An Act relating to taxation; amending K.S.A. 74-2438, 79-201b and 79-2804f and K.S.A. 1995 Supp. 79-1606, 79-1609, 79-2005, 79-2804g, 79-3271, 79-3279, 79-32,182, 79-3606 and 79-5038 and repealing the existing sections.

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

Section 1. K.S.A. 1995 Supp. 79-3271 is hereby amended to read as follows: 79-3271. As used in this act, unless the context otherwise re- quires: (a) ``Business income'' means income arising from transactions and activity in the regular course of the taxpayer's trade or business and in- cludes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations, except that for taxable years commencing after December 31, 1995, a taxpayer may elect that all income derived from the acquisition, management, use or disposition of tangible or intangible property constitutes business income. The election shall be effective and irrevocable for the taxable year of the election and the following nine taxable years. The election shall be binding on all mem- bers of a unitary group of corporations.

(b) ``Commercial domicile'' means the principal place from which the trade or business of the taxpayer is directed or managed.

(c) ``Compensation'' means wages, salaries, commissions and any other form of remuneration paid to employees for personal services.

(d) ``Financial organization'' means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, investment company, or any type of insurance company, but such term shall not be deemed to include any business entity, other than those hereinbefore enumerated, whose primary business activity is making consumer loans or purchasing retail installment contracts from one or more sellers.

(e) ``Nonbusiness income'' means all income other than business in- come.

(f) ``Public utility'' means any business entity which owns or operates for public use any plant, equipment, property, franchise, or license for the transmission of communications, transportation of goods or persons, or the production, storage, transmission, sale, delivery, or furnishing of electricity, water, steam, oil, oil products or gas.

(g) ``Sales'' means all gross receipts of the taxpayer not allocated un- der K.S.A. 79-3274 through 79-3278, and amendments thereto.

(h) ``State'' means any state of the United States, the District of Co- lumbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

(i) ``Telecommunications company'' means any business entity or uni- tary group of entities whose primary business activity is the transmission of communications in the form of voice, data, signals or facsimile com- munications by wire or fiber optic cable.

(j) ``Distressed area taxpayer'' means a corporation which: (1) Is lo- cated in a county which has a population of not more than 45,000 persons and which, as certified by the department of commerce, has sustained an adverse economic impact due to the closure of a state hospital in such county pursuant to the recommendations of the hospital closure commis- sion; and (2) which has a total annual payroll of $20,000,000 or more for employees employed within such county.

Sec. 2. K.S.A. 1995 Supp. 79-3279 is hereby amended to read as follows: 79-3279. (a) All business income of railroads and interstate motor carriers of persons or property for-hire shall be apportioned to this state by multiplying the business income by a fraction, in the case of railroads, the numerator of which is the freight car miles in this state and the de- nominator of which is the freight car miles everywhere, and, in the case of interstate motor carriers, the numerator of which is the total number of miles operated in this state and the denominator of which is the total number of miles operated everywhere.

(b) All business income of any other taxpayer shall be apportioned to this state by one of the following methods:

(1) By multiplying the business income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three; or

(2) at the election of a qualifying taxpayer, by multiplying the business income by a fraction, the numerator of which is the property factor plus the sales factor, and the denominator of which is two.

(A) For purposes of this subsection (b)(2), a qualifying taxpayer is any taxpayer whose payroll factor for a taxable year exceeds 200% of the average of the property factor and the sales factor. Whenever two or more corporations are engaged in a unitary business and required to file a com- bined report, the percentage comparison provided by this subsection (b)(2) shall be calculated by using the payroll factor, property factor and sales factor of the combined group of unitary corporations.

(B) An election under this subsection (b)(2) shall be made by includ- ing a statement with the original tax return indicating that the taxpayer elects to apply the apportionment method under this subsection (b)(2). The election shall be effective and irrevocable for the taxable year of the election and the following nine taxable years. The election shall be bind- ing on all members of a unitary group of corporations. Notwithstanding the above, the secretary of revenue may upon the request of the taxpayer, grant permission to terminate the election under this subsection (b)(2) prior to expiration of the ten-year period.

(3) At the election of a qualifying telecommunications company, by multiplying the business income by a fraction, the numerator of which is the information carrying capacity of wire and fiber optic cable available for use in this state, and the denominator of which is the information carrying capacity of wire and fiber optic cable available for use everywhere during the tax year.

(A) For purposes of this subsection (b)(3), a qualifying telecommu- nications company is a telecommunications company that is a qualifying taxpayer under paragraph (A) of subsection (b)(2).

(B) A qualifying telecommunications company shall make the elec- tion under this subsection (b)(3) in the same manner as provided under paragraph (B) of subsection (b)(2).

(4) At the election of a distressed area taxpayer, by multiplying the business income by the sales factor. The election shall be made by includ- ing a statement with the original tax return indicating that the taxpayer elects to apply this apportionment method. The election may be made only once, it must be made on or before December 31, 1999 and it shall be effective for the taxable year of the election and the following nine taxable years for so long as the taxpayer maintains the payroll amount prescribed by subsection (j) of K.S.A. 79-3271.

New Sec. 3. (a) Except as otherwise provided by subsections (b) and (c), the election allowed by subsection (a) of K.S.A. 79-3271, and amend- ments thereto, shall be filed by the taxpayer on or before the last day of the tax year immediately preceding the tax year for which such election is made.

