Session of 1998
                   
SENATE BILL No. 528
         
By Committee on Assessment and Taxation
         
1-28
            9             AN ACT relating to income taxation; concerning the treatment of private
10             retirement benefits; amending K.S.A. 79-32,117 and repealing the ex-
11             isting section.
12            
13       Be it enacted by the Legislature of the State of Kansas:
14           Section 1. K.S.A. 79-32,117 is hereby amended to read as follows:
15       79-32,117. (a) The Kansas adjusted gross income of an individual means
16       such individual's federal adjusted gross income for the taxable year, with
17       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 in the
20       purchase of state or political subdivision obligations, to the extent that
21       the same is not included in federal adjusted gross income, on obligations
22       of any state or political subdivision thereof, but to the extent that interest
23       income on obligations of this state or a political subdivision thereof issued
24       prior to January 1, 1988, is specifically exempt from income tax under the
25       laws of this state authorizing the issuance of such obligations, it shall be
26       excluded from computation of Kansas adjusted gross income whether or
27       not included in federal adjusted gross income. Interest income on obli-
28       gations of this state or a political subdivision thereof issued after Decem-
29       ber 31, 1987, shall be excluded from computation of Kansas adjusted
30       gross income whether or not included in federal adjusted gross income.
31           (ii) Taxes on or measured by income or fees or payments in lieu of
32       income taxes imposed by this state or any other taxing jurisdiction to the
33       extent deductible in determining federal adjusted gross income and not
34       credited against federal income tax. This paragraph shall not apply to taxes
35       imposed under the provisions of K.S.A. 79-1107 or 79-1108, and amend-
36       ments thereto, for privilege tax year 1995, and all such years thereafter.
37           (iii) The federal net operating loss deduction.
38           (iv) Federal income tax refunds received by the taxpayer if the de-
39       duction of the taxes being refunded resulted in a tax benefit for Kansas
40       income tax purposes during a prior taxable year. Such refunds shall be
41       included in income in the year actually received regardless of the method
42       of accounting used by the taxpayer. For purposes hereof, a tax benefit
43       shall be deemed to have resulted if the amount of the tax had been de-

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  1       ducted in determining income subject to a Kansas income tax for a prior
  2       year regardless of the rate of taxation applied in such prior year to the
  3       Kansas taxable income, but only that portion of the refund shall be in-
  4       cluded as bears the same proportion to the total refund received as the
  5       federal taxes deducted in the year to which such refund is attributable
  6       bears to the total federal income taxes paid for such year. For purposes
  7       of the foregoing sentence, federal taxes shall be considered to have been
  8       deducted only to the extent such deduction does not reduce Kansas tax-
  9       able income below zero.
10           (v) The amount of any depreciation deduction or business expense
11       deduction claimed on the taxpayer's federal income tax return for any
12       capital expenditure in making any building or facility accessible to the
13       handicapped, for which expenditure the taxpayer claimed the credit al-
14       lowed by K.S.A. 79-32,177, and amendments thereto.
15           (vi) Any amount of designated employee contributions picked up by
16       an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965,
17       and amendments to such sections.
18           (vii) The amount of any charitable contribution made to the extent
19       the same is claimed as the basis for the credit allowed pursuant to K.S.A.
20       79-32,196, and amendments thereto.
21           (c) There shall be subtracted from federal adjusted gross income:
22           (i) Interest or dividend income on obligations or securities of any
23       authority, commission or instrumentality of the United States and its pos-
24       sessions less any related expenses directly incurred in the purchase of
25       such obligations or securities, to the extent included in federal adjusted
26       gross income but exempt from state income taxes under the laws of the
27       United States.
28           (ii) Any amounts received which are included in federal adjusted
29       gross income but which are specifically exempt from Kansas income tax-
30       ation under the laws of the state of Kansas.
31           (iii) The portion of any gain or loss from the sale or other disposition
32       of property having a higher adjusted basis for Kansas income tax purposes
33       than for federal income tax purposes on the date such property was sold
34       or disposed of in a transaction in which gain or loss was recognized for
35       purposes of federal income tax that does not exceed such difference in
36       basis, but if a gain is considered a long-term capital gain for federal in-
37       come tax purposes, the modification shall be limited to that portion of
38       such gain which is included in federal adjusted gross income.
39           (iv) The amount necessary to prevent the taxation under this act of
40       any annuity or other amount of income or gain which was properly in-
41       cluded in income or gain and was taxed under the laws of this state for a
42       taxable year prior to the effective date of this act, as amended, to the
43       taxpayer, or to a decedent by reason of whose death the taxpayer acquired

