CHAPTER 184 SENATE BILL No. 226 An Act relating to taxation; amending K.S.A. 79-1009, 79-2974, 79-3228, 79-3295, 79-3296,
79-3298, 79-3299, 79-32,100, 79-32,101, 79-32,106, 79-32,143, 79-3615, 79-3706, 79-
41a03a, 79-4502 and 79-4517 and K.S.A. 1999 Supp. 79-3234 and 79-4217 and repealing
the existing sections; also repealing K.S.A. 79-3297a, 79-4512 and 79-4514 and K.S.A.
1999 Supp. 79-32,208.
Be it enacted by the Legislature of the State of Kansas:

      New Section  1. For purposes of sections 1 through 5 of this act:

      (a) ``Eligible taxpayer'' means any person who is required to file any
return or to pay or remit any tax under the provisions of K.S.A. 79-3601
et seq., and amendments thereto, or 79-3701 et seq., and amendments
thereto, and who, in the opinion of the director has demonstrated a will-
ingness and ability to comply with the tax laws of this state and has main-
tained an acceptable system of business records;

      (b) ``Managed audit agreement'' means an agreement between the
director and an eligible taxpayer consisting of an audit plan developed by
the director and the eligible taxpayer wherein the eligible taxpayer agrees
to review selected sales and purchase records and to calculate and deter-
mine its liability for sales and use taxes; and

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

      New Sec.  2. The director of taxation may enter into a managed audit
agreement with an eligible taxpayer. Under a managed audit agreement,
the director shall:

      (a) Agree to accept, upon verification and subject to the provisions
of section 4, and amendments thereto, the eligible taxpayer's determi-
nations for purposes of making a deficiency assessment or otherwise de-
termining the taxpayer's liability for the audit period under review;

      (b) provide written procedural guidelines to be included as part of
the managed audit agreement, including, but not limited to: (1) The audit
period covered by the managed audit; (2) the general scope of the man-
aged audit; (3) what records will be examined and what types of sampling
techniques will be used; (4) the specific procedures the taxpayer is to
follow in determining any liability; (5) the time period for completion of
the managed audit; and (6) the time period for payment of the tax, penalty
and interest;

      (c) review the results of the managed audit with the eligible taxpayer
and issue a final determination of tax liability in the manner prescribed
by K.S.A. 79-3226, and amendments thereto; and

      (d) recognize the taxpayer's right to request an informal conference
in accordance with the provisions of K.S.A. 79-3610, and amendments
thereto.

      New Sec.  3. The director shall determine, consistent with the effi-
cient use of audit resources, which accounts are to be selected for the
managed audit program, except that no taxpayer shall be required to
participate in the managed audit program. If a taxpayer's account is se-
lected for a managed audit, the taxpayer shall review and examine its
books and records to determine any unreported liability for the audit
period, and shall make available all computations and records reviewed
for verification by the director.

      New Sec.  4. Information provided by the taxpayer as part of the man-
aged audit shall be the same information that is required for the comple-
tion of any other audit the director may conduct. The director may ter-
minate a managed audit agreement and conduct an audit of an eligible
taxpayer under K.S.A. 79-3609, and amendments thereto, if the eligible
taxpayer fails to fulfill any of the terms of a managed audit agreement, or
if the director believes that a managed audit should not be conducted for
any other reason.

      New Sec.  5. Upon completion of the managed audit and verification
by the director, interest shall be computed at 50% of the rate that would
otherwise be imposed for liabilities covered by the audit period. Payment
of the tax, penalty and interest shall be made within the time period
specified by the director.

      New Sec.  6. In all cases where husband and wife file a joint Kansas
income tax return and one spouse is relieved of liability under section
6013(e) or section 6015 of the federal internal revenue code, or would
have otherwise been relieved of liability under either such section had
there been a liability, such spouse shall be relieved of liability for tax,
including interest and penalties, imposed under the Kansas income tax
act for such taxable year.

      Sec.  7. K.S.A. 79-32,101 is hereby amended to read as follows: 79-
32,101. (a) At the time prescribed in this section: (1) Every individual
shall pay estimated tax who can reasonably expect to owe, after withhold-
ing and credits, tax of at least $200 and who expects their withholding
and credits to be less than (A) 90% of the tax shown on the return for
the current year or (B) 100% of the tax shown for the preceding tax year;
and

      (2) every corporation shall pay estimated tax if its Kansas income tax
liability can reasonably be expected to exceed $500.

      (b) In the case of a husband and wife, single payments under this
section may be made by them jointly. If a joint payment is made, but a
joint return is not made for the taxable year, the estimated tax for such
year may be divided between them. Notification of the division of such
payments shall be made at such time and in such manner as the director
of taxation may provide, on forms issued by the director of taxation.

      (c) If on or before January 31, or March 1, in the case of an individual
referred to in subsection (b) of K.S.A. 79-32,102(b) 79-32,102, relating to
income from farming or fishing, of the succeeding year, the taxpayer files
a return for the taxable year, and pays in full the amount of tax computed
on the return, then, under rules and regulations of the secretary of rev-
enue no payment otherwise required to be made under this section on
January 15, or at any time during the preceding year, in the case of an
individual referred to in subsection (b) of K.S.A. 79-32,102(b) 79-32,102,
relating to income from farming or fishing, is required to be made.

      (d) An individual or corporation with a taxable year of less than 12
months shall make a declaration for less than 12 months as prescribed by
rules and regulations of the secretary of revenue.

      (e) The provisions of this section shall not apply to an estate or trust.

      Sec.  8. K.S.A. 79-3295 is hereby amended to read as follows: 79-
3295. (a) The term ``employee'' means a resident of this state as defined
by subsection (b) of K.S.A. 79-32,109, and amendments thereto, perform-
ing services for an employer either within or without the state and a
nonresident performing services within this state, and includes an officer,
employee or elected official of the United States, a state, territory, or any
political subdivision thereof or any agency or instrumentality thereof, and
an officer of a corporation, but shall not include an individual who per-
forms services as an extra in connection with any phase of motion picture
or television production or television commercials for less than 14 days
during any calendar year. As used in this subsection, the term ``extra''
means an individual who pantomimes in the background, adds atmos-
phere to the set and performs such actions without speaking.

      (b) The term ``employer'' means any person, firm, partnership, lim-
ited liability company, corporation, association, trust or fiduciary of any
kind or other type organization transacting qualifying as an employer for
federal income tax withholding purposes and who maintains an office,
transacts business in or deriving derives any income from sources within
the state of Kansas for whom an individual performs or performed any
services, of whatever nature, as the employee of such employer, and who
has control of the payment of wages for such services, or is the officer,
agent or employee of the person having control of the payment of wages.
It also includes the United States, the state and all political subdivisions
thereof, and all agencies or instrumentalities of any of them.

      (c) The term ``payor'' means any person or organization, other than
an employer, who makes payments which are subject to withholding of
income tax pursuant to this act.

      (d) The term ``wages'' means wages as defined by section 3401(a) of
the federal internal revenue code which are taxable under the Kansas
income tax act.

      Sec.  9. K.S.A. 79-3296 is hereby amended to read as follows: 79-
3296. (a) Every employer who is required under federal law to withhold
upon wages pursuant to the federal internal revenue code shall, whenever
the wage recipient is a resident of Kansas or the wages shall be paid on
account of personal service performed in Kansas, withhold and deduct
from such wages paid 10% of the amount required under federal law to
be deducted, except that withholding from employees of interstate car-
riers shall be determined under the provisions of public law 91-569 an
amount to be determined in accordance with section 13, and amendments
thereto.