(b) Any taxpayer currently doing business in the state which has a tax year commencing during calendar year 1996, and which intends to make the election allowed by subsection (a) of K.S.A. 79-3271, and amend- ments thereto, for such taxable year shall file such election within 60 days after the effective date of this act or on or before the last day of the tax year immediately preceding, whichever date is later.

(c) Any taxpayer which is a domestic or foreign corporation doing business in the state for the first time and which intends to make the election allowed by subsection (a) of K.S.A. 79-3271, and amendments thereto, for its initial tax year shall file such election within 60 days after filing the taxpayer's articles of incorporation or application for authority to engage in business as a foreign corporation with the secretary of state or otherwise becomes subject to taxation under article 32 of chapter 79 of the Kansas Statutes Annotated.

(d) The election allowed by subsection (a) of K.S.A. 79-3271, and amendments thereto, shall be made by filing a written statement with the director clearly identifying the tax year for which such election is made.

Sec. 4. K.S.A. 1995 Supp. 79-5038 is hereby amended to read as follows: 79-5038. The provisions of K.S.A. 79-5021 to 79-5036, inclusive, and amendments thereto, shall expire on July 1, 1996 1997.

Sec. 5. K.S.A. 1995 Supp. 79-32,182 is hereby amended to read as follows: 79-32,182. (a) For any taxable year commencing after December 31, 1986, and before January 1, 1988, a credit shall be allowed against the tax imposed by the Kansas income tax act on the Kansas taxable income of a taxpayer for expenditures in research and development ac- tivities conducted within this state in an amount equal to 6 1/2% of the amount by which the amount expended for such activities in the taxable year of the taxpayer exceeds the taxpayer's average of the actual expend- itures for such purposes made in such taxable year and the next preceding taxable year.

(b) For any taxable year commencing after December 31, 1987, and before January 1, 1996 2001, a credit shall be allowed against the tax imposed by the Kansas income tax act on the Kansas taxable income of a taxpayer for expenditures in research and development activities con- ducted within this state in an amount equal to 6 1/2% of the amount by which the amount expended for such activities in the taxable year of the taxpayer exceeds the taxpayer's average of the actual expenditures for such purposes made in such taxable year and the next preceding two taxable years.

(c) (b) In any one taxable year, the amount of such credit allowable for deduction from the taxpayer's tax liability shall not exceed 25% of the total amount of such credit plus any applicable carry forward amount. The amount by which that portion of the credit allowed by subsections (a) and (b) to be claimed in any one taxable year exceeds the taxpayer's tax liability in such year may be carried forward until the total amount of the credit is used.

(d) (c) As used in this section, the term ``expenditures in research and development activities'' means expenditures made for such purposes, other than expenditures of moneys made available to the taxpayer pur- suant to federal or state law, which are treated as expenses allowable for deduction under the provisions of the federal internal revenue code of 1986, and amendments thereto.

Sec. 6. K.S.A. 79-201b is hereby amended to read as follows: 79- 201b. The following described property, to the extent herein specified, shall be and is hereby exempt from all property or ad valorem taxes levied under the laws of the state of Kansas:

First. All real property, and tangible personal property, actually and regularly used exclusively for hospital purposes by a hospital as the same is defined by K.S.A. 65-425, and amendments thereto, or a psychiatric hospital as the same was defined by K.S.A. 59-2902, and amendments thereto, as in effect on January 1, 1976, which hospital or psychiatric hospital is operated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation organized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation; and all intangible property including moneys, notes and other evidences of debt, and the income therefrom, belonging exclusively to such a corporation and used exclusively for hospital or psychiatric hospital purposes. This exemption shall not be deemed inapplicable to property which would otherwise be exempt pursuant to this paragraph because any such hospital or psychi- atric hospital: (a) Uses such property for a nonexempt purpose which is minimal in scope and insubstantial in nature if such use is incidental to the exempt purpose enumerated in this paragraph; or (b) is reimbursed for the actual expense of using such property for the exempt purposes enumerated in this paragraph or paragraph second of K.S.A. 1987 Supp. 79-201, and amendments thereto; or (c) permits the use of such property for the exempt purposes enumerated in this paragraph or paragraph sec- ond of K.S.A. 1987 Supp. 79-201, and amendments thereto, by more than one agency or organization for one or more of such purposes.

Second. All real property, and tangible personal property, actually and regularly used exclusively for adult care home purposes by an adult care home as the same is defined by K.S.A. 39-923, and amendments thereto, which is operated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation organized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation, charges to residents for serv- ices of which produce an amount which in the aggregate is less than the actual cost of operation of the home or the services of which are provided to residents at the lowest feasible cost, taking into consideration such items as reasonable depreciation and interest on indebtedness, and charges to residents for services of which produce an amount which in the aggregate is less than the actual cost of operation of the home or the services of which are provided to residents at the lowest feasible cost, taking into consideration such items as reasonable depreciation, interest on indebtedness, acquisition costs, interest and other expenses of financing acquisition costs, lease expenses and costs of services provided by a parent corporation at its costs, contributions to which are deductible under the Kansas income tax act; and all intangible property including moneys, notes and other evidences of debt, and the income therefrom, belonging exclu- sively to such corporation and used exclusively for adult care home pur- poses. The fact that real property or real or tangible personal property may be leased from a not-for-profit corporation, which is exempt from federal income taxation pursuant to section 501(c)(3) of the internal rev- enue code of 1986, and amendments thereto, and which is the parent corporation to the not-for-profit operator of an adult care home, shall not be grounds to deny exemption or deny that such property is actually and regularly used exclusively for adult care home purposes by an adult care home, nor shall the terms of any such lease be grounds for any such denial.

