Income Tax Incentives
High Performance Incentive Program
This program provides a 10 percent corporate income tax credit on the qualified capital investment of an eligible company. Qualified capital investment can include such items as the purchase or lease of a facility or equipment, remodeling or build-out costs, fixtures, furniture, and computers. Equipment transferred to Kansas from out-of-state is also credited at the original acquisition cost. The 10 percent tax credit is awarded to companies that operate an eligible business, pay above-average wages, and invest in employee training. The credits can be used to significantly reduce a company's corporate income tax liability in a given year. Credits must be used within a consecutive 16-year period. The minimum investment threshold to qualify for HPIP is $1 million for urban counties of Douglas, Johnson, Sedgwick, Shawnee and Wyandotte. For all other counties, the minimum investment threshold is $50,000.
A key component of the High Performance Incentive Program is the completion of the Project Description form, which must be submitted to the Department of Commerce prior to the company signing any document, such as a lease or purchase agreement, which commits the company to locating or expanding in Kansas.
Property Tax Incentives
Machinery and Equipment Property Tax Exemption
Commercial and industrial machinery and equipment acquired by qualified purchase or lease or transferred into the state is exempt from state and local property tax. The exemption pertains to machinery and equipment used in the expansion of an existing facility or the establishment of a new facility. The exemption covers machinery and equipment used in manufacturing or warehousing/distribution, commercial equipment, computers, desks and chairs, copiers, and fax machines.
Property Tax Abatement
Cities or counties may exempt real property from ad valorem taxation. The tax abatement can include all or any portion of the appraised buildings, land and improvements. A total or partial tax abatement may be in effect for up to 10 years after the calendar year in which the business commences its operations. Any property tax abatement is the decision of the city or county.
Sales Tax Exemptions
Sales Tax Exemptions available include:
•Labor related to original construction;
• Remodeling costs, furnishings, furniture, machinery and equipment for qualified projects
•New machinery and equipment for manufacturing and distribution. This also includes pre- and post-production machinery and equipment, including raw material handling, waste storage, water purification, and oil cleaning, as well as ancillary property such as gas pipes, electrical wiring, and pollution-control equipment;
•Tangible personal property that becomes an ingredient or component part of a finished product;
•Tangible personal property that is immediately consumed in the production process, including electric power, natural gas, and water;
•Incoming and outgoing interstate telephone or transmission services (WATTS); and
•Real and personal property financed with an Industrial Revenue Bond (IRB).
Other Tax Incentives and Business Initiatives
Machinery & Equipment Expensing Deduction
Effective January 1, 2012, Kansas taxpayers will be allowed to claim an expense deduction for business machinery and equipment placed in service in Kansas during the tax year. The one-time deduction is allowed for each qualified purchase of machinery and equipment in the year that it is placed in service. Unused expense deduction is treated as a Kansas net operating loss that may be carried forward for 10 years. Eligible investment is machinery and equipment depreciable under the Modified Accelerated Cost Recovery System (MACRS) in section 168 of the Internal Revenue Code, or canned software as defined in section 197 of the Internal Revenue Code. Examples of eligible equipment include manufacturing equipment, office furniture, computers, software and racking.
Union membership is well below the national average.
Inventory Tax Exemption
All merchant and manufacturers' inventories are exempt from property taxes.
Research Tax Credit
Kansas offers an income tax credit equal to 6.5 percent of a company's investment in research and development above an expenditure of the previous three-year period. Twenty-five percent of the allowable annual credit may be claimed in any one year.
No Local Income Taxes or Franchise Tax
Kansas cities and counties do not impose income or earnings taxes on personal or corporate income. Kansas' franchise tax was repealed in tax year 2011.
The Kansas workers' compensation program has undergone major changes over the past few years which have resulted in its premium rates being ranked ninth-lowest in the U.S.
Rural Opportunity Zones Program
Rural Opportunity Zones (ROZs) are designed to reverse dramatic population declines over the past decade in rural areas of Kansas. The program is to spur economic development in and expand job growth in 50 counties around the state. The program took effect July 1, 2011.
The program has two main incentives:
• A state income tax exemption for up to five years to individuals who move to a ROZs county from outside the state. Individuals must not have lived in Kansas for the past five years, nor have Kansas source income of more than $10,000 per year over the past five years.
• Student loan forgiveness of up to $3,000 per year ($15,000 maximum benefit) for individuals who graduate from an accredited post-secondary institution and move to a ROZs county. The student loan forgiveness portion of the program is a county-state partnership, and counties must opt in to participate.
Kansas State Contact:
Kansas Department of Commerce
1000 S.W. Jackson Street, Suite 150
Topeka, KS 66612
Fax: (913) 345-8548
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.