      (b) In the event that a resident individual of this state is employed in
another state, and such other state requires a withholding of income tax
on wages earned by such resident in such other state, the secretary may
enter into an agreement with such other state or the employer of such
resident as to the manner and amount of withholding required by this act
on the wages of such resident earned in such other state.

      (c) The secretary is hereby authorized to enter into an agreement
pursuant to 10 U.S.C. 1045 providing for the withholding of state income
tax from monthly retired or retainer pay of any member or former mem-
ber of the United States armed forces.

      (b) Notwithstanding the requirements of subsection (a), an employer
shall not withhold from the wages of an individual who performs services
as an extra in connection with any phase of motion picture or television
production or television commercials for less than 14 days during any
calendar year. As used in this subsection, the term ``extra'' means an in-
dividual who pantomimes in the background, adds atmosphere to the set
and performs such actions without speaking.

      (c) A determination by the internal revenue service which relieves an
employer or payor from withholding responsibility with respect to pay-
ments to an employee or payee shall also apply for Kansas income tax
withholding purposes. Where an employer or payor is required to rein-
state withholding for federal income tax with regard to any employee or
payee, such obligation shall be equally applicable for Kansas withholding
purposes.

      New Sec.  10. Every payor who withholds federal income tax:

      (a) For any supplemental unemployment compensation, annuity or
sick pay;

      (b) pursuant to a voluntary withholding agreement;

      (c) on gambling winnings;

      (d) on taxable payments of Indian casino profits;

      (e) for any vehicle fringe benefit;

      (f) on periodic payments of pensions, annuities and other deferred
income;

      (g) on nonperiodic distributions of pensions, annuities and other de-
ferred income; or

      (h) on eligible rollover distributions of pensions, annuities and other
deferred income, from payments made to those persons whose primary
residence is in Kansas shall withhold and deduct an amount to be deter-
mined in accordance with section 11, and amendments thereto.

      New Sec.  11. (a) Every employer or payor required to deduct and
withhold tax from wages of an employee or payments other than wages
of a payee under this act shall be liable for the payment of such tax
whether or not it is collected from the employee or payee by the employer
or payor. For purposes of assessment and collection, any amount required
to be withheld and paid over to the department of revenue, and any
additions to tax, penalties and interest with respect thereto, shall be con-
sidered the tax of the employer.

      (b) Any amount of tax withheld shall constitute a special fund in trust
for the department of revenue.

      (c) No employee or payee shall have any right of action against their
employer or payor in respect to any moneys deducted and withheld from
wages or payments other than wages and paid over to the department of
revenue in compliance or in intended compliance with this act.

      New Sec.  12. (a) If an employer or payor fails to deduct and withhold
the tax as required under this act, and thereafter, the income tax against
which the tax may be credited is paid, the tax required to be deducted
and withheld shall not be collected from the employer or payor. The
payment of such tax does not, however, operate to relieve the employer
from liability for penalties, interest or additions to the tax applicable with
respect to such failure to deduct and withhold. The employer or payor
will not be relieved under this provision from liability for payment of the
tax required to be withheld unless it can be shown that the income tax
against which the tax required to be withheld under this act may be cred-
ited has been paid.

      (b) Every agent or other person having control, receipt, custody or
disposal of, or paying the wages of an employee or group of employees
employed by one or more employers, is for the purpose of this act des-
ignated to be an employer. In the case of the corporation, the officers
and board of directors are likewise considered employers. Employers of
classes named in this section shall be subject to all the provisions of law
including penalties as is their principal. Any employer who willfully fails
to collect the tax imposed by the Kansas withholding tax act or truthfully
account for any pay over such tax, or willfully attempts in any manner to
evade or defeat any tax or the payment thereof, shall be subject to a
penalty equal to the total amount of the tax evaded, or not collected, or
not accounted for and paid over in addition to other penalties provided
by law.

      New Sec.  13. (a) The amount to be withheld from wages as required
by K.S.A. 79-3296, and amendments thereto, or from payments other
than wages as required by section 10, and amendments thereto, shall be
an amount which will approximate the employee's or payee's annual tax
liability on a calendar year basis, calculated on the basis of tables to be
prepared by the secretary, and schedules or percentage rates to be pre-
scribed by the secretary, based on the wages, payments other than wages,
or adjusted gross income of the taxpayer.

      (b) The state withholding rate shall be in proper proportion to the
tax rates imposed under K.S.A. 79-32,110, and amendments thereto, and
the tax base, so that the withholding rate corresponds to the employee's
or payee's expected income tax liability. Such rate may be fixed for all
adjusted gross income classes, or variable rates may be established, based
upon adjusted gross income class, to insure proper withholding consistent
with the taxpayer's expected tax liability.

      (c) In the event a resident individual of this state is employed in
another state, and such other state requires a withholding of income tax
on wages earned by such resident in such other state, the secretary may
enter into an agreement with such other state or the employer of such
resident as to the manner and amount of withholding required by this act
on the wages of such resident earned in such other state.

      (d) The secretary is hereby authorized to enter into an agreement
pursuant to 10 U.S.C. 1045 providing for the withholding of state income
tax from monthly retired or retainer pay of any member or former mem-
ber of the United States armed forces.

      Sec.  14. K.S.A. 79-3298 is hereby amended to read as follows: 79-
3298. (a) With respect to any taxes withheld before April 1, 1983, every
employer, other than employers who have received the prior approval of
the director to file an annual return, shall file a withholding return on or
before the last day of the first month following the end of the calendar
quarter in which withholding was required. Such return shall be on a
form prescribed by the director of taxation and shall be accompanied by
payment in full of any amounts withheld by the employer. Employers
who have received the approval of the director to file an annual return
before the effective date of this act shall comply with the applicable pro-
visions of subsection (b).

      (b) With respect to any taxes withheld after March 31, 1983, Every
employer and payor shall remit the taxes and file returns in accordance
with the following provisions. (1) Whenever the total amount withheld
exceeds $100,000 in any calendar year, the employer or payor shall remit
the taxes withheld in accordance with the following schedule: Each cal-
endar month shall be divided into four remittance periods that end on
the 7th, 15th, 21st and the last day of such month. If at the end of any
one or all of such remittance periods the total undeposited taxes equal or
exceed $667, the taxes shall be remitted within three banking days. Sat-
urdays, Sundays and legal holidays shall not be treated as banking days.
(2) Whenever the total amount withheld exceeds $8,000 but does not
exceed $100,000 in any calendar year, the employer or payor shall remit
the taxes withheld for wages paid during the first 15 days of any month
on or before the 25th day of the month. The employer or payor shall
remit the taxes withheld for wages paid during the remainder of that
month on or before the 10th day of the following month. (3) Whenever
the total amount withheld exceeds $1,200 but does not exceed $8,000 in
any calendar year, the employer or payor shall remit the taxes withheld
during any month on or before the 15th day of the following month. (4)
Whenever the total amount withheld exceeds $200 but does not exceed
$1,200 in any calendar year, the employer or payor shall remit the taxes
withheld in any calendar quarter on or before the 25th day of the first
month following the end of that calendar quarter. (5) Whenever the total
amount withheld does not exceed $200 in any calendar year, the employer
or payor shall remit the taxes withheld during that year on or before
January 25 of the following year.

      (c) (b) Each remittance required under the provisions of subsection
(b) (a) shall be accompanied by a Kansas withholding tax remittance form
prescribed and furnished by the director.

      (d) (c) Every employer or payor making remittances pursuant to sub-
section (b) (a) shall file a return on a form prescribed and furnished by
the director for each calendar year on or before the last day of February
of the following year.

