Brief⁽¹⁾

H.B. 2543, as amended, would:

1. Provide refundable income tax credits for property taxes timely paid on certain low-producing oil and gas leases. Oil leases with an average daily production per well of 15 barrels per day or less would qualify for the credits, as would gas leases with average daily production of 90 mcf or less. Such credits would be retroactive to property tax year 1998. Credits would not be allowed for property taxes paid on oil and gas machinery and equipment to the extent that credits are claimed pursuant to K.S.A. 1998 Supp. 79-32,206.



2. Expand the sales tax exemption for certain machinery and equipment to include such machinery and equipment which is an "integral part" of a manufacturing production process. (Current law requires machinery and equipment to have direct and immediate effect on physical transformation of raw materials into new products to qualify for the exemption.) Also exempt would be oil and gas drilling services and supplies, and drilling pumping and monitoring equipment, used at a well site or in oil and gas exploration. An exemption for property consumed in production also would be expanded to include property consumed within one year. (Current law exempts only that which is immediately consumed.) Finally, an exemption would be provided for concrete mixer trucks.



3. Amend K.S.A. 1998 Supp. 79-32,206 to expand from 15 percent to 20 percent the amount of certain property taxes actually and timely paid for all property tax years starting in 1999 which may be claimed as refundable credits against income, premiums, or privilege tax liability.



4. Repeal the severance tax on oil.



5. Expand the property tax exemption in K.S.A. 79-201w for certain "low-cost" items of machinery, equipment, materials, and supplies which are used in the conduct of the owner's business or in the conduct of activities by not-for-profit entities would be taxed as commercial and industrial machinery and equipment. The exemption would be expanded from all items whose retail cost when new is $250 or less to all such items whose retail cost when new is $500 or less.



6. Provide a sales tax exemption for certain sales of tangible personal property and real property damaged or destroyed in the state as a result of weather-related events or occurrences declared to be federal disasters by the President of the United States when federal grants have been authorized. No such sales would be exempt unless they occurred within three years of the date of the weather-related disaster declaration. Refunds would be authorized for any sales taxes paid for such purposes on and after October 1, 1998 but prior to the effective date of the bill, provided the claims are filed on or before July 1, 2000. Refunds would be authorized on all such sales which occur after weather-related disasters but before disaster declarations, provided claims are made within nine months.

Background

Half of the fiscal note for the oil and gas income tax credits for property taxes paid actually would affect FY 1999 receipts. The FY 1999 and FY 2000 impact of these provisions have been combined in the FY 2000 line of the following table for purposes of comparing them with the Governor's budget and other fiscal notes.

The original bill dealt only with income tax credits for property taxes on certain low-production oil leases. The House Taxation Committee added all other provisions hereinbefore described, with the exception of the weather-related disaster sales tax exemption provisions (No. 6 above), which was added by the House Committee of the Whole.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html