Tax committee hears amended Kansas film tax-credit bill with caps on exemptions and credits

The Committee on Taxation heard Senate Bill 52, the Senate version of the Kansas Film and Digital Media Production and Development Act, which includes tax credits and a sales tax exemption for production costs. The Senate amendment added limits to both elements: a $1,000,000 annual cap on the sales tax exemption per production company (including contractors) and a reduction of the annual pool of transferable tax credits from $10,000,000 to $5,000,000.

Why it matters: The bill is intended to attract film and digital media production to Kansas by offering tax incentives. The changes adopted in the Senate narrow the fiscal exposure of the incentives by capping the sales tax exemption and halving the credit pool.

Overview and fiscal note: Adam Seabers, the committee reviser, explained the Senate changes focused on those caps. Kathleen Smith of the Department of Revenue presented the fiscal note: "Department of Revenue is estimating that Senate Bill 52 as amended would decrease state general fund revenues by 5,000,000 for the income tax credit in fiscal years 2627 and '28. It would also, reduce the state general fund and state highway fund for a total combined of $65,000 for the sales tax exemption for all 3 years as well. Assuming that, it was fully used."

Proponent testimony: Stuart Little, representing Grow Kansas Film (government relations), testified in support and said the sponsor group accepts the Senate changes as a compromise to reduce overall cost: "We are satisfied with these adjustments. We believe it does reflect some of the interest on making sure that we keep the cost low, lower than it was, and also to, have the opportunity to get started in the process." Little described the amendments as enabling the program to start while limiting exposure.

Committee discussion: Members asked how the cap on the sales tax exemption would be tracked and enforced. Little and the Department said companies would retain receipts and the process of certificates and final reporting would be part of the credit application and review at the end of production. As Stuart Little described it, "It would be factored into that. It would be part of that calculation. And on page 57 of the bill where it describes that process, it it it goes through the description of what needs to be done and that's submitted as part of what is done at the end of a of a production process before the credit and is available." Kathleen Smith acknowledged difficulties: because companies present exemption certificates at different retailers, the department would likely rely on company reporting and receipts to ensure the $1,000,000 cap was not exceeded.

Outcome: The committee took testimony and closed the hearing on the bill. Several written proponents were filed; the committee did not take a floor vote on the bill during this hearing.