      (e) (d) The excess of any remittance over the actual taxes withheld in
any withholding period shall be credited against the liability for following
withholding periods until exhausted. A refund shall be allowed in accord-
ance with K.S.A. 79-32,105, and amendments thereto, where an over-
payment cannot be adjusted by an offset against the liability for a sub-
sequent withholding period.

      (f) (e) Determinations of amounts withheld during a calendar year by
employers or payors for purposes of determining filing requirements shall
be made by the director upon the basis of amounts withheld by those
employers or payors during the preceding calendar year or by estimates
in cases of employers or payors having no previous withholding histories.
The director is hereby authorized to modify the filing schedule for any
employer or payor when it is apparent that the original determination
was inaccurate.

      (g) (f) Whenever the director has cause to believe that money with-
held by an employer or payor pursuant to this act may be converted,
diverted, lost, or otherwise not timely paid in accordance with this section,
the director shall have the power to require returns and payment from
any such employer or payor at any time at more frequent intervals than
prescribed by this section in order to secure full payment to the state of
all amounts withheld by such employer or payor in accordance with this
act.

      Sec.  15. K.S.A. 79-3299 is hereby amended to read as follows: 79-
3299. (a) Every employer or payor shall, on or before January 31 of each
year prepare a statement for each employee or payee on a form pre-
scribed by the director stating the amount of wages or payments other
than wages subject to Kansas income tax paid during the preceding year,
the total amount of tax withheld, if any, from such wages or payments
other than wages by the employer or payor pursuant to this act and such
other information as may be prescribed by the director. One copy of such
statement shall be filed by the employer or payor with the division of
taxation on or before the last day of February of each year. Two copies
of such statement shall be given to the employee or payee concerned,
one of which will be filed by the employee or payee with the tax return
required by this chapter.

      (b) In the case of an employee whose employment is terminated be-
fore the end of a calendar year, the statement required by subsection (a)
may be mailed at the time provided in that subsection to the last known
address of the employee, or issued at the time of the last payment to the
employee, at the employer's option.

      (c) Any employer or payor who willfully fails to furnish a statement
to an employee or payee as required under the provisions of subsections
(a) and (b) of this section shall be guilty of a misdemeanor and upon
conviction thereof shall be punished by a fine not exceeding $100 for
each such offense.

      (d) The annual statement of wages and salaries paid and amount with-
held required by this section shall be in lieu of the annual information
return required under K.S.A. 79-3222.

      Sec.  16. K.S.A. 79-32,100 is hereby amended to read as follows: 79-
32,100. (a) The tax deducted and withheld under this act shall not be
allowed as a deduction either to the employer or payor or to the employee
or payee in computing taxable income under the ``Kansas income tax act.''

      (b) The full amount of wages and salaries or payments other than
wages from which an amount was withheld in accordance with this act
shall be included in the gross income of the employee or payee unless
such wages and salaries or payments other than wages or a portion thereof
are otherwise excludable under the provisions of the ``Kansas income tax
act.''

      (c) The amount deducted and withheld under this act during any
calendar year from the wages or payments other than wages of an indi-
vidual taxpayer shall be allowed as a credit against the income tax oth-
erwise imposed on such taxpayer by the ``Kansas income tax act,'' whether
or not such amount was remitted to the division of taxation by the em-
ployer or payor in accordance with the terms of this act.

      (d) If the amount withheld under this act during any calendar year
exceeds the individual income tax liability of the employee-payee-taxpayer
any excess shall be applied to any other income tax owed the state of
Kansas by such individual (including fines, penalties and interest, if any)
and the balance of such excess, if any, refunded to the taxpayer as pro-
vided in subsection (c) of K.S.A. 79-32,105(c) 79-32,105, and amendments
thereto.

      Sec.  17. K.S.A. 79-32,106 is hereby amended to read as follows: 79-
32,106. (a) The employer shall be liable to the state for the payment of
the amount required to be deducted and withheld under this act but shall
not be otherwise liable for the amount of any such payments.

      (b) If the employer is the United States or any agency or instrumen-
tality thereof, the return of the amount deducted and withheld upon any
wages or payments other than wages may be made by any officer or
employee of the United States or of such agency or instrumentality, as
the case may be, having control of the payment of such wages or payments
other than wages, or appropriately designated for that purpose. Such
withholding shall, in accordance with 5 U.S.C. 84c, be exempt from pen-
alties otherwise provided by law for noncompliance with this act.

      (c) In case a fiduciary, agent, or other person has the control, receipt,
custody or disposal of, or pays the wages of an employee or group of
employees, employed by one or more employers, the director, under rules
and regulations of the secretary of revenue, is authorized to designate
such fiduciary, agent, or other person to perform such acts as are required
of employers under this act and as the director may specify. Except as
may be otherwise prescribed by the director, all provisions of law (in-
cluding penalties) applicable in respect of any employer shall be appli-
cable to a fiduciary, agent, or other person so designated, but, except as
so provided, the employer for whom such fiduciary, agent, or other per-
sons acts shall remain subject to the provisions of law (including penalties)
applicable in respect of employers.

      Sec.  18. K.S.A. 79-3228 is hereby amended to read as follows: 79-
3228. (a) For all taxable years ending prior to January 1, 2002, if any
taxpayer, without intent to evade the tax imposed by this act, shall fail to
file a return or pay the tax, if one is due, at the time required by or under
the provisions of this act, but shall voluntarily file a correct return of
income or pay the tax due within six months thereafter, there shall be
added to the tax an additional amount equal to 10% of the unpaid balance
of tax due plus interest at the rate prescribed by subsection (a) of K.S.A.
79-2968, and amendments thereto, from the date the tax was due until
paid.

      (b) For all taxable years ending prior to January 1, 2002, if any tax-
payer fails voluntarily to file a return or pay the tax, if one is due, within
six months after the time required by or under the provisions of this act,
there shall be added to the tax an additional amount equal to 25% of the
unpaid balance of tax due plus interest at the rate prescribed by subsec-
tion (a) of K.S.A. 79-2968, and amendments thereto, from the date the
tax was due until paid. Notwithstanding the foregoing, in the event an
assessment is issued following a field audit for any period for which a
return was filed by the taxpayer and all of the tax was paid pursuant to
such return, a penalty shall be imposed for the period included in the
assessment in the amount of 10% of the unpaid balance of tax due shown
in the notice of assessment. If after review of a return for any period
included in the assessment, the secretary or secretary's designee deter-
mines that the underpayment of tax was due to the failure of the taxpayer
to make a reasonable attempt to comply with the provisions of this act,
such penalty shall be imposed for the period included in the assessment
in the amount of 25% of the unpaid balance of tax due.

      (c) For all taxable years ending after December 31, 2001, if any tax-
payer fails to file a return or pay the tax if one is due, at the time required
by or under the provisions of this act, there shall be added to the tax an
additional amount equal to 1% of the unpaid balance of the tax due for
each month or fraction thereof during which such failure continues, not
exceeding 24% in the aggregate, plus interest at the rate prescribed by
subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
the tax was due until paid. Notwithstanding the foregoing, in the event
an assessment is issued following a field audit for any period for which a
return was filed by the taxpayer and all of the tax was paid pursuant to
such return, a penalty shall be imposed for the period included in the
assessment in an amount of 1% per month not exceeding 10% of the
unpaid balance of tax due shown in the notice of assessment. If after
review of a return for any period included in the assessment, the secretary
or secretary's designee determines that the underpayment of tax was due
to the failure of the taxpayer to make a reasonable attempt to comply with
the provisions of this act, such penalty shall be imposed for the period
included in the assessment in the amount of 25% of the unpaid balance
of tax due.