Third. All real property, and tangible personal property, actually and regularly used exclusively for private children's home purposes by a pri- vate children's home as the same is defined by K.S.A. 75-3329, and amendments thereto, which is operated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation or- ganized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation, charges to residents for services of which produce an amount which in the aggregate is less than the actual cost of operation of the home or the services of which are provided to residents at the lowest feasible cost, taking into consideration such items as reasonable depreciation and in- terest on indebtedness, and contributions to which are deductible under the Kansas income tax act; and all intangible property including moneys, notes and other evidences of debt, and the income therefrom, belonging exclusively to such a corporation and used exclusively for children's home purposes.

Fourth. All real property and tangible personal property, actually and regularly used exclusively for housing for elderly and handicapped per- sons having a limited or lower income, or used exclusively for cooperative housing for persons having a limited or low income, assistance for the financing of which was received under 12 U.S.C.A. 1701 et seq., or under 42 U.S.C.A. 1437 et seq., which is operated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation organized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation; and all intangible property including moneys, notes and other evidences of debt, and the income therefrom, belonging exclusively to such a cor- poration and used exclusively for the purposes of such housing. For the purposes of this subsection, cooperative housing shall mean those not- for-profit cooperative housing projects operating pursuant to sections 236 or 221(d)(3), or both, of the national housing act and which have been approved as a cooperative housing project pursuant to applicable federal housing administration and U.S. Department of Housing and Urban De- velopment statutes, and rules and regulations, during such time as the use of such properties are restricted pursuant to such act, statutes or rules and regulations.

Fifth. All real property and tangible personal property, actually and regularly used exclusively for housing for elderly persons, which is oper- ated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation organized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation, in which charges to residents produce an amount which in the aggregate is less than the actual cost of operation of the housing facility or the services of which are provided to residents at the lowest feasible cost, taking into consideration such items as rea- sonable depreciation and interest on indebtedness and contributions to which are deductible under the Kansas income tax act; and all intangible property including moneys, notes and other evidences of debt, and the income therefrom, belonging exclusively to such corporation and used exclusively for the purpose of such housing.

Sixth. All real property and tangible personal property actually and regularly used exclusively for the purpose of group housing of mentally ill or retarded and other handicapped persons which is operated by a corporation organized not for profit under the laws of the state of Kansas or by a corporation organized not for profit under the laws of another state and duly admitted to engage in business in this state as a foreign, not-for-profit corporation, in which charges to residents produce an amount which in the aggregate is less than the actual cost of operation of the housing facility or the services of which are provided to residents at the lowest feasible cost, taking into consideration such items as reasonable depreciation and interest on indebtedness and contributions to which are deductible under the Kansas income tax act, and which is licensed as a facility for the housing of mentally ill or retarded and other handicapped persons under the provisions of K.S.A. 75-3307b, and amendments thereto, or as a rooming or boarding house used as a facility for the housing of mentally retarded and other handicapped persons which is licensed as a lodging establishment under the provisions of K.S.A. 36-501 et seq., and amendments thereto.

The provisions of this section shall apply to all taxable years commenc- ing after December 31, 1985 1995.

Sec. 7. K.S.A. 1995 Supp. 79-3606 is hereby amended to read as follows: 79-3606. The following shall be exempt from the tax imposed by this act:

(a) All sales of motor-vehicle fuel or other articles upon which a sales or excise tax has been paid, not subject to refund, under the laws of this state except cigarettes as defined by K.S.A. 79-3301 and amendments thereto, cereal malt beverages and malt products as defined by K.S.A. 79- 3817 and amendments thereto, including wort, liquid malt, malt syrup and malt extract, which is not subject to taxation under the provisions of K.S.A. 79-41a02 and amendments thereto, and motor vehicles as defined by K.S.A. 79-1017 and amendments thereto;

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

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

(d) all sales of tangible personal property or services purchased by a contractor for the purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any public or private nonprofit hospital, public or private elementary or secondary school or a public or private nonprofit educational institution, which would be exempt from taxation under the provisions of this act if purchased directly by such hospital, school or educational institution; and all sales of tangible personal property or services purchased by a contrac- tor for the purpose of constructing, equipping, reconstructing, maintain- ing, repairing, enlarging, furnishing or remodeling facilities for any polit- ical subdivision of the state, the total cost of which is paid from funds of such political subdivision and which would be exempt from taxation under the provisions of this act if purchased directly by such political subdivision. Nothing in this subsection or in the provisions of K.S.A. 12-3418 and amendments thereto, shall be deemed to exempt the purchase of any construction machinery, equipment or tools used in the constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any political subdivision of the state. As used in this subsection, K.S.A. 12-3418 and 79-3640, and amendments thereto, ``funds of a political subdivision'' shall mean general tax revenues, the proceeds of any bonds and gifts or grants-in-aid. Gifts shall not mean funds used for the purpose of constructing, equipping, reconstructing, repairing, enlarging, furnishing or remodeling facilities which are to be leased to the donor. When any political subdivision of the state, public or private nonprofit hospital, public or private elementary or secondary school or public or private nonprofit educational institution shall contract for the purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities, it shall obtain from the state and furnish to the contractor an exemption certificate for the project involved, and the contractor may purchase materials for in- corporation in such project. The contractor shall furnish the number of such certificate to all suppliers from whom such purchases are made, and such suppliers shall execute invoices covering the same bearing the num- ber of such certificate. Upon completion of the project the contractor shall furnish to the political subdivision, hospital, school or educational institution concerned a sworn statement, on a form to be provided by the director of taxation, that all purchases so made were entitled to exemption under this subsection. All invoices shall be held by the contractor for a period of five years and shall be subject to audit by the director of taxation. If any materials purchased under such a certificate are found not to have been incorporated in the building or other project or not to have been returned for credit or the sales or compensating tax otherwise imposed upon such materials which will not be so incorporated in the building or other project reported and paid by such contractor to the director of taxation not later than the 20th day of the month following the close of the month in which it shall be determined that such materials will not be used for the purpose for which such certificate was issued, the political subdivision, hospital, school or educational institution concerned shall be liable for tax on all materials purchased for the project, and upon payment thereof it may recover the same from the contractor together with rea- sonable attorney fees. Any contractor or any agent, employee or subcon- tractor thereof, who shall use or otherwise dispose of any materials pur- chased under such a certificate for any purpose other than that for which such a certificate is issued without the payment of the sales or compen- sating tax otherwise imposed upon such materials, shall be guilty of a misdemeanor and, upon conviction therefor, shall be subject to the pen- alties provided for in subsection (g) of K.S.A. 79-3615, and amendments thereto;

