ALERT: Kansas Legislature rolls back 2012 tax cuts but with an uncertain effective date; creates taxpayer planning opportunity

Gerald Capps, JD

ALERT: Kansas Legislature rolls back 2012 tax cuts but with an uncertain effective date; creates taxpayer planning opportunity

By Jerry Capps
AGH Specialized Tax Solutions
June 8, 2017

Late June 6, the Kansas Senate and House overrode the Governor’s veto of a new tax bill and have passed legislation creating new tax brackets, raising the tax rates and repealing the non-wage business income exemption.

The legislation contains three primary initiatives:

A complete repeal of the non-wage business income exemption that had eliminated state income tax on income from sole proprietorships, farming and rental activities and pass-through entities such as partnerships, LLCs and S corporations
An increase in the individual state income tax rates to a new top rate of 5.20% from a current top rate of 4.6% for 2017 and increasing to 5.7% for 2018
An addition to individual itemized deductions to include 100% of federal deductible medical expenses

This law clearly repeals the non-wage business income exemption and increases the current income tax rates – but with an uncertain effective date. The new law references January 1, 2017, but also states an effective date of July 1, 2017. In the past, the Kansas Department of Revenue has stated that new tax legislation is effective on January 1 of the year of passage.

If July 1, 2017, is the effective date, this creates a planning opportunity with a very small window.

Taxpayers seeking to minimize any new tax liability should contact their tax professional as soon as possible to discuss potential strategies. For more information about how this legislation may affect you personally, contact your AGH tax professional or Jerry Capps, AGH senior vice president of state and local tax services.

Any discussion of tax matters contained herein is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of: (i) avoiding tax penalties that may be imposed by the IRS or states, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you seek definitive tax advice on a matter, please request a written tax memorandum from your AGH tax advisor.