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  1       the right to receive the income or gain, or to a trust or estate from which
  2       the taxpayer received the income or gain.
  3           (v) The amount of any refund or credit for overpayment of taxes on
  4       or measured by income or fees or payments in lieu of income taxes im-
  5       posed by this state, or any taxing jurisdiction, to the extent included in
  6       gross income for federal income tax purposes.
  7           (vi) Accumulation distributions received by a taxpayer as a beneficiary
  8       of a trust to the extent that the same are included in federal adjusted
  9       gross income.
10           (vii) Amounts received as annuities under the federal civil service
11       retirement system from the civil service retirement and disability fund
12       and other amounts received as retirement benefits in whatever form
13       which were earned for being employed by the federal government or for
14       service in the armed forces of the United States.
15           (viii) Amounts received by retired railroad employees as a supple-
16       mental annuity under the provisions of 45 U.S.C. 228b (a) and 228c (a)(1)
17       et seq.
18           (ix) Amounts received by retired employees of a city and by retired
19       employees of any board of such city as retirement allowances pursuant to
20       K.S.A. 13-14,106, and amendments thereto, or pursuant to any charter
21       ordinance exempting a city from the provisions of K.S.A. 13-14,106, and
22       amendments thereto.
23           (x) For taxable years beginning after December 31, 1976, the amount
24       of the federal tentative jobs tax credit disallowance under the provisions
25       of 26 U.S.C. 280 C. For taxable years ending after December 31, 1978,
26       the amount of the targeted jobs tax credit and work incentive credit dis-
27       allowances under 26 U.S.C. 280 C.
28           (xi) For taxable years beginning after December 31, 1986, dividend
29       income on stock issued by Kansas Venture Capital, Inc.
30           (xii) For taxable years beginning after December 31, 1989, amounts
31       received by retired employees of a board of public utilities as pension and
32       retirement benefits pursuant to K.S.A. 13-1246, 13-1246a and 13-1249
33       and amendments thereto.
34           (xiii) For taxable years beginning after December 31, 1993, the
35       amount of income earned on contributions deposited to an individual
36       development account under K.S.A. 79-32,117h, and amendments thereto.
37           (xiv) For all taxable years commencing after December 31, 1996, that
38       portion of any income of a bank organized under the laws of this state or
39       any other state, a national banking association organized under the laws
40       of the United States, an association organized under the savings and loan
41       code of this state or any other state, or a federal savings association or-
42       ganized under the laws of the United States, for which an election as an
43       S corporation under subchapter S of the federal internal revenue code is

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  1       in effect, which accrues to the taxpayer who is a stockholder of such
  2       corporation and which is not distributed to the stockholders as dividends
  3       of the corporation.
  4           (xv) For the taxable year 1998, amounts not to exceed $8,000, received
  5       by any taxpayer as retirement benefits in whatever form which were
  6       earned for being self-employed or for being employed by a private entity,
  7       to the extent included in federal adjusted gross income. In the case of tax
  8       year 1999, and all tax years thereafter, the maximum amount allowable
  9       shall be increased by the product of the amount allowed for the next
10       preceding tax year multiplied by the cost-of-living adjustment determined
11       under section 1 (f)(3) of the federal internal revenue code for the calendar
12       year in which the taxable year commences.
13           (d) There shall be added to or subtracted from federal adjusted gross
14       income the taxpayer's share, as beneficiary of an estate or trust, of the
15       Kansas fiduciary adjustment determined under K.S.A. 79-32,135, and
16       amendments thereto.
17           (e) The amount of modifications required to be made under this sec-
18       tion by a partner which relates to items of income, gain, loss, deduction
19       or credit of a partnership shall be determined under K.S.A. 79-32,131,
20       and amendments thereto, to the extent that such items affect federal
21       adjusted gross income of the partner.
22           Sec. 2. K.S.A. 79-32,117 is hereby repealed.
23           Sec. 3. This act shall take effect and be in force from and after its
24       publication in the statute book.
25