgments of a court of record and shall be
  6       entitled to the same fees for services to be collected in the same
  7       manner.
  8           The court in which the warrant is docketed shall have jurisdic-
  9       tion over all subsequent proceedings as fully as though a judgment
10       had been rendered in the court. In the discretion of the secretary
11       or the secretary's designee a warrant of like terms, force and effect
12       may be issued and directed to any officer or employee of the sec-
13       retary, and in the execution thereof such officer or employee shall
14       have all the powers conferred by law upon sheriffs, and the sub-
15       sequent proceedings thereunder shall be the same as provided
16       where the warrant is issued directly to the sheriff. The taxpayer
17       shall have the right to redeem the real estate within a period of 18
18       months from the date of such sale. If a warrant is returned, unsa-
19       tisfied in full, the secretary or the secretary's designee shall have
20       the same remedies to enforce the claim for taxes as if the state of
21       Kansas had recovered judgment against the taxpayer for the
22       amount of the tax. No law exempting any goods and chattels, lands
23       and tenements from forced sale under execution shall apply to a
24       levy and sale under any such warrant or upon any execution issued
25       upon any judgment rendered in any action for income taxes. Except
26       as provided further, the secretary or the secretary's designee shall
27       have the right at any time after a warrant has been returned un-
28       satisfied or satisfied only in part, to issue alias warrants until the
29       full amount of the tax is collected.
30           If execution is not issued within 10 years from the date of the docketing
31       of any such warrant, or if 10 years shall have intervened between the date
32       of the last execution issued on such warrant, and the time of issuing an-
33       other writ of execution thereon, such warrant shall become dormant, and
34       shall cease to operate as a lien on the real estate of the delinquent taxpayer.
35       Such dormant warrant may be revived in like manner as dormant judg-
36       ment under the code of civil procedure.
37           Sec. 37. K.S.A. 79-3617 is hereby amended to read as follows:
38       79-3617. Whenever any taxpayer liable to pay any sales or com-
39       pensating tax, refuses or neglects to pay the tax, the amount, in-
40       cluding any interest or penalty, shall be collected in the following
41       manner. The secretary of revenue or the secretary's designee shall
42       issue a warrant under the hand of the secretary or the secretary's
43       designee and official seal directed to the sheriff of any county of

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52

  1       the state commanding the sheriff to levy upon and sell the real and
  2       personal property of the taxpayer found within the sheriff's county
  3       to satisfy the tax, including penalty and interest, and the cost of
  4       executing the warrant and to return such warrant to the secretary
  5       or the secretary's designee and pay to the secretary or the secre-
  6       tary's designee the money collected by virtue thereof not more
  7       than 90 days from the date of the warrant. The sheriff shall, within
  8       five days, after the receipt of the warrant file with the clerk of the
  9       district court of the county a copy thereof, and thereupon the clerk
10       shall either enter in the appearance docket the name of the tax-
11       payer mentioned in the warrant, the amount of the tax or portion
12       of it, interest and penalties for which the warrant is issued and the
13       date such copy is filed and note the taxpayer's name in the general
14       index. No fee shall be charged for either such entry. The amount
15       of such warrant so docketed shall thereupon become a lien upon
16       the title to, and interest in, the real property of the taxpayer
17       against whom it is issued. The sheriff shall proceed in the same
18       manner and with the same effect as prescribed by law with respect
19       to executions issued against property upon judgments of a court
20       of record, and shall be entitled to the same fees for services.
21           The court in which the warrant is docketed shall have jurisdic-
22       tion over all subsequent proceedings as fully as though a judgment
23       had been rendered in the court. A warrant of similar terms, force
24       and effect may be issued by the secretary or the secretary's des-
25       ignee and directed to any officer or employee of the secretary or
26       the secretary's designee, and in the execution thereof such officer
27       or employee shall have all the powers conferred by law upon sher-
28       iffs with respect to executions issued against property upon judg-
29       ments of a court of record and the subsequent proceedings there-
30       under shall be the same as provided where the warrant is issued
31       directly to the sheriff. The taxpayer shall have the right to redeem
32       the real estate within a period of 18 months from the date of such
33       sale. If a warrant is returned, unsatisfied in full, the secretary or
34       the secretary's designee shall have the same remedies to enforce
35       the claim for taxes as if the state of Kansas had recovered judgment
36       against the taxpayer for the amount of the tax. No law exempting
37       any goods and chattels, land and tenements from forced sale under
38       execution shall apply to a levy and sale under any of the warrants
39       or upon any execution issued upon any judgment rendered in any
40       action for sales or compensating taxes. Except as provided further,
41       the secretary or the secretary's designee shall have the right at any
42       time after a warrant has been returned unsatisfied, or satisfied only
43       in part, to issue alias warrants until the full amount of the tax is

