Kansas committee hears background on two housing tax credits as lawmakers weigh sunset proposal

Eric Adel, a policy analyst with the Legislative Research Department, briefed the Kansas Senate Committee on Commerce on the background, mechanics and fiscal impact of two housing tax credit programs enacted in 2022 and administered by the Kansas Housing Resources Corporation (KHRC).

The two programs are the Affordable Housing Tax Credit, which matches the federal low-income housing tax credit on a 1-to-1 basis, and the Housing Investor Tax Credit, a separate state credit for qualified investments in housing projects. Adel told the committee that the affordable housing credit was established beginning in tax year 2023 and that "the credits are non refundable which means they can be used against any outstanding Kansas tax liability that qualifies but not more than that." He said both credits are awarded through competitive application processes administered by the KHRC.

Why it matters: Committee members focused on the programs' long-term fiscal exposure and how a proposed House bill would affect projects already awarded credits. Adel and senators discussed the timing of credits, who claims them, and statutory caps and carry-forward rules that could commit state tax expenditures for years after an allocation.

Key provisions and mechanics

Adel explained that the state affordable housing credit mirrors the federal credit and generally equals either 4 percent or 9 percent of qualifying project costs depending on financing (for example, projects financed with tax-exempt bonds are typically eligible for the 4 percent credit). He said federal rules require projects to meet income and tenant thresholds and recapture penalties apply if those requirements are not met; KHRC can agree to longer recapture periods at the state level (Adel said KHRC may set recapture periods up to 30 years).

Adel described timing and claiming rules: credits are allocated in advance but may only be claimed once a project is placed in service; the allocated credit is claimable for a 10-year credit period and unused credits may be carried forward up to 11 years. He told the committee that "there are credits that have been allocated, but no credits have been claimed to date" and that the first year any of the state credits could be claimed would be tax year 2024.

On the Housing Investor Tax Credit (the second program enacted in 2022), Adel said it is not tied to the federal credit, is issued per housing unit under agreements with KHRC, and is capped at $13 million total per year. He summarized the per-unit amounts and county population bands included in statute (for example, $35,000 per unit in the smallest counties, with eligibility for up to 40 units in a project depending on county population).

Fiscal exposure and committee questions

Committee members pressed on long-term obligations. Adel estimated that an allocation of $25.1 million in credits in a single year would translate to roughly $251 million in claimed credits over a 10-year period if all allocated credits are ultimately claimed and projects comply with program rules. "So the full $250,000,000 could be every year for a period of time," Adel said describing how allocations stack as each year's 10-year claiming window overlaps with others.

Senators also asked whether federal definitions set explicit rent dollar limits; Adel replied those thresholds follow federal rules and are population-dependent, and he could not state exact dollar thresholds off the top of his briefing.

Legislative history and current proposals

Adel gave a brief legislative history: the housing provisions were enacted in 2022 through a larger package (the enacted vehicle was referenced as HB 2237 in committee testimony) that bundled several tax incentives. Adel reported roll-call results discussed at the time: the conference committee report passed the House by a vote of 109-12 and the Senate by a vote of 34-3, as described in the briefing materials.

Committee members were also told about a House Commerce bill, HB 2119, which as introduced would discontinue the Affordable Housing Tax Credit Act beginning July 1 of the year specified in the bill. Adel said that if the law were discontinued, allocations made before a sunset would continue to be governed by the existing credit period and carry-forward rules, meaning projects awarded credits prior to any statutory sunset would remain eligible to claim the allocated credits according to the agreements and timelines in statute.

What the committee did

The briefing was informational; no committee action or vote on the credits or on HB 2119 took place during the session. Members asked for follow-up on some items (for example, whether investor-credit county allocations met county quotas and whether the annual $13 million cap has been reached), and Adel said he would follow up with more detail.

Ending

The committee adjourned after the briefing. Senators indicated the topic remains active for future hearings and follow-up, including the hearing scheduled the next day noted by the chair.