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

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

(g) sales of aircraft including remanufactured and modified aircraft, sales of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of air- craft sold to persons using such aircraft and aircraft repair, modification and replacement parts as certified or licensed carriers of persons or prop- erty in interstate or foreign commerce under authority of the laws of the United States or any foreign government or sold to any foreign govern- ment or agency or instrumentality of such foreign government and all sales of aircraft, aircraft parts, replacement parts and services employed in the remanufacture, modification and repair of aircraft for use outside of the United States;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2) For purposes of this subsection ``machinery and equipment used directly and primarily'' shall include, but not be limited to:

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

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

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

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

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

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

(A) Hand tools;

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

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

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

(E) furniture and buildings; and

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

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

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

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

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

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

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

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

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

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

Sec. 8. K.S.A. 1995 Supp. 79-1606 is hereby amended to read as follows: 79-1606. (a) The county or district appraiser, hearing officer or panel and arbitrator shall adopt, use and maintain the following records, the form and method of use of which shall be prescribed by the director of property valuation: (1) Appeal form, (2) hearing docket, and (3) record of cases, including the disposition thereof.

(b) The county clerk shall furnish appeal forms to any taxpayer who desires to appeal the final determination of the county or district ap- praiser as provided in K.S.A. 79-1448, and amendments thereto. Any such appeal in writing must be shall be in writing and filed with the county clerk within 18 days of the date that the final determination of the ap- praiser was mailed to the taxpayer.

(c) The hearing officer or panel shall hear and determine any appeal made by any taxpayer or such taxpayer's agent or attorney. All such hear- ings shall be held in a suitable place in the county or district. Sufficient evening and Saturday hearings shall be provided as shall be necessary to hear all parties making requests for hearings at such times.

(d) Every appeal so filed shall be set for hearing by the hearing officer or panel, which hearing shall be held on or before July 1, and the hearing officer or panel shall have no authority to be in session thereafter, except as provided in K.S.A. 79-1404, and amendments thereto. The county clerk shall notify each appellant and the county or district appraiser of the date for hearing of the taxpayer's appeal at least 10 days in advance of such hearing. It shall be the duty of the county or district appraiser to initiate the production of evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of the classification or appraisal of residential property. No presumption shall exist in favor of the county or district appraiser with respect to the validity or correctness of any such classification or valuation. Every such appeal shall be determined by or- der of the hearing officer or panel, and such order shall be recorded in the minutes of such hearing officer or panel on or before July 5. Such recorded orders and minutes shall be open to public inspection. Notice as to disposition of the appeal shall be mailed by the county clerk to the taxpayer and the county or district appraiser within five days after the determination.

Sec. 9. K.S.A. 1995 Supp. 79-1609 is hereby amended to read as follows: 79-1609. Any person aggrieved by any order of the hearing officer or panel may appeal to the state board of tax appeals by filing a written notice of appeal, on forms approved by the state board of tax appeals and provided by the county clerk for such purpose, stating the grounds thereof and a description of any comparable property or properties and the ap- praisal thereof upon which they rely as evidence of inequality of the ap- praisal of their property, if that be a ground of the appeal, with the board of tax appeals and by filing a copy thereof with the county clerk within 30 days after the date of the order from which the appeal is taken. A county or district appraiser may appeal to the state board of tax appeals from any order of the hearing officer or panel. With regard to any matter properly submitted to the board relating to the determination of valuation of residential property for taxation purposes, it shall be the duty of the county appraiser to initiate the production of evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of such determination. No presumption shall exist in favor of the county appraiser with respect to the validity and correctness of such determination.

Sec. 10. K.S.A. 74-2438 is hereby amended to read as follows: 74- 2438. An appeal may be taken to the state board of tax appeals from any finding, ruling, order, decision, or other final action on any case of the director of taxation or director of property valuation by any person ag- grieved thereby. Notice of such appeal shall be filed with the secretary of the board within 30 days after such finding, ruling, order, decision or other action on a case, and a copy served upon the director concerned. Upon receipt of a timely appeal, the board shall conduct a hearing in accordance with the provisions of the Kansas administrative procedure act. The hearing before the board shall be a de novo hearing unless the parties agree to submit the case on the record made before the director. With regard to any matter properly submitted to the board relating to the determination of valuation of residential property for taxation pur- poses, it shall be the duty of the county or district appraiser to initiate the production of evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of such determination. No pre- sumption shall exist in favor of the county or district appraiser with re- spect to the validity and correctness of such determination. No interest shall accrue on the amount of the assessment of tax subject to any such appeal beyond 120 days after the date the matter was fully submitted, except that, if a final order is issued within such time period, interest shall continue to accrue until such time as the tax liability is fully satisfied, and if a final order is issued beyond such time period, interest shall recomm- ence to accrue from the date of such order until such time as the tax liability is fully satisfied.

