Kansas House Bill HB2336

Kansas 2025-2026 Regular Session

• Introduced: 2/7/25
• Refer: 2/7/25
• Report Pass: 3/14/25
• Engrossed: 3/24/25
• Refer: 3/25/25

Caption

Providing for the apportionment of business income by the single sales factor and the apportionment of financial institution income by the receipts factor, deductions from income when using the single sales factor and receipts factor, the decrease in corporate income tax rates determining when sales other than tangible personal property are made in the state and excluding sales of a unitary business group of electric and natural gas public utilities.

Summary

HB 2336 would substantially revise Kansas business income tax apportionment rules, moving most taxpayers from the current three-factor formula toward a single sales factor. For tax years beginning on or after January 1, 2025, taxpayers could elect single-sales-factor apportionment for a transition period, and beginning in 2028 that method would become mandatory for business income generally. The bill also changes the apportionment of financial institution income to a receipts factor, updates the sourcing rules for sales other than tangible personal property, and preserves or adjusts several special apportionment rules for certain industries and taxpayers, including telecommunications companies, investment funds service corporations, distressed area taxpayers, railroads, and interstate motor carriers. The bill also creates a deferred tax impact deduction for publicly traded companies and affiliated corporations that would be affected by the shift to single-sales-factor apportionment or receipts-factor apportionment. That deduction is designed to offset changes in deferred tax assets or liabilities caused by the new apportionment rules, with claims required to be filed by July 1, 2028 and deductions spread over ten years beginning in 2035. In addition, HB 2336 would exclude electric and natural gas public utilities from certain unitary-group treatment and sales-factor calculations, and it would continue to exempt those utilities from Kansas income tax under existing law. A separate provision ties corporate income tax rate reductions to growth in corporate income tax receipts. Beginning with fiscal year 2026, the director of the budget would certify excess corporate income tax receipts, and the secretary of revenue would use that amount to reduce the corporate income tax rate in increments rounded down to the nearest 0.1 percent. The bill directs the state to publish new corporate tax rates by October 1, 2027, for effect on January 1, 2028. The bill also amends the definition of where non-tangible sales are sourced to Kansas, especially for services, intangibles, loans, dividends, and communications services. The overall sentiment reflected in the voting history appears strongly favorable. The House passed the bill on emergency final action by a wide margin, 109-9, indicating broad support for the bill’s tax policy changes. No committee transcript was provided, so there is no recorded discussion in the supplied materials to show detailed arguments for or against the measure. The main points of contention likely center on the fiscal and distributional effects of shifting to single-sales-factor apportionment and lowering corporate tax rates. Supporters would likely view the bill as a business tax competitiveness measure that could encourage investment and simplify apportionment, while critics may be concerned about reduced state revenue, the long-term impact on tax fairness across industries, and the special treatment of certain sectors such as public utilities and publicly traded corporations. The bill’s delayed deductions and phased-in rate changes suggest an effort to manage transition costs, but those same provisions may also be seen as complex and potentially costly.

Impact

HB 2336 would amend Kansas corporate and financial institution income tax apportionment statutes, replacing the traditional three-factor apportionment formula with a single sales factor for most business income beginning in 2028 and a receipts factor for financial institutions. It would also revise sourcing rules for non-tangible sales, create a deferred tax impact deduction for eligible publicly traded companies, and modify treatment of electric and natural gas public utilities in unitary groups. The bill further links future corporate income tax rate reductions to growth in corporate tax receipts, potentially lowering the corporate rate over time if receipts increase.

Sentiment

The available voting history indicates strong support for the bill, with passage in the House by a 109-9 vote on emergency final action. That margin suggests the measure was broadly accepted as a tax policy change, likely reflecting support for business tax relief and apportionment reform. No committee transcript was provided, so the record here does not show detailed floor or committee debate.

Contention

The likely areas of disagreement are the bill’s revenue effects, its shift of tax burden among industries, and the complexity of its transition rules. Opponents may object that single-sales-factor apportionment and corporate rate reductions could reduce state revenue or favor certain multistate businesses over others. Special provisions for publicly traded companies, utilities, telecommunications companies, and investment funds service corporations may also draw scrutiny as preferential treatment or as creating uneven tax outcomes across sectors. Supporters, by contrast, would likely argue that the bill improves Kansas’s business tax competitiveness and modernizes sourcing and apportionment rules.