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53

  1       collected. No costs incurred by the sheriff or the clerk of the court
  2       shall be charged to the secretary or the secretary's designee.
  3           If execution is not issued within 10 years from the date of the docketing
  4       of any such warrant, or if 10 years shall have intervened between the date
  5       of the last execution issued on such warrant, and the time of issuing an-
  6       other writ of execution thereon, such warrant shall become dormant, and
  7       shall cease to operate as a lien on the real estate of the delinquent taxpayer.
  8       Such dormant warrant may be revived in like manner as dormant judg-
  9       ments under the code of civil procedure.
10           Sec. 38. K.S.A. 79-213 is hereby amended to read as follows:
11       79-213. (a) Any property owner requesting an exemption from the
12       payment of ad valorem property taxes assessed, or to be assessed,
13       against their property shall be required to file an initial request
14       for exemption, on forms approved by the board of tax appeals and
15       provided by the county appraiser.
16           (b) The initial exemption request shall identify the property for
17       which the exemption is requested and state, in detail, the legal and
18       factual basis for the exemption claimed.
19           (c) The request for exemption shall be filed with the county
20       appraiser of the county where such property is principally located.
21           (d) After a review of the exemption request, and after a prelim-
22       inary examination of the facts as alleged, the county appraiser shall
23       recommend that the exemption request either be granted or de-
24       nied, and, if necessary, that a hearing be held. If a denial is rec-
25       ommended, a statement of the controlling facts and law relied
26       upon shall be included on the form.
27           (e) The county appraiser, after making such written recom-
28       mendation, shall file the request for exemption and the recom-
29       mendations of the county appraiser with the board of tax appeals.
30           (f) Upon receipt of the request for exemption, the board shall
31       docket the same and notify the applicant and the county appraiser
32       of such fact.
33           (g) After examination of the request for exemption, and the
34       county appraiser's recommendation related thereto, the board
35       may fix a time and place for hearing, and shall notify the applicant
36       and the county appraiser of the time and place so fixed. In any case
37       where a party to such request for exemption requests a hearing
38       thereon, the same shall be granted. Hearings shall be conducted
39       in accordance with the provisions of the Kansas administrative pro-
40       cedure act. In all instances where the board sets a request for
41       exemption for hearing, the county shall be represented by its
42       county attorney or county counselor.
43           (h) In the event of a hearing, the same shall be originally set

