Committee on Taxation hears proposal to create Insurance Savings Accounts for property and casualty costs

A Kansas Committee on Taxation hearing on House Bill 2430 centered on a proposal to create Insurance Savings Accounts (ISAs) that would let individuals, married filers and corporations set aside tax-advantaged dollars to pay property and casualty insurance premiums and deductibles.

Mister Severs, the reviser, told the committee the bill would allow accounts at financial institutions beginning Jan. 1, 2027, with contribution limits of $6,000 for individuals, $12,000 for married couples filing jointly and $25,000 for corporations; monies used for non-authorized purposes would be subject to recapture. "Under the bill, individuals and corporations would be eligible to establish insurance savings accounts with certain financial institutions on and after 01/01/2027," he said during the summary presentation.

The bill’s fiscal impact was a central point of contention. Kathleen Smith of the Department of Revenue said the department’s estimate assumes broad participation: "The Department of Revenue is estimating that the bill could decrease state revenues by approximately 73,000,000 in fiscal year 27 and up to 248,900,000 per year thereafter," she said, while noting those figures reflect full utilization. She added a 10% participation scenario would reduce the estimate to about $29,500,000 (roughly $24,400,000 attributable to individuals and $5,100,000 to corporations).

Proponents, including Vicky Schmidt, identified herself as Commissioner and argued the revenue estimate was overstated and would not reflect real-world uptake. "I'm proposing a tool to give Kansans a tax free way to save for property and casualty insurance costs," Schmidt said, urging that most people will not contribute the maximum amounts the fiscal note assumes.

Eric Turk, director of government affairs for the Kansas Department of Insurance, described ISAs as modeled on catastrophe savings and other state savings accounts and emphasized program scope: "This is geared to just property and casualty insurance," he said, noting examples such as renters, auto, homeowners and commercial coverage. Turk also told lawmakers he expected utilization to start low: "we really do believe the ISA's, the utilization will be relatively low, with modest growth over time."

Members asked detailed operational questions about eligibility, administration and tax treatment. Committee members sought clarification on whether LLCs, partnerships and trusts would be treated as corporations for the corporate contribution limit; witnesses recommended statutory clarification or rulemaking by the Secretary of Revenue. Lawmakers also questioned how ISA contributions would interact with existing business deductions for insurance, and whether mortgage escrowed insurance payments could be reimbursed; witnesses said itemized or broken-out insurance invoices would likely allow reimbursement but deferred some technical matters to tax rules or to financial institutions.

Industry stakeholders voiced support. Beth Smoller of the Kansas Association of Insurance Agents told the committee she backed the bill and urged members to discount the Department of Revenue’s high-end fiscal figure: "Throw that figure out," she said, arguing utilization historically grows slowly for similar savings accounts and that clarifying language to include LLCs, partnerships and trusts would help farm and rural entities.

The hearing record includes written proponents and no appearing neutral or opponent witnesses. Chair closed the hearing without a committee vote and continued other business.

Next steps noted by committee members included the potential for drafting clarifying statutory language and instructing the Secretary of Revenue to promulgate rules to address definitions, transferability at death and the interplay with business tax treatment.