Revenue report: Secretary tells Taxation Committee exemptions, subtractions total about $11 billion in foregone revenue

Mark Burkhart, Kansas secretary of revenue, told the Committee on Taxation during a briefing that statutory changes recorded as revenue-enhancing were roughly $94 million, while exemptions, subtractions and modifications listed in the department's tax-expenditure report added up to "a little over $11,000,000,000" in foregone state receipts. The briefing covered income-tax conformity, corporate and individual modifications, and a long list of sales-tax exemptions.

The report is built from tax-year 2023 returns filed in 2024, Burkhart said, and the department relies heavily on electronic filings to compile the figures. "About 92, 93% of our returns are filed electronically," he said, noting that many large corporate returns still arrive in paper boxes that slow analysis. Kathleen Smith, who helps prepare the report, told the committee the department extracts line-item data from those returns to produce fiscal estimates.

Burkhart walked lawmakers through categories that drive the totals. He cited addition modifications — for example, certain municipal or out-of-state bond interest that must be added back — and subtraction modifications, including retirement-benefit exemptions that reduce state receipts. He gave a concrete example: roughly 39,000 taxpayers were affected by a particular modification with an estimated $13,000,000 effect on the tax base.

On tax credits, Burkhart highlighted the High Performance Incentive Program (HPIP), which the department recorded as claimed by 304 corporations and estimated to have a roughly $137,000,000 negative impact on the State General Fund for the period shown. Other sizable credits cited included the credit for taxes paid to other states and the earned-income tax credit.

Sales-tax exemptions were a major focus. Burkhart described legal exemptions (federal government purchases and interstate-commerce limitations), conceptual exemptions tied to single-stage sales tax (ingredient or component-part exemptions), and policy exemptions created by legislators. He identified major line items: an ingredient/component exemption estimated at about $2,900,000,000 and farm-production related exemptions approaching $1,200,000,000. Burkhart summarized that, when aggregated, sales-tax exemptions account for about $9,000,000,000 of the foregone revenue total.

Committee members pressed staff on several technical points: the department's confidentiality rule (items claimed by fewer than five taxpayers are reported as confidential), how exemptions are counted in totals (Burkhart said asterisked values are included in the overall totals but not publicly disclosed), and the statutory renewal period for tax-exempt entity certifications (Kathleen Smith corrected an earlier committee recollection, saying the reapplication cycle is four years). "It is actually 4 years," Smith said.

Members also asked for follow-up research on categories the department does not quantify in the report, including untaxed professional services and digital goods such as e-books, which some other states are studying for possible inclusion in the tax base. Burkhart and staff agreed to return with more detailed analysis on request.

The briefing touched on other programs and changes: a manufacturing machinery-and-equipment exemption estimated to reduce receipts by about $269,000,000; a long-term decline in mineral severance receipts (from more than $100,000,000 when the tax was enacted to under $50,000,000 in recent years); and the Kansas Impact Program, which the department described as capped at $20,000,000 annually (2% of withholding tax receipts set aside for commerce-related activities).

Burkhart concluded by offering to return for deeper dives into specific exemption lines if the committee wanted more detail. The committee signaled interest in additional hearings on sales-tax exemptions and tax credits.