Sec. 11. K.S.A. 1995 Supp. 79-2005 is hereby amended to read as follows: 79-2005. (a) Any taxpayer, before protesting the payment of such taxpayer's taxes, shall be required, either at the time of paying such taxes, or, if the whole or part of the taxes are paid prior to December 20, no later than December 20, or, with respect to taxes paid in whole on or before December 20 by an escrow or tax service agent, no later than January 31 of the next year, to file a written statement with the county treasurer, on forms approved by the state board of tax appeals and pro- vided by the county treasurer, clearly stating the grounds on which the whole or any part of such taxes are protested and citing any law, statute or facts on which such taxpayer relies in protesting the whole or any part of such taxes. When the grounds of such protest is that the valuation or assessment of the property upon which the taxes are levied is illegal or void, the county treasurer shall forward a copy of the written statement of protest to the county appraiser who shall within 15 days of the receipt thereof, schedule an informal meeting with the taxpayer or such taxpay- er's agent or attorney with reference to the property in question. The county appraiser shall review the appraisal of the taxpayer's property with the taxpayer or such taxpayer's agent or attorney and may change the valuation of the taxpayer's property, if in the county appraiser's opinion a change in the valuation of the taxpayer's property is required to assure that the taxpayer's property is valued according to law, and shall, within 15 business days thereof, notify the taxpayer in the event the valuation of the taxpayer's property is changed, in writing of the results of the meeting. In the event the valuation of the taxpayer's property is changed and such change requires a refund of taxes, the county treasurer shall process the refund in the manner provided by subsection (l).

(b) No protest appealing the valuation or assessment of property shall be filed pertaining to any year's valuation or assessment when an appeal of such valuation or assessment was commenced pursuant to K.S.A. 79- 1448, and amendments thereto, nor shall the second half payment of taxes be protested when the first half payment of taxes has been protested. Notwithstanding the foregoing, this provision shall not prevent any sub- sequent owner from protesting taxes levied for the year in which such property was acquired, nor shall it prevent any taxpayer from protesting taxes when the valuation or assessment of such taxpayer's property has been changed pursuant to an order of the director of property valuation.

(c) A protest shall not be necessary to protect the right to a refund of taxes in the event a refund is required because the final resolution of an appeal commenced pursuant to K.S.A. 79-1448, and amendments thereto, occurs after the final date prescribed for the protest of taxes.

(d) If the grounds of such protest shall be that the valuation or as- sessment of the property upon which the taxes so protested are levied is illegal or void, such statement shall further state the exact amount of valuation or assessment which the taxpayer admits to be valid and the exact portion of such taxes which is being protested.

(e) If the grounds of such protest shall be that any tax levy, or any part thereof, is illegal, such statement shall further state the exact portion of such tax which is being protested.

(f) Upon the filing of a written statement of protest, the grounds of which shall be that any tax levied, or any part thereof, is illegal, the county treasurer shall mail a copy of such written statement of protest to the state board of tax appeals and the governing body of the taxing district making the levy being protested.

(g) Within 30 days after notification of the results of the informal meeting with the county appraiser pursuant to subsection (a), the pro- testing taxpayer may, if aggrieved by the results of the informal meeting with the county appraiser, appeal such results to the state board of tax appeals.

(h) After examination of the copy of the written statement of protest and a copy of the written notification of the results of the informal meet- ing with the county appraiser in cases where the grounds of such protest is that the valuation or assessment of the property upon which the taxes are levied is illegal or void, the board shall conduct a hearing in accor- dance with the provisions of the Kansas administrative procedure act, unless waived by the interested parties in writing. If the grounds of such protest is that the valuation or assessment of the property is illegal or void the board shall notify the county appraiser thereof.

(i) In the event of a hearing, the same shall be originally set not later than 90 days after the filing of the copy of the written statement of protest and a copy, when applicable, of the written notification of the results of the informal meeting with the county appraiser with the board. With regard to any matter properly submitted to the board relating to the determination of valuation of residential property for taxation purposes, it shall be the duty of the county appraiser to initiate the production of evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of such determination. No presumption shall exist in favor of the county appraiser with respect to the validity and correctness of such determination. In all instances where the board sets a request for hearing and requires the representation of the county by its attorney or counselor at such hearing, the county shall be represented by its county attorney or counselor.

(j) When a determination is made as to the merits of the tax protest, the board shall render and serve its order thereon. The county treasurer shall notify all affected taxing districts of the amount by which tax reve- nues will be reduced as a result of a refund.

(k) If a protesting taxpayer fails to file a copy of the written statement of protest and a copy, when applicable, of the written notification of the results of the informal meeting with the county appraiser with the board within the time limit prescribed, such protest shall become null and void and of no effect whatsoever.