      (c) (d) If any taxpayer who has failed to file a return or has filed an
incorrect or insufficient return, and after notice from the director refuses
or neglects within 20 days to file a proper return, the director shall de-
termine the income of such taxpayer according to the best available in-
formation and assess the tax together with a penalty of 50% of the unpaid
balance of tax due plus interest at the rate prescribed by subsection (a)
of K.S.A. 79-2968, and amendments thereto, from the date the tax was
originally due to the date of payment.

      (d) (e) Any person, who with fraudulent intent, fails to pay any tax or
to make, render or sign any return, or to supply any information, within
the time required by or under the provisions of this act, shall be assessed
a penalty equal to the amount of the unpaid balance of tax due plus
interest at the rate prescribed by subsection (a) of K.S.A. 79-2968, and
amendments thereto, from the date the tax was originally due to the date
of payment. Such person shall also be guilty of a misdemeanor and shall,
upon conviction, be fined not more than $1,000 or be imprisoned in the
county jail not less than 30 days nor more than one year, or both such
fine and imprisonment.

      (e) (f) Any person who willfully signs a fraudulent return shall be
guilty of a felony, and upon conviction thereof shall be punished by im-
prisonment for a term not exceeding five years. The term ``person'' as
used in this section includes any agent of the taxpayer, and officer or
employee of a corporation or a member or employee of a partnership,
who as such officer, employee or member is under a duty to perform the
act in respect of which the violation occurs.

      (f) (g)  (1) Whenever the secretary or the secretary's designee deter-
mines that the failure of the taxpayer to comply with the provisions of
subsections (a), (b) and, (c) and (d) of this section was due to reasonable
causes, the secretary or the secretary's designee may waive or reduce any
of the penalties and may reduce the interest rate to the underpayment
rate prescribed and determined for the applicable period under section
6621 of the federal internal revenue code as in effect on January 1, 1994,
upon making a record of the reasons therefor.

      (2) No penalty shall be assessed hereunder with respect to any un-
derpayment of income tax liability reported on any amended return filed
by any taxpayer who at the time of filing pays such underpayment and
whose return is not being examined at the time of filing.

      (3) No penalty assessed hereunder shall be collected if the taxpayer
has had the tax abated on appeal, and any penalty collected upon such
tax shall be refunded.

      (g) (h) In case of a nonresident or any officer or employee of a cor-
poration, the failure to do any act required by or under the provisions of
this act shall be deemed an act committed in part at the office of the
director.

      (h) (i) In the case of a nonresident individual, partnership or corpo-
ration, the failure to do any act required by or under the provision of this
act shall prohibit such nonresident from being awarded any contract for
construction, reconstruction or maintenance or for the sale of materials
and supplies to the state of Kansas or any political subdivision thereof
until such time as such nonresident has fully complied with this act.

      Sec.  19. K.S.A. 79-3615 is hereby amended to read as follows: 79-
3615. (a) If any taxpayer shall fail to pay the tax required under this act
at the time required by or under the provisions of this act, there shall be
added to the unpaid balance of the tax, interest at the rate per month
prescribed by subsection (a) of K.S.A. 79-2968 and amendments thereto
from the date the tax was due until paid.

      (b) For all taxable years ending prior to January 1, 2002, if any tax-
payer due to negligence or intentional disregard fails to file a return or
pay the tax due at the time required by or under the provisions of this
act, there shall be added to the tax a penalty in an amount equal to 10%
of the unpaid balance of tax due.

      (c) For all taxable years ending prior to January 1, 2002, if any person
fails to make a return, or to pay any tax, within six months from the date
the return or tax was due, except in the case of an extension of time
granted by the secretary of revenue or the secretary's designee, there
shall be added to the tax due a penalty equal to 25% of the unpaid balance
of such tax due. Notwithstanding the foregoing, in the event an assess-
ment is issued following a field audit for any period for which a return
was filed by the taxpayer and all of the tax was paid pursuant to such
return, a penalty shall be imposed for the period included in the assess-
ment in the amount of 10% of the unpaid balance of tax due shown in
the notice of assessment. If after review of a return for any period in-
cluded in the assessment, the secretary or secretary's designee determines
that the underpayment of tax was due to the failure of the taxpayer to
make a reasonable attempt to comply with the provisions of this act, such
penalty shall be imposed for the period included in the assessment in the
amount of 25% of the unpaid balance of tax due.

      (d) For all taxable years ending after December 31, 2001, if any tax-
payer fails to file a return or pay the tax if one is due, at the time required
by or under the provisions of this act, there shall be added to the tax an
additional amount equal to 1% of the unpaid balance of the tax due for
each month or fraction thereof during which such failure continues, not
exceeding 24% in the aggregate, plus interest at the rate prescribed by
subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
the tax was due until paid. Notwithstanding the foregoing, in the event
an assessment is issued following a field audit for any period for which a
return was filed by the taxpayer and all of the tax was paid pursuant to
such return, a penalty shall be imposed for the period included in the
assessment in an amount of 1% per month not exceeding 10% of the
unpaid balance of tax due shown in the notice of assessment. If after
review of a return for any period included in the assessment, the secretary
or secretary's designee determines that the underpayment of tax was due
to the failure of the taxpayer to make a reasonable attempt to comply with
the provisions of this act, such penalty shall be imposed for the period
included in the assessment in the amount of 25% of the unpaid balance
of tax due.

      (d) (e) If any taxpayer, with fraudulent intent, fails to pay any tax or
make, render or sign any return, or to supply any information, within the
time required by or under the provisions of this act, there shall be added
to the tax a penalty in an amount equal to 50% of the unpaid balance of
tax due.

      (e) (f) Penalty or interest applied under the provisions of subsections
(a) and (d) shall be in addition to the penalty added under any other
provisions of this section, but the provisions of subsections (b) and (c)
shall be mutually exclusive of each other.

      (f) (g) Whenever the secretary or the secretary's designee determines
that the failure of the taxpayer to comply with the provisions of subsec-
tions (b) and (c) (a), (b), (c) and (d) of this section was due to reasonable
causes, the secretary or the secretary's designee may waive or reduce any
of the penalties and may reduce the interest rate to the underpayment
rate prescribed and determined for the applicable period under section
6621 of the federal internal revenue code as in effect on January 1, 1994,
upon making a record of the reasons therefor.

      (g) (h) In addition to all other penalties provided by this section, any
person who willfully fails to make a return or to pay any tax imposed
under the Kansas retailers' sales tax act, or who makes a false or fraudulent
return, or fails to keep any books or records prescribed by this act, or
who willfully violates any regulations of the secretary of revenue, for the
enforcement and administration of this act, or who aids and abets another
in attempting to evade the payment of any tax imposed by this act, or
who violates any other provision of this act, shall, upon conviction thereof,
be fined not less than $500, nor more than $10,000, or be imprisoned in
the county jail not less than one month, nor more than six months, or be
both so fined and imprisoned, in the discretion of the court.

      (i) No penalty assessed hereunder shall be collected if the taxpayer
has had the tax abated on appeal, and any penalty collected upon such
tax shall be refunded.

      Sec.  20. K.S.A. 79-3706 is hereby amended to read as follows: 79-
3706. (a) Each retailer or person subject to the provisions of this act shall
make remittances of the tax imposed by K.S.A. 79-3703, and amendments
thereto, and file returns in accordance with the provisions of K.S.A. 79-
3607 and amendments thereto, except that the time schedule for remit-
ting tax and filing returns shall be determined on the basis of calendar
year compensating tax liability in lieu of calendar year sales tax liability.
Returns shall show in detail the total quantity of tangible personal prop-
erty sold by any retailer or used, stored or consumed by any person within
the state during the period for which the return is filed subject to the tax
herein imposed, and such other information as the director may deem
pertinent. The director may, upon request and a proper showing of the
necessity therefor, grant an extension of time not to exceed 60 days for
making any return and payment. Returns shall be signed by the retailer
or such retailer's duly authorized agent, and must be certified by such
retailer to be correct.

