Committee hears bill to create Aviation and Innovative Manufacturing program offering refundable credits and payroll retention

The House Commerce Committee heard testimony on HB 2308, the Aviation and Innovative Manufacturing in Kansas Act, a proposal to create a new state economic-development program that would offer refundable investment tax credits, retention of payroll withholding taxes, training reimbursements and sales-tax exemptions to attract electric- and hydrogen-powered vehicle producers, aircraft assemblers and related suppliers to Kansas.

Committee members, state economic-development staff and industry representatives described the bill as a narrowly targeted tool to compete for high-capital aerospace and advanced-vehicle projects and to expand in-state supply chains. Joshua Jefferson, deputy secretary at the Kansas Department of Commerce, said the measure “slightly enhances the state's traditional incentive programs” while adding strict eligibility, clawbacks and reporting requirements.

HB 2308 would establish the Aviation and Innovative Manufacturing in Kansas program, administered by the Secretary of Commerce. Key requirements described in committee testimony include a $250,000,000 minimum capital investment for projects that are aircraft assembly or electric/hydrogen vehicle production, a requirement that projects be completed and commercial operations begin within five years, and a requirement to hire at least 250 new employees within five years of commencing commercial operations. Starting wages for those new employees must be at least 100% of the median county wage where the facility is located. Companies would also be required to retain employment levels for 10 years after operations begin or face partial clawbacks based on the percentage shortfall.

Incentives laid out in testimony include: - A refundable investment tax credit of up to 10% of qualifying investment (paid out in at least five successive taxable years), with an automatic 10% credit for projects located outside a metropolitan county. - Retention of up to 100% of Kansas payroll withholding taxes for wages that meet the county-median threshold for up to 10 successive taxable years. - Reimbursement of employee training and education expenses (limited to training performed in Kansas at community or technical colleges) up to $5,000,000 per project. - A sales-tax exemption for construction costs associated with establishing a qualified facility. - A “Kansas First” procurement benefit that can provide up to $1,000,000 per $20,000,000 of in-state procurement in a fiscal year, limited to three claims per qualified company and subject to a $5,000,000 annual aggregate cap for all companies.

Witnesses from the aviation and business community gave largely supportive testimony. Andrew Nave, executive vice president for economic development at the Greater Wichita Partnership, said, “It is really laser focused on helping us compete as a state for the most cutting edge industries, especially in the aviation sector.” Sam Sackett of Spirit AeroSystems said his company and its supply chain “are very supportive of this proposal,” noting incentives can help retain and attract work and suppliers. Mike O'Neil of Bombardier and Scott Wagner of the Kansas Association of Airports also testified in support, urging that the state preserve its aerospace competitiveness.

Committee members pressed staff on specifics. Representative Williams asked several times about public transparency and how confidential information would be handled; Revisor Reimer and witnesses said the bill includes an exception to the state's Open Records Act for confidential company material collected during compliance reviews but that the bill also requires annual reporting to a transparency database on incentive amounts, recipients, employment and investment. Legislative research staff listed existing refundable credits in statute, including Apex and several smaller credits, to answer whether refundable credits already exist in Kansas.

Joshua Jefferson provided additional context about program design, telling the committee the program would be statewide in application and would complement existing programs such as PEAK and HPIP. He said the department included clawbacks tied to capital investment and employment and that incentive awards would not be paid until companies met agreed benchmarks.

The committee did not take a vote on HB 2308 during the hearing. Members requested a fiscal note and additional detail from research and commerce staff on how the wage and payroll provisions would be applied and whether the wage requirement would be applied on a per-job basis or by averaging payroll. The hearing concluded with committee staff noting the record would remain open for additional materials.