(l) In the event the board orders that a refund be made and no appeal is taken from such order, the county treasurer shall, as soon thereafter as reasonably practicable, refund to the taxpayer such protested taxes from tax moneys collected but not distributed. Upon making such refund, the county treasurer shall charge the fund or funds having received such protested taxes.

(m) Whenever, by reason of the refund of taxes previously received or the reduction of taxes levied but not received as a result of decreases in assessed valuation, it will be impossible to pay for imperative functions for the current budget year, the governing body of the taxing district affected may issue no-fund warrants in the amount necessary. Such war- rants shall conform to the requirements prescribed by K.S.A. 79-2940, and amendments thereto, except they shall not bear the notation required by such section and may be issued without the approval of the state board of tax appeals. The governing body of such taxing district shall make a tax levy at the time fixed for the certification of tax levies to the county clerk next following the issuance of such warrants sufficient to pay such war- rants and the interest thereon. All such tax levies shall be in addition to all other levies authorized by law.

(n) The county treasurer shall disburse to the proper funds all por- tions of taxes paid under protest and shall maintain a record of all portions of such taxes which are so protested and shall notify the governing body of the taxing district levying such taxes thereof and the director of ac- counts and reports if any tax protested was levied by the state.

(o) This statute shall not apply to the valuation and assessment of property assessed by the director of property valuation and it shall not be necessary for any owner of state assessed property, who has an appeal pending before the board of tax appeals, to protest the payment of taxes under this statute solely for the purpose of protecting the right to a refund of taxes paid under protest should that owner be successful in that appeal.

New Sec./007006/As used in sections 12 through 22:

(a) ``County'' means Wyandotte county, Kansas.

(b) ``Board'' means the board of trustees of the Wyandotte county land bank.

(c) ``Bank'' means the Wyandotte county land bank established pur- suant to this act.

New Sec./007006/(a) The board of county commissioners of Wyandotte county may establish a county land bank by adoption of a resolution.

(b) The bank shall be governed by a board of trustees. The board of county commissioners of Wyandotte county may appoint the board. Com- missioners may serve on or as the board of trustees. Vacancies on the board shall be filled by appointment for the unexpired term.

(c) The board of county commissioners may advance operating funds to the bank to pay expenses of the board of trustees and the bank. Mem- bers of the board of trustees shall receive no compensation, but shall be paid their actual and necessary expenses in attending meetings and in carrying out their duties as members of the board.

(d) The bank may be dissolved by resolution of the board of county commissioners. In such case, all property of the bank shall be transferred to and held by the board of county commissioners of the county and may be disposed of as otherwise provided by law.

New Sec./007006/(a) The bank shall be subject to the provisions of the cash-basis law, K.S.A. 10-1101 et seq., and amendments thereto.

(b) The budget of the bank shall be prepared, adopted and published as provided by law for other political subdivisions of the state. No budget shall be adopted by the board until it has been submitted to, reviewed and approved by the board of county commissioners.

(c) The board shall keep accurate accounts of all receipts and dis- bursements. The receipts and disbursements of the board shall be audited yearly by a certified or licensed public accountant and the report of the audit shall be included in and become part of the annual report of the board.

(d) All records and accounts shall be subject to public inspection pur- suant to K.S.A. 45-216 et seq., and amendments thereto.

(e) Any moneys of the bank which are not immediately required for the purposes of the bank shall be invested in the manner provided by K.S.A. 12-1675, and amendments thereto.

(f) The bank shall make an annual report to the board of county commissioners on or before January 31 of each year, showing receipts and disbursements from all funds under its control and showing all prop- erty transactions occurring in each year. Such report shall include an inventory of all property held by the bank. A copy of such inventory also shall be published in the official county newspaper on or before January 31 of each year.

(g) The bank shall be subject to the provisions of K.S.A. 9-1401 et seq., and amendments thereto.

New Sec./007006/(a) The board shall select annually, from its member- ship, a chairperson, a vice-chairperson and a treasurer. The treasurer shall be bonded in such amounts as the board of county commissioners may require.

(b) The board may appoint such officers, agents and employees as it may require for the performance of its duties, and shall determine the qualifications and duties and fix the compensation of such officers, agents and employees.

(c) The board shall fix the time and place at which its meetings shall be held. Meetings shall be held within the county and shall be subject to the provision of K.S.A. 75-4317 et seq., and amendments thereto. Public notice shall be given of all meetings.

(d) A majority of the board shall constitute a quorum for the trans- action of business. No action of the board shall be binding unless taken at a meeting at which at least a quorum is present.

(e) The members of the board shall be subject to the provisions of the laws of the state of Kansas which relate to conflicts of interest of county officers and employees, including but not limited to K.S.A. 75- 4301 et seq., and amendments thereto.

(f) Subject to the provisions of K.S.A. 75-6101 et seq., and amend- ments thereto, if any action at law or equity, or other legal proceeding, shall be brought against any member of the board for any act or omission arising out of the performance of duties as a member of the board, such member shall be indemnified in whole and held harmless by the board for any judgment or decree entered against such member and, further, shall be defended at the cost and expense of the bank in any such pro- ceeding.

New Sec./007006/The board may:

(a) Sue and be sued;

(b) enter into contracts;

(c) appoint and remove staff and provide for the compensation thereof;

(d) acquire, by purchase, gift or devise, and convey any real property, including easements and reversionary interests, and personal property subject to the provisions of this act;

(e) rebate all, or any portion thereof, the taxes on any property sold or conveyed by the bank;

(f) exercise any other power which may be delegated to the land bank by the board of county commissioners and the governing bodies of the cities and other taxing subdivisions located in the county by interlocal agreement and other lawful means; and

(g) exercise any other incidental power which is necessary to carry out the purposes of the land bank and this act.