      (b) If any taxpayer fails to pay the tax required under the act of which
this section is amendatory at the time required by or under the provisions
of the act of which this section is amendatory, there shall be added to the
unpaid balance of the tax, interest at the rate per month prescribed by
subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
the tax was due until paid.

      (c) For all taxable years ending prior to January 1, 2002, if any tax-
payer due to negligence or intentional disregard fails to file a return or
pay the tax due at the time required by or under the provisions of this
section, there shall be added to the tax a penalty in an amount equal to
10% of the unpaid balance of tax due.

      (d) For all taxable years ending prior to January 1, 2002, if any person
fails to make a return, or to pay any tax, within six months from the date
the return or tax was due, except in the case of an extension of time
granted by the secretary of revenue or the secretary's designee, there shall
be added to the tax due a penalty equal to 25% of the unpaid balance of
such tax due.

      (e) For all taxable years ending after December 31, 2001, if any tax-
payer fails to file a return or pay the tax if one is due, at the time required
by or under the provisions of this act, there shall be added to the tax an
additional amount equal to 1% of the unpaid balance of the tax due for
each month or fraction thereof during which such failure continues, not
exceeding 24% in the aggregate, plus interest at the rate prescribed by
subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
the tax was due until paid. Notwithstanding the foregoing, in the event
an assessment is issued following a field audit for any period for which a
return was filed by the taxpayer and all of the tax was paid pursuant to
such return, a penalty shall be imposed for the period included in the
assessment in an amount of 1% per month not exceeding 10% of the
unpaid balance of tax due shown in the notice of assessment. If after
review of a return for any period included in the assessment, the secretary
or secretary's designee determines that the underpayment of tax was due
to the failure of the taxpayer to make a reasonable attempt to comply with
the provisions of this act, such penalty shall be imposed for the period
included in the assessment in the amount of 25% of the unpaid balance
of tax due.

      (e) (f) If any taxpayer, with fraudulent intent, fails to pay any tax or
make, render or sign any return, or to supply any information, within the
time required by or under the provisions of this section, there shall be
added to the tax a penalty in an amount equal to 50% of the unpaid
balance of tax due.

      (f) (g) Penalty or interest applied under the provisions of subsections
(b) and (e) shall be in addition to the penalty added under any other
provisions of this section, but the provisions of subsections (c) and (d)
shall be mutually exclusive of each other.

      (g) (h) Whenever the secretary of revenue or the secretary's designee
determines that the failure of the taxpayer to comply with the provisions
of subsections (c) and (d) (b), (c), (d) and (e) was due to reasonable causes,
the secretary or the secretary's designee may waive or reduce any of the
penalties and may reduce the interest rate to the underpayment rate
prescribed and determined for the applicable period under section 6621
of the federal internal revenue code as in effect on January 1, 1994 upon
making a record of the reasons therefor.

      (h) (i) In addition to all other penalties provided by this section, any
person who willfully fails to make a return or to pay any tax imposed
under the Kansas compensating tax act, or who makes a false or fraudu-
lent return, or fails to keep any books or records prescribed by the Kansas
compensating tax act, or who willfully violates any regulations of the sec-
retary of revenue, for the enforcement and administration of the Kansas
compensating tax act, or who aids and abets another in attempting to
evade the payment of any tax imposed by the Kansas compensating tax
act, or who violates any other provision of the Kansas compensating tax
act, shall, upon conviction thereof, be fined not less than $100 nor more
than $1,000, or be imprisoned in the county jail not less than one month
nor more than six months, or be both so fined and imprisoned, in the
discretion of the court.

      (j) No penalty assessed hereunder shall be collected if the taxpayer
has had the tax abated on appeal, and any penalty collected upon such
tax shall be refunded.

      Sec.  21. K.S.A. 79-41a03a is hereby amended to read as follows: 79-
41a03a. (a) If any taxpayer fails to pay the tax levied pursuant to K.S.A.
79-41a02, and amendments thereto, at the time required by or under the
provisions of K.S.A. 79-41a03, and amendments thereto, there shall be
added to the unpaid balance of the tax, interest at the rate per month
prescribed by subsection (a) of K.S.A. 79-2968, and amendments thereto,
from the date the tax was due until paid.

      (b) For all taxable years ending prior to January 1, 2002, if any tax-
payer due to negligence or intentional disregard fails to file a return or
pay the tax due at the time required by or under the provisions of K.S.A.
79-41a03, and amendments thereto, there shall be added to the tax a
penalty in an amount equal to 10% of the unpaid balance of tax due.

      (c) For all taxable years ending prior to January 1, 2002, if any person
fails to make a return, or to pay any tax, within six months from the date
the return or tax was due, except in the case of an extension of time
granted by the secretary of revenue or the secretary's designee, there
shall be added to the tax due a penalty equal to 25% of the unpaid balance
of such tax due.

      (d) For all taxable years ending after December 31, 2001, if any tax-
payer fails to file a return or pay the tax if one is due, at the time required
by or under the provisions of this act, there shall be added to the tax an
additional amount equal to 1% of the unpaid balance of the tax due for
each month or fraction thereof during which such failure continues, not
exceeding 24% in the aggregate, plus interest at the rate prescribed by
subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
the tax was due until paid. Notwithstanding the foregoing, in the event
an assessment is issued following a field audit for any period for which a
return was filed by the taxpayer and all of the tax was paid pursuant to
such return, a penalty shall be imposed for the period included in the
assessment in an amount of 1% per month not exceeding 10% of the
unpaid balance of tax due shown in the notice of assessment. If after
review of a return for any period included in the assessment, the secretary
or secretary's designee determines that the underpayment of tax was due
to the failure of the taxpayer to make a reasonable attempt to comply with
the provisions of this act, such penalty shall be imposed for the period
included in the assessment in the amount of 25% of the unpaid balance
of tax due.

      (d) (e) If any taxpayer, with fraudulent intent, fails to pay any tax or
make, render or sign any return, or to supply any information, within the
time required by or under the provisions of K.S.A. 79-41a03, and amend-
ments thereto, there shall be added to the tax a penalty in an amount
equal to 50% of the unpaid balance of tax due.

      (e) (f) Penalty or interest applied under the provisions of subsections
(a) and (d) shall be in addition to the penalty added under any other
provisions of this section, but the provisions of subsections (b) and (c)
shall be mutually exclusive of each other.

      (f) (g) Whenever the secretary of revenue or the secretary's designee
determines that the failure of the taxpayer to comply with the provisions
of subsections (b) and (c) was due to reasonable causes, the secretary or
the secretary's designee may waive or reduce any of the penalties and
may reduce the interest rate to the underpayment rate prescribed and
determined for the applicable period under section 6621 of the federal
internal revenue code as in effect on January 1, 1994, upon making a
record of the reasons therefor.

      (g) (h) In addition to all other penalties provided by this section, any
person who willfully fails to make a return or to pay any tax imposed
under K.S.A. 79-41a02, and amendments thereto, or who makes a false
or fraudulent return, or fails to keep any books or records necessary to
determine the accuracy of the person's reports, or who willfully violates
any regulations of the secretary of revenue, for the enforcement and ad-
ministration of the provisions of K.S.A. 79-41a01 to 79-41a09, inclusive,
and amendments thereto, or who aids and abets another in attempting to
evade the payment of any tax imposed by K.S.A. 79-41a02, and amend-
ments thereto, or who violates any other provision of K.S.A. 79-41a01 to
79-41a09, inclusive, and amendments thereto, shall, upon conviction
thereof, be fined not less than $100 nor more than $1,000, or be impris-
oned in the county jail not less than one month nor more than six months,
or be both so fined and imprisoned, in the discretion of the court.