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54

  1       not later than 90 days after the filing of the request for exemption
  2       with the board.
  3           (i) During the pendency of a request for exemption, no person,
  4       firm, unincorporated association, company or corporation charged
  5       with real estate or personal property taxes pursuant to K.S.A. 79-
  6       2004 and 79-2004a, and amendments thereto, on the tax books in
  7       the hands of the county treasurer shall be required to pay the tax
  8       from the date the request is filed with the county appraiser until
  9       the expiration of 30 days after the board issued its order thereon
10       and the same becomes a final order. In the event that taxes have
11       been assessed against the subject property, no interest shall accrue
12       on any unpaid tax for the year or years in question nor shall the
13       unpaid tax be considered delinquent from the date the request is
14       filed with the county appraiser until the expiration of 30 days after
15       the board issued its order thereon. In the event the board deter-
16       mines an application for exemption is without merit and filed in
17       bad faith to delay the due date of the tax, the tax shall be consid-
18       ered delinquent as of the date the tax would have been due pur-
19       suant to K.S.A. 79-2004 and 79-2004a, and amendments thereto,
20       and interest shall accrue as prescribed therein.
21           (j) In the event the board grants the initial request for exemp-
22       tion, the same shall be effective beginning with the date of first
23       exempt use except that, with respect to property the construction
24       of which commenced not to exceed 24 months prior to the date of
25       first exempt use, the same shall be effective beginning with the
26       date of commencement of construction.
27           (k) In conjunction with its authority to grant exemptions, the
28       board shall have the authority to abate all unpaid taxes that have
29       accrued from and since the effective date of the exemption. In the
30       event that taxes have been paid during the period where the sub-
31       ject property has been determined to be exempt, the board shall
32       have the authority to order a refund of taxes for a period not to
33       exceed three years.
34           (l) The provisions of this section shall not apply to: (1) Farm
35       machinery and equipment exempted from ad valorem taxation by
36       K.S.A. 79-201j, and amendments thereto; (2) personal property ex-
37       empted from ad valorem taxation by K.S.A. 79-215, and amend-
38       ments thereto; (3) wearing apparel, household goods and personal
39       effects exempted from ad valorem taxation by K.S.A. 79-201c, and
40       amendments thereto; (4) livestock; (5) hay and silage exempted
41       from ad valorem taxation by K.S.A. 79-201d, and amendments
42       thereto; (6) merchants' and manufacturers' inventories exempted
43       from ad valorem taxation by K.S.A. 79-201m and amendments

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55

  1       thereto; (7) grain exempted from ad valorem taxation by K.S.A. 79-
  2       201n, and amendments thereto; (8) property exempted from ad
  3       valorem taxation by K.S.A. 79-201a Seventeenth and amendments
  4       thereto, including all property previously acquired by the secre-
  5       tary of transportation or a predecessor in interest, which is used
  6       in the administration, construction, maintenance or operation of
  7       the state system of highways. The secretary of transportation shall
  8       at the time of acquisition of property notify the county appraiser
  9       in the county in which the property is located that the acquisition
10       occurred and provide a legal description of the property acquired;
11       (9) property exempted from ad valorem taxation by K.S.A. 79-201a
12       Ninth, and amendments thereto, including all property previously
13       acquired by the Kansas turnpike authority which is used in the
14       administration, construction, maintenance or operation of the
15       Kansas turnpike. The Kansas turnpike authority shall at the time
16       of acquisition of property notify the county appraiser in the county
17       in which the property is located that the acquisition occurred and
18       provide a legal description of the property acquired; (10) aqua-
19       culture machinery and equipment exempted from ad valorem tax-
20       ation by K.S.A. 79-201j, and amendments thereto. As used in this
21       section, ``aquaculture'' has the same meaning ascribed thereto by
22       K.S.A. 47-1901, and amendments thereto; (11) Christmas tree ma-
23       chinery and equipment exempted from ad valorem taxation by
24       K.S.A. 79-201j, and amendments thereto; (12) property used ex-
25       clusively by the state or any municipality or political subdivision
26       of the state for right-of-way purposes. The state agency or the gov-
27       erning body of the municipality or political subdivision shall at the
28       time of acquisition of property for right-of-way purposes notify the
29       county appraiser in the county in which the property is located
30       that the acquisition occurred and provide a legal description of the
31       property acquired; (13) machinery, equipment, materials and sup-
32       plies exempted from ad valorem taxation by K.S.A. 79-201w, and
33       amendments thereto; (14) vehicles owned by the state or by any
34       political or taxing subdivision thereof and used exclusively for gov-
35       ernmental purposes; and (15) property used for residential pur-
36       poses which is exempted pursuant to K.S.A. 79-201x from the prop-
37       erty tax levied pursuant to K.S.A. 1997 Supp. 72-6431, and
38       amendments thereto; and (16) motor vehicles exempted from taxation
39       by subsection (e) of K.S.A. 79-5107, and amendments thereto.
40           (m) The provisions of this section shall apply to property ex-
41       empt pursuant to the provisions of section 13 of article 11 of the
42       Kansas constitution.
43           (n) The provisions of subsection (j) and (k) as amended by this