New Sec./007006/(a) Any property acquired by a county, city or other taxing subdivision within such county may be transferred to the bank. The board may accept or refuse to accept any property authorized to be trans- ferred pursuant to this subsection. The transfer of any property pursuant to this subsection shall not be subject to any bidding requirement and shall be exempt from any provision of law requiring a public sale.

(b) The fee simple title to any real estate which is sold to the county in accordance with the provisions of K.S.A. 79-2804, and amendments thereto, and upon acceptance by the board of trustees may be transferred to the bank by a good and sufficient deed by the county clerk upon a written order from the board of county commissioners.

New Sec./007006/The board shall assume possession and control of any property acquired by it under this act and shall hold and administer such property. In the administration of property, the board shall:

(a) Manage, maintain and protect or temporarily use for a public pur- pose such property in the manner the board deems appropriate;

(b) compile and maintain a written inventory of all such property. The inventory shall be available for public inspection and distribution at all times;

(c) study, analyze and evaluate potential, present and future uses for such property which would provide for the effective reutilization of such property;

(d) plan for and use the board's best efforts to consummate the sale or other disposition of such property at such times and upon such terms and conditions deemed appropriate;

(e) establish and maintain records and accounts reflecting all trans- actions, expenditures and revenues relating to the bank's activities, in- cluding separate itemizations of all transactions, expenditures and reve- nues concerning each individual parcel of property acquired; and

(f) thirty days prior to the sale of any property owned by the bank, publish a notice in the official county newspaper announcing such sale.

New Sec. 19. (a) The board, without competitive bidding, may sell any property acquired by the board at such times, to such persons, and upon such terms and conditions, and subject to such restrictions and covenants deemed necessary or appropriate to assure the property's ef- fective reutilization. The sale of any real property by the board under the provisions of this act on which there are delinquent special assessments to finance public improvements shall be conditioned upon the approval of the governing body of the municipality which levied the special as- sessments.

(b) The board, for purposes of land disposition, may consolidate, as- semble or subdivide individual parcels of property acquired by the bank.

New Sec. 20. (a) Until sold or otherwise disposed of by the bank and except for special assessments levied by a municipality to finance public improvements, any property acquired by the bank shall be exempt from the payment of ad valorem taxes levied by the state and any other political or taxing subdivision of the state.

(b) Except for special assessments levied by a municipality to finance public improvements, when the board acquires property pursuant to this act, the county treasurer shall remove from the tax rolls all taxes, assess- ments, charges, penalties and interest that are due and payable on the property at the time of acquisition by the board.

(c) Property held by the bank shall remain liable for special assess- ments levied by a municipality to finance public improvements, but no payment thereof shall be required until such property is sold or otherwise conveyed by the bank.

(d) The governing body of any municipality which has levied special assessments on property acquired by the bank may abate part or all of the special assessments, and the bank and governing body may enter into agreements related thereto. Any special assessments that are abated shall be removed from the tax rolls by the county treasurer as of the effective date of the abatement.

New Sec. 21. (a) Except as provided in paragraph (b), any moneys derived from the sale of property by the bank shall be retained by the bank for the purposes and operations thereof.

(b) The board may use all or any part of the proceeds from the sale described in paragraph (a) to reimburse any municipality for delinquent special assessments due on such property.

New Sec. 22. The board may establish separate neighborhood or city advisory committees consisting of persons living or owning property within the county, city or neighborhood. In the case of neighborhood advisory committees, the board shall determine the boundaries of each neighborhood. In the absence of a resolution by the board providing oth- erwise, each advisory committee shall consist of not less than five nor more than nine persons, to be appointed by the board for two-year over- lapping terms. The board shall consult with each advisory committee as needed to review the operations and activities of the bank and to receive the advice of the members of the advisory committee concerning any matter which comes before the committees.

Sec. 23. K.S.A. 79-2804f is hereby amended to read as follows: 79- 2804f. (a) The county commissioners shall keep a record of all real estate acquired by the county under the provisions of K.S.A. 79-2804 or, and amendments thereto, showing: The case by name, title and number, to- gether with the date of filing of the petition and of the sale and identifying the tract, lot or piece of real estate described therein; the amount of judgment lien and the amount set forth in the order of sale of the charges, costs, and expenses of the proceeding and sale paid by the county. Such record shall upon request be open to inspection at all reasonable times.

(b) Except as provided by subsection (c), such real estate shall be sold by the board of county commissioners of said the county at private or public sale for cash in hand; the consideration for the purchase to be at least the original amount of the judgment lien and interest thereon as provided by law, plus the amount of costs set forth in the order of sale and plus any and all subsequent taxes and special assessments on said such real estate that were not included in said such judgment. If in the discretion of the board of county commissioners it be is deemed necessary to prevent a menace to the public health or welfare, or that repair or rehabilitation of any structures thereon would be economically unsound, said the board may remove or cause to be removed any such improve- ments upon any property acquired by the county under the provisions of this act. The board of county commissioners may sell all or any of the salvaged materials therefrom at public or private sale, and after first de- ducting the cost of such removal, shall credit the remainder of such pro- ceeds to the county general fund. Any deficiency shall be charged to such general fund.