      Sec.  22. K.S.A. 79-1009 is hereby amended to read as follows: 79-
1009. To the end that the state of Kansas and the political subdivisions
thereof may receive all taxes due in every instance, including contribu-
tions due under the employment security law, contractors, who are non-
residents of this state, desiring to engage in, prosecute, follow or carry on
the business of contracting as defined in this act shall register with the
secretary of revenue or the secretary's designee for each contract where
the total contract price or compensation to be received amounts to more
than $10,000, except that a foreign corporation authorized to do business
in this state shall not be required to register under the provisions of this
act. The secretary or the secretary's designee shall charge a fee for such
registration in the amount of $10 for each such contract. All such fees
received by the secretary or the secretary's designee shall be deposited
on Monday of each week with the state treasurer. The state treasurer
shall thereupon credit the amount of such fees to the state general fund.

      Sec.  23. K.S.A. 79-2974 is hereby amended to read as follows: 79-
2974. On and after January 1, 1998, the The secretary of revenue shall
make available in a medium readily accessible to taxpayers all adminis-
trative rulings of the department of revenue which affect the duties and
responsibilities of taxpayers pursuant to any law administered by the de-
partment of revenue. Private letter rulings and written final determina-
tions of the secretary or the designee of the secretary shall be provided in
such a manner as to conceal the identity of the specific taxpayer for whom
the private letter ruling was issued. The secretary shall cause to be pub-
lished in the Kansas register a description of each such administrative
ruling within 30 days of such ruling together with specific instructions as
to how the complete text of the administrative ruling may be obtained.
As used in this section, administrative rulings shall include revenue no-
tices, revenue rulings, information guides, policy directives, private letter
rulings, written final determinations of the secretary or the designee of
the secretary and directives of the division of property valuation or its
director.

      Sec.  24. K.S.A. 79-4502 is hereby amended to read as follows: 79-
4502. As used in this act, unless the context clearly indicates otherwise:

      (a) ``Income'' means the sum of adjusted gross income under the
Kansas income tax act, maintenance, support money, cash public assis-
tance and relief (not including any refund granted under this act), the
gross amount of any pension or annuity (including all monetary retire-
ment benefits from whatever source derived, including but not limited
to, railroad retirement benefits, all payments received under the federal
social security act except disability payments, and veterans disability pen-
sions), all dividends and interest from whatever source derived not in-
cluded in adjusted gross income, workers compensation and the gross
amount of ``loss of time'' insurance. It does not include gifts from non-
governmental sources or surplus food or other relief in kind supplied by
a governmental agency, nor shall net operating losses and net capital
losses be considered in the determination of income.

      (b) ``Household'' means a claimant, a claimant and spouse who oc-
cupy the homestead or a claimant and one or more individuals not related
as husband and wife who together occupy a homestead.

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

      (d) ``Homestead'' means the dwelling, or any part thereof, whether
owned or rented, which is occupied as a residence by the household and
so much of the land surrounding it, as defined as a home site for ad
valorem tax purposes, and may consist of a part of a multi-dwelling or
multi-purpose building and a part of the land upon which it is built or a
manufactured home or mobile home and the land upon which it is situ-
ated. ``Owned'' includes a vendee in possession under a land contract, a
life tenant, a beneficiary under a trust and one or more joint tenants or
tenants in common.

      (e) ``Claimant'' means a person who has filed a claim under the pro-
visions of this act and was, during the entire calendar year preceding the
year in which such claim was filed for refund under this act, except as
provided in K.S.A. 79-4503, and amendments thereto, both domiciled in
this state and was: (1) A person having a disability; (2) a person who is 55
years of age or older or (3) a person other than a person included under
(1) or (2) having one or more dependent children under 18 years of age
residing at the person's homestead during the calendar year immediately
preceding the year in which a claim is filed under this act.

      When a homestead is occupied by two or more individuals and more
than one of the individuals is able to qualify as a claimant, the individuals
may determine between them as to whom the claimant will be. If they
are unable to agree, the matter shall be referred to the secretary of rev-
enue whose decision shall be final.

      (f) ``Property taxes accrued'' means property taxes, exclusive of special
assessments, delinquent interest and charges for service, levied on a
claimant's homestead in 1979 or any calendar year thereafter by the state
of Kansas and the political and taxing subdivisions of the state. When a
homestead is owned by two or more persons or entities as joint tenants
or tenants in common and one or more of the persons or entities is not
a member of claimant's household, ``property taxes accrued'' is that part
of property taxes levied on the homestead that reflects the ownership
percentage of the claimant's household. For purposes of this act, property
taxes are ``levied'' when the tax roll is delivered to the local treasurer with
the treasurer's warrant for collection. When a claimant and household
own their homestead part of a calendar year, ``property taxes accrued''
means only taxes levied on the homestead when both owned and occupied
as a homestead by the claimant's household at the time of the levy, mul-
tiplied by the percentage of 12 months that the property was owned and
occupied by the household as its homestead in the year. When a house-
hold owns and occupies two or more different homesteads in the same
calendar year, property taxes accrued shall be the sum of the taxes allo-
cable to those several properties while occupied by the household as its
homestead during the year. Whenever a homestead is an integral part of
a larger unit such as a multi-purpose or multi-dwelling building, property
taxes accrued shall be that percentage of the total property taxes accrued
as the value of the homestead is of the total value. For the purpose of
this act, the word ``unit'' refers to that parcel of property covered by a
single tax statement of which the homestead is a part.

      (g) ``Disability'' means:

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

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

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

      (i) ``Rent constituting property taxes accrued'' means 20% of the gross
rent actually paid in cash or its equivalent in 1979 or any taxable year
thereafter by a claimant and claimant's household solely for the right of
occupancy of a Kansas homestead on which ad valorem property taxes
were levied in full for that year. When a household occupies two or more
different homesteads in the same calendar year, rent constituting prop-
erty taxes accrued shall be computed by adding the rent constituting
property taxes accrued for each property rented by the household while
occupied by the household as its homestead during the year.

      (j) ``Gross rent'' means the rental paid at arm's length solely for the
right of occupancy of a homestead or space rental paid to a landlord for
the parking of a mobile home, exclusive of charges for any utilities, serv-
ices, furniture and furnishings or personal property appliances furnished
by the landlord as a part of the rental agreement, whether or not expressly
set out in the rental agreement. Whenever the director of taxation finds
that the landlord and tenant have not dealt with each other at arms length
and that the gross rent charge was excessive, the director may adjust the
gross rent to a reasonable amount for the purposes of the claim.

      New Sec.  25. Insofar as the same may be made applicable, the pro-
visions of K.S.A. 79-3226, and amendments thereto, shall apply to claims
for refunds allowable pursuant to the homestead property tax refund act
which may become in dispute.

      Sec.  26. K.S.A. 79-4517 is hereby amended to read as follows: 79-
4517. For claims in respect of property taxes levied in 1976 or in any year
subsequent thereto, the director of taxation may: (a) extend the time for
filing any claim under the provisions of this act or accept a claim filed
after the filing deadline when good cause exists therefor; or (b) accept a
claim filed after the deadline for filing in the case of sickness, absence or
disability of the claimant if said the claim has been filed within four (4)
years of said the deadline.

      Sec.  27. K.S.A. 1999 Supp. 79-3234 is hereby amended to read as
follows: 79-3234. (a) All reports and returns required by this act shall be
preserved for three years and thereafter until the director orders them
to be destroyed.

