Amelia Kovar Donahue, Assistant Revisor of Statutes, and Lynn Kent from the Division of Property Valuation briefed the committee on the legal framework for classifying commercial and industrial machinery and equipment (commonly CIME/CEMA) and on a statutory exemption enacted in 2006.

Kovar Donahue told the panel that Article 11, Section 1 of the Kansas Constitution establishes classes for assessment and that subclass 5 of Class 2 (tangible personal property) covers commercial and industrial machinery and equipment and is assessed at 25 percent of value under a retail‑cost‑when‑new minus depreciation method. She cited statutory definitions in KSA 79‑102 (real and personal property definitions) and the 2006 exemption statute, KSA 79‑2‑223, which exempted certain machinery and equipment acquired after June 30, 2006, when the transaction was bona fide and not undertaken for tax avoidance. “It is subclass 5 of class 2 tangible personal property that is commercial and industrial machinery and equipment,” she said.

Kovar Donahue and Lynn Kent explained that when classification is unclear, state law directs appraisers to apply the traditional three‑part fixture test — annexation, adaptation and the intent of the party — and that statute KSA 79‑261, adopted in 2014, codified that test and requires all three parts to be satisfied for property to be classified as a fixture (real property). Kent emphasized that the county appraiser must make a case‑by‑case determination and that written appraisal guidance exists to promote uniformity. “The appraiser has to look at annexation, adaptation, and intent,” Kent said. “All three parts of this test must be satisfied in order for the property to be considered a fixture.”

The witnesses noted several statutory wrinkles: public utilities and some telecommunications and railroad machinery have dedicated classifications and separate exemptions (KSA 79‑2‑24 and KSA 79‑14‑39); renewable energy generation equipment has other exemption treatment; and statute sets a 20 percent floor on depreciated retail cost for subclass 5 equipment. Kent told the committee PVD does not have reliable statewide counts of property placed into the 2006 exemption because exempt property is generally not reported by taxpayers in the same way as taxable property.

Why it matters: the 2006 exemption and the fixture‑classification rules determine whether high‑value equipment sits on the property tax rolls as part of real property or is treated as exempt personal property — a difference that can mean millions in annual local tax revenue for counties and taxing entities or relief for specific industrial investors. Recent litigation and appeals over the classification of ethanol plants and similar facilities have amplified the importance of consistent classification and clearer procedural routes for disputed cases.

What lawmakers asked: committee members asked for clearer data on how many properties are currently treated as exempt under the 2006 statute and whether additional statutory clarity or administrative checklists could reduce litigation. Revisor staff indicated the statute and constitutional framework are definitive; committee staff and PVD agreed to pursue additional operational detail for November, including whether documentation or filing adjustments could improve the state’s visibility into exempt personal property.