The Kansas Senate advanced the largest incentive program in state history Thursday, to chase a mystery $4 billion factory.
The package, sold to lawmakers as essential to making Kansas competitive for major projects, was approved on a 32-7 vote after less than 30 minutes of debate.
But the chamber made a key change that state officials said could sink Kansas’ chances at landing the project.
The package requested by the Kansas Department of Commerce was a multi-million dollar plan that included what would be the state’s first use of refundable tax credits. It meant that even if the company reduced its state income tax liability to zero with deductions for plant construction and other costs, Kansas could still pay out millions of dollars annually to the company.
On Tuesday, Senators agreed to remove the refundable portion of the tax credit.
“This is a deal killer,” David Toland, Kansas Lieutenant Governor and Commerce Secretary, said in a statement.
“This company, and any company investing billions of dollars, expects refundable tax credits like what are offered in other states. In a hyper-competitive economic development landscape, like it or not, refundable credits are the price of admission if you want to win.”
The commerce department is pushing the Legislature to pass the package on a tight timeframe. The undisclosed company is set to choose a location for the plant next month and announce the decision in March.
Senate President Ty Masterson said he wasn’t concerned about the timeframe, or the loss of the refundable tax credit.
“We probably do need to settle that but keep in mind this is step one,” Masterson said. “We’ll be in conference (with the House) on it and I’m hoping that question can be answered by that point.”
Earlier in the day Rep. Sean Tarwater, chair of the House Commerce Committee, said he wasn’t a fan of the refundable tax credit but that a solution would be needed if Kansas wanted to land the project.
“We’re going to find a better way of making that company realize the tax credits over a longer period of time so it has less effect on the (state general fund),” the Stillwell Republican said. “By the time we have to pay those payments we will have reaped the benefits from having jobs here.”
Tarwater plans to take the bill up in his committee next week.
Sen. Caryn Tyson, who proposed the amendment in committee, criticized the bill as “crony capitalism.” She and six other conservative Republicans opposed its passage.
“This bill allows one person in the state of Kansas, the secretary of Commerce, to decide a billion to a billion in a half in incentives,” Tyson said. “It’s disappointing that we would push this Legislation through.”
The bill says qualifying companies can receive 15% of their income tax liability, a 10% reimbursement on payroll costs, a 100% exemption on sales tax for construction and a 50% property tax incentive.
The Senate altered the measure this week to block the commerce secretary from entering into contracts using the package after March 31, 2023. It also added a provision for a statewide corporate tax reduction if the package is used and to prevent companies from using multiple incentive programs at once.
It also would reimburse the company for 50% of employee training costs, up to $5 million per year. Using the figures provided by the state, the company considering Kansas could qualify for up to $800 million in just income and payroll tax benefits.
Though the identity of the company has not been released — state officials signed non-disclosure agreements — experts told The Star last week that the numbers point to a new electric vehicle, battery or microchip plant.