      (b) Except in accordance with proper judicial order, or as provided
in subsection (c) or in K.S.A. 17-7511, subsection (g) of K.S.A. 46-1106,
K.S.A. 46-1114, or K.S.A. 79-32,153a, and amendments thereto, it shall
be unlawful for the director, any deputy, agent, clerk or other officer,
employee or former employee of the department of revenue or any other
state officer or employee or former state officer or employee to divulge,
or to make known in any way, the amount of income or any particulars
set forth or disclosed in any report, return, federal return or federal return
information required under this act; and it shall be unlawful for the di-
rector, any deputy, agent, clerk or other officer or employee engaged in
the administration of this act to engage in the business or profession of
tax accounting or to accept employment, with or without consideration,
from any person, firm or corporation for the purpose, directly or indi-
rectly, of preparing tax returns or reports required by the laws of the state
of Kansas, by any other state or by the United States government, or to
accept any employment for the purpose of advising, preparing material
or data, or the auditing of books or records to be used in an effort to
defeat or cancel any tax or part thereof that has been assessed by the
state of Kansas, any other state or by the United States government.

      (c) Nothing in this section shall be construed to prohibit the publi-
cation of statistics, so classified as to prevent the identification of partic-
ular reports or returns and the items thereof, or the inspection of returns
by the attorney general or other legal representatives of the state. Nothing
in this section shall prohibit the post auditor from access to all income
tax reports or returns in accordance with and subject to the provisions of
subsection (g) of K.S.A. 46-1106 or K.S.A. 46-1114, and amendments
thereto. Nothing in this section shall be construed to prohibit the disclo-
sure of taxpayer information from income tax returns to persons or en-
tities contracting with the secretary of revenue where the secretary has
determined disclosure of such information is essential for completion of
the contract and has taken appropriate steps to preserve confidentiality.
Nothing in this section shall be construed to prohibit the disclosure of
job creation and investment information derived from tax schedules re-
quired to be filed under the Kansas income tax act to the secretary of
commerce. Nothing in this section shall be construed to prohibit the dis-
closure of income tax returns to the state gaming agency to be used solely
for the purpose of determining qualifications of licensees of and applicants
for licensure in tribal gaming. Any information received by the state gam-
ing agency shall be confidential and shall not be disclosed except to the
executive director, employees of the state gaming agency and members
and employees of the tribal gaming commission. Nothing in this section
shall be construed to prohibit the disclosure of the taxpayer's name, last
known address and residency status to the department of wildlife and
parks to be used solely in its license fraud investigations. Nothing in this
section shall prohibit the disclosure of the name, residence address, em-
ployer or Kansas adjusted gross income of a taxpayer who may have a
duty of support in a title IV-D case to the secretary of the Kansas de-
partment of social and rehabilitation services for use solely in administra-
tive or judicial proceedings to establish, modify or enforce such support
obligation in a title IV-D case. In addition to any other limits on use, such
use shall be allowed only where subject to a protective order which pro-
hibits disclosure outside of the title IV-D proceeding. As used in this
section, ``title IV-D case'' means a case being administered pursuant to
part D of title IV of the federal social security act (42 U.S.C. § 651 et
seq.) and amendments thereto. Any person receiving any information un-
der the provisions of this subsection shall be subject to the confidentiality
provisions of subsection (b) and to the penalty provisions of subsection
(d).

      (d) Any violation of subsection (b) or (c) is a class B nonperson mis-
demeanor and, if the offender is an officer or employee of the state, such
officer or employee shall be dismissed from office.

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

      (f) Notwithstanding the provisions of this section, the secretary of
revenue may:

      (1) Communicate to the executive director of the Kansas lottery in-
formation as to whether a person, partnership or corporation is current
in the filing of all applicable tax returns and in the payment of all taxes,
interest and penalties to the state of Kansas, excluding items under formal
appeal, for the purpose of determining whether such person, partnership
or corporation is eligible to be selected as a lottery retailer;

      (2) communicate to the executive director of the Kansas racing com-
mission as to whether a person, partnership or corporation has failed to
meet any tax obligation to the state of Kansas for the purpose of deter-
mining whether such person, partnership or corporation is eligible for a
facility owner license or facility manager license pursuant to the Kansas
parimutuel racing act; and

      (3) provide such information to the president of Kansas, Inc. as re-
quired by K.S.A. 1999 Supp. 74-8017, and amendments thereto. The
president and any employees or former employees of Kansas, Inc. re-
ceiving any such information shall be subject to the confidentiality pro-
visions of subsection (b) and to the penalty provisions of subsection (d).

      (g) Nothing in this section shall be construed to allow disclosure of
the amount of income or any particulars set forth or disclosed in any
report, return, federal return or federal return information, where such
disclosure is prohibited by the federal internal revenue code as in effect
on September 1, 1996, and amendments thereto, related federal internal
revenue rules or regulations, or other federal law.

      New Sec.  28.  (a) For tax years 2000 and 2001, each Kansas state
individual income tax return form shall contain a designation as follows:

      Kansas World War II Memorial Fund. Check if you wish to donate, in
addition to your tax liability, or designate from your refund, ______$1,
______$5, ______$10, or $______.

      (b) The director of taxation of the department of revenue shall de-
termine annually the total amount designated for contribution to the Kan-
sas World War II Memorial Fund pursuant to subsection (a) and shall
report such amount to the state treasurer who shall credit the entire
amount thereof to the Kansas World War II Memorial Fund which fund
is hereby established in the state treasury. In the case where donations
are made pursuant to subsection (a), the director shall remit the entire
amount thereof to the state treasurer who shall credit the same to such
fund. All moneys deposited in such fund shall be used solely for the
purpose of providing contributions to the World War II Memorial Society
on behalf of Kansas for the benefit of the World War II memorial to be
located in Washington, D.C. All expenditures from such fund shall be
made in accordance with appropriation acts upon warrants of the director
of accounts and reports payable to the World War II Memorial Society
issued pursuant to vouchers approved by the state treasurer.

      New Sec.  29. (a) For all taxable years commencing after December
31, 1999, and subject to the provisions of this section, there shall be
allowed as a property tax refund to the operator of an oil lease an amount
equal to 50% of the total amount of property tax levied and actually and
timely paid by the operator for a property tax year which is attributable
to the working interest of an oil lease the average daily production per
well from which is 15 barrels or less when the price per barrel of oil is
$16 or less, as prescribed in the oil and gas appraisal guide by the director
of property valuation for the applicable tax year. No refund shall be al-
lowed for property tax paid upon machinery and equipment for which a
credit is claimed pursuant to K.S.A. 1999 Supp. 79-32,206 and amend-
ments thereto.

      (b) No claim for a refund allowable pursuant to subsection (a) shall
be paid unless filed with and in possession of the department of revenue
on or before April 15 of the year next succeeding the year in which such
taxes were paid, except that the director of taxation may extend the time
for filing any claim or accept a claim filed after the deadline for filing
when good cause exists therefor if the claim has been filed within three
years of the deadline.

      (c) The allowable amount of such claim shall be paid to the operator
from funds appropriated for such purposes upon warrants of the director
of accounts and reports pursuant to vouchers approved by the director of
taxation or by any person designated by the claimant, but no warrant
issued hereunder shall be drawn in an amount of less than $5. No interest
shall be allowed on any payment made to an operator pursuant to this
section.

      (d) Insofar as the same may be made applicable, the provisions of
K.S.A. 79-3226, and amendments thereto, shall apply to claims for re-
funds allowable pursuant to this section which may become in dispute.

      (e) The department of revenue shall devise and provide forms and
instructions necessary to administer this section, and the secretary of rev-
enue may adopt rules and regulations for such purpose.

