Brief ⁽¹⁾

SB 410 would provide the following administrative changes to the tax law.

• �Reduce Interest for Participants in a "Managed Sales Tax Audit Program." The bill would provide an incentive for corporate taxpayer participation in the "managed-audit" program. Under this program the taxpayer commits to performing a self-audit against an audit plan developed by the Department of Revenue. Under the bill, the Department could offer a 50 percent interest rate reduction on assessments identified by the eligible taxpayer and verified by the director.



• �Allow an "Innocent Spouse" Finding at the State Level. At the federal level, the Internal Revenue Service (IRS) is required to relieve an innocent spouse from income tax liability. This federal relief automatically flows through to the state level. However the state has no authority to make such a finding independently when the federal but not the state income tax has been paid. SB 410 would allow the state to make an innocent spouse finding independently.



• �Raise the Threshold for Filing Estimated Individual Income Tax Returns. Under current law there is a two-prong test for determining whether an individual must file estimated individual income tax returns. One is whether the individual can reasonably expect to owe $200 above withholding and credits. This bill would move that threshold to $350.



• �Clarify Certain Provisions of the Withholding Tax Law. SB 410 would codify Kansas' adherence to the federal treatment of non-wage payments such as gambling winnings, taxable payments of Indian casino profits, and periodic pension payments which requires withholding. The bill would also codify certain withholding provisions currently found in Department of Revenue regulations.



• �Allow Tax Penalties to be Phased in at 1 Percent a Month, Up to 24 Percent. Under current statute, if a taxpayer fails to file or pay by the due date, a 10 percent penalty must be assessed in addition to interest, regardless of how late the payment is. After six months the penalty rises to 25 percent. Under the bill, penalties would be phased-in at the rate of 1 percent per month, up to a maximum of 24 percent.



• �Eliminate the $10 registration fee associated with the statutory requirement that nonresident contractors are required to register each Kansas contract with a price greater than $10,000.



• �Require the Secretary of Revenue to provide limited public access to written final determinations in addition to the other types of administrative rulings that are already made public.



• �Prohibit the collection of penalties when the taxpayer has had the unpaid balance of tax abated on appeal.

Background

This bill was requested by the Department of Revenue. The Senate Committee amended the bill to remove a provision which would have provided a $2.00 incentive for taxpayers using electronic filing. This provision would have resulted in a $720,000 fiscal impact for 2001.

The House Committee amended the bill to eliminate the non-resident contractor registration fee, prohibit the collection of penalties when there has been an abatement of the unpaid balance of tax on appeal, and to require the Secretary to provide public access to written final determinations. The fee elimination amendment was suggested by the Department of Revenue. The other two House Committee amendments were proposed by KCCI.

The Department of Revenue estimates that there would be a one-year cost associated with raising the threshold for estimated payments in the amount of $275,000. This is the bill's only significant fiscal impact.

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