Approved: February 24, 2020 MINUTES of the HOUSE
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Approved: February 24, 2020 MINUTES OF THE HOUSE TAXATION COMMITTEE The meeting was called to order by Chairperson Steven Johnson at 3:30 pm on Monday, February 03, 2020, in room 112-N of the Capitol. All members were present except: Representative John Barker – Excused Committee staff present: Adam Siebers, Office of Revisor of Statutes Amelia Kovar-Donohue, Office of Revisor of Statutes Charles Reimer, Office of Revisor of Statutes Chris Courtwright, Legislative Research Department J.G. Scott, Legislative Research Department Lea Gerard, Committee Assistant Reed Holwegner, Legislative Research Department Conferees appearing before the Committee: Kathleen Smith, Department of Revenue Pat Cedeno, WATCO Companies Mark Mickelson, CEO of Mickelson & Company Taylor Williamson, Kansas Wheat, Corn, Soybean,Kansas Grain and Sorghum Producers Shahira Stafford, Kansas Cooperative Council Randy Stookey, Kansas Grain and Feed Association. Ty Dragoo, International Association of Sheet Metal, Air, Rail and Transportation Workers Others in attendance: See Attached List Request for bill introductions There were no bill introductions. Hearing on: HB2460 — Providing an income tax credit for qualified railroad track maintenance expenditures of short line railroads. Adam Siebers provided an overview for HB2460 stating the bill creates a new income tax credit for qualified railroad track maintenance expenditures of short line railroads. The tax credit runs for five years beginning in tax year 2021 and ending in tax year 2025. The bill allows an income tax credit of 50.0% of eligible taxpayer's expenditures for qualified railroad track maintenance during the tax year. The total amount of tax credits would be capped at $8,720. million for each tax year. This applies for class II and class III railroads that encompasses the short line railroads. Kathleen Smith provided information on the fiscal note for HB2460 stating the estimated cost could be a potential decrease in the State General Fund collections of $8.72 million per year beginning in tax Unless specifically noted, the individual remarks recorded herein have not been transcribed verbatim. Individual remarks as reported herein have not been submitted to the individuals appearing before the committee for editing or corrections. Page 1 CONTINUATION SHEET MINUTES of the Committee on Taxation at 3:30 pm on Monday, February 03, 2020, in room 112-N of the Capitol. year 2021 ending in tax year 2025. Proponents: Pat Cedeno, WATCO Companies testified as a proponent to HB2460 stating from WATCO's perspective there are three lines in Kansas which are the Kansas and Oklahoma Railroad, South Kansas and Oklahoma Railroad, and the Kaw River Railroad that makes up 1,400 miles of track throughout Kansas. Regarding the value of short line railroads in Kansas, HB2460 would help short line railroads to attack some major issues. The proposed tax credit is a tool the short line railroads can use to keep up with growth and economic development in rural areas (Attachment 1). Mark Mickelson, CEO Mickelson & Company testified as a proponent to HB2460 noting the tax credit provides track infrastructure to meet the needs of customers. The tax credit applies to class II and III railroads and is 50% of investment on infrastructure upgrades and capped at $5,000 per mile of track. The tax credit is effective January 1, 2021 and sunsets in 2025. He noted improved rail infrastructure will allow short lines to handle heavier and fully loaded rail cars which is vital to the state (Attachment 2), Taylor Williamson, Director of Government Affairs for Kansas Wheat testifying on behalf of the Corn, Wheat, Soybean and Grain Sorghum Associations as a proponent to HB2460. He stated rail lines are vital to getting commodities from the farms to areas of consumption and need. Maintaining safe and reliable rail lines is important to the state's agricultural economy and allows commodities to move efficiently to market. He noted with new trade deals promising more exports, it is important to move bigger volumes quickly and as safely as possible (Attachment 3). Shahira Stafford, Kansas Cooperative Council testified as a proponent to HB2460 stating the agricultural cooperatives have robust grain and agronomy operations that relay heavily on rail to transport products to the market. Most of the coops are in rural communities that use short line rail roads to access the national freight network exporting wheat, corn, sorghum, and other commodities both domestically and overseas. She stated the KCC supports HB2460 as written but would like an amendment to extend the income tax credit to owners and lessees of rail siding located along a short line railroad (Attachment 4). Randy Stookey, Senior Vice President of Government Affairs testified as a proponent on HB2460 stating he drafted the amendment to extend the tax credit. He noted grain elevator rail siding must be maintained and upgraded to handle larger rail cars. It is an investment in short lines as well as the state. The amendment was attached to his testimony (Attachment 5). Written only testimony as a proponent to HB2460 was submitted by. Unless specifically noted, the individual remarks recorded herein have not been transcribed verbatim. Individual remarks as reported herein have not been submitted to the individuals appearing before the committee for editing or corrections. Page 2 CONTINUATION SHEET MINUTES of the Committee on Taxation at 3:30 pm on Monday, February 03, 2020, in room 112-N of the Capitol. Theodore Behring, Farmers Cooperative Equity Company (Attachment 6) Kim Alan Barnes, Pawnee County Cooperative Association (Attachment 7) John Donley, Kansas Farm Bureau (Attachment 8) Marty Pohlod, Kyle Railroad (Attachment 9) Hugh Mounday, Pawnee County Cooperative Association (Attachment 10) Jerald Kemmerer, Pride Ag Resources (Attachment 11) Martie Floyd, Western Kansas Development Organization (Attachment 12) Opponents: Ty Dragoo, International Association of Sheet Metal, Air, Rail, and Transportation Workers in the State of Kansas testified as an opponent to HB2460 noting most short line railroad holding companies have seen quarterly profits grow into the billions. This is due to deregulation and tax breaks such as the 45G tax credit which is a capped permanent tax credit. The 45G tax credit is a federal income tax credit for track maintenance for short lines and regional railroads in the United States (Attachment 13). Neutral: Written only testimony as neutral to HB2460 was submitted by: Lindsey Douglas, Deputy Secretary, Kansas Department of Transportation (Attachment 14). Hearing closed on HB2460. Final action on bills previously heard HB2466 - An Act concerning income taxation; enacting the Kansas Taxpayer Protection Act; relating to paid tax return preparers; requiring a signature and tax identification number on returns and claims; authorizing actions by the secretary of revenue to enjoin certain conduct. Adam Siebers provided an overview on HB2466 that requires a signature and tax identification number on returns and claims. There would be certain penalties that the Department of Revenue can take in the event the paid tax preparer does not following the bill's requirements. Representative Mason moved, seconded by Representative Helgerson to recommend HB2466 favorable Unless specifically noted, the individual remarks recorded herein have not been transcribed verbatim. Individual remarks as reported herein have not been submitted to the individuals appearing before the committee for editing or corrections. Page 3 CONTINUATION SHEET MINUTES of the Committee on Taxation at 3:30 pm on Monday, February 03, 2020, in room 112-N of the Capitol. for passage and placed on the consent calendar. Motion carried. Unless specifically noted, the individual remarks recorded herein have not been transcribed verbatim. Individual remarks as reported herein have not been submitted to the individuals appearing before the committee for editing or corrections. Page 4.