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Archive for Wednesday, March 26, 2014

Local governments relieved by modified property tax bill

March 26, 2014

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— After nearly three years of disagreement between business interests and local governments, the Kansas House passed a bill Wednesday that would clarify how certain large, complex pieces of commercial and industrial property are taxed and appraised.

House Bill 2643 is aimed at facilities like ethanol plants, oil refineries and fertilizer manufacturers, where the difference between a "building" and a "piece of equipment" often is not plainly clear.

An earlier version of the bill would have made it easier for the owners of those facilities to have those facilities reclassified as machinery and equipment, as opposed to real estate, thus making them exempt from property taxes.

A Legislative Post Audit report from 2013 estimated that passage of the bill would have reduced property tax revenues statewide by as much as $170 million to $500 million.

But after lengthy negotiations, Rep. John Edmonds, R-Great Bend, helped broker a compromise that appeared to leave both sides relatively satisfied.

"We can live with it," said Larry Baer, assistant general counsel for the League of Kansas Municipalities.

As amended, the bill now puts into statute what had previously been "guidelines" from the state's Property Valuation Division about how county appraisers should treat such property.

Part of the problem, Edmonds said, was that those guidelines were not being followed uniformly from county to county.

"Moving forward, I think we have a procedure in place by which we can reasonably appraise and understand what we're doing," Edmonds said.

The bill codifies various ways to determine whether a facility is used as real or personal property.

It also sets out a process for making that determination in advance for new projects receiving 10-year tax abatements, either through economic development incentives or because they are funded with industrial revenue bonds, so that the owners will know at the start how their property will be classified once it comes back onto the tax rolls.

Baer said local governments still have concerns about an amendment added in the House by Rep. Scott Schwab, R-Olathe, which gives special treatment to cement manufacturing plants, declaring a long list of items at those facilities as personal property that will be tax exempt. The amendment mainly benefits two cement plants in Allen and Neosho counties.

Edmonds said he thinks that amendment is insignificant. But Baer said it may set a precedent, opening the door for other industries to come to the Legislature in future years asking for similar special treatment.

Douglas County Administrator Craig Weinaug said it was not immediately clear whether the bill would have a fiscal impact on local governments in the county.

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