If, at the end of six (6) months from and after the confirmation of said the sale to the county to any of said the real estate, any of said the real estate remains unsold, the board of county commissioners may reduce the price therefor and sell the same after first advertising the same once each week for three (3) consecutive weeks in said the county describing said the real estate, giving the location thereof and requesting sealed bids therefor on or before a specified date and said the board shall accept the highest cash bid received: Provided, however,. The board of county com- missioners may reject bids in an amount less than the current market value of said the real estate and if no bid be is accepted or received, such board may sell the same for such sum that, in their the board's judgment, would be the market value thereof, but no such sale shall be made for an amount less than the best bid received, if any, and rejected: Provided, however,. The board of county commissioners, at any time after the end of six (6) months from and after the confirmation of said the sale to the county and after advertising such real estate at least three (3) times in the official county paper and such other papers as the board shall direct, describing the same, giving the general location thereof, and the time and place of sale, may sell such real estate at public auction for cash in hand to the highest bidder therefor.

All real estate sold by said the county as provided in this section sub- section shall be conveyed to the purchaser by a good and sufficient deed by the county clerk of said the county upon a written order from the board of county commissioners. Such order shall be deemed conclusive evidence of the compliance with this section in any action challenging the validity of such deed. Immediately upon the execution of any such deed, the county clerk shall assess the real estate so conveyed and enter the valuation thereof on the assessment and tax rolls.

(c) Any property acquired by the board of county commissioners pur- suant to K.S.A. 79-2804, and amendments thereto, may be transferred to the county land bank as provided by section 17.

Sec. 24. K.S.A. 1995 Supp. 79-2804g is hereby amended to read as follows: 79-2804g. (a) Whenever any tract, lot or piece of real estate is offered for sale at public auction pursuant to K.S.A. 79-2804, and amend- ments thereto, such tract, lot or piece of real estate shall not be sold, either directly or indirectly, to:

(1) Any person having a statutory right to redeem such real estate prior to such sale, pursuant to the provisions of K.S.A. 79-2803, and amendments thereto;

(2) any person who held an interest in a tract as owner or holder of the record title or any mortgagee or assignee who held an interest at any time when any tax constituting part of the county's judgment became due;

(3) any parent, grandparent, child, grandchild, spouse, sibling, trustee or trust beneficiary of any person enumerated in paragraph (2); or

(4) with respect to a title holding corporation, any current or former stockholder, current officer or director, or any person having a relation- ship enumerated in paragraph (3) to such stockholder, officer or director.

(b) If any such real estate is acquired by a county pursuant to K.S.A. 79-2804, and amendments thereto, and, at the end of six months from and after confirmation of such sale to the county, such real estate is ad- vertised for sale at public auction, as provided in K.S.A. 79-2804f, and amendments thereto, such real estate shall not be sold, either prior to or at such auction, to any person having a statutory right to redeem such real estate, under the provisions of K.S.A. 79-2803, and amendments thereto, for an amount less than the original judgment lien and interest thereon, plus the costs, charges and expenses of the proceedings and sale, as set forth in the execution and order of sale issued pursuant to K.S.A. 79-2804, and amendments thereto.

(c) If any tract, lot or piece of real estate purchased at public auction pursuant to K.S.A. 79-2804, and amendments thereto, is transferred, sold, given or otherwise conveyed to any person who had a statutory right to redeem such real estate prior to such sale pursuant to K.S.A. 79-2803, and amendments thereto, within 10 years of the date of the public auc- tion, such person shall be liable for an amount equal to the original judg- ment lien and interest thereon from the date of the public auction.

(d) The provisions of this section shall apply to the sale or conveyance of any real estate by a county land bank established pursuant to section 13.

New Sec. 25. The provisions of sections 1 through 3 of this act shall be applicable to all taxable years beginning after December 31, 1995.

New Sec. 26. (a) Prior to December 31, 1996, the governing body of each city which, pursuant to K.S.A. 12-1771, and amendments thereto, has established a redevelopment district prior to July 1, 1996, shall certify to the director of accounts and reports the amount equal to the amount of revenue realized from ad valorem taxes imposed pursuant to K.S.A. 72-6431, and amendments thereto, within such redevelopment district. Prior to February 1, 1997, and annually on that date thereafter, the gov- erning body of each such city shall certify to the director of accounts and reports an amount equal to the amount by which revenues realized from such ad valorem taxes imposed in such redevelopment district are esti- mated to be reduced for the ensuing calendar year due to legislative changes in the statewide school finance formula. Prior to March 1 of each year, the director of accounts and reports shall certify to the state treas- urer each amount certified by the governing bodies of cities under this section for the ensuing calendar year and shall transfer from the state general fund to the city tax increment financing revenue fund the aggre- gate of all amounts so certified. Prior to April 15 of each year, the state treasurer shall pay from the city tax increment financing revenue fund to each city certifying an amount to the director of accounts and reports under this section for the ensuing calendar year the amount so certified.

(b) There is hereby created the tax increment financing revenue re- placement fund which shall be administered by the state treasurer. All expenditures from the tax increment financing revenue replacement fund shall be made in accordance with appropriations acts upon warrants of the director of accounts and reports issued pursuant to vouchers approved by the state treasurer or a person or persons designated by the state treasurer.

Sec. 27. K.S.A. 74-2438, 79-201b and 79-2804f and K.S.A. 1995 Supp. 79-1606, 79-1609, 79-2005, 79-2804g, 79-3271, 79-3279, 79- 32,182, 79-3606 and 79-5038 are hereby repealed.

Sec. 28. This act shall take effect and be in force from and after its publication in the statute book.

Approved May 17, 1996.