Taxes, Credits and Exemptions

Employers may receive a non-refundable tax credit for compensation paid for each new qualified employee in each of the first five years of employment. This employer incentive is available for qualifying new employees hired between 2022-2026. A second credit is available for companies that reimburse tuition for their employees. This employer credit can be claimed if the employee graduates from a qualified program within one year of the date of hire.

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The following are eligible for agricultural exemption in Kansas: ingredient or component parts; parts consumed in production; propane for agricultural use; property purchased is farm or aquaculture machinery or equipment, repair/replacement parts, or labor services on farm or aquaculture machinery; seeds, fertilizers, insecticides, herbicides, germicides, pesticides, fungicides.

A taxpayer may be entitled to a deduction from Kansas adjusted gross income of the amortizable costs of a new facility or expansion of an existing biomass-to-energy plant. The deduction is equal to 55 percent of the amortized costs of the facility for the first taxable year and five percent for the next nine taxable years.

A taxpayer is entitled to a deduction from Kansas adjusted gross income with respect to the amortizable costs of carbon dioxide capture, sequestration or utilization machinery and equipment over a period of 10 years.

The premium tax rate for domestic and foreign insurance companies doing business in Kansas is 2 percent. Kansas law KSA 40-252d provides for a tax credit for insurance companies equal to 15 percent of Kansas-based employees’ salaries, or up to a maximum of 1.125 percent of taxable premiums dependent on the company’s affiliation. The company can claim either the 15 percent credit or up to the 1.125 percent, whichever is less. This could make the effective tax rate on such companies as low as 0.875 percent and is an annual credit that is recalculated each year.

K.S.A. 79-3606(kk)(1) exempts all sales of machinery and equipment used in Kansas as an integral or essential part of an integrated production operation by a manufacturing or processing plant or facility, all sales of installation, repair and maintenance services performed on such machinery and equipment; and all sales of repair and replacement parts and accessories for such machinery and equipment.

K.A.R. 92-19-28 and K.A.R. 92-20-18 exempt the sale of rolling stock (including buses and trailers), repair or replacement materials and parts for rolling stock, gasoline, distillate and other motor fuels purchased for rolling stock when purchased by a motor carrier qualifying as a public utility, for immediate and direct use in interstate commerce.

All merchants’ and manufacturers’ inventories have been exempt from property taxes by constitutional amendment since 1989 (K.S.A. 79-201m). This exemption does not apply to public utility inventories.

A state and local property tax exemption is available for new or used commercial and industrial machinery, and equipment acquired by qualified purchase or lease, or transferred into the state for the purpose of expanding an existing facility or establishing a new facility.

State law allows a 100% property tax abatement for 10 years on real property if industrial revenue bonds are used or if it qualifies under the state Constitution, which allows companies that manufacture articles of commerce, conduct research and development or store goods and commodities sold in commerce to receive a property tax abatement. Tax abatement on real property is offered by the city or county where the property is located.

The Kansas Utility Sales Tax Exemption allows businesses to claim an exemption on the portion of their utility that is consumed in the production, manufacturing, processing, mining, drilling, refining, compounding of tangible personal property or the providing of a taxable service.

K.S.A. 79-3606(fff) exempts all sales of material handling equipment, racking systems and other related machinery and equipment used for the handling, movement or storage of tangible personal property in a warehouse or distribution facility in Kansas, all sales of installation, repair and maintenance services performed on such machinery and equipment; and all sales of repair and replacement parts for such machinery and equipment.

Kansas offers a property tax exemption for projects producing electricity from renewable sources, including wind, solar, photovoltaic, biomass, hydropower, geothermal and landfill gas resources. The exemption applies to all property actually and regularly used in the generation of electricity from renewable sources, whether it is an industrial, commercial, utility or personal application.

Businesses using IRBs as a financing mechanism may enjoy certain tax exemptions on property finances with IRBs and the cost of construction labor, building materials and machinery and equipment. 

The incentive offered is a deduction from Kansas adjusted gross income based on the amortized costs of a waste heat utilization system. The deduction shall be equal to 55 percent of the amortizable costs of the system for the first taxable year and 5 percent for the next nine years.

Any waste heat utilization system is exempt from all property taxes levied at the time of purchase and after or at the start of construction or installation of such property and for 10 years immediately following the taxable year in which construction or installation of such property is completed.

The Kansas Development Finance Authority is authorized to issue revenue bonds in amounts sufficient to finance the construction of waste heat utilization systems at electric generation facilities.