The Kansas House of Representatives is considering legislation that would prevent taxpayers from electing to use the apportionment rules under the Multistate Tax Compact (MTC) when determining business income and allocating income tax liability between states. As introduced, the legislation also stipulates that the Kansas Income Tax Act should supersede the MTC in the event of a conflict between the Act and the MTC. These amendments would be retroactive to tax years after 2007.
Additionally, the legislation would also retroactively amend the definition of business income. For tax years after 2007, business income would mean:
-income arising from transactions and activity in the regular course of the taxpayer’s trade or business;
-income arising from transactions and activity involving tangible and intangible property or assets used in the operation of the taxpayer’s trade or business; or
-income of the taxpayer that may be apportioned to Kansas under the provisions of the Constitution of the United States and laws thereof, except that a taxpayer may elect that all income constitutes business income. Any election made would be effective and irrevocable for the tax year in which the election was made and the following nine tax years. The election would also be binding on all members of a unitary group of corporations.
H.B. 2489, as introduced in the Kansas House of Representatives, January 17, 2018