      New Sec.  30. (a) For all taxable years commencing after December
31, 2000, and with respect to property initially acquired and first placed
into service in this state on and after January 1, 2001, there shall be
allowed as a credit against the tax liability imposed by the Kansas income
tax act of a telecommunications company, as defined in K.S.A. 79-3271
and amendments thereto, an amount equal to the difference between the
property tax levied for property tax year 2001, and all such years there-
after, and actually and timely paid during the appropriate income taxable
year upon property assessed at the 33% assessment rate and the property
tax which would be levied and paid on such property if assessed at a 25%
assessment rate.

      (b) If the amount of the tax credit determined under subsection (a)
exceeds the tax liability for the telecommunications company for any tax-
able year, the amount thereof which exceeds such tax liability shall be
refunded to the telecommunications company. If the telecommunications
company is a corporation having an election in effect under subchapter
S of the federal internal revenue code, a partnership or a limited liability
company, the credit provided by this section shall be claimed by the
shareholders of such corporation, the partners of such partnership or the
members of such limited liability company in the same manner as such
shareholders, partners or members account for their proportionate shares
of income or loss of the corporation, partnership or limited liability com-
pany.

      (c) As used in this section, the term ``acquired'' shall not include the
transfer of property pursuant to an exchange for stock securities, or the
transfer of assets of one business entity to another due to a merger or
other consolidation.

      Sec.  31. K.S.A. 1999 Supp. 79-4217 is hereby amended to read as
follows: 79-4217. (a) There is hereby imposed an excise tax upon the
severance and production of coal, oil or gas from the earth or water in
this state for sale, transport, storage, profit or commercial use, subject to
the following provisions of this section. Such tax shall be borne ratably by
all persons within the term ``producer'' as such term is defined in K.S.A.
79-4216, and amendments thereto, in proportion to their respective ben-
eficial interest in the coal, oil or gas severed. Such tax shall be applied
equally to all portions of the gross value of each barrel of oil severed and
subject to such tax and to the gross value of the gas severed and subject
to such tax. The rate of such tax shall be 8% of the gross value of all oil
or gas severed from the earth or water in this state and subject to the tax
imposed under this act. The rate of such tax with respect to coal shall be
$1 per ton. For the purposes of the tax imposed hereunder the amount
of oil or gas produced shall be measured or determined: (1) In the case
of oil, by tank tables compiled to show 100% of the full capacity of tanks
without deduction for overage or losses in handling; allowance for any
reasonable and bona fide deduction for basic sediment and water, and
for correction of temperature to 60 degrees Fahrenheit will be allowed;
and if the amount of oil severed has been measured or determined by
tank tables compiled to show less than 100% of the full capacity of tanks,
such amount shall be raised to a basis of 100% for the purpose of the tax
imposed by this act; and (2) in the case of gas, by meter readings showing
100% of the full volume expressed in cubic feet at a standard base and
flowing temperature of 60 degrees Fahrenheit, and at the absolute pres-
sure at which the gas is sold and purchased; correction to be made for
pressure according to Boyle's law, and used for specific gravity according
to the gravity at which the gas is sold and purchased, or if not so specified,
according to the test made by the balance method.

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

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

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

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

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

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

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

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

      (2) ``Base production'' means the average monthly amount of pro-
duction for the twelve-month period immediately prior to the production
enhancement project beginning date, minus the monthly rate of produc-
tion decline for the well or project for each month beginning 180 days
prior to the project beginning date. The monthly rate of production de-
cline shall be equal to the average extrapolated monthly decline rate for
the well or project for the twelve-month period immediately prior to the
production enhancement project beginning date, except that the monthly
rate of production decline shall be equal to zero in the case where the well
or project has experienced no monthly decline during the twelve-month
period immediately prior to the production enhancement project begin-
ning date. Such monthly rate of production decline shall be continued as
the decline that would have occurred except for the enhancement project.
Any well or project which may have produced during the twelve-month
period immediately prior to the production enhancement project begin-
ning date but is not capable of production on the project beginning date
shall have a base production equal to zero. The calculation of the base
production amount shall be evidenced by an affidavit and supporting doc-
umentation filed by the applying taxpayer with the state corporation com-
mission.

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

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

      (i) Workover;

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

      (iii) secondary recovery projects;

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

      (v) replacement or enhancement of surface equipment;

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

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

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

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

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

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

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

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

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

      Sec.  32. K.S.A. 79-32,143 is hereby amended to read as follows: 79-
32,143. (a) For net operating losses incurred in taxable years beginning
after December 31, 1987, a net operating loss deduction shall be allowed
in the same manner that it is allowed under the federal internal revenue
code except that such net operating loss may only be carried forward to
each of the 10 taxable years following the taxable year of the net operating
loss. For net operating farm losses, as defined by subsection (i) of section
172 of the federal internal revenue code, incurred in taxable years begin-
ning after December 31, 1999, a net operating loss deduction shall be
allowed in the same manner that it is allowed under the federal internal
revenue code except that such net operating loss may be carried forward
to each of the 10 taxable years following the taxable year of the net op-
erating loss. The amount of the net operating loss that may be carried
back or forward for Kansas income tax purposes shall be that portion of
the federal net operating loss allocated to Kansas under this act in the
taxable year that the net operating loss is sustained.

      (b) The amount of the loss to be carried back or forward will be the
federal net operating loss after (1) all modifications required under this
act applicable to the net loss in the year the loss was incurred; and (2)
after apportionment as to source in the case of corporations, nonresident
individuals for losses incurred in taxable years beginning prior to January
1, 1978, and nonresident estates and trusts in the same manner that in-
come for such corporations, nonresident individuals, estates and trusts is
required to be apportioned.

      (c) If a net operating loss was incurred in a taxable year beginning
prior to January 1, 1988, the amount of the net operating loss that may
be carried back and carried forward and the period for which it may be
carried back and carried forward shall be determined under the provisions
of the Kansas income tax laws which were in effect during the year that
such net operating loss was incurred.

      (d) If any portion of a net operating loss described in subsections (a)
and (b) is not utilized prior to the final year of the carryforward period
provided in subsection (a), a refund shall be allowable in such final year
in an amount equal to the refund which would have been allowable in
the taxable year the loss was incurred by utilizing the three year carryback
provided under K.S.A. 79-32,143, as in effect on December 31, 1987,
multiplied by a fraction, the numerator of which is the unused portion of
such net operating loss in the final year, and the denominator of which
is the amount of such net operating loss which could have been carried
back to the three years immediately preceding the year in which the loss
was incurred. In no event may such fraction exceed 1.

      (e) Notwithstanding any other provisions of the Kansas income tax
act, the net operating loss as computed under subsections (a), (b) and (c)
of this section shall be allowed in full in determining Kansas taxable in-
come or at the option of the taxpayer allowed in full in determining Kansas
adjusted gross income.

      (f) No refund of income tax which results from a net operating loss
carry back shall be allowed in an amount exceeding $1,500 in any year.
Any excess amount may be carried back or forward to any other year or
years as provided by this section.

 Sec.  33. On and after January 1, 2000, K.S.A. 1999 Supp. 79-32,208
is hereby repealed.

 Sec.  34. K.S.A. 79-1009, 79-2974, 79-3228, 79-3295, 79-32,143, 79-
3296, 79-3297a, 79-3298, 79-3299, 79-32,100, 79-32,101, 79-32,106, 79-
3615, 79-3706, 79-41a03a, 79-4502, 79-4512, 79-4514 and 79-4517 and
K.S.A. 1999 Supp. 79-3234 and 79-4217 are hereby repealed.

 Sec.  35. This act shall take effect and be in force from and after its
publication in the statute book.

Approved June 3, 2000.
__________