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Minutes for SB126 - Committee on Utilities
Short Title
Exemption from income tax for certain public utilities.
Minutes Content for Wed, Mar 20, 2019
Chairman Masterson called the meeting to order and opened the hearing on SB126
Staff gave an overview of the bill.(Attachment 1)
Proponents
Jim Zakoura, Kansas Industrial Consumers Group spoke in support of the bill stating SB126 would suspend the 7% Kansas corporate income tax for investor owned utilities - an expense which is passed through and paid by Kansas utility customers as a component of utility rates. We know a reduction in income taxes will directly reduce utility rates. Mr. Zakoura went on to say while suspending utility income taxes will clearly benefit the ratepayers who pay those taxes, it appears such action will not materially impact Kansas tax collections or the Kansas Treasury.(Attachment 2)
Mr. Zakoura answered questions from members.
Randy Stookey, Renew Kansas, and Kansas Grain & Feed (jointly) provided written only testimony in support of the bill.(Attachment 3)
Opponents
Whitney Damron on behalf of Liberty Utilities stated that SB126 has a requirement which stipulates that a utility must credit to customer's bill within thirty days any federal or state tax assessments which reduce a utilities tax liability. He concluded by saying this legislation should be rejected for any number of reasons but primarily for the misleading oversimplification of the impact of how taxes are considered in utility rate making, plus the unreasonable requirement of implementing new rates in an unreasonable time frame.(Attachment 4)
Janet Buchanan, Kansas Gas Service stated several reasons why they believe the proposed bill is unnecessary. 1. Violation of IRS normalization rules; 2. 30 day implementation period is too short; 3. Multiple rate changes; 4. Lacking in symmetry; 5. Negative impact on deferred tax benefits to customers; 5. She concluded by saying each of the concerns mentioned in her testimony can best be addressed by the Commission without making any changes to the current law and allowing the Commission to utilize its current authority to assure customers receive the benefits of any tax law changes.(Attachment 5)
Tom Stevens, Black Hills Energy testified saying it should also be pointed out that just because no "cash" or "current" taxes have been paid in recent years by Black Hills Energy and other utilities, the liability has not been extinguished. Rather, the tax obligation is merely being deferred for future payment. The four-year state income tax exemption within Section 2(d) would delay the year when many utilities would begin paying cash taxes to the state.(Attachment 6)
Darrin Ives, Vice President, Regulatory Affairs said the first component requires Westar or KCP&L to include expenses related to income taxes as a component of our retail rates and to track any over collection of those taxes due to changes in state or federal law. The second, and more concerning, component of SB126 stipulates that for tax years 2019, 2020, 2021 and 2022, every electric and natural gas public utility that is investor-owned and subject to jurisdiction of the KCC would be exempt from paying Kansas income tax and could not collect Kansas income tax expenses as a part of its retail rates.(Attachment 7)
Chairman Masterson asked if any members had questions. All questions were answered.
Aaron Bishop provided written only testimony in opposition to the bill.(Attachment 8)
Neutral
Justin Grady, on behalf of the Staff of the Kansas Corporation Commission stated that the Commission Staff is taking a neutral position of SB126. He stated the Staff's first concern with Section 1 of SB126 is that this language is asymmetric, in that it only required a tracking of over collection of income taxes, not under collection of income taxes. Staff's second concern with Section 1 of SB126 is the requirement that a utility lower rates within 30-days of a change in tax law.(Attachment 9)
Mr. Grady answered questions from members.
Chairman Masterson closed the hearing on SB126
Next meeting is March 21, 2019 to work HB2084.
Adjourned 2:28pm