SB 500--Am. by HCW

56

  1       act shall be applicable to all taxable years commencing after De-
  2       cember 31, 1995.
  3           [Sec. 39. K.S.A. 79-3619 is hereby amended to read as follows:
  4       79-3619. (a) For the purposes of more efficiently securing the pay-
  5       ment, collection and accounting for the taxes provided for under
  6       this act, agreements between competing retailers or the adoption
  7       of appropriate rules and regulations by organizations or associa-
  8       tions of retailers to provide uniform methods for adding and col-
  9       lecting the full amount of the tax imposed by this act, or an amount
10       equal as nearly as possible or practicable to the average equivalent
11       thereof, and which do not involve price-fixing agreements other-
12       wise unlawful, and which shall first have the approval of the di-
13       rector of taxation, are expressly authorized and shall be held not
14       to be in violation of any antitrust laws of this state. It shall be the
15       duty of the director of taxation to cooperate with such retailers,
16       organizations, or associations in formulating such agreements,
17       rules and regulations. The secretary of revenue shall adopt rules
18       and regulations for adding and collecting such tax, or an amount
19       equal as nearly as possible or practicable to the average equivalent
20       thereof, by providing different methods applying uniformly to re-
21       tailers within the same general classification for the purpose of
22       enabling such retailers to add and collect, as far as practicable, the
23       amount of such tax.
24           [(b) The secretary of revenue may adopt rules and regulations to pro-
25       vide for the issuance of permits to certain businesses which grant direct
26       payment authority that allows certain purchases to be made without the
27       payment of retailers' sales or use tax to the vendor or service provider
28       and requires the permit holder to self-accrue any state and local tax that
29       is due and pay such tax directly to the department of revenue. The sec-
30       retary shall be accorded broad discretion in establishing qualification
31       standards for direct pay authority, in entering into agreement with permit
32       holders that fix accounting and reporting requirements, in granting and
33       canceling the direct pay privilege, and in establishing other requirements
34       for administration of this section.]
35           Sec. 26 39 [40]. K.S.A. 79-201t, 79-201w, 79-201x, 79-213, 79-
36       1537, 79-1537b, 79-1537c, 79-1537e, 79-1537f, 79-1538, 79-1538a, 79-
37       1539, 79-1540, 79-1541, 79-1541a, 79-1541b, 79-1542, 79-1542a, 79-
38       1543, 79-1545, 79-1547, 79-1548, 79-1549, 79-1550, 79-1551, 79-1552,
39       79-1553, 79-1554, 79-1555, 79-1556, 79-1557, 79-1557a, 79-1559, 79-
40       1560, 79-1561, 79-1562, 79-1563, 79-1563a, 79-1564, 79-1565, 79-1566,
41       79-1567, 79-1567a, 79-1568, 79-1569, 79-1570, 79-1571, 79-1572, 79-
42       1573, 79-1574, 79-1575, 79-1576, 79-1579, 79-1580, 79-1584, 79-1584a,
43       79-1584b, 79-1584c, 79-1585, 79-1586, 79-1587, 79-3235, 79-32,110, 79-

SB 500--Am. by HCW

57

  1       32,117, 79-32,117h, 79-32,117i, 79-32,119, 79-32,121, 79-3603, 79-
  2       3606, 79-3617, [79-3619,] 79-3633, 79-3635 and 79-4217 and K.S.A.
  3       1997 Supp. 72-6431 are hereby repealed.
  4           Sec. 27 40 [41]. This act shall take effect and be in force from and
  5       after its publication in the statute book.
  6